Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 10-May-15 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Document Period End Date | 31-Mar-15 | |
Entity Registrant Name | Lightstone Real Estate Income Trust Inc. | |
Entity Central Index Key | 1619312 | |
Current Fiscal Year End Date | -19 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 20,000 |
BALANCE_SHEETS
BALANCE SHEETS (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Assets | ||
Cash | $166,660 | $200,000 |
Due from affiliate | 33,260 | |
Total Assets | 199,920 | 200,000 |
Liabilities and Stockholders' Equity | ||
Accounts payable and other accrued expenses | 5,333 | |
Total liabilities | 5,333 | |
Commitments and Contingencies | ||
Stockholders' Equity: | ||
Preferred stock, $0.01 par value; 50,000,000 shares and none authorized, respectively, none issued and outstanding | ||
Common stock, $0.01 par value; 200,000,000 and 20,000 shares authorized, respectively, 286,674 and 20,000 shares issued and outstanding, respectively | 200 | 200 |
Additional paid-in capital | 199,800 | 199,800 |
Accumulated deficit | -5,413 | |
Total Stockholders' Equity | 194,587 | 200,000 |
Total Liabilities and Stockholders' Equity | $199,920 | $200,000 |
BALANCE_SHEETS_Parenthetical
BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
BALANCE SHEETS [Abstract] | ||
Preferred Stock, par value per share | $0.01 | $0.01 |
Preferred Stock, shares authorized | 50,000,000 | |
Preferred Stock, shares issued | ||
Preferred Stock, shares outstanding | ||
Common Stock, par value per share | $0.01 | $0.01 |
Common Stock, shares authorized | 200,000,000 | 20,000 |
Common Stock, shares issued | 20,000 | 20,000 |
Common Stock, shares outstanding | 20,000 | 20,000 |
STATEMENTS_OF_OPERATIONS
STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
STATEMENTS OF OPERATIONS [Abstract] | |
Revenues | |
Expenses: | |
General and administrative costs | 5,413 |
Total expenses | 5,413 |
Net loss | ($5,413) |
Net loss per common share, basic and diluted | ($0.27) |
Weighted average number of common shares outstanding, basic and diluted | 20,000 |
STATEMENT_OF_STOCKHOLDERS_EQUI
STATEMENT OF STOCKHOLDERS' EQUITY (USD $) | Total | Common Shares [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] |
BALANCE at Dec. 31, 2014 | $200,000 | $200 | $199,800 | |
BALANCE, shares at Dec. 31, 2014 | 20,000 | |||
Net loss | -5,413 | -5,413 | ||
BALANCE at Mar. 31, 2015 | $194,587 | $200 | $199,800 | ($5,413) |
BALANCE, shares at Mar. 31, 2015 | 20,000 |
STATEMENT_OF_CASH_FLOWS
STATEMENT OF CASH FLOWS (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
Net loss | ($5,413) |
Changes in assets and liabilities: | |
Increase in accounts payable and other accrued expenses | 5,333 |
Increase in due from affiliate | -33,260 |
Net cash used in operating activities | -33,340 |
Net change in cash | -33,340 |
Cash, beginning of year | 200,000 |
Cash, end of period | $166,660 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2015 | |
Organization [Abstract] | |
Organization | 1. Organization |
Lightstone Real Estate Income Trust, Inc. (‘‘Lightstone Income Trust''), incorporated on September 9, 2014, in Maryland, intends to elect to qualify and be taxed as a real estate investment trust (‘‘REIT'') for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2015. | |
Lightstone Income Trust sold 20,000 Common Shares to Lightstone Real Estate Income LLC, a Delaware limited liability company (the ‘‘Advisor''), an entity majority owned by David Lichtenstein, on September 12, 2014, for $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests of Lightstone Income Trust's sponsor, The Lightstone Group, LLC (the ‘‘Sponsor''). Subject to the oversight of the Company's board of directors (the “Board of Directors”), the Advisor has primary responsibility for making investment decisions and managing the Company's day-to-day operations. Mr. Lichtenstein also acts as the Company's Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control the Lightstone REIT Income Trust. | |
Lightstone Income Trust, together with any of its subsidiaries that may exist from time to time, are collectively referred to as the ‘‘Company'' and the use of ‘‘we,'' ‘‘our,'' ‘‘us'' or similar pronouns refers to Lightstone Income Trust or the Company as required by the context in which any such pronoun is used. | |
The Company's registration statement on Form S-11 (the “Offering”), pursuant to which it is offering to sell up to 30,000,000 shares of its common stock, par value $0.01 per share (which may be referred to herein as ‘‘shares of common stock'' or as ‘‘Common Shares'') for $10.00 per share, subject to certain volume and other discounts (exclusive of 10,000,000 shares available pursuant to its distribution reinvestment program (the ‘‘DRIP'') at an initial purchase price of $9.50 per share) was declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933 on February 26, 2015. As of March 31, 2015, the Company had received gross proceeds of $200,000 from the sale of 20,000 shares of its common stock, to the Advisor. The Company intends to sell shares of its common stock under the Offering until the earlier of the date on which all the shares are sold, or February 26, 2017, two years from the date the Offering was declared effective by the SEC. The Company reserves the right to reallocate the shares of common stock it is offering between the primary offering and the DRIP. Additionally, the Offering may be terminated at any time. | |
The Company will seek to originate, acquire and manage a diverse portfolio of real estate-related investments. The Company may invest in mezzanine loans, first lien mortgage loans, second lien mortgage loans, bridge loans and preferred equity interests, in each case with a focus on investments intended to finance development or redevelopment opportunities. The Company may also invest in debt and derivative securities related to real estate assets. The Company expects that a majority of its investments by value will be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly owned by, the Sponsor, by its affiliates or by real estate investment programs sponsored by it. As of the date of these financial statements, the Company has not acquired any real estate-related investment or other investments. | |
The Company has no employees. The Company intends to retain the Advisor to manage its affairs on a day-to-day basis. Orchard Securities, LLC (the ‘‘Dealer Manager''), a third party not affiliated with the Company, the Sponsor or the Advisor, will serve as the dealer manager of the Offering. The Advisor is an affiliate of the Sponsor and will receive compensation and fees for services related to the investment and management of the Company's assets. The Advisor will receive fees during the organization and offering, operational and liquidation/listing stages. (See Note 4 for a summary of related-party fees.) |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended | |
Mar. 31, 2015 | ||
Summary of Significant Accounting Policies [Abstract] | ||
Summary of Significant Accounting Policies | 2 | Summary of Significant Accounting Policies |
As the Company has not yet commenced operations, some of the significant accounting policies may or may not be relevant during the period September 9, 2014 (date of inception) through March 31, 2015, but the Company anticipates that these significant accounting policies will apply in the future. | ||
The accompanying unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. The accompanying unaudited financial statements of the Lightstone Real Estate Income Trust Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. | ||
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (‘‘GAAP''). GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate debt investments and securities and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. | ||
The unaudited statements of operations for interim periods are not necessarily indicative of results for the full year or any other period. | ||
Cash and Cash Equivalents | ||
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. All cash and cash equivalents are held in commercial paper and money market funds. | ||
Real Estate-Related Debt Investments | ||
Real estate-related debt investments are intended to be held until maturity and accordingly, will be carried at cost, net of unamortized loan fees, origination fees, discounts, premiums and unfunded commitments. Real estate-related debt investments that are deemed impaired will be carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Real estate-related debt investments where the Company does not intend to hold the investment for the foreseeable future or until the debt investment's expected payoff will be classified as held for sale and recorded at the lower of cost or estimated value. | ||
Interest income will be recognized on an accrual basis and any related premium, discount, origination costs and fees will be amortized over the life of the investment using the effective interest method. The amortization will be reflected as an adjustment to interest income in the Company's statements of operations. The amortization of a premium or accretion of a discount will be discontinued if such debt investment is reclassified to held for sale. | ||
Real Estate Securities | ||
Real estate securities will be classified as available for sale on the acquisition date, which will be carried at fair value. Unrealized gains (losses) will be recorded as a component of accumulated other comprehensive income, or AOCI, in the Company's statements of stockholders' equity. However, the Company may elect the fair value option for certain of the available-for-sale securities, and as a result, any unrealized gains (losses) on such securities will be recorded in unrealized gain (loss) on investments in the Company's statements of operations. | ||
Interest income will be recognized using the effective interest method with any premium or discount amortized or accreted through earnings based on expected cash flow through the expected maturity date of the security. Changes to expected cash flow may result in a change to the yield, which will then be applied retrospectively for high-credit-quality securities that cannot be prepaid or otherwise settled in such a way that the holder would not recover substantially all the investment or prospectively for all other securities to recognize interest income. | ||
Credit Losses and Impairment on Investments | ||
Real Estate-Related Debt Investments | ||
Real estate-related debt investments will be considered impaired when, based on current information and events, it is probable that the Company will not be able to collect principal and interest amounts due according to the contractual terms. The Company will assess the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management will be required in this analysis. The Company will consider the estimated net recoverable value of the debt investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination will be based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the debt investment, a loan loss reserve will be recorded with a corresponding charge to provision for loan losses. The loan loss reserve for each debt investment will be maintained at a level that is determined to be adequate by management to absorb probable losses. | ||
Income recognition will be suspended for a debt investment at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired debt investment is in doubt, all payments will be applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired debt investment is not in doubt, contractual interest will be recorded as interest income when received, under the cash basis method, until an accrual is resumed when the debt investment becomes contractually current and performance is demonstrated to be resumed. A debt investment will be written off when it is no longer realizable or is legally discharged. | ||
Real Estate Securities | ||
Real estate securities for which the fair value option is elected will not be evaluated for other-than-temporary impairment (‘‘OTTI'') as any change in fair value will be recorded in the Company's statements of operations. Realized losses on such securities will be reclassified to realized gain (loss) on investments and other as losses occur. | ||
Real estate securities for which the fair value option is not elected will be evaluated for OTTI quarterly. Impairment of a security is considered to be other-than-temporary when: (a) the holder has the intent to sell the impaired security; (b) it is more likely than not the holder will be required to sell the security; or (c) the holder does not expect to recover the entire amortized cost of the security. When a real estate security has been deemed to be other-than-temporarily impaired due to (a) or (b), the security will be written down to its fair value and an OTTI will be recognized in the statements of operations. In the case of (c), the security will be written down to its fair value and the amount of OTTI will then be bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses will be recognized in the Company's statements of operations. The remaining OTTI related to the valuation adjustment will be recognized as a component of accumulated other comprehensive income in the Company's statements of equity. The portion of OTTI recognized through earnings will be accreted back to the amortized cost basis of the security through interest income, while amounts recognized through other comprehensive income will be amortized over the life of the security with no impact on earnings. Real estate securities which are not high- credit-quality will be considered to have an OTTI if the security has an unrealized loss and there has been an adverse change in expected cash flow. The amount of OTTI will then be bifurcated as discussed above. | ||
Deferred Financing Costs | ||
The Company will capitalize initial direct costs associated with financing activities. The costs will be capitalized upon the execution of the loan and amortized over the initial term of the corresponding loan. Amortization of deferred loan costs will begin in the period during which the loan is originated using the effective interest method over the term of the loan. | ||
Income Taxes | ||
As of March 31, 2015 and December 31, 2014, the Company is subject to federal income taxes as a regular (subchapter C) corporation. The Company intends to elect to be taxed as a REIT commencing with the taxable year ended December 31, 2015. If the Company qualifies as a REIT, it generally will not be subject to U.S. federal income tax on its taxable income or capital gain that it distributes to its stockholders. To maintain its REIT qualification, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. | ||
Additionally, even if the Company qualifies as a REIT, it may still be subject to some U.S. federal, state and local taxes on its income and property and to U.S. federal income taxes and excise taxes on its undistributed income. | ||
To maintain qualification as a REIT, the Company may engage in certain activities through a wholly owned taxable REIT subsidiary (‘‘TRS''). A TRS will be subject to U.S. federal, state, local and foreign income taxes. | ||
Organization and Offering Expenses | ||
Organization and offering expenses include all the expenses incurred in connection with the Offering. Organization and offering expenses (other than selling commissions and dealer manager fee) of the Company may be paid by the Advisor on behalf of the Company. | ||
These costs include all costs and expenses paid by the Company in connection with its formation and the offering, including the Company's legal, accounting, printing, mailing and filing fees, charges of the escrow agent, reimbursements to the Dealer Manager and participating broker-dealers for due diligence expenses set forth in detailed and itemized invoices, amounts to reimburse the Advisor for its portion of the salaries of the employees of its affiliates who provide services to the Advisor, and other costs in connection with administrative oversight of such offering and the marketing process, such as preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by the Dealer Manager or participating broker-dealers. | ||
The Advisor will advance the organization and offering expenses to the extent that the Company does not have the funds to pay such expenses. Organization and offering expenses advanced by the Advisor will not be liabilities to the Company unless and until the Company has sold a minimum of 200,000 Common Shares (excluding Common Shares purchased by New York, Tennessee and Pennsylvania investors) and the Offering breaks escrow. Once the Offering breaks escrow, the Company will record any offering expenses incurred from its inception to stockholder's equity as a reduction to additional paid-in capital (‘‘APIC'') as well as any organization costs incurred from its inception as a general and administrative cost and repay the Advisor with available funds for any costs paid by the Advisor. Through March 31, 2015, approximately $1.4 million has been incurred for organization and offering expenses. The Company has not recorded any of the organization and offering expenses incurred as a liability as the Offering has not broken escrow. | ||
Accounting for Derivative Financial Instruments and Hedging Activities | ||
The Company may enter into derivative financial instrument transactions in order to mitigate interest rate risk on a related financial instrument. The Company may designate these derivative financial instruments as hedges and apply hedge accounting. The Company will record all derivative instruments at fair value on the balance sheet. | ||
Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, will be considered cash flow hedges. The Company will formally document all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking each hedge transaction. The Company will periodically review the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges will be accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in AOCI within stockholder's equity. Amounts will be reclassified from AOCI to the statement of operations in the period or periods the hedged forecasted transaction affects earnings. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, will be considered fair value hedges. The effective portion of the derivatives gain or loss will be initially reported as a component of AOCI and subsequently reclassified into earnings when the transaction affects earnings. The ineffective portion of the gain or loss will be reported in earnings immediately. | ||
Stock-Based Compensation | ||
The Company intends to adopt a stock incentive plan to align the long-term financial interest of its independent directors, officers and employees (if it ever has employees), employees of the Advisor and other affiliates, certain of its consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide services to the Company, with those of the stockholders. Awards will be granted at the fair market value on the date of the grant with fair value estimated using the Black-Scholes-Merton option valuation model, which incorporates assumptions surrounding the volatility, dividend yield, risk-free interest rate, expected life, and exercise price as compared to the underlying stock price on the grant date. As stock-based compensation expense recognized in the statements of operations will be based on awards ultimately expected to vest, the amount of expense will be reduced for forfeitures estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The tax benefits associated with these stock-based payments will be classified as financing activities in the statement of cash flows as required under previous regulations. | ||
Concentration of Risk | ||
The Company maintains its cash in bank deposit accounts, which, at times, may exceed U.S. federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. | ||
Basic and Diluted Net Earnings per Common Share | ||
Net earnings per Common Share will be computed by dividing the net income/(loss) by the weighted average number of shares of common stock outstanding. Diluted income per Common Share takes into account the effect of dilutive instruments, such as stock options, but uses the average Common Share price for the period in determining the number of incremental Common Shares that are to be added to the weighted-average number of Common Shares outstanding. | ||
New Accounting Pronouncements | ||
In May 2014, the FASB issued an accounting standards update that completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards. The update applies to all companies that enter into contracts with customers to transfer goods or services and is effective for us for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and companies have the choice to apply the update either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying the update at the date of initial application (January 1, 2017) and not adjusting comparative information. The Company is currently evaluating the requirements and impact of this update on its financial statements. | ||
In April 2015, the FASB issued an accounting standards update to simplify the presentation of debt issuance costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This new guidance will be effective for the Company beginning January 1, 2016. The Company is currently evaluating the impact of this standard on the Company's financial statements. | ||
The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its operations. |
Stockholders_Equity
Stockholder's Equity | 3 Months Ended | |
Mar. 31, 2015 | ||
Stockholder's Equity [Abstract] | ||
Stockholder's Equity | 3 | Stockholders' Equity |
Preferred Stock | ||
The Company's charter authorizes the Company's board of directors to designate and issue one or more classes or series of preferred stock without approval of the holders of Common Shares. On February 11, 2015, the Company amended and restated its charter to authorize the issuance of 50,000,000 shares of preferred stock. Prior to the issuance of shares of each class or series, the board of directors will be required by Maryland law and by the charter to set, subject to the charter restrictions on ownership and transfer of stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption of each class or series of preferred stock so issued, which may be more beneficial than the rights, preferences and privileges attributable to Common Shares. The issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of the Company. As of March 31, 2015 and December 31, 2014, the Company had no outstanding shares of preferred stock. | ||
Common Shares | ||
Subject to the restrictions on ownership and transfer of stock contained in the Company's charter and except as may otherwise be specified in the charter, the holders of Common Shares will be entitled to one vote per Common Share on all matters submitted to a stockholder vote, including the election of the Company's directors. There will be no cumulative voting in the election of directors. Therefore, the holders of a majority of outstanding Common Shares will be able to elect the Company's entire board of directors. Except as the Company's charter may provide with respect to any series of preferred stock that the Company may issue in the future, the holders of Common Shares will possess exclusive voting power. | ||
Holders of the Company's Common Shares will be entitled to receive such distributions as authorized from time to time by the Company's board of directors and declared out of legally available funds, subject to any preferential rights of any preferred stock that the Company issues in the future. In any liquidation, each outstanding Common Share will entitle its holder to share (based on the percentage of Common Shares held) in the assets that remain after the Company pays its liabilities and any preferential distributions owed to preferred stockholders. Holders of Common Shares will not have preemptive rights, which means that there will be no automatic option to purchase any new Common Shares that the Company issues, nor will holders of Common Shares have any preference, conversion, exchange, sinking fund or redemption rights. Holders of Common Shares will not have appraisal rights unless the board of directors determines that appraisal rights apply, with respect to all or any classes or series of stock, to a particular transaction or all transactions occurring after the date of such determination in connection with which holders of such Common Shares would otherwise be entitled to exercise appraisal rights. Common Shares will be nonassessable by the Company upon its receipt of the consideration for which the board of directors authorized their issuance. | ||
On February 11, 2015, the Company amended and restated its charter to authorize the issuance of 200,000,000 Common Shares. Under the charter, the Company will not be able to make certain material changes to its business form or operations without the approval of stockholders holding at least a majority of the shares of its stock entitled to vote on the matter. The Company had 20,000 shares of common stock outstanding as of March 31, 2015 and December 31, 2014. | ||
Stock Incentive Plan | ||
The Company intends to adopt a stock incentive plan to align the long-term financial interest of its independent directors, officers and employees (if we ever have employees), employees of the Advisor and other affiliates, certain of the Company's consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide consulting services to us, with those of its stockholders. The Company's board of directors intends to design long-term incentive awards to ensure that eligible officers, employees, consultants and independent directors have a continuing stake in the Company's long-term success, that the total compensation realized by the Company's executive officers reflects its multi-year performance as measured by the efficient use of capital and changes in stockholder value, and that a portion of the Company's executive officers' total compensation is earned over a multi-year period and is forfeitable if the employment of the executive officer is terminated. | ||
The Company's board of directors has the full authority to administer and interpret the plan, including to grant to the Company's independent directors, officers and employees (if we ever have employees), employees of the Advisor and other affiliates, certain of the Company's consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide consulting services to us (a) stock options, (b) stock appreciation rights, (c) restricted stock, (d) performance shares, and (e) other stock-based awards; to determine, in accordance with the terms of the stock incentive plan, the number of Common Shares to be covered by each award granted and the terms and conditions, consistent with the terms of the stock incentive plan, of any award granted; and generally, to exercise such powers and to perform such acts as the Company's board of directors deems necessary or expedient to promote the Company's best interests that are not in conflict with the provisions of the stock incentive plan. The Company's board of directors, however, may not take any action under the Company's stock incentive plan that would result in a repricing of any stock option without having first obtained the affirmative vote of the Company's stockholders. The aggregate number of Common Shares that may be issued or used for reference purposes or with respect to which awards may be granted under the stock incentive plan will not exceed 5% of the Company's outstanding Common Shares on a fully diluted basis at any time (subject to adjustment for stock splits, combinations, reclassifications, reorganizations and certain other specified events pursuant to the stock incentive plan). | ||
The Company's board of directors intends to continually evaluate the use of equity-based awards and intends to use such awards as part of designing and administering the Company's compensation program. We expect to make grants at regular intervals. | ||
The Company intends to follow a practice of granting equity incentives on an annual basis to the Company's independent directors, officers and employees (if we ever have employees), employees of the Advisor and other affiliates, certain of the Company's consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide consulting services to us. We also may make grants (a) on the commencement of employment or engagement, as applicable, of the participant, (b) to key employees of us or the Advisor or its affiliates following a significant change in job responsibilities, or (c) to meet specific retention objectives. Grants will be issued on the date they are approved by the Company's board of directors, except in certain circumstances, such as for new hires, who may be granted awards on or following commencement of employment on the second day after we release the Company's financial results for that quarter. The exercise price for stock options will be determined by the Company's board of directors at the time of the grant and will not be less than 100% (or, in the case of an incentive stock option granted to a ten percent stockholder, 110%) of the fair market value of the Common Shares at the time of the grant. The Company's board of directors will set the vesting schedule, which may be subject to the attainment of specified performance targets or such other factors as the Company's board of directors may determine, in its sole discretion. | ||
The stock incentive plan and the awards granted under the plan will not affect the power of the Company's board of directors or stockholders to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the Company's capital structure or the Company's business; (b) any merger or consolidation of the Company or any affiliate of the Company; (c) any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Company's Common Shares; (d) the dissolution or liquidation of the Company or any affiliate of the Company; (e) any sale or transfer of all or part of the assets or business of the Company or any affiliate of the Company; (f) any stock split, reverse stock split, stock dividend, subdivision, combination or reclassification of shares that may be issued under the stock incentive plan; or (g) any other corporate act or proceeding. In addition, if any change in the Company's capital structure occurs pursuant to any stock split, reverse stock split, stock dividend, subdivision, combination or reclassification of shares that may be issued under the stock incentive plan, any recapitalization, any merger, any consolidation, any spinoff, any reorganization or any partial or complete liquidation, or any other corporate transaction or event having an effect similar to the foregoing, then any of the following shall be appropriately adjusted: (i) the aggregate number and kind of shares of stock that may thereafter be issued under the stock incentive plan; (ii) the number and kind of shares of stock or other property (including cash) to be issued upon exercise of an outstanding award or under other awards granted under the stock incentive plan; (iii) the purchase price thereof; and/or (iv) the individual participant limitations set forth in the stock incentive plan (other than those based on cash limitations). In addition, if there shall occur any change in the Company's capital structure or business other than any of those set forth in the preceding sentence, then the Company's board of directors may adjust any award or make such other adjustments to the stock incentive plan. Awards under the stock incentive plan are intended to either be exempt from, or comply with, the applicable requirements of, Section 409A of the Internal Revenue Code of 1986, as amended, and any award agreement shall be limited, construed and interpreted in accordance with such intent. | ||
Upon a change in control (as defined under the stock incentive plan) of the Company, and except as otherwise provided by the Company's board of directors in an award agreement or in a written employment agreement, outstanding unvested awards will vest in full, but restrictions (other than vesting conditions) to which restricted shares or any other award granted prior to the change in control are subject will not lapse. |
Related_Party_Transaction_and_
Related Party Transaction and Other Arrangements | 3 Months Ended | ||
Mar. 31, 2015 | |||
Related Party Transactions [Abstract] | |||
Related Party Transactions | 4 | Related Party Transaction and Other Arrangements | |
The Advisor has agreed to advance the Company the funds to pay organization and offering expenses until the Company breaks escrow. During the three months ended March 31, 2015 the Company paid $33,260 related to organizational and offering expenses that the Advisor will reimburse us for, the amounts are recorded in due from affiliate on the balance sheet. | |||
The Company has agreements with the Dealer Manager and the Advisor to pay certain fees, as follows, in exchange for services performed by these entities and other affiliated entities. The following table summarizes all the compensation and fees the Company may pay to the Dealer Manager or to the Advisor or its affiliates, including amounts to reimburse their costs in providing services. | |||
Organization and Offering Stage | |||
Fees | Amount | ||
Selling Commissions | The Dealer Manager will receive selling commissions in an amount of up to 7% of the gross proceeds in the primary offering. The Dealer Manager will reallow all selling commissions to the participating broker-dealer who actually sold the Common Shares. Selling commissions are expected to be approximately $21.0 million if the maximum offering of 30 million shares of common stock is sold under the Offering. Alternatively, a participating broker-dealer may elect to receive a fee equal to 7.5% of the gross proceeds from the sale of Common Shares, of which 2.5% will be paid at the time of such sale and 1% will be paid on each anniversary of the closing of such sale up to and including the fifth anniversary of the closing of such sale, in which event, a portion of the dealer manager fee will be reallowed such that the combined selling commission and dealer manager fee do not exceed 10% of the gross offering proceeds (excluding securities purchased through the DRIP). From the Company's inception through March 31, 2015, the Company has not incurred any selling commissions. | ||
Dealer Manager Fee | The Dealer Manager will receive a dealer manager fee in an amount of up to 3% of gross proceeds in the primary offering. The Dealer Manager, in its sole discretion, may reallow all or any portion of the dealer manager fee to participating broker-dealers as a marketing fee. No dealer manager fee will be paid with respect to sales under the DRIP. The dealer manager fee will be reduced to 2.5% of the gross proceeds on sales by a participating broker- dealer in the Company's primary offering if a participating broker-dealer elects to receive the 7.5% fee described in ‘‘— Selling Commissions'' above. The aggregate estimated dealer manager fee is expected to be approximately $9.0 million if the maximum offering of 30 million Common Shares is sold under the Offering. From the Company's inception through March 31, 2015, the Company has not incurred any dealer manager fees. | ||
Organization and Offering | The Company will reimburse the Advisor for all organization and offering expenses that it funds in connection with the Offering, other than the selling commissions and dealer manager fee. The Company expects that such organization and offering expenses, other than selling commissions and dealer manager fee, will amount to approximately 2% of gross offering proceeds. In no event will organization and offering expenses (inclusive of selling commissions and dealer manager fees) exceed 15% of gross offering proceeds. | ||
Expenses | |||
Operational Stage | |||
Fees | Amount | ||
Acquisition Fee | The Company will pay to the Advisor or its affiliates 1% of the amount funded by us to originate or acquire an investment (including the Company's pro rata share (direct or indirect) of debt incurred in respect of such investment, but excluding acquisition fees and acquisition expenses). Notwithstanding the foregoing, the Company will not pay any acquisition fee to the Advisor or any of its affiliates with respect to any transaction between the Company and the Sponsor, any of its affiliates or any program sponsored by it. Assuming no origination or acquisition transactions between the Company and the Sponsor, any of its affiliates or any program sponsored by it, the estimated aggregate acquisition fees are expected to be approximately $10.6 million, if the maximum offering of 30 million Common Shares is sold under the Offering, assuming an aggregate long-term permanent leverage of approximately 75%. | ||
Acquisition Expenses | The Company will reimburse the Advisor for expenses actually incurred related to selecting, originating or acquiring investments on the Company's behalf, regardless of whether the Company actually acquires the related investments. In addition, the Company will pay third parties, or reimburse the Advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to, legal fees and expenses, travel and communications expenses, accounting fees and expenses and other closing costs and miscellaneous expenses, regardless of whether the Company acquires the related investments. The Company estimates that total acquisition expenses (including those paid to third parties, as described above) will be approximately 0.6% of the amount funded by us to originate or acquire an investment (including the Company's pro rata share (direct or indirect) of debt attributable to such investment, but excluding acquisition fees and acquisition expenses). In no event will the total of all acquisition fees and acquisition expenses (including those paid to third parties, as described above) with respect to a particular investment be unreasonable or, except in limited circumstances, exceed 5% of the amount funded by us to originate or acquire an investment (including the Company's pro rata share (direct or indirect) of debt attributable to such investment, but exclusive of acquisition fees and acquisition expenses). The estimated aggregate acquisition expenses are expected to be approximately $6.3 million, if the maximum offering of 30 million Common Shares is sold under the Offering, assuming an aggregate long-term permanent leverage of approximately 75%. | ||
Asset Management Fee | The Company will pay the Advisor or its assignees a monthly asset management fee equal to one-twelfth (1⁄12) of 1% of the cost of the Company's assets. The cost of the Company's assets means the amount funded by the Company for investments, including expenses and any financing attributable to such investments, less any principal received on such investments. | ||
Fees | Amount | ||
Operating Expenses | Beginning 12 months after the original effective date of the Offering, the Company will reimburse the Advisor's costs of providing administrative services, subject to the limitation that the Company generally will not reimburse the Advisor for any amount by which the total operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (i) 2% of average invested assets (as defined in the advisory agreement), and (ii) 25% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of investments for that period. After the end of any fiscal quarter for which the Company's total operating expenses exceed this 2%/25% limitation for the four fiscal quarters then ended, if the Company's independent directors exercise their right to conclude that this excess was justified, this fact will be disclosed in writing to the holders of Common Shares within 60 days. If the Company's independent directors do not determine such excess expenses are justified, the Advisor is required to reimburse the Company, at the end of the four preceding fiscal quarters, by the amount that the Company's aggregate annual total operating expenses paid or incurred exceed this 2%/25% limitation. | ||
Additionally, the Company will reimburse the Advisor for personnel costs in connection with other services; however, the Company will not reimburse the Advisor for (a) services for which the Advisor or its affiliates are entitled to compensation in the form of a separate fee, or (b) the salaries and benefits of the Company's named executive officers. | |||
Liquidation/Listing Stage | |||
Fees | Amount | ||
Disposition Fee | For substantial assistance in connection with the sale of investments and based on the services provided, as determined by the Company's independent directors, the Company will pay to the Advisor or any of its affiliates a disposition fee equal to up to 1% of the contract sales price of each investment sold. The Company will not pay a disposition fee upon the maturity, prepayment, workout, modification or extension of a debt instrument unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of: (a) 1% of the principal amount of the debt prior to such transaction; and (b) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of debt, the Company will pay a disposition fee upon the sale of such property. | ||
Annual Subordinated Performance Fee | The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of the annual return to holders of Common Shares, payable annually in arrears. Specifically, in any year in which holders of Common Shares receive payment of an 8% annual cumulative, pre-tax, non- compounded return on the aggregate capital contributed by them, the Advisor will be entitled to 15% of the amount in excess of the 8% per annum return; provided, that the annual subordinated performance fee will not exceed 10% of the aggregate return paid to the holders of Common Shares for the applicable year, and provided, further, that the annual subordinated performance fee will not be paid unless and until holders of Common Shares receive a return of the aggregate capital contributed by them. This fee will be payable only from net sales proceeds, which results in, or is deemed to result in, the return on the aggregate capital contributed by holders of Common Shares plus 8% per annum thereon. | ||
Subordinated Participation in Net Sales Proceeds (payable only if the Company is not listed on an exchange and the advisory agreement is not terminated or non-renewed) | The Advisor will receive from time to time, when available, including in connection with a merger, consolidation or sale, or other disposition of all or substantially all the Company's assets, 15% of remaining “net sales proceeds” (as defined in the Company's charter) after return of capital contributions plus payment to holders of Common Shares of an 8% annual cumulative, pre-tax, non-compounded return on the aggregate capital contributed by them. | ||
Subordinated Incentive Listing Fee (payable only if we are listed on an exchange) | Upon the listing of the Common Shares on a national securities exchange, including a listing in connection with a merger or other business combination, the Advisor will receive a fee equal to 15% of the amount by which the sum of the Company's market value (determined after listing) plus distributions attributable to net sales proceeds paid to the holders of Common Shares exceeds the sum of the aggregate capital contributed by them plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded return. | ||
Fees | Amount | ||
Subordinated Fee upon Termination or Non- Renewal of the Advisory Agreement | Upon termination or non-renewal of the advisory agreement with or without cause, including for poor performance by the Advisor, the Advisor will be entitled to receive a fee equal to 15% of the amount by which the sum of the market value of the Company's investments (as of the date of termination or non-renewal) plus distributions attributable to net sales proceeds paid to holders of Common Shares exceeds the sum of the aggregate capital contributed by them plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded return; provided, however, that the subordinated fee upon termination or non-renewal of the advisory agreement will not be paid unless and until holders of Common Shares receive a return of the aggregate capital contributed by them plus 8% annually thereon. | ||
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Summary of Significant Accounting Policies [Abstract] | |
Cash and Cash Equivalents | Cash and Cash Equivalents |
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. All cash and cash equivalents are held in commercial paper and money market funds. | |
Real Estate-Related Debt Investments | Real Estate-Related Debt Investments |
Real estate-related debt investments are intended to be held until maturity and accordingly, will be carried at cost, net of unamortized loan fees, origination fees, discounts, premiums and unfunded commitments. Real estate-related debt investments that are deemed impaired will be carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Real estate-related debt investments where the Company does not intend to hold the investment for the foreseeable future or until the debt investment's expected payoff will be classified as held for sale and recorded at the lower of cost or estimated value. | |
Interest income will be recognized on an accrual basis and any related premium, discount, origination costs and fees will be amortized over the life of the investment using the effective interest method. The amortization will be reflected as an adjustment to interest income in the Company's statements of operations. The amortization of a premium or accretion of a discount will be discontinued if such debt investment is reclassified to held for sale. | |
Real Estate Securities | Real Estate Securities |
Real estate securities will be classified as available for sale on the acquisition date, which will be carried at fair value. Unrealized gains (losses) will be recorded as a component of accumulated other comprehensive income, or AOCI, in the Company's statements of stockholders' equity. However, the Company may elect the fair value option for certain of the available-for-sale securities, and as a result, any unrealized gains (losses) on such securities will be recorded in unrealized gain (loss) on investments in the Company's statements of operations. | |
Interest income will be recognized using the effective interest method with any premium or discount amortized or accreted through earnings based on expected cash flow through the expected maturity date of the security. Changes to expected cash flow may result in a change to the yield, which will then be applied retrospectively for high-credit-quality securities that cannot be prepaid or otherwise settled in such a way that the holder would not recover substantially all the investment or prospectively for all other securities to recognize interest income. | |
Credit Losses and Impairment on Investments | Credit Losses and Impairment on Investments |
Real Estate-Related Debt Investments | |
Real estate-related debt investments will be considered impaired when, based on current information and events, it is probable that the Company will not be able to collect principal and interest amounts due according to the contractual terms. The Company will assess the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management will be required in this analysis. The Company will consider the estimated net recoverable value of the debt investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination will be based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the debt investment, a loan loss reserve will be recorded with a corresponding charge to provision for loan losses. The loan loss reserve for each debt investment will be maintained at a level that is determined to be adequate by management to absorb probable losses. | |
Income recognition will be suspended for a debt investment at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired debt investment is in doubt, all payments will be applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired debt investment is not in doubt, contractual interest will be recorded as interest income when received, under the cash basis method, until an accrual is resumed when the debt investment becomes contractually current and performance is demonstrated to be resumed. A debt investment will be written off when it is no longer realizable or is legally discharged. | |
Real Estate Securities | |
Real estate securities for which the fair value option is elected will not be evaluated for other-than-temporary impairment (‘‘OTTI'') as any change in fair value will be recorded in the Company's statements of operations. Realized losses on such securities will be reclassified to realized gain (loss) on investments and other as losses occur. | |
Real estate securities for which the fair value option is not elected will be evaluated for OTTI quarterly. Impairment of a security is considered to be other-than-temporary when: (a) the holder has the intent to sell the impaired security; (b) it is more likely than not the holder will be required to sell the security; or (c) the holder does not expect to recover the entire amortized cost of the security. When a real estate security has been deemed to be other-than-temporarily impaired due to (a) or (b), the security will be written down to its fair value and an OTTI will be recognized in the statements of operations. In the case of (c), the security will be written down to its fair value and the amount of OTTI will then be bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses will be recognized in the Company's statements of operations. The remaining OTTI related to the valuation adjustment will be recognized as a component of accumulated other comprehensive income in the Company's statements of equity. The portion of OTTI recognized through earnings will be accreted back to the amortized cost basis of the security through interest income, while amounts recognized through other comprehensive income will be amortized over the life of the security with no impact on earnings. Real estate securities which are not high- credit-quality will be considered to have an OTTI if the security has an unrealized loss and there has been an adverse change in expected cash flow. The amount of OTTI will then be bifurcated as discussed above. | |
Deferred Financing Costs | Deferred Financing Costs |
The Company will capitalize initial direct costs associated with financing activities. The costs will be capitalized upon the execution of the loan and amortized over the initial term of the corresponding loan. Amortization of deferred loan costs will begin in the period during which the loan is originated using the effective interest method over the term of the loan. | |
Income Taxes | Income Taxes |
As of March 31, 2015 and December 31, 2014, the Company is subject to federal income taxes as a regular (subchapter C) corporation. The Company intends to elect to be taxed as a REIT commencing with the taxable year ended December 31, 2015. If the Company qualifies as a REIT, it generally will not be subject to U.S. federal income tax on its taxable income or capital gain that it distributes to its stockholders. To maintain its REIT qualification, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. | |
Additionally, even if the Company qualifies as a REIT, it may still be subject to some U.S. federal, state and local taxes on its income and property and to U.S. federal income taxes and excise taxes on its undistributed income. | |
To maintain qualification as a REIT, the Company may engage in certain activities through a wholly owned taxable REIT subsidiary (‘‘TRS''). A TRS will be subject to U.S. federal, state, local and foreign income taxes. | |
Organization and Offering Costs | Organization and Offering Expenses |
Organization and offering expenses include all the expenses incurred in connection with the Offering. Organization and offering expenses (other than selling commissions and dealer manager fee) of the Company may be paid by the Advisor on behalf of the Company. | |
These costs include all costs and expenses paid by the Company in connection with its formation and the offering, including the Company's legal, accounting, printing, mailing and filing fees, charges of the escrow agent, reimbursements to the Dealer Manager and participating broker-dealers for due diligence expenses set forth in detailed and itemized invoices, amounts to reimburse the Advisor for its portion of the salaries of the employees of its affiliates who provide services to the Advisor, and other costs in connection with administrative oversight of such offering and the marketing process, such as preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by the Dealer Manager or participating broker-dealers. | |
The Advisor will advance the organization and offering expenses to the extent that the Company does not have the funds to pay such expenses. Organization and offering expenses advanced by the Advisor will not be liabilities to the Company unless and until the Company has sold a minimum of 200,000 Common Shares (excluding Common Shares purchased by New York, Tennessee and Pennsylvania investors) and the Offering breaks escrow. Once the Offering breaks escrow, the Company will record any offering expenses incurred from its inception to stockholder's equity as a reduction to additional paid-in capital (‘‘APIC'') as well as any organization costs incurred from its inception as a general and administrative cost and repay the Advisor with available funds for any costs paid by the Advisor. Through March 31, 2015, approximately $1.4 million has been incurred for organization and offering expenses. The Company has not recorded any of the organization and offering expenses incurred as a liability as the Offering has not broken escrow. | |
Accounting for Derivative Financial Instruments and Hedging Activities | Accounting for Derivative Financial Instruments and Hedging Activities |
The Company may enter into derivative financial instrument transactions in order to mitigate interest rate risk on a related financial instrument. The Company may designate these derivative financial instruments as hedges and apply hedge accounting. The Company will record all derivative instruments at fair value on the balance sheet. | |
Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, will be considered cash flow hedges. The Company will formally document all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking each hedge transaction. The Company will periodically review the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges will be accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in AOCI within stockholder's equity. Amounts will be reclassified from AOCI to the statement of operations in the period or periods the hedged forecasted transaction affects earnings. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, will be considered fair value hedges. The effective portion of the derivatives gain or loss will be initially reported as a component of AOCI and subsequently reclassified into earnings when the transaction affects earnings. The ineffective portion of the gain or loss will be reported in earnings immediately. | |
Stock-Based Compensation | Stock-Based Compensation |
The Company intends to adopt a stock incentive plan to align the long-term financial interest of its independent directors, officers and employees (if it ever has employees), employees of the Advisor and other affiliates, certain of its consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide services to the Company, with those of the stockholders. Awards will be granted at the fair market value on the date of the grant with fair value estimated using the Black-Scholes-Merton option valuation model, which incorporates assumptions surrounding the volatility, dividend yield, risk-free interest rate, expected life, and exercise price as compared to the underlying stock price on the grant date. As stock-based compensation expense recognized in the statements of operations will be based on awards ultimately expected to vest, the amount of expense will be reduced for forfeitures estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The tax benefits associated with these stock-based payments will be classified as financing activities in the statement of cash flows as required under previous regulations. | |
Concentration of Risk | Concentration of Risk |
The Company maintains its cash in bank deposit accounts, which, at times, may exceed U.S. federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. | |
Basic and Diluted Net Earnings per Common Share | Basic and Diluted Net Earnings per Common Share |
Net earnings per Common Share will be computed by dividing the net income/(loss) by the weighted average number of shares of common stock outstanding. Diluted income per Common Share takes into account the effect of dilutive instruments, such as stock options, but uses the average Common Share price for the period in determining the number of incremental Common Shares that are to be added to the weighted-average number of Common Shares outstanding. | |
New Accounting Pronouncements | New Accounting Pronouncements |
In May 2014, the FASB issued an accounting standards update that completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards. The update applies to all companies that enter into contracts with customers to transfer goods or services and is effective for us for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and companies have the choice to apply the update either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying the update at the date of initial application (January 1, 2017) and not adjusting comparative information. The Company is currently evaluating the requirements and impact of this update on its financial statements. | |
In April 2015, the FASB issued an accounting standards update to simplify the presentation of debt issuance costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This new guidance will be effective for the Company beginning January 1, 2016. The Company is currently evaluating the impact of this standard on the Company's financial statements. | |
The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its operations. |
Organization_Details
Organization (Details) (USD $) | 3 Months Ended | 0 Months Ended | 1 Months Ended |
Mar. 31, 2015 | Sep. 12, 2014 | Mar. 31, 2015 | |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||
Date of incorporation | 9-Sep-14 | ||
Lightstone Real Estate Income LLC [Member] | |||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||
Issuance of common shares, shares | 20,000 | ||
Shares issued, price per share | $10 | ||
Stock Offering [Member] | |||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||
Shares reserved for issuance | 30,000,000 | 30,000,000 | |
Shares reserved for issuance, price per share | 10 | ||
Gross proceeds from sale of common stock | $200,000 | ||
Issuance of common shares, shares | 20,000 | ||
Distribution Reinvestment Plan [Member] | |||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||
Shares reserved for issuance | 10,000,000 | 10,000,000 | |
Shares reserved for issuance, price per share | 9.5 |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended |
In Millions, except Share data, unless otherwise specified | Mar. 31, 2015 |
Accounting Policies [Line Items] | |
REIT annual distribution, percent of taxable income | 90.00% |
Minimum shares needed to be sold to incur organization and offering expenses | 200,000 |
Organization and offering expenses incurred | $1.40 |
Stockholders_Equity_Details
Stockholder's Equity (Details) | 3 Months Ended | ||
Mar. 31, 2015 | Feb. 11, 2015 | Dec. 31, 2014 | |
Stockholder's Equity [Abstract] | |||
Preferred Stock, shares authorized | 50,000,000 | 50,000,000 | |
Preferred Stock, shares outstanding | |||
Common Stock, shares authorized | 200,000,000 | 200,000,000 | 20,000 |
Common Stock, shares outstanding | 20,000 | 20,000 | |
Stock Incentive Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percent of outstanding shares issuable | 5.00% | ||
Exercise price, percent of fair market value | 100.00% | ||
Stock Incentive Plan [Member] | Ten Percent Stockholder [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Exercise price, percent of fair market value | 110.00% |
Related_Party_Transaction_and_1
Related Party Transaction and Other Arrangements (Organization and Offering Stage) (Details) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions [Abstract] | |
Increase in due from affiliate | $33,260 |
Stock Offering [Member] | |
Related Party Transaction [Line Items] | |
Expected selling commissions | 21,000,000 |
Shares reserved for issuance | 30,000,000 |
Expected dealer manager fee | $9,000,000 |
Dealer Manager [Member] | Stock Offering [Member] | |
Related Party Transaction [Line Items] | |
Selling commissions, percent of gross proceeds | 7.00% |
Dealer manager fee, percent of gross proceeds | 3.00% |
Participating broker-dealer or registered representative [Member] | |
Related Party Transaction [Line Items] | |
Dealer manager fee, percent of gross proceeds | 10.00% |
Participating broker-dealer or registered representative [Member] | Stock Offering [Member] | |
Related Party Transaction [Line Items] | |
Selling commissions, percent of gross proceeds | 7.50% |
Dealer manager fee, percent of gross proceeds | 2.50% |
Participating broker-dealer or registered representative [Member] | Stock Offering [Member] | Time of Sale of Stock [Member] | |
Related Party Transaction [Line Items] | |
Selling commissions, percent of gross proceeds | 2.50% |
Participating broker-dealer or registered representative [Member] | Stock Offering [Member] | Each Anniversary of Stock Sale Closing [Member] | |
Related Party Transaction [Line Items] | |
Selling commissions, percent of gross proceeds | 1.00% |
Advisor [Member] | Stock Offering [Member] | |
Related Party Transaction [Line Items] | |
Organization and offering expenses, percent of gross proceeds | 2.00% |
Advisor [Member] | Stock Offering [Member] | Maximum [Member] | |
Related Party Transaction [Line Items] | |
Organization and offering expenses, percent of gross proceeds | 15.00% |
Related_Party_Transaction_and_2
Related Party Transaction and Other Arrangements (Organization Stage) (Details) (USD $) | 3 Months Ended |
In Millions, except Share data, unless otherwise specified | Mar. 31, 2015 |
Related Party Transaction [Line Items] | |
Acquisition fee, percent of debt incurred to originate or acquire investment | 1.00% |
Aggregate long-term permenant leverage percentage | 75.00% |
Acquisition expenses, percent of debt incurred to originate or acquire investment | 0.60% |
Acquisition fees and acquisition expenses, percent of debt incurred to originate or acquire investment | 5.00% |
Asset management fee, multiplier | 0.08% |
Minimum percentage of average invested assets | 2.00% |
Minimum percentage of net income | 25.00% |
Stock Offering [Member] | |
Related Party Transaction [Line Items] | |
Estimated acquisition fee | 10.6 |
Shares reserved for issuance | 30,000,000 |
Estimated acquisition expenses | 6.3 |
Related_Party_Transaction_and_3
Related Party Transaction and Other Arrangements (Liquidation/Listing Stage) (Details) | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions [Abstract] | |
Disposition fee, percentage of contract sales price | 1.00% |
Disposition fee, percentage of principal debt or associated fees | 1.00% |
Annual cumulative, pre-tax, non-compounded return on aggregate capital contributed, percent | 8.00% |
Annual subordinated performance fee after cumulative return, percent | 15.00% |
Annual subordinated performance fee, maximum percentage of aggregate return payable | 10.00% |
Subordinated Participation in Net Sales Proceeds, percentage | 15.00% |
Subordinated Incentive Listing Fee, percentage | 15.00% |
Subordinated Fee upon Termination or Non- Renewal of the Advisory Agreement, percentage | 15.00% |