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DOCUMENTS INCORPORATED BY REFERENCE
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LIGHTSTONE VALUE PLUS REIT I, INC.
Table of Contents
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Special Note Regarding Forward-Looking Statements
This annual report on Form 10-K, together with other statements and information publicly disseminated by Lightstone Value Plus REIT I, Inc. (the “Lightstone REIT I”), which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September 16, 2021, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Lightstone REIT intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Lightstone REIT ’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond the Lightstone REIT’s control and which could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) uncertainties regarding the COVID-19 pandemic, including its impact on our business and the economy generally, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt, or other sources of financing on favorable terms, (iv) changes in governmental laws and regulations, (v) the level and volatility of interest rates and foreign currency exchange rates, (vi) the effect of the phase-out of the London Interbank Offered Rate, or LIBOR, as a variable rate debt benchmark and the transition to a different benchmark interest rate, (vii) the availability of suitable acquisition opportunities and (viii) increases in operating costs. Accordingly, there is no assurance that the Lightstone REIT’s expectations will be realized.
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PART I.
ITEM 1. BUSINESS:
General Description of Business
Structure
The Lightstone REIT I is a Maryland corporation, formed on June 8, 2004, which has elected to be taxed, and qualify as a real estate investment trust for U.S. federal income tax purposes (“REIT”). The Lightstone REIT I was formed primarily for the purpose of engaging in the business of investing in and owning commercial and residential real estate properties and making other real estate-related investments located throughout the United States.
The Lightstone REIT I is structured as an umbrella partnership real estate investment trust, (“UPREIT”), and substantially all of its current and future business is and will be conducted through Lightstone Value Plus REIT, L.P. (the “Operating Partnership”), a Delaware limited partnership formed on July 12, 2004. As of December 31, 2021, we held a 98% general partnership interest in our Operating Partnership’s common units.
The Lightstone REIT I and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns in this annual report refers to the Lightstone REIT I, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through our Operating Partnership, we own, operate and develop commercial, residential, and hospitality properties and make real estate-related investments, principally in the United States. Our real estate investments are held by us alone or jointly with other parties. We also originate or acquire mortgage loans secured by real estate. Although most of our investments are of these types, we may invest in whatever types of real estate or real estate-related investments that we believe are in our best interests. Since its inception, we have owned and managed various commercial and residential properties located throughout the United States. We evaluate all of our real estate investments as one operating segment.
As of December 31, 2021, we have ownership interests in (i) two consolidated operating properties, (ii) two consolidated development properties and (iii) seven unconsolidated operating properties. With respect to our consolidated operating properties, we wholly own the St. Augustine Outlet Center, a retail property containing 0.3 million square feet of gross leasable area, and have a majority ownership interest of 59.2% in Gantry Park Landing, a multi-family residential property containing 199 apartment units. With respect to our consolidated development properties, we wholly own two projects consisting of the Lower East Side Moxy Hotel and the Exterior Street Project. We also hold a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”) which we account for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any. The Joint Venture is between us and the operating partnership of Lightstone Value Plus REIT II, Inc., a REIT also sponsored by our Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, we have other real estate-related investments, including preferred contributions that were made pursuant to agreements with various related party entities (the “Preferred Investments”) and nonrecourse promissory notes made to unaffiliated third-parties. Our real estate investments have been and are expected to continue to be held by the Company alone or jointly with other parties.
Our advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 6, 2004, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 limited partner common units (“Common Units”) in the Operating Partnership. Our Advisor also owns 20,000 shares of our common stock (“Common Shares”) which were issued on July 6, 2004 for $200,000, or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as the sponsor (the “Sponsor”) during our initial public offering (the “Offering”), which terminated on October 10, 2008. Our Advisor, together with our board of directors (the “Board of Directors”) and pursuant to the terms of an advisory agreement, has the primary responsibility for making investment decisions on our behalf and managing our day-to-day operations. Through his ownership and control of The Lightstone Group, LLC, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP, LLC, a Delaware limited liability company, which owns an aggregate of $30.0 million of special general partner interests (“SLP Units”) in the Operating Partnership which were purchased, at a cost of $100,000 per unit, in connection with our Offering. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control the Lightstone REIT I or the Operating Partnership.
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We do not have any employees. The Advisor receives compensation and fees for services related to the investment and management of our assets.
Our Advisor has affiliates which may manage and develop certain of our properties. However, we also contract with other unaffiliated third-party property managers.
Our Common Shares are not currently listed on a national securities exchange. We may seek to list our stock for trading on a national securities exchange only if a majority of our independent directors believe listing would be in the best interest of our stockholders. We do not intend to list our shares at this time. We do not anticipate that there would be any market for our shares of common stock until they are listed for trading.
Noncontrolling Interests
Partners of Operating Partnership
On July 6, 2004, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 Common Units. The Advisor has the right to convert the Common Units into cash or, at the option of the Company, an equal number of Common Shares.
In connection with the Offering, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $30.0 million of SLP Units in the Operating Partnership at a cost of $100,000 per unit. As the majority owner of the SLP Units, Mr. Lichtenstein is the beneficial owner of a 99% interest in such SLP Units and thus receives an indirect benefit from any distributions made in respect thereof. These SLP Units may be entitled to a portion of any regular and liquidation distributions that we make to our stockholders, but only after our stockholders have received a stated preferred return.
In addition, an aggregate of 497,209 Common Units were issued to other unrelated parties during the years ended December 31, 2008 and 2009 and remain outstanding as of December 31, 2021.
Other Noncontrolling Interests in Consolidated Subsidiaries
As of December 31, 2021, the other noncontrolling interests in consolidated subsidiaries include ownership interests in (i) Pro-DFJV Holdings LLC (“PRO”) held by the Company’s Sponsor, (ii) 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”), held by the Company’s Sponsor and other affiliates and (iii) various joint ventures held by affiliates of our Sponsor that have originated promissory notes to unaffiliated third parties. PRO’s holdings principally consist of Marco OP Units and Marco II OP Units. The 2nd Street Joint Venture owns Gantry Park Landing.
Related Party
Our Advisor and its affiliates, and Lightstone SLP, LLC are related parties of the Company. Certain of these entities are entitled to compensation for services related to the investment, management and disposition of our assets. The compensation is based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements as outlined in each of the respective agreements.
Primary Investment Objectives
Our primary objective is to achieve capital appreciation with a secondary objective of income without subjecting principal to undue risk.
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Acquisition and Investment Policies
We have, to date, acquired and/or developed residential, commercial and hospitality properties principally, all of which are located in the United States and also made other real estate-related investments. Our acquisitions have included both portfolios and individual properties. Our current operating properties consist of one retail property (the St. Augustine Outlet Center) and one multi-family residential property (Gantry Park Landing). We have also acquired various parcels of land and air rights related to the development and construction of real estate properties. Additionally, we have made preferred investments in related parties and originated nonrecourse loans to unaffiliated third-party borrowers.
We may acquire the following types of real estate interests:
| ● | Fee interests in market-rate, middle market multifamily properties at a discount to replacement cost located either in emerging markets or near major metropolitan areas. We will attempt to identify those sub-markets with job growth opportunities and demand demographics which support potential long-term value appreciation for multifamily properties. |
| ● | Fee interests in well-located, multi-tenant, community, power and lifestyle shopping centers and malls located in highly trafficked retail corridors, in selected high-barrier to entry markets and submarkets. We will attempt to identify those sub-markets with constraints on the amount of additional property supply will make future competition less likely. |
| ● | Fee interests in improved, multi-tenant, industrial properties located near major transportation arteries and distribution corridors with limited management responsibilities. |
| ● | Fee interests in improved, multi-tenant, office properties located near major transportation arteries in urban and suburban areas. |
| ● | Fee interests in lodging properties located near major transportation arteries in urban and suburban areas. |
All of the properties are owned by subsidiary limited partnerships or limited liability companies. These subsidiaries are single-purpose entities that we created to own a single property, and each have no assets other than the property it owns. These entities represent a useful means of shielding our Operating Partnership from liability under state laws and will make the underlying properties easier to transfer. However, tax law disregards single-member LLCs and so it will be as if the Operating Partnership owns the underlying properties for tax purposes. Use of single-purpose entities in this manner is customary for REITs. Our independent directors are not required to approve all transactions involving the creation of subsidiary limited liability companies and limited partnerships that we use for investment in properties on our behalf. These subsidiary arrangements are intended to ensure that no environmental or other liabilities associated with any particular property can be attributed against other properties that the Operating Partnership or we will own. The limited liability aspect of a subsidiary’s form will shield parent and affiliated (but not subsidiary) companies, including the Operating Partnership and us, from liability assessed against it. No additional fees are imposed upon the REIT by the subsidiary companies’ managers and these subsidiaries are not affected our stockholders’ voting rights.
We have not and do not intend to make significant investments in single family residential properties; leisure home sites; farms; ranches; timberlands; unimproved properties not intended to be developed; or mining properties.
Not more than 10% of our total assets may be invested in unimproved real property. For purposes of this paragraph, “unimproved real properties” does not include properties acquired for the purpose of producing rental or other operating income, properties under construction and properties for which development or construction is planned within one year. Additionally, we do not invest in contracts for the sale of real estate unless in recordable form and appropriately recorded.
Although we are not limited as to the geographic area where we may conduct our operations, we have invested and may continue to invest in properties located near the existing operations of our Sponsor, in order to achieve economies of scale where possible.
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Financing Strategy and Policies
We utilize leverage when acquiring and developing our properties. The number of different properties we acquire are affected by numerous factors, including, the amount of funds available to us. When interest rates on loans are high or financing is otherwise unavailable on terms that are satisfactory to us, we may purchase certain properties for cash with the intention of obtaining a loan for a portion of the purchase price or development costs at a later time. However, we have and intend to continue to limit our aggregate long-term permanent borrowings to 75% of the aggregate fair market value of all properties unless any excess borrowing is approved by a majority of the independent directors and is disclosed to our stockholders.
Our charter provides that the aggregate amount of borrowing, both secured and unsecured, may not exceed 300% of net assets in the absence of a satisfactory showing that a higher level is appropriate, the approval of the Board of Directors and disclosure to stockholders. Net assets means our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders, along with justification for such excess. As of December 31, 2021, our total borrowings represented 59% of net assets.
We have financed our property acquisitions and development activities through a variety of means, including but not limited to individual non-recourse mortgages and through the exchange of an interest in the property for limited partnership units of the Operating Partnership. Generally, though not exclusively, we intend to seek to finance our investments with debt which will be on a non-recourse basis. However, we may, secure recourse financing or provide a guarantee to lenders, if we believe this may result in more favorable terms.
Tax Status
We elected to be taxed and qualify as a REIT, commencing with the taxable year ended December 31, 2005. If we remain qualified as a REIT, we generally will not be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT qualification under the Internal Revenue Code of 1986, as amended, or the Code, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with generally accepted accounting principles in the United States of America, or GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify as a REIT. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. Additionally, even if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income.
To maintain our qualification as a REIT, we engage in certain activities such as providing real estate-related services through wholly-owned taxable REIT subsidiaries (“TRSs”). As such, we are subject to U.S. federal and state income and franchise taxes from these activities.
As of December 31, 2021 and 2020, we had no material uncertain income tax positions. Additionally, even if we continue to qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income, if any.
Competition
The commercial, multifamily residential and hospitality real estate markets are highly competitive. We compete in markets with other owners and operators of such properties. The development of new properties intensifies the competition among owners and operators of these types of real estate in many market areas in which we either operate or intend to operate. We compete based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed. The number of competing properties in a particular market could have a material effect on our occupancy levels, rental rates and on the operating expenses of certain of our properties.
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In addition, we compete with other entities engaged in real estate investment activities to locate suitable properties to acquire and/or develop and also to locate tenants and purchasers for our properties. These competitors include other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, governmental bodies and other entities. There also may be other REITs with asset acquisition objectives similar to ours that may be organized in the future. Some of these competitors, including larger REITs, have substantially greater marketing and financial resources than we have and generally may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of tenants. In addition, these same entities seek financing through similar channels to those sought by us. Therefore, we compete for institutional investors in a market where funds for real estate investment may decrease.
Competition from these and other third party real estate investors may limit the number of suitable investment opportunities available to us. It may also result in higher prices, lower yields and a narrower spread of yields over our borrowing costs, making it more difficult for us to acquire new investments on attractive terms.
We believe that our Sponsor’s experience, coupled with our financing, professionalism, diversity of investments and reputation in the industry enable us to compete with the other real estate investment companies.
Because we are organized as an UPREIT, we believe we are well positioned within the industries in which we operate to offer existing property owners the potential opportunity to contribute their properties to us in tax-deferred transactions using our operating partnership units as transactional currency. As a result, we may have a competitive advantage over certain of our competitors that are structured as traditional REITs and non-REITs in pursuing acquisitions with tax-sensitive sellers.
COVID-19 Pandemic
The World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future.
As a result of previously imposed restrictions, we temporarily closed our St. Augustine Outlet Center from March 20, 2020 through May 7, 2020. During the COVID-19 pandemic, the property’s occupancy declined and because of limited leasing success, we began exploring various strategic alternatives for our St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that we would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to our other tenants that we would not renew their leases at scheduled expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, we recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021. See Note 8 of the Notes to Consolidated Financial Statements for additional information.
Additionally, as a result of the COVID-19 pandemic, during 2020 we saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted. However, both occupancy and rental rates have improved considerably throughout 2021 and have returned to pre-COVID-19 levels.
To-date, the COVID-19 pandemic has not had any significant impact on our development projects. Furthermore, our other real estate-related investments (both our preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers) also relate to various development projects which are at different stages in their respective development process. These investments, which are subject to similar restrictions and other measures, have also not yet been significantly impacted by the COVID-19 pandemic.
The overall extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.
If our operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates further decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on our preferred investments in related parties, our business and financial results could be materially and adversely impacted.
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Environmental
As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. Compliance with existing laws has not had a material adverse effect on our financial condition or results of operations, and management does not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired or developed in the future.
Employees
We do not have employees. We entered into an advisory agreement with our Advisor on April 22, 2005, pursuant to which our Advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments, subject to oversight by the Board of Directors. We pay our Advisor fees for services related to the investment and management of our assets, and we reimburse our Advisor for certain expenses incurred on our behalf.
Available Information
We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and proxy statements, with the United States Securities and Exchange Commission (the “SEC”). Stockholders may obtain copies of our filings with the SEC, free of charge, from the website maintained by the SEC at http://www.sec.gov, or at the SEC’s Public Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our office is located at 1985 Cedar Bridge Avenue, Lakewood, NJ 08701. Our telephone number is (732) 367-0129. Our website is www.lightstonecapitalmarkets.com.
ITEM 1B. UNRESOLVED STAFF COMMENTS:
None applicable.
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ITEM 2. PROPERTIES:
Operating Properties
St. Augustine Outlet Center
We wholly own the St. Augustine Outlet Center, a retail property containing 0.3 million square feet of gross leasable area located in St. Augustine, Florida. The St. Augustine Outlet Center was built in 1998 and subsequently acquired by us in 2006 and renovated and expanded in 2008. During the COVID-19 pandemic, the property’s occupancy declined and because of limited leasing success, we began exploring various strategic alternatives for our St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that we would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to our other tenants that we would not renew their leases at scheduled expiration. As of December 31, 2021, the property was 67% occupied. However, because of the aforementioned lease terminations and scheduled expirations, substantially all of the tenants vacated during January 2022. See Note 8 of the Notes to the Consolidated Financial Statements for additional information.
Gantry Park Landing
We have a 59.2% membership interest in a joint venture which developed, constructed and owns Gantry Park Landing, a multi-family apartment building located in Queens, New York. The following table contains certain information for Gantry Park Landing as of December 31, 2021.
| Location | Year Built | Leaseable Units | Percentage
Occupied as of December 31, 2021 | Annualized
Revenues based on rents at December 31, 2021 | Annualized
Revenues per unit at December 31, 2021 | |||||||||||||||
| Gantry Park Landing (Multi-Family Apartment Building) | Queens, New York | 2013 | 199 | 99.0 | % | $ | 9.5 million | $ | 48,265 | |||||||||||
Annualized revenue is defined as the minimum monthly payments due as of December 31, 2021 annualized.
Development Properties
Lower East Side Moxy Hotel
On December 3, 2018, we acquired three adjacent parcels of land located at 147-151 Bowery, New York, New York on which we are developing a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”), which is currently under construction and expected to open during the fourth quarter of 2022.
Exterior Street Project
On February 27, 2019, we, initially acquired two adjacent parcels of land located at 355 and 399 Exterior Street, New York, New York and subsequently acquired an additional adjacent parcel in September 2021 on which we are currently developing a multi-family residential property (the “Exterior Street Project”).
The following is a summary of the amounts incurred and capitalized to construction in progress for our development projects as of December 31, 2021 (dollars in thousands):
| Development Project | ||||
| Lower East Side Moxy Hotel | $ | 146,747 | ||
| Exterior Street Project | 87,467 | |||
| Total | $ | 234,214 | ||
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ITEM 3. LEGAL PROCEEDINGS:
From time to time in the ordinary course of business, we may become subject to legal proceedings, claims or disputes.
As of the date hereof, we are not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on our results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES:
Shareholder Information
As of March 15, 2022, we had 22.1 million common shares outstanding, held by a total of 5,963 stockholders. The number of stockholders is based on the records of DST Systems Inc., which serves as our registrar and transfer agent.
Market Information
The Company’s common stock is not currently listed on a national securities exchange. The Company may seek to list its common stock for trading on a national securities exchange only if a majority of its independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares of common stock until they are listed for trading.
Estimated Net Asset Value (“NAV”) and NAV per Share of Common Stock (“NAV per Share”)
On December 16, 2021, our board of directors determined and approved our estimated NAV of $313.8 million and resulting estimated NAV per Share of $11.75, after allocations of value to special general partner interests, or SLP Units, in our Operating Partnership, held by Lightstone SLP, LLC, an affiliate of our Advisor, assuming a liquidation event, both as of September 30, 2021. From our inception through the termination of our initial public offering on October 10, 2008, Lightstone SLP, LLC, an affiliate of our Advisor, contributed cash of $30.0 million in exchange for 300 SLP Units, at a cost of $100,000 per unit.
The estimated NAV of our shares was calculated as of a particular point in time. The estimated NAV of our shares will fluctuate over time in response to developments related to individual assets in the portfolio and the management of those assets and in response to the real estate and finance markets. There is no assurance of the extent to which the current estimated valuation should be relied upon for any purpose after its effective date regardless that it may be published on any statement issued by us or otherwise.
Process and Methodology
Our Advisor, along with any necessary material assistance or confirmation of a third-party valuation expert or service, is responsible for calculating our estimated NAV and resulting NAV per Share, which we currently expect will be done on an annual basis unless our Common Shares are approved for listing on a national securities exchange. Our board of directors will review and approve each estimate of NAV and resulting NAV per Share.
Our estimated NAV and resulting NAV per Share as of September 30, 2021 were calculated with the assistance of both our Advisor and Robert A. Stanger & Co, Inc. (“Stanger”), an independent third-party valuation firm engaged by us to assist with the valuation of our assets, liabilities and any allocations of value to SLP Units. Our Advisor recommended and our board of directors established the estimated NAV per Share as of September 30, 2021 based upon the analysis and reports provided by our Advisor and Stanger. The process for estimating the value of our assets, liabilities and allocations of value to SLP Units, is performed in accordance with the provisions of the Investment Program Association Practice Guideline 2013-01, “Valuations of Publicly Registered Non-Listed REITs.” We believe that our valuations were developed in a manner reasonably designed to ensure their reliability.
The engagement of Stanger with respect to our estimated NAV and resulting NAV per Share as of September 30, 2021 was approved by our board of directors, including all of our independent directors. Stanger has extensive experience in conducting asset valuations, including valuations of commercial real estate, debt, properties and real estate-related investments.
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With respect to our estimated NAV and resulting NAV per Share as of September 30, 2021, Stanger prepared appraisal reports (the “Stanger Appraisal Reports”), summarizing key inputs and assumptions, for three of our properties (the “Stanger Appraised Properties”), all of which we wholly own and consolidate, consisting of (i) the St. Augustine Outlet Center and (ii) the Lower East Side Moxy Hotel and the Exterior Street Project (collectively, the “Development Properties”).
Stanger also prepared a NAV report (the “September 2021 NAV Report”) which estimates our NAV per Share as of September 30, 2021. The September 2021 NAV Report relied upon (i) the Stanger Appraisal Reports for the Stanger Appraised Properties, (ii) an appraisal report prepared by another independent third-party valuation firm for Gantry Park Landing, our 59.2% majority-owned and consolidated multi-family residential property, (iii) Stanger’s estimated value of our outstanding indebtedness, (iv) our Advisor’s value opinion with respect to our 2.5% non-managing ownership interest in an unconsolidated joint venture (the “Joint Venture”), assuming a liquidation pursuant to the terms of the Joint Venture’s operating agreement, and our other investments in related parties, (v) Stanger’s estimate of the allocation of value to the SLP Units, and (vi) our Advisor’s estimate of the value of our cash and cash equivalents, marketable securities, restricted escrows, other assets, other liabilities and other non-controlling interests, to calculate estimated NAV per Share, all as of September 30, 2021.
The table below sets forth the calculation of our estimated NAV and resulting NAV per Share as of September 30, 2021, as well as the comparable calculation as of September 30, 2020. Certain amounts are reflected net of noncontrolling interests, as applicable. Dollar and share amounts are presented in thousands, except per share data.
| As
of September 30, 2021 | As
of September 30, 2020 | |||||||||||||||
| Value | Per Share | Value | Per Share | |||||||||||||
| Net Assets: | ||||||||||||||||
| Real Estate Properties | $ | 329,755 | $ | 14.53 | $ | 287,124 | $ | 12.60 | ||||||||
| Non-Real Estate Assets: | ||||||||||||||||
| Cash and cash equivalents | 32,245 | 56,521 | ||||||||||||||
| Investments in related parties | 15,541 | 15,657 | ||||||||||||||
| Marketable securities, available for sale | 53,071 | 36,192 | ||||||||||||||
| Restricted escrows | 1,601 | 2,419 | ||||||||||||||
| Notes receivable, net | 32,468 | 51,258 | ||||||||||||||
| Other assets | 1,840 | 1,337 | ||||||||||||||
| Total non-real estate assets | 136,766 | 6.02 | 163,384 | 7.17 | ||||||||||||
| Total Assets | 466,521 | 20.55 | 450,508 | 19.77 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Mortgage notes payable | (131,811 | ) | (140,441 | ) | ||||||||||||
| Notes payable | - | - | ||||||||||||||
| Other liabilities | (20,268 | ) | (13,282 | ) | ||||||||||||
| Total liabilities | (152,079 | ) | (6.70 | ) | (153,723 | ) | (6.75 | ) | ||||||||
| Other noncontrolling interests | (617 | ) | (0.03 | ) | (617 | ) | (0.02 | ) | ||||||||
| Net Asset Value before Allocations to SLP Units | 313,825 | 13.82 | 296,168 | 13.00 | ||||||||||||
| Allocations to SLP Units | (47,040 | ) | (2.07 | ) | (41,499 | ) | (1.82 | ) | ||||||||
| Net Asset Value | $ | 266,785 | $ | 11.75 | $ | 254,669 | $ | 11.18 | ||||||||
| Shares of Common Stock Outstanding(1) | 22,702 | 22,784 | ||||||||||||||
Note:
| (1) | Includes 0.5 million shares of our common stock assuming the conversion of an equal number of common units of limited partnership interest in our Operating Partnership (“common units”). |
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Use of Independent Valuation Firm:
As discussed above, our Advisor is responsible for calculating our NAV. In connection with determining our NAV, our Advisor may rely on the material assistance or confirmation of a third-party valuation expert or service. In this regard, Stanger was selected by our board of directors to assist our Advisor in the calculation of our estimated NAV and resulting NAV per Share as of September 30, 2021. Stanger’s service included appraising the Stanger Appraised Properties and preparing the September 2021 NAV Report. Stanger is engaged in the business of appraising commercial real estate properties and is not affiliated with us or our Advisor. The compensation we paid to Stanger was based on the scope of work and not on the appraised values of our real estate properties. The appraisals were performed in accordance with the Code of Ethics and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation. The Stanger Appraisal Reports were reviewed, approved, and signed by an individual with the professional designation of MAI licensed in the state where each real property is located. The use of the reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In preparing its reports, Stanger did not, and was not requested to; solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of us.
Stanger collected reasonably available material information that it deemed relevant in appraising our real estate properties. Stanger relied in part on property-level information provided by our Advisor, including (i) property historical and projected operating revenues and expenses; (ii) property lease agreements and/or lease abstracts; and (iii) information regarding recent or planned capital expenditures.
In conducting their investigation and analyses, Stanger took into account customary and accepted financial and commercial procedures and considerations as they deemed relevant. Although Stanger reviewed information supplied or otherwise made available by us or the Advisor for reasonableness, they assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to them by any other party and did not independently verify any such information. Stanger has assumed that any operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Stanger were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of our management, our board of directors, and/or our Advisor. Stanger relied on us to advise them promptly if any information previously provided became inaccurate or was required to be updated during the period of their review.
In performing its analyses, Stanger made numerous other assumptions as of various points in time with respect to industry performance, general business, economic, and regulatory conditions, and other matters, many of which are beyond their control and our control. Stanger also made assumptions with respect to certain factual matters. For example, unless specifically informed to the contrary, Stanger assumed that we have clear and marketable title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no significant deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density, or shape are pending or being considered. Furthermore, Stanger’s analyses, opinions, and conclusions were necessarily based upon market, economic, financial, and other circumstances and conditions existing as of or prior to the date of the Stanger Appraisal Reports, and any material change in such circumstances and conditions may affect Stanger’s analyses and conclusions. The Stanger Appraisal Reports contain other assumptions, qualifications, and limitations that qualify the analyses, opinions, and conclusions set forth therein. Furthermore, the prices at which our real estate properties may actually be sold could differ from Stanger’s analyses.
Stanger is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public security offerings, private placements, business combinations, and similar transactions. We do not believe that there are any material conflicts of interest between Stanger, on the one hand, and us, our Sponsor, our Advisor, and our affiliates, on the other hand. Our Advisor engaged Stanger on behalf of our board of directors to deliver their reports to assist in the NAV calculation as of September 30, 2021 and Stanger received compensation for those efforts. In addition, we agreed to indemnify Stanger against certain liabilities arising out of this engagement. In the two years prior to the date of this filing, Stanger was previously engaged by us for appraisal and valuation services in connection with our financial reporting requirements. Stanger has received usual and customary fees in connection with those services. Stanger may from time to time in the future perform other services for us and our Sponsor or other affiliates of the Sponsor, so long as such other services do not adversely affect the independence of Stanger as certified in the applicable Appraisal Reports. During the past two years Stanger has also been engaged to provide appraisal services to another non-traded REIT sponsored by our Sponsor for which it was paid usual and customary fees.
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Although Stanger considered any comments received from us and our Advisor relating to their reports, the final appraised values of the Stanger Appraised Properties were determined by Stanger. The reports are addressed to our board of directors to assist our board of directors in calculating our estimated NAV per Share as of September 30, 2021. The reports are not addressed to the public, may not be relied upon by any other person to establish our estimated NAV per Share, and do not constitute a recommendation to any person to purchase or sell any shares of our common stock.
Our goal in calculating our estimated NAV is to arrive at values that are reasonable and supportable using what we deem to be appropriate valuation methodologies and assumptions. The reports, including the analysis, opinions, and conclusions set forth in such reports, are qualified by the assumptions, qualifications, and limitations set forth in the respective reports. The following is a summary of our valuation methodologies used to value our assets and liabilities by key component:
Real estate properties:
As of September 30, 2021, we have ownership interests in four consolidated properties (collectively, the “Real Estate Properties”).
As described above, we engaged Stanger to provide an appraisal of the Stanger Appraised Properties consisting of three of our four consolidated properties in which we held ownership interests as of September 30, 2021. The Stanger Appraised Properties consist of the St. Augustine Outlet Center and the Development Properties. We also engaged another independent third-party valuation firm to provide an appraisal report for Gantry Park Landing. In preparing their appraisal reports, the scope of the work performed by Stanger and the other independent third-party valuation firm included the following procedures, as well other factors:
| ● | A review of all property level information provided by our Advisor; |
| ● | A review of the historical performance of our real estate investments and business plans related to operations of the investments; |
| ● | A review of the data models prepared by the Advisor supporting the valuation for each investment; and |
| ● | A review of the applicable markets by means of publications and other resources to measure current market conditions, supply and demand factors, and growth patterns. |
Stanger and the other independent third-party valuation firm employed the income approach and/or the sales comparison approach to estimate the value of the appraised properties. The income approach involves an economic analysis of the property based on its potential to provide future net annual income. As part of the valuation, a discounted cash flow analysis (“DCF Analysis”) and/or direct capitalization analysis was used in the income approach to determine the value of our interest in the portfolio. The indicated value by the income approach represents the amount an investor may pay for the expectation of receiving the net cash flow from the property.
The direct capitalization analysis is based upon the net operating income of the property capitalized at an appropriate capitalization rate for the property based upon property characteristics and competitive position and market conditions at the date of the appraisal.
In applying the DCF Analysis, pro forma statements of operations for the property including revenues and expenses are analyzed and projected over a multi-year period. The property is assumed to be sold at the end of the multi-year holding period. The reversion value of the property which can be realized upon sale at the end of the holding period is calculated based on the capitalization of the estimated net operating income of the property in the year of sale, utilizing a capitalization rate deemed appropriate in light of the age, anticipated functional and economic obsolescence and competitive position of the property at the time of sale. Net proceeds to owners are determined by deducting appropriate costs of sale. The discount rate selected for the DCF Analysis is based upon estimated target rates of return for buyers of similar properties.
The sales comparison approach utilizes indices of value derived from actual or proposed sales of comparable properties to estimate the value of the subject property. The appraiser analyzed such comparable sale data as was available to develop a market value conclusion for the subject property.
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Stanger prepared the Stanger Appraisal Reports and the other independent third-party valuation firm prepared an appraisal report for Gantry Park Landing, summarizing key inputs and assumptions, for each of the appraised properties using financial information provided by us and our Advisor. From such review, Stanger and the other independent third-party valuation firm selected the appropriate cash flow discount rate, residual discount rate, and terminal capitalization rate in the DCF Analysis, if applicable, the appropriate capitalization rate in the direct capitalization analysis and the appropriate price per unit in the sales comparison analysis. As for those properties consolidated on our financials, and for which we do not own 100% of the ownership interest, the property value was adjusted to reflect our ownership interest in such property after consideration of the distribution priorities associated with such property.
The estimated values for our investments in real estate may or may not represent current market values and do not equal the book values of our real estate investments in accordance with U.S. GAAP. Our consolidated investments in real estate are currently carried in our consolidated financial statements at their amortized cost basis, adjusted for any loss impairments and bargain purchase gains recognized to date. Our unconsolidated investments in real estate are currently accounted for under the cost method of accounting in our consolidated financial statements.
St. Augustine Outlet Center
As of September 30, 2021, our wholly owned St. Augustine Outlet Center, a retail property, was valued at $24.9 million, based on a sales comparison approach.
Gantry Park Landing
As of September 30, 2021, our 59.2% ownership interest in Gantry Park Landing, a multi-family residential property, was valued at $75.5 million. The following summarizes the key assumptions that were used in the discounted cash flow model to estimate the value of Gantry Park Landing as of September 30, 2021:
| Gantry | ||||
| Park Landing | ||||
| Weighted-average: | ||||
| Exit capitalization rate | 4.25 | % | ||
| Discount rate | 5.25 | % | ||
| Annual market rent growth rate | 2.95 | % | ||
| Annual net operating income growth rate | 2.88 | % | ||
| Holding period (in years) | 11.0 | |||
While we believe that the assumptions made by the other independent third-party appraisal firm for Gantry Park Landing are reasonable, a change in these assumptions would impact the calculation of the estimated value included in our Real Estate Properties. The table below represents the estimated increase or decrease to our estimated NAV per Share resulting from a 25-basis point increase and decrease in the capitalization rate and discount rate for Gantry Park Landing. The table is presented to provide a hypothetical illustration of the possible results if only one change in assumptions was made, with all other factors remaining constant. Further, each of these assumptions could change by more or less than 25 basis points or not at all.
| Change in NAV per Share | ||||||||
| Increase of | Decrease of | |||||||
| 25 basis points | 25 basis points | |||||||
| Exit capitalization rate | $ | (0.19 | ) | $ | 0.22 | |||
| Discount rate | $ | (0.07 | ) | $ | 0.07 | |||
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Development Properties
As of September 30, 2021, we wholly own and consolidate the Development Properties consisting of the following:
Lower East Side Moxy Hotel
As of September 30, 2021, we wholly own and consolidate the Lower East Side Moxy Hotel, a development project which when completed will consist of a 296-room Marriott-branded hotel located at 147-151 Bowery, New York, New York As of September 30, 2021, because the Lower East Side Moxy Hotel was under development, Stanger deemed it appropriate to determine its fair value of $132.7 million as of that date based on the estimated fair value of the underlying land of $58.7 million (using a sales comparison approach) plus other development costs incurred of $74.0 million.
Exterior Street Project
As of September 30, 2021, we wholly own and consolidate the Exterior Street Project, a multi-family development project located at 355 and 399 Exterior Street, New York, New York. As of September 30, 2021, because the Exterior Street Project was under development, Stanger deemed it appropriate to determine its fair value of $96.6 million as of that date based on the aggregate estimated fair value of the underlying land of $70.1 million (using a sales comparison approach) plus other development costs incurred of $26.5 million.
The aggregate fair value of our Real Estate Properties of $329.8 million compared to their aggregate carrying value of $275.7 million, both as of September 30, 2021, equates to an increase in value of 19.6%.
Cash and cash equivalents: The estimated values of our cash and cash equivalents approximate their carrying values due to their short maturities.
Investments in related parties: As of September 30, 2021, we had various investments in related parties, which were classified as investments in related parties in our consolidated balance sheets, as follows:
| ● | As of September 30, 2021, we have a 2.5% non-managing ownership interest in the Joint Venture, which owns seven hospitality properties. The Joint Venture is between us and the operating partnership of Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a real estate investment trust also sponsored by our Sponsor, which has a 97.5% managing ownership interest in the Joint Venture. We do not consolidate our ownership interest in the Joint Venture but rather account for it under the cost method of accounting. As of September 30, 2021, our Advisor estimated the fair value of our ownership interest in the Joint Venture was $1.0 million based on a hypothetical liquidation of the estimated value of the Joint Venture’s net assets, which approximated our carrying value. |
| ● | We have entered into agreements with various related party entities pursuant to which we have made aggregate outstanding contributions of $14.5 million to affiliates of our Sponsor which have either developed or are developing various residential and hospitality projects located in the New York City and Miami metropolitan areas. These contributions were made pursuant to instruments (the “Preferred Investments”) that entitle us to monthly preferred distributions at 12% per annum and are classified as held-to-maturity securities and are recorded at cost. As of September 30, 2021, the aggregate estimated value of our Preferred Investments of $14.5 million approximated their carrying values based on market rates for similar instruments. |
Marketable securities, available for sale: The estimated values of our marketable securities, available for sale, are based on Level 1 and Level 2 inputs. Level 1 inputs are inputs that are observable, either directly or indirectly, such as quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. All of our marketable securities measured using Level 2 inputs were valued based on a market approach using readily available quoted market prices for similar assets.
Restricted escrows: The estimated values of our restricted escrows approximate their carrying values due to their short maturities.
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Notes receivable, net: The estimated values of our notes receivable generally approximate their carrying values as of September 30, 2020 based on current market rates for similar instruments.
Other assets: Our other assets consist of tenant accounts receivable and prepaid expenses and other assets. The estimated values of these items approximate their carrying values due to their short maturities. Certain other items, primarily straight-line rent receivable, intangibles and deferred costs, have been eliminated for the purpose of the valuation because those items are already considered in our valuation of the respective investments in real estate properties or financial instruments.
Mortgage notes payable: We have mortgage notes payable that bear interest at both variable and fixed rates. The estimated values of our variable-rate mortgage loans were generally deemed to approximate their carrying values because their interest rates move in conjunction with changes to market interest rates. The estimated values for our fixed-rate mortgage loans were estimated using a discounted cash flow analysis, which used inputs based on the remaining loan terms and estimated current market interest rates for mortgage loans with similar characteristics, including remaining loan term and loan-to-value ratios. The market interest rates for our fixed-rate mortgage loans were generally determined based on market rates for available comparable debt. The estimated market interest rates for our fixed-rate mortgage loans ranged from 2.35% to 2.85% as of September 30, 2021.
Other liabilities: Our other liabilities consist of our accounts payable and accrued expenses, amounts due to our Sponsor, tenant allowances and deposits payable, distributions payable and deferred rental income. The carrying values of these items were considered to equal their fair value due to their short maturities. Certain other items, primarily intangibles, have been eliminated for the purpose of the valuation because those items are already considered in our valuation of the respective Real Estate Properties or financial instruments.
Other noncontrolling interests: Our other noncontrolling interests consist of accrued distributions on common units and SLP Units.
Allocations of value to SLP units: The carrying value of the SLP Units held by Lightstone SLP, LLC, an affiliate of our Advisor, are classified in noncontrolling interests on our consolidated balance sheet. The IPA’s Practice Guideline 2013—01 provides for adjustments to the NAV for preferred securities, special interests and incentive fees based on the aggregate NAV of the company and payable to the sponsor in a hypothetical liquidation of the company as of the valuation date in accordance with the provisions of the partnership or advisory agreements and the terms of the preferred securities. Because certain distributions related to our SLP Units are only payable to their holder in a liquidation event, we believe they should be valued for our NAV in accordance with these provisions.
Our operating agreement provides for distributions to be made during our liquidating stage to our stockholders and the holder of the SLP Units at certain prescribed thresholds. In connection with our initial public offering of common stock, Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units. In the calculation of our estimated NAV, a $47.0 million allocation of value was made to the SLP Units representing the amount of estimated distributions which would have been payable to the holder of the SLP Units, assuming a liquidation event as of September 30, 2021.
Historical Estimated NAV and NAV per Share
Additional information on our historical reported estimated NAV and NAV per Share for the preceding year may be found in the following referenced filing:
As of September 30, 2020 – Current Report on Form 8-K filed on December 14, 2020
Limitations and Risks
As with any valuation methodology, the methodology used to determine our estimated NAV and resulting estimated NAV per Share is based upon a number of estimates and assumptions that may prove later not to be accurate or complete. Further, different participants with different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated NAV per Share, which could be significantly different from the estimated NAV per Share approved by our board of directors. The estimated NAV per Share approved by our board of directors does not represent the fair value of our assets and liabilities in accordance with GAAP, and such estimated NAV per Share is not a representation, warranty or guarantee that:
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| ● | A stockholder would be able to resell his or her shares at the estimated NAV per Share; |
| ● | A stockholder would ultimately realize distributions per share of common stock equal to the estimated NAV per Share upon liquidation of our assets and settlement of our liabilities or a sale of the Company; |
| ● | Our shares of common stock would trade at the estimated NAV per Share on a national securities exchange; |
| ● | An independent third-party appraiser or other third-party valuation firm would agree with the estimated NAV per Share; or |
| ● | The methodology used to estimate our NAV per Share would be acceptable to FINRA or under the Employee Retirement Income Security Act with respect to their respective requirements. |
The Internal Revenue Service and the Department of Labor do not provide any guidance on the methodology an issuer must use to determine its estimated NAV per share. FINRA guidance provides that NAV valuations be derived from a methodology that conforms to standard industry practice.
As with any valuation methodology, our methodology is based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive different estimated NAVs and resulting NAVs per share, and these differences could be significant. The estimated NAV per Share is not audited and does not represent the fair value of our assets less our liabilities in accordance with GAAP, nor do they represent an actual liquidation value of our assets and liabilities or the amount shares of our common stock would trade at on a national securities exchange. As of the date of this filing, although we have not sought stockholder approval to adopt a plan of liquidation of the Company, certain distributions may be payable to Lightstone SLP, LLC for its SLP Units in connection with a liquidation event. Accordingly, our estimated NAV reflects any allocations of value to the SLP Units representing the amount that would be payable to Lightstone SLP, LLC in connection with a liquidation event pursuant to the guidelines for estimating NAV contained in IPA Practice Guideline 2013-01, “Valuation of Publicly Registered Non-Listed REITs.” Our estimated NAV per Share is based on the estimated value of our assets less the estimated value of our liabilities and other non-controlling interests less any allocations to the SLP Units divided by the number of our diluted shares of common stock outstanding, all as of the date indicated. Our estimated NAV per Share does not reflect a discount for the fact we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. Our estimated NAV per Share does not take into account estimated disposition costs or fees or penalties, if any, that may apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of certain debt. Our estimated NAV per Share will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets, developments related to individual assets and the management of those assets and changes in the real estate and capital markets. Different parties using different assumptions and estimates could derive different NAVs and resulting estimated NAVs per share, and these differences could be significant. Markets for real estate and real estate-related investments can fluctuate and values are expected to change in the future. We currently expect that our Advisor will estimate our NAV on at least an annual basis. Our board of directors will review and approve each estimate of NAV and resulting estimated NAV per Share.
The following factors may cause a stockholder not to ultimately realize distributions per share of common stock equal to the estimated NAV per Share upon liquidation:
| ● | The methodology used to determine estimated NAV per Share includes a number of estimates and assumptions that may not prove to be accurate or complete as compared to the actual amounts received in the liquidation; |
| ● | In a liquidation, certain assets may not be liquidated at their estimated values because of transfer fees and disposition fees, which are not reflected in the estimated NAV calculation; |
| ● | In a liquidation, debt obligations may have to be prepaid and the costs of any prepayment penalties may reduce the liquidation amounts. Prepayment penalties are not included in determining the estimated value of liabilities in determining estimated NAV; |
| ● | In a liquidation, the real estate assets may derive a portfolio premium which premium is not considered in determining estimated NAV; |
| ● | In a liquidation, the potential buyers of the assets may use different estimates and assumptions than those used in determining estimated NAV; |
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| ● | If the liquidation occurs through a listing of the common stock on a national securities exchange, the capital markets may value the Company’s net assets at a different amount than the estimated NAV. Such valuation would likely be based upon customary REIT valuation methodology including funds from operation (“FFO”) multiples of other comparable REITs, FFO coverage of dividends and adjusted FFO payout of the Company’s anticipated dividend; and |
| ● | If the liquidation occurs through a merger of the Company with another REIT, the amount realized for the common stock may not equal the estimated NAV per Share because of many factors including the aggregate consideration received, the make-up of the consideration (e.g., cash, stock or both), the performance of any stock received as part of the consideration during the merger process and thereafter, the reception of the merger in the market and whether the market believes the pricing of the merger was fair to both parties. |
Share Repurchase Program
Our share repurchase program (the “SRP”) may provide our stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to us, subject to restrictions.
On March 25, 2020, our board of directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.
Effective March 15, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to our current NAV per Share, as determined by the Company’s board of directors and reported by the Company from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by us within one year of the stockholder’s date of death for consideration.
At the above noted dates, the Board of Directors established that on an annual basis, we would not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Additionally, redemption requests are expected to be processed on a quarterly basis and would be subject to pro ration if either type of redemption requests exceeded the annual limitation.
For the year ended December 31, 2021, we repurchased 143,918 shares of common stock for $11.18 per share, pursuant to the SRP. For the period from January 1 through March 24, 2020, we repurchased 287,987 shares of common stock for $10.87 per share, pursuant to the SRP.
On March 18, 2022, the Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0%.
2020 Tender Offer
We commenced a tender offer on June 15, 2020, pursuant to which we offered to acquire up to 225,000 of our shares of common stock at a purchase price of $5.00 per share, or $1.1 million in the aggregate (the “2020 Tender Offer”). Pursuant to the terms of the 2020 Tender Offer, which expired on July 24, 2020, we repurchased 0.1 million shares of our common stock for an aggregate of $0.3 million in August 2020.
Dividend Reinvestment Program
Our distribution reinvestment program (“DRIP”) provides our shareholders with an opportunity to purchase additional shares of our common stock at a discount by reinvesting distributions. Under our distribution reinvestment program, a shareholder may acquire, from time to time, additional shares of our common stock by reinvesting cash distributions payable by us to such shareholder, without incurring any brokerage commission, fees or service charges.
The DRIP had been suspended since 2015 until our DRIP Registration Statement on Form S-3D was filed and became effective as amended and restated, under the Securities Act of 1933 on October 25, 2018.
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Pursuant to the DRIP following its reactivation, our stockholders who elect to participate may invest all or a portion of the cash distributions that we pay them on shares of our common stock in additional shares of our common stock without paying any fees or commissions. The purchase price for shares under the DRIP will be equal to 95% of our current NAV per Share, as determined by the our board of directors and reported by us from time to time. On December 16, 2021, our board of directors determined our NAV per Share of $11.75, as of September 30, 2021, which resulted in a purchase price for shares under the DRIP of $11.16 per share. As of December 31, 2021, 9.9 million shares remain available for issuance under our DRIP.
Our board of directors reserves the right to terminate the DRIP for any reason without cause by providing written notice of the termination to all participants.
Distributions
Distributions on Common Shares
Our board of directors commenced declaring and we began paying regular quarterly distributions on our Common Shares at the pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $10.00 per share, beginning February 1, 2006. Subsequently, our board of directors has declared regular quarterly distributions at the annualized rate of 7.0% assuming a purchase price of $10.00 per share, with the exception of the three-month period ended June 30, 2010. The distributions for the three-month period ended June 30, 2010 were at an aggregate annualized rate of 8% based on the share price of $10.00. Through December 31, 2021, we have paid aggregate distribution in the amount of $263.3 million, which includes cash distributions paid to stockholders and common stock issued under our DRIP.
Total distributions declared during both of the years ended December 31, 2021 and 2020 were $15.6 million.
On March 18, 2022, our board of directors authorized and declared a Common Share distribution of $0.175 per share for the quarterly period ending March 31, 2021. The quarterly distribution is the pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $10.00 per share. The distribution will be paid on or about the 15th day of the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders have an option to elect the receipt of shares under the Company’s DRIP.
Distributions on SLP Units
From our inception through March 31, 2010, cumulative distributions declared to Lightstone SLP, LLC were $4.9 million, all of which had been paid as of April 2010. For the three months ended June 30, 2010, the Operating Partnership did not declare a distribution related to the SLP Units as the distribution to the stockholders was less than 7% for this period. On August 30, 2010, the Company declared additional distributions to the stockholders to bring the annualized distribution to at least 7%. As such, the Company as of August 30, 2010 recommenced declaring distributions to Lightstone SLP, LLC at the 7% annualized rate, except for the three months ended June 30, 2010 which was at an 8% annualized rate which represents the same rate paid to the stockholders.
During each of the years ended December 31, 2021 and 2020, distributions of $2.1 million were declared and distributions of $2.1 million were paid related to the SLP Units and are part of noncontrolling interests. Since inception through December 31, 2021, cumulative distributions declared were $29.7 million, of which $29.2 million have been paid. Such distributions, paid currently at a 7% annualized rate of return to Lightstone SLP, LLC through December 31, 2021, with the exception of the distribution related to the three months ended June 30, 2010, which was paid at an 8% annualized rate will always be subordinated until stockholders receive a stated preferred return, as described below.
Additionally, on March 18, 2022, our board of directors declared a quarterly distribution for the quarterly period ending March 31, 2022 on the SLP Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive a stated preferred return.
Recent Sales of Unregistered Securities
During the period covered by this Form 10-K, we did not sell any equity securities that were not registered under the Securities Act of 1933.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
You should read the following discussion and analysis together with our consolidated financial statements and notes thereto included in this Annual Report on Form 10-K. The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. Please see “Special Note Regarding Forward-Looking Statements” above for a description of these risks and uncertainties. Dollar amounts are presented in thousands, except per share data and where indicated in millions.
Overview
Lightstone Value Plus REIT I, Inc. (the “Lightstone REIT I”), (together with the Operating Partnership (as defined below), the “Company”, also referred to as “we”, “our” or “us” herein) has and expects to continue to acquire and operate or develop in the future, commercial, residential and hospitality properties and/or make real estate-related investments, principally in the United States. Our acquisitions and investments are, principally conducted through the Operating Partnership, and may include both portfolios and individual properties.
As of December 31, 2021, we have ownership interests in (i) two consolidated operating properties, (ii) two consolidated development properties and (iii) seven unconsolidated operating properties. With respect to our consolidated operating properties, we wholly own the St. Augustine Outlet Center, a retail property containing 0.3 million square feet of gross leasable area, and have a majority ownership interest of 59.2% in Gantry Park Landing, a multi-family residential property containing 199 apartment units. With respect to our consolidated development properties, we wholly own two projects consisting of the Lower East Side Moxy Hotel and the Exterior Street Project. We also hold a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”) which we account for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any. The Joint Venture is between us and the operating partnership of Lightstone Value Plus REIT II, Inc., a real estate investment trust also sponsored by our Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, we have other real estate-related investments, including preferred contributions that were made pursuant to agreements with various related party entities (the “Preferred Investments”) and nonrecourse promissory notes made to unaffiliated third-parties. Our real estate investments have been and are expected to continue to be held by the Company alone or jointly with other parties.
We do not have employees. We entered into an advisory agreement pursuant to which the Advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments, subject to oversight by our board of directors (the “Board of Directors”). We pay the Advisor fees for services related to the investment and management of our assets, and we will reimburse the Advisor for certain expenses incurred on our behalf.
To maintain our qualification as a REIT, we engage in certain activities through taxable REIT subsidiaries (“TRSs”). As such, we may still be subject to U.S. federal and state income and franchise taxes from these activities.
Acquisitions and Investment Strategy
We have, to date, acquired and/or developed residential, commercial and hospitality properties principally, all of which are located in the United States and also made other real estate-related investments. Our acquisitions have included both portfolios and individual properties. Our current operating properties consist of one retail property (the St. Augustine Outlet Center) and one multi-family residential property (Gantry Park Landing). We have also acquired various parcels of land and air rights related to the development and construction of real estate properties. Additionally, we have made preferred investments in related parties and originated nonrecourse loans to unaffiliated third-party borrowers.
Investments in real estate are generally made through the purchase of all or part of a fee simple ownership, or all or part of a leasehold interest. We may also purchase limited partnership interests, limited liability company interests and other equity securities. We may also enter into joint ventures with related parties for the acquisition, development or improvement of properties as well as general partnerships, co-tenancies and other participations with real estate developers, owners and others for the purpose of developing, owning and operating real properties. We will not enter into a joint venture to make an investment that we would not be permitted to make on our own. Not more than 10% of our total assets will be invested in unimproved real property. For purposes of this paragraph, “unimproved real properties” does not include properties acquired for the purpose of producing rental or other operating income, properties under construction and properties for which development or construction is planned within one year.
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Current Environment
Our operating results are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, availability or terms of financings, financial markets volatility, political upheaval or uncertainty, natural and man-made disasters, terrorism and acts of war, unfavorable changes in laws and regulations, outbreaks of contagious diseases, cybercrime, loss of key relationships, and recession.
COVID-19 Pandemic
The World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future.
As a result of previously imposed restrictions, we temporarily closed our St. Augustine Outlet Center from March 20, 2020 through May 7, 2020. During the COVID-19 pandemic, the property’s occupancy declined and because of limited leasing success, we began exploring various strategic alternatives for our St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that we would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to our other tenants that we would not renew their leases at scheduled expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, we recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021. See Note 8 of the Notes to Consolidated Financial Statements for additional information.
Additionally, as a result of the COVID-19 pandemic, during 2020 we saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted. However, both occupancy and rental rates have improved considerably throughout 2021 and have returned to pre-COVID-19 levels.
To-date, the COVID-19 pandemic has not had any significant impact on our development projects. Furthermore, our other real estate-related investments (both our preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers) also relate to various development projects which are at different stages in their respective development process. These investments, which are subject to similar restrictions and other measures, have also not yet been significantly impacted by the COVID-19 pandemic.
The overall extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.
If our operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates further decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on our preferred investments in related parties, our business and financial results could be materially and adversely impacted.
We are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred to above or throughout this Form 10-K. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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.
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Critical Accounting Estimates and Policies
General
Our consolidated financial statements, included in this annual report, include our accounts, the Operating Partnership and its subsidiaries (over which we exercise financial and operating control). All inter-company balances and transactions have been eliminated in consolidation.
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and judgments about the effects of matters or future events that are inherently uncertain. These estimates and judgments may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates, including contingencies and litigation. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
To assist in understanding our results of operations and financial position, we have identified our critical accounting policies and discussed them below. These accounting policies are most important to the portrayal of our results and financial position, either because of the significance of the financial statement items to which they relate or because they require our management’s most difficult, subjective or complex judgments.
Revenue Recognition
Our revenue, which is comprised largely of rental income, includes rents that tenants pay in accordance with the terms of their respective leases reported on a straight-line basis over the initial term of the lease. Since our leases may provide for rental increases at specified intervals, straight-line basis accounting requires us to record as an asset, and include in revenue, unbilled rent that we only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease.
In addition, we will defer the recognition of contingent rental income, such as percentage rents, until the specific target which triggers the contingent rental income is achieved. Cost recoveries from tenants will be included in tenant recovery income in the period the related costs are incurred.
Investments in Real Estate
We generally record investments in real estate at cost and capitalize improvements and replacements when they extend the useful life or improve the efficiency of the asset. We expense costs of ordinary repairs and maintenance as incurred. We compute depreciation using the straight-line method over the estimated useful lives of the applicable real estate asset. We generally use estimated useful lives of up to thirty-nine years for buildings and improvements, five to ten years for furniture and fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.
We make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because, if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.
We record assets and groups of assets and liabilities which comprise disposal groups as “held for sale” when all of the following criteria are met: a decision has been made to sell, the assets are available for sale immediately, the assets are being actively marketed at a reasonable price in relation to the current fair value, a sale has been or is expected to be concluded within twelve months of the balance sheet date, and significant changes to the plan to sell are not expected. The assets and disposal groups held for sale are valued at the lower of book value or fair value less disposal costs. For sales of real estate or assets classified as held for sale, we evaluate whether a disposal transaction meets the criteria of a strategic shift and will have a major effect on our operations and financial results to determine if the results of operations and gains on sale of real estate will be presented as part of our continuing operations or as discontinued operations in our consolidated statements of operations. If the disposal represents a strategic shift, it will be classified as discontinued operations for all periods presented; if not, it will be presented in continuing operations.
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We evaluate the recoverability of our investments in real estate assets at the lowest identifiable level, the individual property level. An impairment loss is recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.
We evaluate the long-lived assets for potential impairment whenever events or changes in circumstances indicate that the undiscounted projected cash flows are less than the carrying amount for a particular property. No single indicator would necessarily result in us preparing an estimate to determine if a long-lived asset’s future undiscounted cash flows are less than its book value. We use judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a long-lived asset requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The estimated cash flows used for the impairment analysis are subjective and require us to use our judgment and the determination of estimated fair value are based on our plans for the respective assets and our views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, may be substantial.
Accounting for Asset Acquisitions
The cost of the acquisition in an asset acquisition is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, and certain liabilities such as assumed debt and contingent liabilities on the basis of their relative fair values. Fees incurred related to asset acquisitions are capitalized as part of the cost of the investment.
Accounting for Development Projects
We incur a variety of costs in the development of a property. The costs of land and building under development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development. We cease capitalization when the development project is substantially complete and placed in service, which may occur in phases. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment.
Once a development project is placed in service, which may occur in phases or for an entire building or project, the costs capitalized to that development project are transferred to land and improvements, buildings and improvements, and furniture and fixtures on our consolidated balance sheets at the historical cost of the property.
Notes Receivable and Preferred Investments
Notes receivable and preferred investments that we intend to hold to maturity are carried at cost, net of any unamortized origination costs, fees, discounts, premiums and unfunded commitments.
Investment income will be recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to investment income in the Company’s statements of operations.
Income recognition is suspended when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal is not in doubt, contractual interest is recorded as investment income when received, under the cash basis method, until an accrual is resumed when the instrument becomes contractually current and performance is demonstrated to be resumed.
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Credit Losses and Impairment on Notes Receivable
Notes receivable are considered impaired when, based on current information and events, it is probable that we will not be able to collect principal and interest amounts due according to the contractual terms. We assess the credit quality of our notes receivable and adequacy of reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management is required in this analysis. We consider the estimated net recoverable value of the notes receivable 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 is 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 notes receivable, a reserve is recorded with a corresponding charge to investment income. The reserve for each note receivable is maintained at a level that is determined to be adequate by management to absorb probable losses.
Credit Losses and Impairment on Preferred Investments
Preferred investments that are accounted for as held to maturity are assessed for impairment at the individual investment level when there is a decline in fair value below the amortized cost basis that is deemed to be other than temporary. In making the determination of an other-than-temporary impairment assessment, the Company considers all available information relevant to the collectability of the investment, including information about past events, current conditions, and reasonable and supportable forecasts when developing the estimate of cash flows expected to be collected. This information includes the remaining redemption terms of the investment, financial condition of the issuer, expected defaults and the value of any underlying collateral. In assessing whether the entire amortized cost basis of the investment will be recovered, the Company compares the present value of cash flows expected to be collected from the investment with the amortized cost basis and records an impairment based on the amount by which the present value of cash flows expected to be collected is less than the amortized cost basis of the investment.
Treatment of Management Compensation, Expense Reimbursements and Operating Partnership Participation Interest
Management of our operations is outsourced to our Advisor and certain other affiliates of our Sponsor. Fees related to each of these services are accounted for based on the nature of such service and the relevant accounting literature. Such fees include acquisition fees associated with the purchase of interests in affiliated real estate entities; asset management fees paid to our Advisor and property management fees paid to our Property Manager, which manage certain of the properties we acquire, or to other unaffiliated third-party property managers, principally for the management of our hospitality properties. These fees are expensed or capitalized to the basis of acquired assets, as appropriate.
Our Property Manager may also perform fee-based construction management services for both our re-development activities and tenant construction projects. These fees are considered incremental to the construction effort and will be capitalized to the associated real estate project as incurred. Costs incurred for tenant construction will be depreciated over the shorter of their useful life or the term of the related lease. Costs related to redevelopment activities will be depreciated over the estimated useful life of the associated project.
Leasing activity at certain of our properties has also been outsourced to our Property Manager. Any corresponding leasing fees we pay are capitalized and amortized over the life of the related lease.
Expense reimbursements made to both our Advisor and Property Manager will be expensed or capitalized to the basis of acquired assets, as appropriate.
Through March 31, 2009, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $30.0 million of SLP Units in the Operating Partnership at a cost of $100,000 per unit and none thereafter.
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Income Taxes
We elected to be taxed and qualify as a REIT commencing with the taxable year ended December 31, 2005. If we remain qualified as a REIT, we generally will not be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT qualification under the Internal Revenue Code of 1986, as amended, or the Code, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with generally accepted accounting principles in the United States of America, or GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify as a REIT. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders.
To maintain our qualification as a REIT, we engage in certain activities through taxable REIT subsidiaries (“TRSs”). As such, we may still be subject to U.S. federal and state income and franchise taxes from these activities.
As of December 31, 2021 and 2020, we had no material uncertain income tax positions. Additionally, even if we continue to qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income.
Results of Operations
Disposition of the Santa Clara Data Center
On January 10, 2019, we acquired a parcel of land located at 2175 Martin Avenue, Santa Clara, California (the “Martin Avenue Land”) from an unaffiliated third party for $10.6 million. Subsequently, we completed certain activities associated with the potential development and construction of a data center on the Martin Avenue Land (the “Santa Clara Data Center”).
On July 7, 2021, we disposed of the Santa Clara Data Center to an unrelated third party for a contractual sales price of $13.9 million. In connection with the disposition of the Santa Clara Data Center, we recognized a gain on sale of investment property of $0.2 million during the third quarter of 2021.
The disposition of the Santa Clara Data Center did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on our operations and financial results. Accordingly, the operating results of the Santa Clara Data Center are reflected in our results from continuing operations for all periods presented through its date of disposition.
Investment Impairment - St. Augustine Outlet Center
During the COVID-19 pandemic, St. Augustine Outlet Center’s occupancy declined and because of limited leasing success, we began been exploring various strategic alternatives for the property and as a result determined during the third quarter of 2021 that we would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at scheduled expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, we recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021 to reduce the carrying value of the St. Augustine Outlet Center to its estimated fair value of $23.3 million as of September 30, 2021. In estimating the fair value of the St. Augustine Outlet Center, we used management’s internal analysis prepared with consideration of local market conditions.
We believe the reduced carrying value of the St. Augustine Outlet Center is currently recoverable. However, if market conditions worsen unexpectedly or if changes in its strategy significantly affect any key assumptions used in determining the property’s estimated fair value, we may need to take additional impairment charges in future periods.
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For the Year Ended December 31, 2021 vs. December 31, 2020
Consolidated
Revenues
Our revenues are comprised of rental income and tenant recovery income. Total revenues decreased by $0.9 million to $10.4 million for the year ended December 31, 2021 compared to $11.3 million for the same period in 2020. This decrease was primarily attributable to reduced occupancy and rental rates for Gantry Park Landing during the 2021 period resulting from the COVID-19 pandemic.
Property operating expenses
Property operating expenses increased by $0.2 million to $4.2 million for the year ended December 31, 2021 compared to $4.0 million for the same period in 2020. The increase in property operating expenses is primarily a result of lease termination fees incurred for the St. Augustine Outlet Center. See “Investment Impairment - St. Augustine Outlet Center” above.
Real estate taxes
Real estate taxes decreased by $0.3 million to $0.3 million for the year ended December 31, 2021 compared to $0.6 million for the same period in 2020. The decrease reflects lower real estate taxes resulting from the sale of the Santa Clara Data Center and certain land parcels adjacent to the St. Augustine Outlet Center.
General and administrative expenses
General and administrative expenses decreased by $0.5 million to $2.6 million for the year ended December 31, 2021 compared to $3.1 million for the same period in 2020 principally due to lower bad debt expense in 2021.
Impairment charge
During the third quarter of 2021, we recorded a non-cash impairment charge of $11.3 million to reduce the carrying value of our St. Augustine Outlet Center to its estimated fair value as of September 30, 2021. See “Investment Impairment - St. Augustine Outlet Center” above.
Depreciation and amortization
Depreciation and amortization increased by $1.5 million to $5.5 million for the year ended December 31, 2021 compared to $4.0 million for the same period in 2020. The increase in depreciation and amortization reflects changes to the estimated remaining useful lives of certain tenant-related building improvements resulting from lease terminations for the St. Augustine Outlet Center. See “Investment Impairment - St. Augustine Outlet Center” above.
Interest and dividend income
Interest and dividend income increased by $0.8 million to $13.8 million for the year ended December 31, 2021 compared to $13.0 million for the same period in 2020. The increase primarily reflects higher interest income earned on our notes receivable of $0.3 million and higher interest and dividend income earned on our available cash and investments in marketable securities of $0.7 million, partially offset by lower investment income of $0.2 million from our Preferred Investments.
Interest expense
Interest expense, including amortization of deferred financing costs, decreased by $0.4 million to $2.6 million for the year ended December 31, 2021 compared to $3.0 million for the same period in 2020. During the year ended December 31, 2021 and 2020, $8.2 million and $7.8 million, respectively, of interest was capitalized to construction in progress for our development projects.
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Gain on disposition of real estate, net
Our gain on disposition of real estate, net of $3.9 million during the year ended December 31, 2021 primarily is attributable to a second quarter gain of $3.6 million recognized in connection with the disposition of a parcel of land adjacent to St. Augustine Outlet Center and a third quarter gain of $0.2 million recognized in connection with the disposition of the Santa Clara Data Center.
Our gain on disposition of real estate, net of $1.6 million during the year ended December 31, 2020 consists of a second quarter gain of $1.6 million recognized in connection with the disposition of a parcel of land adjacent to the St. Augustine Outlet Center.
Unrealized gain/(loss) on marketable equity securities
During the year ended December 31, 2021, we recorded unrealized gains on marketable equity securities of $16.5 million and during the year ended December 31, 2020, we recorded unrealized losses on marketable equity securities of $12.2 million. These unrealized gains and losses represented the change in the fair value of our marketable equity securities during those periods.
Gain/(loss) on sale and redemption of marketable securities
During the year ended December 31, 2021, we recorded a gain on the sale of marketable securities of $5.9 million and during the year ended December 31, 2020, we recorded a loss on the sale of marketable securities of $0.2 million. These gains and losses represented the difference between the sales price and carrying value of our marketable securities sold during those periods.
Noncontrolling interests
The net earnings allocated to noncontrolling interests relates to (i) parties of the Company that hold units in the Operating Partnership, (ii) the interest in PRO-DFJV Holdings LLC (“PRO”) held by our Sponsor, (iii) the ownership interests in 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”) held by our Sponsor and other affiliates and (iv) the ownership interest in various joint ventures held by affiliates of our Sponsor that have originated nonrecourse loans to unaffiliated third-party borrowers.
Financial Condition, Liquidity and Capital Resources
Overview:
As of December 31, 2021, we had $39.4 million of cash on hand, $3.2 million of restricted cash and $62.8 million of marketable securities. We also have the ability to make draws from a line of credit up to $20.0 million, subject to certain conditions (see “Notes Payable – Line of Credit”). We currently believe that these items along with rental income from our operating properties; interest and dividend income earned on our marketable securities, notes receivable and preferred investments; as well as proceeds received from the repayment of the notes receivable and redemptions of the preferred investments will be sufficient to satisfy our expected cash requirements primarily consisting our anticipated operating expenses, scheduled debt service, capital expenditures (including certain of our development activities) and distributions to our shareholders, if any, required to maintain our status as a REIT for the foreseeable future. However, we may also obtain additional funds through selective asset dispositions, joint venture arrangements, new borrowings and refinancing of existing debt.
We currently have two development projects (see “Development Activities”). With respect to our Lower East Side Moxy Hotel, which is currently under construction and expected to open during the fourth quarter of 2022, we have obtained construction financings and the remaining costs associated with the construction of the Lower East Side Moxy Hotel are expected to be funded from the remaining availability under such construction financings. See “Development Activities - Lower East Side Moxy Hotel” for additional information. Our Exterior Street Project is currently under development and we expect to seek construction financing to fund a substantial portion of its future development and construction costs. See “Development Activities – Exterior Street Project” for additional information.
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Our borrowings consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. We typically have obtained level payment financing, meaning that the amount of debt service payable would be substantially the same each year. As such, most of the mortgages on our properties provide for a so-called “balloon” payment and are at a fixed interest rate.
Additionally, in order to leverage our investments in marketable securities and seek a higher rate of return, we have access to borrowings under a margin loan and line of credit collateralized by the securities held with the financial institution that provided the margin loan and line of credit as well as a portion of our Marco OP Units. These loans are due on demand and any outstanding balance must be paid upon the liquidation of securities.
Our charter provides that the aggregate amount of borrowing, both secured and unsecured, may not exceed 300% of net assets in the absence of a satisfactory showing that a higher level is appropriate, the approval of the Board of Directors and disclosure to stockholders. Net assets means our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders, along with justification for such excess. As of December 31, 2021, our total borrowings of $171.8 million represented 53% of net assets.
Any future properties that we may acquire or investments we may make may be funded through a combination of borrowings, proceeds generated from the sale and redemption of our marketable securities, available for sale, proceeds received from the selective disposition of our properties and proceeds received from the redemption of our preferred investments in related parties. These borrowings may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not exclusively, we intend to seek to encumber our properties with debt, which will be on a non-recourse basis. This means that a lender’s rights on default will generally be limited to foreclosing on the property. However, we may, at our discretion, secure recourse financing or provide a guarantee to lenders if we believe this may result in more favorable terms. When we give a guaranty for a property owning entity, we will be responsible to the lender for the satisfaction of the indebtedness if it is not paid by the property owning entity.
We may also obtain lines of credit to be used to acquire properties or real estate-related assets. These lines of credit will be at prevailing market terms and will be repaid from proceeds from the sale or refinancing of properties, working capital or permanent financing. Our Sponsor or its affiliates may guarantee the lines of credit although they will not be obligated to do so. We expect that such properties may be purchased by our Sponsor’s affiliates on our behalf, in our name, in order to minimize the imposition of a transfer tax upon a transfer of such properties to us.
We have various agreements, including an advisory agreement, with the Advisor to pay certain fees in exchange for services performed by the Advisor and/or its affiliated entities. Additionally, our ability to secure financing and our real estate operations are dependent upon our Advisor and its affiliates to perform such services as provided in these agreements.
In addition to meeting working capital needs and distributions, if any, to our stockholders, our capital resources are used to make certain payments to our Advisor and our Property Manager, including payments related to asset acquisition fees, development fees and leasing commissions, asset management fees, the reimbursement of acquisition related expenses to our Advisor and property management fees. We also reimburse our Advisor and its affiliates for actual expenses it incurs for administrative and other services provided to us. Additionally, the Operating Partnership may be required to make distributions to Lightstone SLP, LLC, an affiliate of the Advisor.
The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and our independent directors.
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The following table represents the fees incurred associated with the payments to our Advisor and its affiliates:
| For
the Year Ended | ||||||||
| December 31, 2021 | December 31,
2020 | |||||||
| Asset management fees (general and administrative costs) | $ | 849 | $ | 919 | ||||
| Property management fees (property operating expenses) | 362 | 388 | ||||||
| Development fees and cost reimbursement(1) | 3,595 | 1,337 | ||||||
| Total | $ | 4,806 | $ | 2,644 | ||||
| (1) | Development fees and development costs that we reimburse our Advisor for are capitalized and are included in the carrying value of the associated development project and classified as construction in progress on the consolidated balance sheets. As of December 31, 2021, we owed the Advisor and its affiliated entities $0.7 million for development fees, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. See Note 3 of the Notes to Consolidated Financial Statements for additional information. |
Additionally, we may be required to make distributions on the special general partner interests (“SLP Units”) in the Operating Partnership held by Lightstone SLP, LLC, an affiliate of the Advisor. In connection with the Company’s initial public offering, Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units. These SLP Units, the purchase price of which will be repaid only after stockholders receive a stated preferred return and their net investment, entitle Lightstone SLP, LLC to a portion of any regular distributions made by the Operating Partnership.
During both the of the years ended December 31, 2021 and 2020, distributions of $2.1 million were declared and paid on the SLP units.
Our charter states that our operating expenses, excluding offering costs, property operating expenses and real estate taxes, as well as acquisition fees and non-cash related items (“Qualified Operating Expenses”) are to be less than the greater of 2% of our average invested net assets or 25% of net income. For the year ended December 31, 2021, our Qualified Operating Expenses were less than the greater of 2% of our average invested net assets or 25% of net income.
In addition, our charter states that our acquisition fees and expenses shall not exceed 6% of the contractual purchase price or in the case of a mortgage, 6% of funds advanced unless approved by a majority of the independent directors. For the year ended December 31, 2021, the acquisition fees and acquisition expenses were less than 6% of each of the contract prices.
Summary of Cash Flows.
The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below:
| Year
Ended December 31, 2021 | Year
Ended December 31, 2020 | |||||||
| Cash flows provided by operating activities | $ | 10,001 | $ | 10,144 | ||||
| Cash flows provided by/(used in) investing activities | 49,161 | (54,493 | ) | |||||
| Cash flows (used in)/provided by financing activities | (63,411 | ) | 11,390 | |||||
| Net change in cash, cash equivalents and restricted cash | (4,249 | ) | (32,959 | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of year | 46,841 | 79,800 | ||||||
| Cash, cash equivalents and restricted cash, end of year | $ | 42,592 | $ | 46,841 | ||||
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Operating activities
The net cash provided by operating activities of $10.0 million for the year ended December 31, 2021 consists of the following:
| ● | cash inflows of $9.8 million from our net income after adjustment for non-cash items; and |
| ● | cash inflows of $0.2 million associated with the net changes in operating assets and liabilities. |
Investing activities
The net cash provided by investing activities of $49.2 million for the year ended December 31, 2021 consists primarily of the following:
| ● | purchases of investment property of $59.5 million; |
| ● | net proceeds from the sale of marketable securities of $5.2 million |
| ● | proceeds from notes receivable of $83.2 million; and |
| ● | proceeds from the sale of investment property of $20.2 million. |
Financing activities
The net cash used in financing activities of $63.4 million for the year ended December 31, 2021 is primarily related to the following:
| ● | debt principal payments of $89.1 million; |
| ● | proceeds from mortgage financing of $67.3 million; |
| ● | payment of loan fees and expenses of $6.1 million; |
| ● | redemption and cancellation of common shares of $1.6 million; |
| ● | distributions to our noncontrolling interests of $18.8 million; and |
| ● | distributions to our common shareholders of $15.3 million. |
Development Activities
Lower East Side Moxy Hotel
On December 3, 2018, we, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land located at 147-151 Bowery, New York, New York from unaffiliated third parties for aggregate consideration of $56.5 million, excluding closing and other acquisition related costs. Additionally, on December 6, 2018, we, though a subsidiary of the Operating Partnership, acquired certain air rights located at 329 Broome Street, New York, New York from an unaffiliated third party for $2.4 million, excluding closing and other acquisition related costs. We are using the land and air rights in connection with the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”). On June 3, 2021, the Company entered into a development agreement (the “Development Agreement”) with an affiliate of the Advisor (the “Moxy Lower East Side Developer”) pursuant to which the Lower East Side Moxy Developer will be paid a development fee equal to 3% of hard and soft costs incurred in connection with the development and construction of the Lower East Side Moxy Hotel. Additionally on June 3, 2021, the Company obtained construction financing for the Lower East Side Moxy Hotel. The Lower East Side Moxy Hotel is currently under construction and expected to open during the fourth quarter of 2022.
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Previously on December 3, 2018, we had entered into a mortgage loan which was collateralized by the Lower East Side Moxy Hotel (the “Lower East Side Moxy Mortgage”) for $35.6 million. The Lower East Side Moxy Mortgage had an initial term of two years, bore interest at the London Interbank Offered Rate (“LIBOR”) + 4.25%, subject to a 6.63% floor, and required monthly interest-only payments through its stated maturity with the entire unpaid balance due upon maturity. In November 2020 the maturity date of Lower East Side Moxy Mortgage was extended to March 3, 2021 and in March 2021 it was further extended until June 3, 2021, on which date it was then repaid in full as discussed below.
On June 3, 2021, we, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy Senior Loan”) providing for up to $90.0 million of funds for the development and construction of the Lower East Side Moxy Hotel. At closing, $35.6 million of proceeds were initially advanced under the Moxy Senior Loan, which were used to repay in full the Lower East Side Moxy Mortgage. The Moxy Senior Loan bears interest at LIBOR + 7.50%, subject to an 8.00% floor, and initially matures on June 3, 2024, with two one-year extension options, subject to the satisfaction of certain conditions. The Moxy Senior Loan is collateralized by the Lower East Side Moxy Hotel. As of December 31, 2021, the outstanding principal balance of the Moxy Senior Loan was $35.6 million and the remaining availability under the facility was up to $54.4 million.
Simultaneously on June 3, 2021, we, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) providing for up to $40.0 million of additional funds for the development and construction of the Lower East Side Moxy Hotel. The Moxy Junior Loan bears interest at LIBOR + 13.50%, subject to a 14.00% floor, and initially matures on June 3, 2024, with two one-year extension options subject to the satisfaction of certain conditions. The Moxy Junior Loan is subordinate to the Moxy Senior loan but also collateralized by the Lower East Side Moxy Hotel. We provided a principal guarantee of up to $7.0 million with respect to the Moxy Junior Loan. As of December 31, 2021, the outstanding principal balance of the Moxy Junior Loan was $24.6 million and the remaining availability under the facility was up to $15.4 million.
Future draws to cover the costs associated with the development and construction of the Lower East Side Moxy Hotel will first be advanced under the Moxy Junior Loan until it has been fully funded and thereafter, funds will be advanced under the remaining availability of the Moxy Senior Loan.
In connection with the Moxy Construction Loans, we provided certain completion and carry cost guarantees. We also entered into an interest rate cap agreement pursuant to which the LIBOR rate will be capped at 3.00% on the Moxy Senior Loan through June 3, 2024 at a cost of $0.2 million. Furthermore, in connection with the Moxy Construction Loans, we paid $5.3 million of loan fees and expenses and accrued $1.1 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2021.
Exterior Street Project
On February 27, 2019, we, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located at 355 and 399 Exterior Street, New York, New York from unaffiliated third parties for an aggregate purchase price of $59.0 million, excluding closing and other acquisition related costs. In September 2021, we subsequently acquired an additional adjacent parcel of land at cost from an affiliate of our Advisor for $1.0 million in order to achieve certain zoning compliance. We are using the land parcels for the development of a multi-family residential property (the “Exterior Street Project”).
On March 29, 2019, we entered into a $35.0 million loan (the “Exterior Street Loan”) which commencing on October 10, 2020 bears interest at LIBOR + 2.25% through its scheduled maturity date. The Exterior Street Loan requires monthly interest-only payments with the outstanding principal balance due in full at its maturity date. The Exterior Street Loan was initially scheduled to mature on April 9, 2021 but during April 2021, its maturity date was further extended to April 9, 2022. Additionally, on December 21, 2021, the loan agreement was amended to provide an additional six-month extension and an additional $7.0 million loan (the “Exterior Street Supplemental Loan” and collectively with the Exterior Street Loan, the “Exterior Street Loans”) which bears interest at LIBOR + 2.50% and requires monthly interest-only payments through its maturity date. The Exterior Street Loans are scheduled to mature on April 9, 2022, with a six-month extension option, subject to certain conditions and are collateralized by the Exterior Street Project.
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The following is a summary of the amounts incurred and capitalized to development projects on the consolidated balance sheet for the Lower East Side Moxy Hotel and the Exterior Street Project as of December 31, 2021:
| Development Project | ||||
| Lower East Side Moxy Hotel | $ | 146,747 | ||
| Exterior Street Project | 87,467 | |||
| Total | $ | 234,214 | ||
To-date the ongoing COVID-19 pandemic as well as other economic conditions and uncertainties have not had a significant impact on our development activities associated with either the Lower East Side Moxy Hotel or the Exterior Street Project. As discussed above, we have already obtained construction financing for the Lower East Side Moxy Hotel and it is currently under construction and expected to open during the fourth quarter of 2022. However, with respect to our Exterior Street Project which is currently under development, we currently expect to seek construction financing to fund a substantial portion of its future development and construction costs. The ongoing COVID-19 pandemic as well as other economic conditions and uncertainties may (i) affect our ability to obtain construction financing, and/or (ii) cause delays or increase costs associated with building materials or construction services necessary for construction, which could adversely impact our ability to either ultimately commence and/or complete construction as planned, on budget or at all for the Exterior Street Project.
Although we currently believe our capital resources are sufficient to fund our expected development activities for the next 12 months, there can be no assurance we will be successful in obtaining construction financing at favorable terms, if at all.
Preferred Investments
We have Preferred Investments that entitle us to monthly preferred distributions. The Preferred Investments are classified as held-to-maturity securities, recorded at cost and included in investments in related parties on the consolidated balance sheets. The fair value of these investments approximated their carrying values based on market rates for similar instruments. During the year ended December 31, 2020, we redeemed $11.0 million of the 40 East End Avenue Preferred Investment and the entire remaining Miami Moxy Preferred Investment of $9.0 million.
The Preferred Investments are summarized as follows:
| Preferred Investment Balance | Investment Income(1) | |||||||||||||||||||
| Dividend | As
of December 31, | As
of December 31, | For
the Year Ended December 31, | |||||||||||||||||
| Preferred Investments | Rate | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| 40 East End Avenue | 12 | % | $ | 6,000 | $ | 6,000 | $ | 730 | $ | 886 | ||||||||||
| East 11th Street | 12 | % | 8,500 | 8,500 | 1,034 | 1,040 | ||||||||||||||
| Miami Moxy | 12 | % | - | - | - | 45 | ||||||||||||||
| Total Preferred Investments | $ | 14,500 | $ | 14,500 | $ | 1,764 | $ | 1,971 | ||||||||||||
Note:
| (1) | Included in interest and dividend income on the statements of operations. |
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Notes Receivable
We formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).
We determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, we consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.
The Joint Venture Promissory Notes generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with the initial funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from 1.00% to 1.50%) based on the principal commitment under the loan and retain a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”). The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.
The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional one-year extension options subject to satisfaction of certain conditions, including the funding of additional Loan Reserves and payment of extension fees. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.
The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets. The origination fees received are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the initial term.
The Notes Receivable are summarized as follows:
| As
of December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Company’s | Loan | Contractual | Unamortized | ||||||||||||||||||||||||||||||||||||||
| Joint | Ownership | Commitment | Origination | Origination | Maturity | Interest | Outstanding | Origination | Carrying | Unfunded | |||||||||||||||||||||||||||||||
| Venture/Lender | Percentage | Amount | Fee | Date | Date | Rate | Principal | Reserves | Fee | Value | Commitment | ||||||||||||||||||||||||||||||
| LSC 1543 7th LLC (1) | 50 | % | 20,000 | 1.00 | % | August 27, 2019 | February 28, 2022 | Libor plus 5.40% (Floor of 7.90%) | $ | 17,500 | $ | - | $ | (33 | ) | $ | 17,467 | $ | - | ||||||||||||||||||||||
| LSC 11640 Mayfield LLC (2) | 50 | % | 18,000 | 1.50 | % | March 4, 2020 | March 1, 2022 | Libor plus 11.00% (Floor of 13.00%) | 10,040 | (629 | ) | (24 | ) | 9,387 | 6,960 | ||||||||||||||||||||||||||
| Total | $ | 27,540 | $ | (629 | ) | $ | (57 | ) | $ | 26,854 | $ | 6,960 | |||||||||||||||||||||||||||||
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| As
of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Company’s | Loan | Contractual | Unamortized | ||||||||||||||||||||||||||||||||||||||
| Joint | Ownership | Commitment | Origination | Origination | Maturity | Interest | Outstanding | Origination | Carrying | Unfunded | |||||||||||||||||||||||||||||||
| Venture/Lender | Percentage | Amount | Fee | Date | Date | Rate | Principal | Reserves | Fee | Value | Commitment | ||||||||||||||||||||||||||||||
| LSC 162nd Capital I LLC (3) | 45.45 | % | $ | 4,234 | 1.50 | % | February 5, 2019 | September 11, 2021 | LIBOR + 7.50% (Floor of 11%) | $ | 4,076 | $ | (338 | ) | $ | (33 | ) | $ | 3,705 | $ | - | ||||||||||||||||||||
| LSC 162nd Capital II LLC (3) | 45.45 | % | 9,166 | 1.50 | % | February 5, 2019 | September 11, 2021 | LIBOR + 7.50% (Floor of 11%) | 8,824 | (732 | ) | (71 | ) | 8,021 | - | ||||||||||||||||||||||||||
| LSC 1543 7th LLC | 50 | % | 20,000 | 1.00 | % | August 27, 2019 | August 26, 2021 | LIBOR + 5.40% (Floor of 7.90%) | 20,000 | - | (33 | ) | 19,967 | - | |||||||||||||||||||||||||||
| LSC 1650 Lincoln LLC (3) | 50 | % | 24,000 | 1.00 | % | August 27, 2019 | August 26, 2021 | LIBOR + 5.40% (Floor of 7.90%) | 24,000 | - | (40 | ) | 23,960 | - | |||||||||||||||||||||||||||
| LSC 11640 Mayfield LLC | 50 | % | 18,000 | 1.50 | % | March 4, 2020 | March 1, 2022 | LIBOR + 10.50% (Floor of 12.50%) | 10,750 | (2,369 | ) | (158 | ) | 8,223 | 7,250 | ||||||||||||||||||||||||||
| LSC 87 Newkirk LLC (4) | 50 | % | 42,700 | 1.25 | % | July 2, 2020 | December 1, 2021 | LIBOR + 6.00% (Floor of 7.00%) | 42,700 | (1,597 | ) | (355 | ) | 40,748 | - | ||||||||||||||||||||||||||
| Total | $ | 110,350 | $ | (5,036 | ) | $ | (690 | ) | $ | 104,624 | $ | 7,250 | |||||||||||||||||||||||||||||
Notes:
| (1) | Repaid in full during March 2022. |
| (2) | Repaid in full during February 2022. |
| (3) | Repaid in full during December 2021. |
| (4) | Repaid in full during April 2021. |
The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:
| For the | For the | |||||||
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| Joint Venture/Lender | 2021 | 2020 | ||||||
| LSC 162nd Capital I LLC | $ | 491 | $ | 641 | ||||
| LSC 162nd Capital II LLC | 1,063 | 1,387 | ||||||
| LSC 1543 7th LLC | 1,802 | 1,770 | ||||||
| LSC 1650 Lincoln LLC | 2,317 | 2,124 | ||||||
| LSC 11640 Mayfield LLC | 1,875 | 1,243 | ||||||
| LSC 87 Newkirk LLC | 1,585 | 1,625 | ||||||
| Total | $ | 9,133 | $ | 8,790 | ||||
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Stockholder’s Equity
Share Repurchase Program
Our share repurchase program (the “SRP”) may provide our stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to us, subject to restrictions.
On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.
Effective March 15, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to our current NAV per Share, as determined by the Board of Directors and reported by the Company from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by us within one year of the stockholder’s date of death for consideration.
At the above noted dates, the Board of Directors established that on an annual basis, we would not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Additionally, redemption requests generally would be processed on a quarterly basis and would be subject to pro ration if either type of redemption requests exceeded the annual limitation.
For the year ended December 31, 2021, we repurchased 143,918 shares of common stock for $11.18 per share, pursuant to the SRP. For the period from January 1 through March 24, 2020, we repurchased 287,987 shares of common stock for $10.87 per share, pursuant to the SRP.
On March 18, 2022, The Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0%.
2020 Tender Offer
We commenced a tender offer on June 15, 2020, pursuant to which we offered to acquire up to 225,000 of our shares of common stock at a purchase price of $5.00 per share, or $1.1 million in the aggregate (the “2020 Tender Offer”). Pursuant to the terms of the 2020 Tender Offer, which expired on July 24, 2020, we repurchased 0.1 million shares of our common stock for an aggregate of $0.3 million in August 2020.
Distribution Reinvestment Program (“DRIP”)
Our distribution reinvestment program (“DRIP”) provides our shareholders with an opportunity to purchase additional shares of our common stock at a discount by reinvesting distributions. Under our distribution reinvestment program, a shareholder may acquire, from time to time, additional shares of our common stock by reinvesting cash distributions payable by us to such shareholder, without incurring any brokerage commission, fees or service charges.
The DRIP had been suspended since 2015 until our DRIP Registration Statement on Form S-3D was filed and became effective as amended and restated, under the Securities Act of 1933 on October 25, 2018.
Pursuant to the DRIP following its reactivation, our stockholders who elect to participate may invest all or a portion of the cash distributions that we pay them on shares of our common stock in additional shares of our common stock without paying any fees or commissions. The purchase price for shares under the DRIP will be equal to 95% of our current NAV per Share, as determined by the Board of Directors and reported by us from time to time. On December 16, 2021, the Board of Directors determined our NAV per Share of $11.75, as of September 30, 2021, which resulted in a purchase price for shares under the DRIP of $11.16 per share. As of December 31, 2021, 9.9 million shares remain available for issuance under our DRIP.
The Board of Directors reserves the right to terminate the DRIP for any reason without cause by providing written notice of termination of the DRIP to all participants.
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Distributions Declared by the Board of Directors
Common Shares
During the years ended December 31, 2021 and 2020, distributions on our Common Shares were declared quarterly, for each calendar quarter end, at the pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $10.00 per share, to stockholders of record at the close of business on the last day of the quarter-end. All distributions were paid on or about the 15th day of the month following the quarter-end.
Total distributions declared during both of the years ended December 31, 2021 and 2020 were $15.6 million.
On March 18, 2022, the Board of Directors authorized and declared a Common Share distribution of $0.175 per share for the quarterly period ending March 31, 2022. The quarterly distribution is the pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $10.00 per share. The distribution will be paid on or about the 15th day of the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders have an option to elect the receipt of shares under the Company’s DRIP.
SLP Units
For both of the years ended December 31, 2021 and 2020, total distributions declared and paid on the SLP Units were $2.1 million. Additionally, on March 18, 2022, the Board of Directors declared a quarterly distribution for the quarterly period ending March 31, 2022 on the SLP Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive a stated preferred return.
Contractual Obligations
The following is a summary of our contractual obligations outstanding over the next five years and thereafter as of December 31, 2021.
| Contractual Obligations | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | |||||||||||||||||||||
| Mortgage Payable | $ | 43,389 | $ | 1,454 | $ | 126,910 | $ | - | $ | - | $ | - | $ | 171,753 | ||||||||||||||
| Interest Payments1 | 9,786 | 9,446 | 6,169 | - | - | - | 25,401 | |||||||||||||||||||||
| Total Contractual Obligations | $ | 53,175 | $ | 10,900 | $ | 133,079 | $ | - | $ | - | $ | - | $ | 197,154 | ||||||||||||||
| 1) | These amounts represent future interest payments related to mortgage payable obligations based on the fixed and variable interest rates specified in the associated debt agreement. All variable rate debt agreements are based on the one month LIBOR rate. For purposes of calculating future interest amounts on variable interest rate debt the one month LIBOR rate as of December 31, 2021 was used. |
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Notes Payable
Margin Loan
We have access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain of our marketable securities. The Margin Loan, which is due on demand, bears interest at LIBOR + 0.85% (0.95% as of December 31, 2021) and is collateralized by the marketable securities in our account. The amounts available to us under the Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in our account. There were no amounts outstanding under the Margin Loan as of December 31, 2021 and 2020.
Line of Credit
We have a non-revolving credit facility (the “Line of Credit”) with a financial institution that provides for borrowings up to a maximum of $20.0 million, subject to a 55% loan-to-value ratio based on the fair value of the underlying collateral, matures on November 30, 2022 and bears interest at LIBOR + 1.35% (1.45% as of December 31, 2021). The Line of Credit is collateralized by an aggregate of 209,243 of Marco OP Units and Marco II OP Units and was guaranteed by PRO. As of December 31, 2021, the amount of borrowings available to be drawn under the Line of Credit was $18.4 million. No amounts were outstanding under the Line of Credit as of both December 31, 2021 and 2020.
LIBOR
The Moxy Construction Loans, Exterior Street Loans, Margin Loan and Line of Credit are indexed to LIBOR. In late 2021, it was announced LIBOR interest rates will cease publication altogether by June 30, 2023. We have and intend continue to incorporate relatively standardized replacement rate provisions into our LIBOR-indexed debt documents, including a spread adjustment mechanism designed to equate to the current LIBOR “all in” rate. There is significant uncertainty with respect to the implementation of the phase out and what alternative indexes will be adopted which will ultimately be determined by the market as a whole. It therefore remains uncertain how such changes will be implemented and the effects such changes would have on us and the financial markets generally.
Debt Maturities
The Exterior Street Loans (outstanding principal balance of $42.0 million as of December 31, 2021) mature on April 9, 2022. We currently intend to extend or refinance the Exterior Street Loans on or before their maturity date.
However, if we are unable to extend or refinance any of our maturing indebtedness at favorable terms, we will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. We have no additional significant maturities of mortgage debt over the next 12 months.
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Funds from Operations and Modified Funds from Operations
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings, improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be less informative.
Because of these factors, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has published a standardized measure of performance known as funds from operations (“FFO”), which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. FFO is not equivalent to our net income or loss as determined under GAAP.
We calculate FFO, a non-GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Our FFO calculation complies with NAREIT’s definition.
We believe that the use of FFO provides a more complete understanding of our performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT’s definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries. These changes had a particularly significant impact on publicly registered, non-listed REITs, which typically have a significant amount of acquisition activity in the early part of their existence, particularly during the period when they are raising capital through ongoing initial public offerings.
Because of these factors, the Investment Program Association (the “IPA”), an industry trade group, published a standardized measure of performance known as modified funds from operations (“MFFO”), which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs. MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. MFFO is not equivalent to our net income or loss as determined under GAAP.
We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for acquisition and transaction-related fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline and exclude acquisition and transaction-related fees and expenses (which includes costs incurred in connection with strategic alternatives), amounts relating to deferred rent receivables and amortization of market lease and other intangibles, net (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), accretion of discounts and amortization of premiums on debt investments and borrowings, mark-to-market adjustments included in net income (including gains or losses incurred on assets held for sale), gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Certain of the above adjustments are also made to reconcile net income (loss) to net cash provided by (used in) operating activities, such as for the amortization of a premium and accretion of a discount on debt and securities investments, amortization of fees, any unrealized gains (losses) on derivatives, securities or other investments, as well as other adjustments.
37
MFFO excludes non-recurring impairment of real estate-related investments. We assess the credit quality of our investments and adequacy of reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. We consider the estimated net recoverable value of a loan 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 prospects for the borrower and the competitive situation of the region where the borrower does business.
We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring properties and once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.
Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. FFO and MFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.
Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, NAREIT, the IPA or another industry trade group may publish updates to the White Paper or the Practice Guidelines or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry, and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.
38
The below table illustrates the items deducted in the calculation of FFO and MFFO. Items are presented net of non-controlling interest portions where applicable.
| For
the Years Ended | ||||||||
| December 31,
2021 | December 31, 2020 | |||||||
| Net income/(loss) | $ | 23,963 | $ | (1,087 | ) | |||
| FFO adjustments: | ||||||||
| Depreciation and amortization | 5,523 | 3,956 | ||||||
| Gain on disposal of real estate, net | (3,947 | ) | (1,562 | ) | ||||
| Impairment charge | 11,341 | - | ||||||
| FFO | 36,880 | 1,307 | ||||||
| MFFO adjustments: | ||||||||
| Other adjustments: | ||||||||
| Acquisition and other transaction related costs expensed(1) | - | - | ||||||
| Noncash adjustments: | ||||||||
| Amortization of above or below market leases and liabilities(2) | - | - | ||||||
| Mark to market adjustments(3) | (16,650 | ) | 12,204 | |||||
| Loss on debt extinguishment(4) | 103 | - | ||||||
| (Gain)/loss on sale of marketable securities(4) | (5,882 | ) | 230 | |||||
| MFFO | 14,451 | 13,741 | ||||||
| Straight-line rent(5) | 5 | 104 | ||||||
| MFFO - IPA recommended format | $ | 14,456 | $ | 13,845 | ||||
| Net income/(loss) | $ | 23,963 | $ | (1,087 | ) | |||
| Less: income attributable to noncontrolling interests | (4,880 | ) | (3,202 | ) | ||||
| Net income/(loss) applicable to Company’s common shares | $ | 19,083 | $ | (4,289 | ) | |||
| Net income/(loss) per common share, basic and diluted | $ | 0.86 | $ | (0.19 | ) | |||
| FFO | $ | 36,880 | $ | 1,307 | ||||
| Less: FFO attributable to noncontrolling interests | (5,799 | ) | (1,697 | ) | ||||
| FFO attributable to Company’s common shares | $ | 31,081 | $ | (390 | ) | |||
| FFO per common share, basic and diluted | $ | 1.40 | $ | (0.02 | ) | |||
| MFFO - IPA recommended format | $ | 14,456 | $ | 13,845 | ||||
| Less: MFFO attributable to noncontrolling interests | (4,755 | ) | (3,634 | ) | ||||
| MFFO attributable to Company’s common shares | $ | 9,701 | $ | 10,211 | ||||
| Weighted average number of common shares outstanding, basic and diluted | 22,254 | 22,337 | ||||||
39
Notes:
| (1) | The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. Such fees and expenses are paid in cash, and therefore such funds will not be available to distribute to investors. Such fees and expenses negatively impact our operating performance during the period in which properties are being acquired. Therefore, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. Acquisition fees and expenses will not be paid or reimbursed, as applicable, to our advisor even if there are no further proceeds from the sale of shares in our offering, and therefore such fees and expenses would need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows. |
| (2) | Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate. |
| (3) | Management believes that adjusting for mark-to-market adjustments is appropriate because they are nonrecurring items that may not be reflective of ongoing operations and reflects unrealized impacts on value based only on then current market conditions, although they may be based upon current operational issues related to an individual property or industry or general market conditions. The need to reflect mark-to-market adjustments is a continuous process and is analyzed on a quarterly and/or annual basis in accordance with GAAP. |
| (4) | Management believes that adjusting for gains or losses related to extinguishment/sale of debt, derivatives or securities holdings is appropriate because they are items that may not be reflective of ongoing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods. |
| (5) | Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance. |
The table below presents our cumulative distributions paid and cumulative FFO:
| From
inception through | ||||
| December 31,
2021 | ||||
| FFO attributable to Company’s common shares | $ | 266,732 | ||
| Distributions Paid | $ | 263,308 | ||
For the year ended December 31, 2021, we paid cash distributions of $15.3 million. Cash flow from operations was $10.0 million and FFO attributable to Company’s common shares for the year ended December 31, 2021 was $31.1 million. For the year ended December 31, 2020, we paid cash distributions of $15.4 million. Cash flow from operations was $10.1 million and FFO attributable to Company’s common shares for the year ended December 31, 2020 was negative $0.4 million.
New Accounting Pronouncements
See Note 2 to the Notes to Consolidated Financial Statements for further information concerning accounting standards that we have not yet been required to adopt and may be applicable to our future operations.
40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Lightstone Value Plus REIT I, Inc. and Subsidiaries
(a Maryland corporation)
Index
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Lightstone Value Plus REIT I, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Lightstone Value Plus REIT I, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Investment Property –Impairment of Investment Property
As of December 31, 2021, the Company had investment property, net of accumulated depreciation, of approximately $81.6 million. As more fully described in Note 2 to the financial statements, the Company reviews its investment properties for impairment at the lowest identifiable level, the individual property level, whenever events or change in circumstances indicate that the carrying value of a particular property may not be recoverable. When such conditions exist, the Company performs a recoverability analysis to determine if the estimated undiscounted projected cash flows from operations and the estimated proceeds from the ultimate disposition of an investment property exceed the property’s carrying values. The Company estimates undiscounted cash flows of an investment property using observable and unobservable inputs such as historical and projected cash flows, net operating income, current market and other applicable trends, estimated capitalization rates, and residual values. In the event the analysis indicates that a potential impairment exists, the Company will perform an additional analysis to assess the recoverability of the carrying value of the real estate.
We identified the investment property impairment evaluation as a critical audit matter due to estimation uncertainty in determining the undiscounted cash flows of an investment property. In particular, the impairment evaluation for investment property is sensitive to significant assumptions such as forecasted cash flows and net operating income, estimated capitalization rates, and residual values, all of which can be affected by expectations about future market or economic conditions, demand, and competition. This in turn led to a high degree of auditor judgment and subjectivity and significant audit effort was required in performing procedures to evaluate management's investment property impairment evaluation.
F-2
Addressing the matter involved performing procedures and evaluating audit evidence, in connection with forming our overall opinion on the financial statements. We obtained an understanding and evaluated the design of controls over the Company’s impairment evaluation. Our procedures included, among others, assessing the methodologies applied, evaluating the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by management in its analysis. In addition, we performed sensitivity analysis over significant estimates and assumptions including future operating income and residual values. We tested estimated undiscounted cash flows by comparing them to historical operating results by property and the reasonableness of key inputs including forecasted net operating income, capitalization rates, and assumed hold periods. We held discussions with management about the current status of each property and management’s judgments to understand the probability of future events that could affect the holding period and other cash flow assumptions for the properties. We compared anticipated sales values and capitalization rates with comparable observable market data, which involved the use of our valuation specialists. When assessing the assumptions related to estimated undiscounted cash flows, we evaluated whether the assumptions used were reasonable considering the past and current performance of the property and considered whether they were consistent with evidence obtained in other areas of the audit.
/s/ EisnerAmper LLP
We have served as the Company’s auditor since 2010.
New
York,
March 23, 2022
F-3
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
| As
of December 31, 2021 | As
of December 31, 2020 | |||||||
| Assets | ||||||||
| Investment property: | ||||||||
| Land and improvements | $ | $ | ||||||
| Building and improvements | ||||||||
| Furniture and fixtures | ||||||||
| Construction in progress | ||||||||
| Gross investment property | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net investment property | ||||||||
| Development projects | ||||||||
| Investments in related parties | ||||||||
| Cash and cash equivalents | ||||||||
| Marketable securities | ||||||||
| Restricted cash | ||||||||
| Notes receivable, net | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Mortgages payable, net | $ | $ | ||||||
| Accounts payable, accrued expenses and other liabilities | ||||||||
| Due to related parties | ||||||||
| Tenant allowances and deposits payable | ||||||||
| Distributions payable | ||||||||
| Deferred rental income | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Company’s Stockholders Equity: | ||||||||
| Preferred shares, $ par value, million shares authorized, issued and outstanding | ||||||||
| Common stock, $ par value; million shares authorized, million and million shares issued and outstanding, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive (loss)/income | ( | ) | ||||||
| Accumulated surplus | ||||||||
| Total Company’s stockholders’ equity | ||||||||
| Noncontrolling interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
| For
the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenues: | ||||||||
| Rental income | $ | $ | ||||||
| Tenant recovery income | ||||||||
| Total revenues | ||||||||
| Expenses: | ||||||||
| Property operating expenses | ||||||||
| Real estate taxes | ||||||||
| General and administrative costs | ||||||||
| Impairment charge | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Interest and dividend income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain on disposition of real estate, net | ||||||||
| Gain/(loss) on sale of marketable securities | ( | ) | ||||||
| Unrealized gain/(loss) on marketable equity securities | ( | ) | ||||||
| Other income, net | ||||||||
| Net income/(loss) | ( | ) | ||||||
| Less: net income attributable to noncontrolling interests | ( | ) | ( | ) | ||||
| Net income/(loss) attributable to Company’s common shares | $ | $ | ( | ) | ||||
| Basic and diluted net income/(loss) per Company’s common share: | ||||||||
| Net income/(loss) per Company’s common shares, basic and diluted | $ | $ | ( | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
| For
the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Net income/(loss) | $ | $ | ( | ) | ||||
| Other comprehensive loss: | ||||||||
| Holding gain/(loss) on available for sale debt securities | ( | ) | ||||||
| Reclassification adjustment for gain included in net income | ( | ) | ||||||
| Other comprehensive loss: | ( | ) | ( | ) | ||||
| Comprehensive income/(loss) | ( | ) | ||||||
| Less: Comprehensive income attributable to noncontrolling interests | ( | ) | ( | ) | ||||
| Comprehensive income/(loss) attributable to the Company’s common shares | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common | Paid-In | Comprehensive | Accumulated | Noncontrolling | Total | |||||||||||||||||||||||
| Shares | Amount | Capital | Income | Surplus | Interests | Equity | ||||||||||||||||||||||
| BALANCE, December 31, 2019 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Distributions declared (a) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Distributions paid to noncontrolling interests | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Contributions received from noncontrolling interests | - | |||||||||||||||||||||||||||
| Redemption, cancellation and tender of shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Shares issued from distribution reinvestment program | ||||||||||||||||||||||||||||
| BALANCE, December 31, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions declared (a) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Distributions paid to noncontrolling interests | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Contributions received from noncontrolling interests | - | |||||||||||||||||||||||||||
| Redemption and cancellation of shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Shares issued from distribution reinvestment program | ||||||||||||||||||||||||||||
| BALANCE, December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| (a) |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| For
the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income/(loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Unrealized (gain)/loss on marketable equity securities | ( | ) | ||||||
| (Gain)/loss on sale of marketable securities | ( | ) | ||||||
| Amortization of deferred financing costs | ||||||||
| Noncash interest income | ( | ) | ( | ) | ||||
| Gain on disposition of real estate | ( | ) | ( | ) | ||||
| Other non-cash adjustments | ||||||||
| Impairment charge | ||||||||
| Changes in assets and liabilities: | ||||||||
| (Increase)/decrease in prepaid expenses and other assets | ( | ) | ||||||
| Increase/(decrease) in tenant allowances and deposits payable | ( | ) | ||||||
| Increase in accounts payable, accrued expenses and other liabilities | ||||||||
| Decrease in due to related parties | ( | ) | ( | ) | ||||
| Decrease in deferred rental income | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of investment property | ( | ) | ( | ) | ||||
| Purchase of marketable securities | ( | ) | ( | ) | ||||
| Proceeds from sale of marketable securities | ||||||||
| Proceeds from disposition of real estate | ||||||||
| Investment in joint venture | ( | ) | ( | ) | ||||
| Proceeds from joint venture | ||||||||
| Funding of notes receivable | ( | ) | ||||||
| Proceeds from notes receivable | ||||||||
| Proceeds from investments in related parties | ||||||||
| Net cash provided by/(used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from mortgage financing | ||||||||
| Mortgage principal payments | ( | ) | ( | ) | ||||
| Payment of loan fees and expenses | ( | ) | ( | ) | ||||
| Redemption, cancellation and tender of common shares | ( | ) | ( | ) | ||||
| Contributions received from noncontrolling interests | ||||||||
| Distributions paid to noncontrolling interests | ( | ) | ( | ) | ||||
| Distributions paid to Company’s common stockholders | ( | ) | ( | ) | ||||
| Net cash (used in)/provided by financing activities | ( | ) | ||||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of year | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
See Note 2 for supplemental cash flow information.
The accompanying notes are an integral part of these consolidated financial statement
F-8
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 1. | Structure |
Lightstone Value Plus REIT I, Inc., which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September 16, 2021, a Maryland corporation (“Lightstone REIT I”), formed on June 8, 2004, which has elected to be taxed and qualify as a real estate investment trust for U.S. federal income tax purposes (“REIT”). The Lightstone REIT I was formed primarily for the purpose of engaging in the business of investing in and owning commercial and residential real estate properties located throughout the United States.
The Lightstone REIT I is structured as an umbrella partnership real estate investment trust, or UPREIT, and substantially all of the Company’s current and future business is and will be conducted through Lightstone Value Plus REIT, L.P. (the “Operating Partnership”), a Delaware limited partnership formed on July 12, 2004. As of December 31, 2021, the Company held a 98% general partnership interest in the Company’s Operating Partnership’s common units (“Common Units”).
The Lightstone REIT I and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to the Lightstone REIT I, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through its Operating Partnership, the Company owns, operates and develops commercial, residential, and hospitality properties and makes real estate-related investments, principally in the United States. The Company’s real estate investments are held alone or jointly with other parties. The Company also originates or acquires mortgage loans secured by real estate. Although most of its investments are of these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes is in its best interests.
Since
its inception, the Company has owned and managed various commercial and residential properties located throughout the United States.
The Company evaluates all of its real estate investments as one operating segment. As of December 31, 2021, the Company has ownership
interests in (i) two consolidated operating properties, (ii) two consolidated development properties and (iii) seven unconsolidated
operating properties. With respect to its consolidated operating properties, the Company wholly owns the St. Augustine Outlet
Center, a retail property containing 0.3 million square feet of gross leasable area, and has a majority ownership interest of
The
Company’s advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein.
On July 6, 2004, the Advisor contributed $
F-9
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management of the Company’s assets.
The Company’s Advisor has affiliates which may manage and develop certain of its properties. However, the Company also contracts with other unaffiliated third-party property managers.
The Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its stock for trading on a national securities exchange only if a majority of independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares of common stock until they are listed for trading.
Related Parties:
The Advisor and its affiliates, and Lightstone SLP, LLC are related parties of the Company. Certain of these entities are entitled to compensation for services related to the investment, management and disposition of the Company’s assets. The compensation is based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements as outlined in each of the respective agreements. See Note 12 for additional information.
Noncontrolling Interests
Partners of Operating Partnership
On
July 6, 2004, the Advisor contributed $
In
connection with the Offering, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $
In
addition, an aggregate
Other Noncontrolling Interests in Consolidated Subsidiaries
Other noncontrolling interests in consolidated subsidiaries include ownership interests in (i) Pro-DFJV Holdings LLC (“PRO”) held by the Company’s Sponsor (see Note 11), (ii) 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”), held by the Company’s Sponsor and other affiliates (see Note 11) and (iii) various joint ventures held by affiliates of the Sponsor that have originated promissory notes to unaffiliated third parties (see Note 5). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note 6). The 2nd Street Joint Venture owns Gantry Park Landing, a multi-family apartment building located in Queens, New York.
See Note 11 for further discussion of noncontrolling interests.
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LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
COVID-19 Pandemic
The World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future.
As
a result of previously imposed restrictions, the Company temporarily closed its St. Augustine Outlet Center from March 20, 2020
through May 7, 2020. During the COVID-19 pandemic, the property’s occupancy declined and because of limited leasing success,
the Company began exploring various strategic alternatives for its St. Augustine Outlet Center and as a result determined during
the third quarter of 2021 that it would no longer pursue leasing of space to tenants and therefore, entered into lease termination
agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at scheduled
expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet
Center, the Company recorded a non-cash impairment charge of $
Additionally, as a result of the COVID-19 pandemic, during 2020 the Company saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted. However, both occupancy and rental rates have improved considerably throughout 2021 and have returned to pre-COVID-19 levels.
To-date, the COVID-19 pandemic has not had any significant impact on the Company’s development projects. Furthermore, the Company’s other real estate-related investments (both its preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers) also relate to various development projects which are at different stages in their respective development process. These investments, which are subject to similar restrictions and other measures, have also not yet been significantly impacted by the COVID-19 pandemic.
The overall extent to which the Company’s business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.
If the Company’s operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on the Company’s preferred investments in related parties, the Company’s business and financial results could be materially and adversely impacted.
F-11
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 2. | Summary of Significant Accounting Policies |
Principles of Consolidation and Basis of Presentation
The
consolidated financial statements include the accounts of Lightstone REIT I and the Operating Partnership and its subsidiaries
(over which the Company exercises financial and operating control). As of December 31, 2021, Lightstone REIT I had a
The consolidated 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 and real estate-related investments, depreciable lives, 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.
Investments in entities where the Company has the ability to exercise significant influence, but does not exercise financial and operating control, and is not considered to be the primary beneficiary of a variable interest entity will be accounted for using the equity method. Investments in entities where the Company has virtually no influence are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for cash contributions and distributions.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less when made to be cash equivalents.
As required by the Company’s lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate taxes, and other reserves for certain of its consolidated properties. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions, and major capital expenditures. Alternatively, a lender may require its own formula for an escrow of capital reserves. Restricted cash may also include certain funds temporarily placed in escrow with qualified intermediaries to facilitate potential like-kind exchange transactions in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended.
The following is a summary of the Company’s cash, cash equivalents, and restricted cash total as presented in the statements of cash flows for the periods presented:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
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LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Supplemental cash flow information for the periods indicated is as follows:
| For
the Years Ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Cash paid for interest | $ | $ | ||||||
| Distributions declared but not paid | $ | $ | ||||||
| Accrued development costs | $ | $ | ||||||
| Amortization of deferred financing costs included in development projects | $ | $ | ||||||
| Holding gain/loss on available for sale debt securities | $ | $ | ||||||
| Value of shares issued from distribution reinvestment program | $ | $ | ||||||
| Accrued loan exit fee included in deferred financing costs | $ | $ | ||||||
Marketable Securities
Marketable securities consist of equity and debt securities that are designated as available-for-sale. Marketable debt securities are recorded at fair value and unrealized holding gains or losses are reported as a component of accumulated other comprehensive income. The Company’s marketable equity securities are recorded at fair value and unrealized holding gains and losses are recognized on the consolidated statements of operations.
Realized
gains or losses resulting from the sale of these securities are determined based on the specific identification of the securities
sold. An impairment charge is recognized when the decline in the fair value of a debt security below the amortized cost basis
is determined to be other-than-temporary. The Company considers various factors in determining whether to recognize an impairment
charge, including the duration and severity of any decline in fair value below our amortized cost basis, any adverse changes in
the financial condition of the issuers and our intent and ability to hold the investment for a period of time sufficient to allow
for any anticipated recovery in market value. The Board of Directors has authorized the Company from time to time to invest the
Company’s available cash in marketable securities of real estate related companies. The Board of Directors has approved
investments of marketable securities of real estate companies up to
Revenue Recognition
Minimum rents are recognized on a straight-line accrual basis, over the terms of the related leases. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to rental income over the initial lease term, including any below-market renewal periods taken into account. Percentage rents, which are based on commercial tenants’ sales, are recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants’ leases. Recoveries from commercial tenants for real estate taxes, insurance and other operating expenses, and from residential tenants for utility costs, are recognized as revenues in the period that the applicable costs are incurred.
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LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Consolidated VIEs
The Company consolidates certain joint ventures which have originated nonrecourse loans to unaffiliated third-party borrowers (see Note 5) which are variable interest entities, or VIEs, for which the Company is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership, or legal entities such as an LLC, are considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to our business activities and the business activities of the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
Investments in Real Estate
Accounting for Asset Acquisitions
The cost of the real estate assets acquired in an asset acquisition is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, based in each case on their relative fair values. Fees incurred related to asset acquisitions are capitalized as part of the cost of the investment.
Accounting for Business Combinations
Upon the acquisition of real estate operating properties that meet the definition of a business, the Company estimates the fair value of acquired tangible assets and identified intangible assets and liabilities and assumed debt at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, the Company evaluates the existence of goodwill or a gain from a bargain purchase and allocates the initial purchase price to the applicable assets, liabilities and noncontrolling interests, if any. As final information regarding fair value of the assets acquired, liabilities assumed and noncontrolling interests is received and estimates are refined, appropriate adjustments are made to the purchase price allocation. The allocations are finalized as soon as all the information necessary is available.
Accounting for Development Projects
The Company incurs a variety of costs in the development of a property. The costs of land and building under development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development. The Company ceases capitalization when the development project is substantially complete and placed in service, which may occur in phases. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment.
Once a development project is placed in service, which may occur in phases or for an entire building or project, the costs capitalized to that development project are transferred to land and improvements, buildings and improvements, and furniture and fixtures on the Company’s consolidated balance sheets at the historical cost of the property.
F-14
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Impairment Evaluation
The Company evaluates the recoverability of its investments in real estate assets at the lowest identifiable level, the individual property level. An impairment loss is recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.
The Company evaluates the long-lived assets for potential impairment whenever events or changes in circumstances indicate that the undiscounted projected cash flows are less than the carrying amount for a particular property. No single indicator would necessarily result in the Company preparing an estimate to determine if a long-lived asset’s future undiscounted cash flows are less than its book value. The Company uses judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a long-lived asset requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The estimated cash flows used for the impairment analysis are subjective and require the Company to use its judgment and the determination of estimated fair value are based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company’s plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, may be substantial.
Notes Receivable and Preferred Investments
Notes receivable and preferred investments that we intend to hold to maturity are carried at cost, net of any unamortized origination costs, fees, discounts, premiums and unfunded commitments.
Investment income will be recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to investment income in the Company’s statements of operations.
Income recognition is suspended when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal is not in doubt, contractual interest is recorded as investment income when received, under the cash basis method, until an accrual is resumed when the instrument becomes contractually current and performance is demonstrated to be resumed.
Credit Losses and Impairment on Notes Receivable
Notes receivable are considered impaired when, based on current information and events, it is probable that we will not be able to collect principal and interest amounts due according to the contractual terms. We assess the credit quality of our notes receivable and adequacy of reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management is required in this analysis. We consider the estimated net recoverable value of the notes receivable 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 is 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 notes receivable, a reserve is recorded with a corresponding charge to investment income. The reserve for each note receivable is maintained at a level that is determined to be adequate by management to absorb probable losses.
F-15
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Credit Losses and Impairment on Preferred Investments
Preferred investments that are accounted for as held to maturity are assessed for impairment at the individual investment level when there is a decline in fair value below the amortized cost basis that is deemed to be other than temporary. In making the determination of an other-than-temporary impairment assessment, the Company considers all available information relevant to the collectability of the investment, including information about past events, current conditions, and reasonable and supportable forecasts when developing the estimate of cash flows expected to be collected. This information includes the remaining redemption terms of the investment, financial condition of the issuer, expected defaults and the value of any underlying collateral. In assessing whether the entire amortized cost basis of the investment will be recovered, the Company compares the present value of cash flows expected to be collected from the investment with the amortized cost basis and records an impairment based on the amount by which the present value of cash flows expected to be collected is less than the amortized cost basis of the investment.
Depreciation and Amortization
Depreciation
expense is computed based on the straight-line method over the estimated useful life of the applicable real estate asset. The
Company generally uses estimated useful lives of up to
Leases
The Company’s retail property (St. Augustine Outlet Center) and its multi-family residential property (Gantry Park Landing) are both leased to tenants under operating leases. Substantially all of our multi-family residential property leases have initial terms of 12 months or less. Our remaining retail space leases expire from 2022 through 2024.
Deferred Costs
The Company capitalizes initial direct costs associated with financing activities. The costs are capitalized upon the execution of the loan, presented in the consolidated balance sheets as a direct deduction from the carrying value of the corresponding loan and amortized over the initial term of the corresponding loan. Amortization of deferred loan costs begin in the period during which the loan is originated using the effective interest method over the term of the loan. The Company capitalizes initial direct costs associated with leasing activities. The costs are capitalized upon the execution of the lease and amortized over the initial term of the corresponding lease.
Income Taxes
The Company has elected to be taxed as a REIT commencing with the taxable year ended December 31, 2005. 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 the regular corporate rate, 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.
To maintain its qualification as a REIT, the Company engages in certain activities through wholly-owned taxable REIT subsidiaries (“TRSs”). As such, the Company is subject to U.S. federal and state income and franchise taxes from these activities.
As
of December 31, 2021 and 2020, the Company had
F-16
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities, due to related parties, tenant allowances and deposits payable and deferred rental income approximate their fair values because of the short maturity of these instruments. The carrying amounts of the notes receivable approximate their fair values because the interest rates are variable and reflective of market rates.
The estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:
As of December 31, | As
of December 31, 2020 | |||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
| Mortgages payable | $ | $ | $ | $ | ||||||||||||
The fair value of the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated current market interest rates.
Accounting for Derivative Financial Investments 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 records all derivative instruments at fair value on the consolidated balance sheets and changes in the fair value of the instruments are recorded in the consolidated statements of operations.
Stock-Based Compensation
The Company had a stock-based incentive award plan for the independent directors of its Board pursuant to which awards were granted at fair market value as of the date of grant. This plan expired in April 2015. For the years ended December 31, 2021 and 2020, the Company had compensation costs related to the incentive award plan.
Concentration of Risk
The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed 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 its cash and cash equivalents.
Basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the applicable period. Dilutive income per share includes the potentially dilutive effect, if any, which would occur if our outstanding options to purchase our common stock were exercised. For all periods presented dilutive net income per share is equivalent to basic net income per share.
F-17
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
New Accounting Pronouncements
In June 2016, the FASB issued an accounting standards update which replaces the incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects that the adoption of this standard will not have a material effect on its consolidated financial position, results of operations or cash flows.
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 current operations.
Reclassifications
Certain prior period amounts may have been reclassified to conform to the current year presentation.
F-18
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 3. | Development Projects |
Lower East Side Moxy Hotel
On
December 3, 2018, the Company, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land
located at 147-151 Bowery, New York, New York from unaffiliated third parties for aggregate consideration of $
Exterior Street Project
On
February 27, 2019, the Company, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located
at 355 and 399 Exterior Street, New York, New York from unaffiliated third parties for an aggregate purchase price of $
Santa Clara Data Center
On
January 10, 2019, the Company acquired a parcel of land located at 2175 Martin Avenue, Santa Clara, California (the “Martin
Avenue Land”) from an unaffiliated third party for $
On
July 7, 2021, the Company disposed of the Santa Clara Data Center to an unrelated third party for a contractual sales price of
$
The disposition of the Santa Clara Data Center did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of the Santa Clara Data Center are reflected in the Company’s results from continuing operations for all periods presented through its date of disposition.
The following is a summary of the amounts incurred and capitalized to each of the Company’s development projects as of the dates indicated and the amounts of interest capitalized to each of the Company’s development projects for the periods indicated:
| Amounts
Capitalized to Construction in Progress | Capitalized Interest | |||||||||||||||
| As
of December 31, | As
of December 31, | Year
Ended December 31, | ||||||||||||||
| Development Project | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Lower East Side Moxy Hotel | $ | $ | $ | $ | ||||||||||||
| Exterior Street Project | ||||||||||||||||
| Santa Clara Data Center | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
F-19
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 4. | Investments in Related Parties |
Preferred Investments
The
Company has entered into agreements with various related party entities that provide for it to make preferred contributions pursuant
to certain instruments (the “Preferred Investments”) that entitle it to certain prescribed monthly preferred distributions
(see below for additional information). The Preferred Investments had an aggregate balance of $
The Preferred Investments are summarized as follows:
| Preferred Investment Balance | Investment Income(1) | |||||||||||||||||||
| Dividend | As of December 31, | As of December 31, | For the Year Ended December 31, | |||||||||||||||||
| Preferred Investments | Rate | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| 40 East End Avenue | % | $ | $ | $ | $ | |||||||||||||||
| East 11th Street | % | |||||||||||||||||||
| Miami Moxy | % | |||||||||||||||||||
| Total Preferred Investments | $ | $ | $ | $ | ||||||||||||||||
Note:
| (1) |
40 East End Avenue Preferred Investment
In
May 2015, the Company entered into an agreement pursuant to which it made aggregate contributions of $
Contributions
were made pursuant to an instrument, the “40 East End Avenue Preferred Investment,” that is entitled to monthly preferred
distributions, initially at a rate of
F-20
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
East 11th Street Preferred Investment
On
April 21, 2016, the Company entered into an agreement, as amended, with various related party entities pursuant to which it to
made aggregate contributions of $
Miami Moxy Preferred Investment
On
September 30, 2016, the Company entered into an agreement with various related party entities pursuant to which it made aggregate
contributions of $
The Joint Venture
During 2015, the Company formed the Joint Venture with Lightstone REIT II. The Company has a 2.5% membership interest in the Joint Venture and Lightstone REIT II holds the remaining 97.5% membership interest. The Joint Venture previously acquired our membership interests in a portfolio of 11 hotels in a series of transactions completed during 2015. The Joint Venture holds ownership interests in seven hotels as of December 31, 2021.
The Company accounts for its 2.5% membership interest in the Joint Venture using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any, and as of December 31, 2021 and 2020, the carrying value of its investment was $1.0 million and $1.1 million, respectively, which is included in investments in related parties on the consolidated balance sheets.
F-21
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 5. | Notes Receivable |
The Company has formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).
The NR Subsidiaries and NR Affiliates have varying ownership interests in the NR Joint Ventures and certain other wholly-owned subsidiaries of the Operating Partnership serve as the manager and are the sole decision-maker for each of the NR Joint Ventures.
The Company has determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, the Company has consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.
The
Joint Venture Promissory Notes generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection
with the initial funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from
The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional extension options subject to satisfaction of certain conditions, including the funding of additional Loan Reserves and payment of extension fees. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.
Origination fees are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the term.
During
the year ended December 31, 2021, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint
Ventures of $
F-22
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The Notes Receivable are summarized as follows:
| As
of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Company’s | Loan | Contractual | Unamortized | |||||||||||||||||||||||||||||||||||||
| Joint | Ownership | Commitment | Origination | Origination | Maturity | Interest | Outstanding | Origination | Carrying | Unfunded | ||||||||||||||||||||||||||||||
| Venture/Lender | Percentage | Amount | Fee | Date | Date | Rate | Principal | Reserves | Fee | Value | Commitment | |||||||||||||||||||||||||||||
| LSC 1543 7th LLC (1) | % | % | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| LSC 11640 Mayfield LLC (2) | % | % | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| As
of December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
| Company’s | Loan | Contractual | Unamortized | |||||||||||||||||||||||||||||||||||||
| Joint | Ownership | Commitment | Origination | Origination | Maturity | Interest | Outstanding | Origination | Carrying | Unfunded | ||||||||||||||||||||||||||||||
| Venture/Lender | Percentage | Amount | Fee | Date | Date | Rate | Principal | Reserves | Fee | Value | Commitment | |||||||||||||||||||||||||||||
| LSC 162nd Capital I LLC (3) | % | $ | % | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| LSC 162nd Capital II LLC (3) | % | % | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| LSC 1543 7th LLC | % | % | ( | ) | ||||||||||||||||||||||||||||||||||||
| LSC 1650 Lincoln LLC (3) | % | % | ( | ) | ||||||||||||||||||||||||||||||||||||
| LSC 11640 Mayfield LLC | % | % | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| LSC 87 Newkirk LLC (4) | % | % | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
Notes:
| (1) |
| (2) |
| (3) |
| (4) |
F-23
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:
| For the Year Ended | For the Year Ended | |||||||
| December 31, | December 31, | |||||||
| Joint Venture/Lender | 2021 | 2020 | ||||||
| LSC 162nd Capital I LLC | $ | $ | ||||||
| LSC 162nd Capital II LLC | ||||||||
| LSC 1543 7th LLC | ||||||||
| LSC 1650 Lincoln LLC | ||||||||
| LSC 11640 Mayfield LLC | ||||||||
| LSC 87 Newkirk LLC | ||||||||
| Total | $ | $ | ||||||
F-24
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 6. | Marketable Securities, Fair Value Measurements and Notes Payable |
Marketable Securities:
The following is a summary of the Company’s available for sale securities as of the dates indicated:
| As
of December 31, 2021 | ||||||||||||||||
| Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Marketable Securities: | ||||||||||||||||
| Equity securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | ( | ) | $ | ||||||||||
| Marco OP Units and Marco II OP Units | ||||||||||||||||
| ( | ) | |||||||||||||||
| Debt securities: | ||||||||||||||||
| Corporate Bonds | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
As
of 2020 | ||||||||||||||||
| Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Marketable Securities: | ||||||||||||||||
| Equity securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | ( | ) | $ | ||||||||||
| Marco OP Units and Marco II OP Units | ( | ) | ||||||||||||||
| ( | ) | |||||||||||||||
| Debt securities: | ||||||||||||||||
| Corporate Bonds | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
As
of both December 31, 2021 and 2020, the Company held an aggregate of
F-25
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Beginning
with the onset of the COVID-19 pandemic in March 2020, financial markets have experienced significant volatility resulting in
swings in market interest rates and market prices of certain equity securities. Primarily because of this volatility, particularly
due to the above noted changes in the closing prices of Simon Stock, the Company incurred an unrealized gain of $
Additionally,
as of December 31, 2021 and 2020, certain of the Company’s marketable debt securities had gross unrealized losses of $
The Company may sell certain of its investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
| ● | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Marketable securities, available for sale, measured at fair value on a recurring basis as of the dates indicated are as follows:
| Fair Value Measurement Using | ||||||||||||||||
| As of December 31, 2021 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Marketable Securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | $ | ||||||||||||
| Marco OP and OP II Units | ||||||||||||||||
| Corporate Bonds | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
F-26
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| Fair Value Measurement Using | ||||||||||||||||
| As of December 31, 2020 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Marketable Securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | $ | ||||||||||||
| Marco OP and OP II Units | ||||||||||||||||
| Corporate Bonds | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The fair values of the Company’s common equity securities are measured using readily quoted prices for these investments which are listed for trade on active markets. The fair values of the Company’s preferred equity securities and corporate bonds are measured using readily available quoted prices for these securities; however, the markets for these securities are not active. Additionally, as noted and disclosed above, the Company’s Marco OP and OP II units are both ultimately exchangeable for cash or similar number of shares of Simon Stock, therefore the Company uses the quoted market price of Simon Stock to measure the fair value of the Company’s Marco OP and OP II units.
Nonrecurring Fair Value Measurements
During
the third quarter of 2021, the Company recorded a non-cash impairment charge of $
The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.
Notes Payable
Margin Loan
The
Company has access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain
of the Company’s marketable securities. The Margin Loan, which is due on demand, bears interest at
Line of Credit
The
Company has a non-revolving credit facility (the “Line of Credit”) that provides for borrowings up to a maximum of
$
F-27
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 7. | Mortgages Payable |
Mortgages payable, net consists of the following:
| Property/Investment | Interest Rate | Weighted
Average Interest Rate as of December 31, 2021 | Maturity
Date | Amount
Due at Maturity | As
of December 31, 2021 | As
of December 31, 2020 | ||||||||||||||
| Gantry Park Landing | % | $ | $ | $ | ||||||||||||||||
| Lower East Side Moxy Hotel | Repaid in full during June 2021 | |||||||||||||||||||
| Lower East Side Moxy Hotel Senior | % | |||||||||||||||||||
| Lower East Side Moxy Hotel Junior | % | |||||||||||||||||||
| Exterior Street Project | % | |||||||||||||||||||
| Exterior Street Project Supplemental | % | |||||||||||||||||||
| Santa Monica Notes Receivable | Repaid in full during December 2021 | |||||||||||||||||||
| 87 Newkirk Note Receivable | Repaid in full during April 2021 | |||||||||||||||||||
| Total mortgages payable | % | $ | ||||||||||||||||||
| Less: Deferred financing costs | ( | ) | ( | ) | ||||||||||||||||
| Total mortgages payable, net | $ | $ | ||||||||||||||||||
LIBOR
as of December 31, 2021 and 2020 was
F-28
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The following table shows the Company’s contractually scheduled principal maturities during the next five years and thereafter:
| 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | ||||||||||||||||||||||
| Principal maturities | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Less: Deferred financing costs | ( |
|||||||||||||||||||||||||||
| Total principal maturities, net | $ | |||||||||||||||||||||||||||
On
June 3, 2021, the Company, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy
Senior Loan”) providing for up to $
Simultaneously
on June 3, 2021, the Company, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility
(the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) providing
for up to $
Future draws to cover the costs associated with the development and construction of the Lower East Side Moxy Hotel will first be advanced under the Moxy Junior Loan until it has been fully funded and thereafter, funds will be advanced under the remaining availability of the Moxy Senior Loan.
In
connection with the Moxy Construction Loans, the Company has provided certain completion and carry cost guarantees. The Company
has also entered into an interest rate cap agreement pursuant to which the LIBOR rate will be capped at 3.00% on the Moxy Senior
Loan through June 3, 2024 at a cost of $
On
July 22, 2020, the Company, through the 87 Newkirk Joint Venture, entered into a $
On
November 12, 2019, the Company, through LSC 1543 7th LLC and LSC 1650 Lincoln LLC (collectively, the “Santa Monica Joint
Ventures”), entered into a $
F-29
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
On
March 29, 2019, the Company entered into a $
On
November 19, 2014, the 2nd Street Joint Venture entered into a $
Certain of the Company’s debt agreements require the maintenance of certain ratios, including debt service coverage. As of December 31, 2021, the Company was in compliance with all of its financial debt covenants. Additionally, certain of our mortgages payable also contain clauses providing for prepayment penalties.
Debt Maturities
The
Exterior Street Loans (outstanding aggregate principal balance of $
However, if the Company is unable to extend or refinance its maturing indebtedness at favorable terms, it will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. The Company has no additional significant maturities of mortgage debt over the next 12 months.
F-30
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 8. | St. Augustine Outlet Center |
Investment Impairment
During
the COVID-19 pandemic, the St. Augustine Outlet Center’s occupancy declined and because of limited leasing success, the
Company began been exploring various strategic alternatives for the property and as a result determined during the third quarter
of 2021 that it would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with
certain tenants and also provided notice to its other tenants that it would not renew their leases at scheduled expiration. As
a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, the Company
recorded a non-cash impairment charge of $
The Company believes the carrying value of the St. Augustine Outlet Center, as of December 31, 2021, is recoverable. However, if market conditions worsen unexpectedly or if changes in its strategy significantly affect any key assumptions used in determining the property’s estimated fair value, the Company may need to take additional impairment charges in future periods.
Land Parcel Sales
On
May 25, 2021, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center to an
unrelated third party for a contractual sales price of $
On
April 6, 2020, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center to an
unrelated third party for a contractual sales price of $
| 9. | Distributions Payable |
On November 8, 2021 and November 6, 2020 the Board of Directors authorized and the Company declared distributions of $ per share for the quarterly periods ending December 31, 2021 and 2020. The quarterly distributions are the pro rata equivalent of annual distributions of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $10.00 per share. The distributions will be paid on or about the 15th day of the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders had an option to elect the receipt of shares under the Company’s DRIP at a discounted price of $11.16 and $10.62 per share, equal to 95% of the Company’s most recently published estimated net asset value per share as of September 30, 2021 and 2020, respectively. The distributions payable as of December 31, 2021 and 2020 were paid in January 2022 and 2021, respectively.
F-31
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 10. | Company’s Stockholder’s Equity |
Preferred Shares
Shares of preferred stock may be issued in the future in one or more series as authorized by the Board of Directors. Prior to the issuance of shares of any series, the Board of Directors is required by the Company’s charter to fix the number of shares to be included in each series and the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each series. Because the Board of Directors has the power to establish the preferences, powers and rights of each series of preferred stock, it may provide the holders of any series of preferred stock with preferences, powers and rights, voting or otherwise, senior to the rights of holders of our common stock. The issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of the Company, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of the Company’s common stock. As of December 31, 2021 and 2020, the Company had outstanding preferred shares.
Common Shares
All of the common stock offered by the Company will be duly authorized, fully paid and nonassessable. Subject to the preferential rights of any other class or series of stock and to the provisions of its charter regarding the restriction on the ownership and transfer of shares of our stock, holders of the Company’s common stock will be entitled to receive distributions if authorized by the Board of Directors and to share ratably in the Company’s assets available for distribution to the stockholders in the event of a liquidation, dissolution or winding-up.
Each outstanding share of the Company’s common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors. There is no cumulative voting in the election of directors, which means that the holders of a majority of the outstanding common stock can elect all of the directors then standing for election, and the holders of the remaining common stock will not be able to elect any directors.
Holders of the Company’s common stock have no conversion, sinking fund, redemption or exchange rights, and have no preemptive rights to subscribe for any of its securities. Maryland law provides that a stockholder has appraisal rights in connection with some transactions. However, the Company’ charter provides that the holders of its stock do not have appraisal rights unless a majority of the Board of Directors determines that such rights shall apply. Shares of the Company’s common stock have equal dividend, distribution, liquidation and other rights.
Under its charter, the Company cannot make some material changes to its business form or operations without the approval of stockholders holding at least a majority of the shares of our stock entitled to vote on the matter. These include (1) amendment of its charter, (2) its liquidation or dissolution, (3) its reorganization, and (4) its merger, consolidation or the sale or other disposition of its assets. Share exchanges in which the Company is the acquirer, however, do not require stockholder approval.
Distributions, Share Repurchase Program and Tender Offer
The
Board of Directors commenced declaring and the Company began paying regular quarterly distributions on its Common Shares at the
pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $
per share, beginning February 1, 2006. Subsequently, the Board of Directors has declared regular quarterly distributions at the
annualized rate of rate of 7.0% assuming a purchase price of $10.00 per share, with the exception of the three-month period ended
June 30, 2010. The distributions for the three-month period ended June 30, 2010 were at an aggregate annualized rate of
Total
distributions declared during both of the years ended December 31, 2021 and 2020 were $
On
March 18, 2022, the Board of Directors authorized and the Company declared a distribution of $ per share for the quarterly
period ending March 31, 2022. The quarterly distribution is the pro rata equivalent of an annual distribution of $
F-32
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The Company’s stockholders have the option to elect the receipt of shares in lieu of cash under the Company’s DRIP. The Company’s DRIP Registration Statement on Form S-3D was filed and became effective under the Securities Act of 1933 on October 25, 2018. The purchase price for shares under the DRIP will be equal to 95% of our current NAV per Share, as determined by the Board of Directors and reported by the Company from time to time. On December 16, 2021, the Board of Directors determined our NAV per Share of $, as of September 30, 2021, which resulted in a purchase price for shares under the DRIP of $ per share. As of December 31, 2021, million shares remain available for issuance under our DRIP.
Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of the Company’s performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, the Company’s ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. The Company cannot assure that any future distributions will be made or that it will maintain any particular level of distributions that it has previously established or may establish.
Share Repurchase Program
The Company’s share repurchase program (the “SRP”) may provide its stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to the Company, subject to restrictions.
On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.
Effective March 18, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to our current NAV per Share of Common Stock (“NAV per Share”), as determined by the Board of Directors and reported by the Company from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by the Company within one year of the stockholder’s date of death for consideration.
At the above noted dates, the Board of Directors established that on an annual basis, the Company would not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Additionally, redemption requests generally would be processed on a quarterly basis and would be subject to pro ration if either type of redemption requests exceeded the annual limitation.
For the year ended December 31, 2021, the Company repurchased shares of common stock for $ per share, pursuant to its share repurchase program. For the period from January 1 through March 24, 2020, the Company repurchased shares of common stock for $ per share, pursuant to the share repurchase program.
2020 Tender Offer
The
Company commenced a tender offer on June 15, 2020, pursuant to which the Company offered to acquire up to of its shares
of common stock at a purchase price of $ per share, or $
F-33
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 11. | Noncontrolling Interests |
The Company’s noncontrolling interests consist of (i) parties of the Company that hold units in the Operating Partnership, and (ii) certain interests in consolidated subsidiaries. The units held by noncontrolling interests in the Operating Partnership include SLP Units and Common Units. The noncontrolling interests in consolidated subsidiaries include ownership interests in (i) PRO held by the Company’s Sponsor and (ii) 50-01 2nd St Associates LLC (the “2nd Street Joint Venture”) held by the Company’s Sponsor and other affiliates and (iii) various joint ventures held by affiliates of our Sponsor that have originated promissory notes to unaffiliated third parties (see Note 5). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note 6). The 2nd Street Joint Venture owns Gantry Park Landing, a multi-family apartment building located in Queens, New York. See below for additional information.
Share Description
See Note 12 for discussion of rights related to SLP Units. The Common Units of the Operating Partnership have similar rights as those of the Company’s stockholders including distribution rights.
Distributions
During
the years ended December 31, 2021 and 2020, the Company paid distributions to noncontrolling interests of $
Noncontrolling Interest of Subsidiary within the Operating Partnership
During
2009, the Operating Partnership acquired certain membership interests in Prime Outlets Acquisition Company (“POAC”)
and Mill Run, LLC (“Mill Run”), which were subsequently contributed to PRO in exchange for a
On
September 19, 2018, the Company’s Sponsor transferred
Consolidated Joint Venture
In
August 2011, the Operating Partnership and the Sponsor and other related parties formed the 2nd Street Joint Venture, which owns
Gantry Park Landing, a multi-family apartment building located in Queens, New York. The Operating Partnership has a
F-34
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 12. | Related Party Transactions |
The Company has agreements with the Advisor and its affiliates to pay certain fees, as follows, in exchange for services performed by these entities and other related parties. The Company’s ability to secure financing and subsequent real estate operations are dependent upon its Advisor and their affiliates to perform such services as provided in these agreements.
| Fees | Amount | |
| Acquisition Fee | The
Advisor is paid an acquisition fee equal to | |
Property Management - Residential/Retail
|
The
property managers are paid a monthly management fee of up to | |
| Property Management - Office/Industrial | The
property managers are paid monthly property management and leasing fees of up to | |
| Asset Management Fee | The
Advisor or its affiliates are paid an asset management fee of | |
Reimbursement of Other expenses
|
For
any year in which the Company qualifies as a REIT, the Advisor must reimburse the Company for the amounts, if any, by which
the total operating expenses, the sum of the advisor asset management fee plus other operating expenses paid during the previous
fiscal year exceed the greater of | |
| The Advisor or its affiliates are reimbursed for expenses that may include costs of goods and services, administrative services and non-supervisory services performed directly for the Company by independent parties. |
F-35
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Lightstone
SLP, LLC, an affiliate of the Company’s Sponsor, has purchased SLP Units in the Operating Partnership. These SLP Units,
the purchase price of which will be repaid only after stockholders receive a stated preferred return and their net investment,
entitle Lightstone SLP, LLC to a portion of any regular distributions made by the Operating Partnership. From our inception through
March 31, 2010, cumulative distributions declared to Lightstone SLP, LLC were $
During
each of the years ended December 31, 2021 and 2020, distributions of $
Additionally, on March 18, 2022, the Board of Directors declared a quarterly distribution for the quarterly period ending March 31, 2022 on the SLP Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive a stated preferred return.
The SLP Units also entitle Lightstone SLP, LLC to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net sale proceeds upon the liquidation of the Lightstone REIT I and, therefore, cannot be determined at the present time. Liquidating distributions to Lightstone SLP, LLC will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return, as described below:
| Operating Stage Distributions | Amount of Distribution | |
7% Stockholder Return Threshold
|
Once
a cumulative non-compounded return of | |
12% Stockholder Return Threshold
|
Once
a cumulative non-compounded return of | |
Returns in Excess of 12% |
After
the |
F-36
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Liquidating Stage Distributions |
Amount of Distribution | |
| 7% Stockholder Return Threshold | Once
stockholders have received liquidation distributions, and a cumulative non-compounded 7% return per year on their initial
net investment, Lightstone SLP, LLC will receive available distributions until it has received an amount equal to its initial
purchase price of the special general partner interests plus a cumulative non-compounded return of | |
| 12% Stockholder Return Threshold | Once
stockholders have received liquidation distributions [in an amount equal to their net investment] plus a cumulative non-compounded
return of | |
| Returns in Excess of 12% | After
stockholders and Lightstone LP, LLC have received liquidation distributions [in an amount equal to their net investment] plus
a cumulative non-compounded return of |
The following table represents the fees incurred associated with the payments to the Company’s Advisor and its affiliates for the period indicated
| For
the Year Ended | ||||||||
| December 31,
2021 | December 31,
2020 | |||||||
| Asset management fees (general and administrative costs) | $ | $ | ||||||
| Property management fees (property operating expenses) | ||||||||
| Development fees and cost reimbursement(1) | ||||||||
| Total | $ | $ | ||||||
| (1) | Development fees and the reimbursement of development-related costs that the Company pays to the Advisor and its affiliates are capitalized and are included in the carrying value of the associated development project which are classified as development projects on the consolidated balance sheets. As of December 31, 2021, the Company owed the Advisor and its affiliated entities $0.7 million for development fees, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. |
See Notes 3, 4 and 5 for other related party transactions.
F-37
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 13. | Commitments and Contingencies |
Legal Proceedings
From time to time in the ordinary course of business, the Lightstone REIT I may become subject to legal proceedings, claims or disputes.
As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.
Tax Protection Agreements
On
December 8, 2009, the Company, the Operating Partnership and PRO, (collectively, the LVP Parties”) entered into a definitive
agreement (the “Contribution Agreement”) with Simon Inc. and certain of its affiliates (collectively, “Simon”)
providing for the disposition of a substantial portion of the Company’s portfolio of retail properties at that time to Simon,
including (i) the St. Augustine Outlet Center, which is wholly owned, (ii) a
On December 9, 2011 and December 4, 2012, GPH, LVH and certain of their subsidiaries (collectively, the “Holding Entities”) completed the disposition of their ownership interests in two outlet centers and a parcel of land (collectively, the “Outlet Centers Transactions”) to Simon. In connection with the closing of the Outlet Centers Transactions, the Holdings Entities, the Company, the Operating Partnership, PRO and certain affiliates of the Sponsor (collectively, the “Outlet Centers Parties”) entered into a tax matters agreement with Simon pursuant to which Simon generally may not engage in a transaction that could result in the recognition of the “built-in gain” with respect to the two outlets centers at the time of the closing for specified periods of up to eight years following the closing date. Simon had a number of obligations with respect to the allocation of partnership liabilities to the Outlet Centers Parties. For example, Simon agreed to maintain a debt level of no less than the cash portion of the proceeds from the Outlet Centers Transaction until at least the fourth anniversary of the closing, and the Outlet Centers Parties provided and had the opportunity to continue to provide guaranties of collection with respect to a revolving credit facility (or indebtedness incurred to refinance the revolving credit facility) for at least four years following the closing of the Outlet Centers Transactions. The Outlet Centers Parties were also given the opportunity to enter into agreements to make specified capital contributions to Simon OP in the event that it defaults on certain of its indebtedness. If Simon breaches its obligations under the tax matters agreement, Simon will be required to indemnify the Outlet Centers Parties for certain taxes that they are deemed to incur, including taxes relating to the recognition of “built-in gains” with respect to the two outlet centers, and gains recognized as a result of a reduction in the allocation of partnership liabilities. These indemnification payments will be “grossed up” such that the amount of the payments will equal, on an after-tax basis, the tax liability deemed incurred because of the breach.
F-38
PART II. CONTINUED:
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
None
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. As of December 31, 2021, we conducted an evaluation under the supervision and with the participation of the Advisor’s management, including our Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chairman and Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2021 that our disclosure controls and procedures were adequate and effective.
Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system is a process designed by, or under the supervision of, our Chairman and Chief Executive Officer and Chief Financial Officer and effected by our Board, management and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes policies and procedures that:
| ● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and disposition of assets; |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorization of our management and directors; and |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, they used the control criteria framework of the Committee of Sponsoring Organizations, or COSO, of the Treadway Commission published in its report entitled Internal Control—Integrated Framework (2013). Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
41
ITEM 9B. OTHER INFORMATION:
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections:
None.
42
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
The following table presents certain information as of March 15, 2022 concerning each of our directors serving in such capacity:
| Name | Age | Principal Occupation and Positions Held | Year
Term of Office Will Expire |
Served
as a Director Since |
|||||
| David Lichtenstein | 61 | Chief Executive Officer, President and Chairman of the Board of Directors | 2022 | 2004 | |||||
| George R. Whittemore | 72 | Director | 2022 | 2006 | |||||
| Alan Retkinski | 50 | Director | 2022 | 2019 | |||||
| Howard E. Friedman | 56 | Director | 2022 | 2021 |
David Lichtenstein is the Chairman of our Board of Directors and our Chief Executive Officer, and is the Chief Executive Officer of our Advisor. Mr. Lichtenstein founded both American Shelter Corporation and The Lightstone Group. From 1988 to the present, Mr. Lichtenstein has served as Chairman of the Board of Directors and Chief Executive Officer of The Lightstone Group, directing all aspects of the acquisition, financing and management of a diverse portfolio of multi-family, lodging, retail and industrial properties located in 20 states, and Puerto Rico. From April 2008 to present, Mr. Lichtenstein has served as the Chairman of the board of directors and Chief Executive Officer of Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”) and Lightstone Value Plus REIT II LLC, its advisor. From October 2012 to the present, Mr. Lichtenstein has served as the Chairman of the board of directors of Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”) and from April 2013 to the present, as the Chief Executive Officer of Lightstone REIT III and of Lightstone Value Plus REIT III LLC. From September 2014 to the present, Mr. Lichtenstein has served as Chairman of the Board of Directors and Chief Executive Officer of Lightstone Value Plus REIT III, (“Lightstone REIT IV”), and as Chief Executive Officer of Lightstone Real Estate Income LLC, its advisor. From October 2014 to the present, Mr. Lichtenstein has served as Chairman of the Board of Directors and Chief Executive Officer of Lightstone Enterprises Limited (“Lightstone Enterprises”). On August 31, 2021, Mr. Lichtenstein was appointed Chairman Emeritus of the Board of Directors of Lightstone Value Plus REIT V, Inc. (“Lightstone V”) and previously served as the Chairman of the Board of Directors of Lightstone REIT V from September 2017 through August 31, 2021. Additionally, Mr. Lichtenstein is Chairman and Chief Executive Officer of the Lightstone REIT V’s advisor. From July 2015 to the present, Mr. Lichtenstein has served as a member of the Board of Directors of the New York City Economic Development Corporation. Mr. Lichtenstein is a member of the International Council of Shopping Centers and the National Association of Real Estate Investment Trusts, Inc., and industry trade group, as well as, a member of the Board of Directors of Touro College and New York Medical College. Mr. Lichtenstein has been selected to serve as a director due to his extensive experience and networking relationships in the real estate industry, along with his experience in acquiring and financing real estate properties.
George R. Whittemore is one of our independent directors. From April 2008 to the present, Mr. Whittemore has served as a member of the board of directors of Lightstone REIT II and from December 2013 to present, has served as a member of the board of directors of Lightstone REIT III. Mr. Whittemore also presently serves as a Director and Chairman of the Audit Committee of Village Bank Financial Corporation in Richmond, Virginia, a publicly traded company. Mr. Whittemore previously served as a Director of Condor Hospitality, Inc. in Norfolk, Nebraska, a publicly traded company, from November 1994 to March 2016. Mr. Whittemore previously served as a Director and Chairman of the Audit Committee of Prime Group Realty Trust from July 2005 until December 2012. Mr. Whittemore previously served as President and Chief Executive Officer of Condor Hospitality Trust, Inc. from November 2001 until August 2004 and as Senior Vice President and Director of both Anderson & Strudwick, Incorporated, a brokerage firm based in Richmond, Virginia, and Anderson & Strudwick Investment Corporation, from October 1996 until October 2001. Mr. Whittemore has also served as a Director, President and Managing Officer of Pioneer Federal Savings Bank and its parent, Pioneer Financial Corporation, from September 1982 until August 1994, and as President of Mills Value Adviser, Inc., a registered investment advisor. Mr. Whittemore is a graduate of the University of Richmond. Mr. Whittemore has been selected to serve as an independent director due to his extensive experience in accounting, banking, finance and real estate.
Alan Retkinski is one of our independent directors. Since 2004, Mr. Retkinski has been the president of Lexington Realty International, a national multi-faceted real estate brokerage firm specializing in investment sales, retail leasing, lease preparation/negotiating and management. Mr. Retkinski has been selected to serve as an independent director due to his extensive experience in real estate transactions.
43
Howard E. Friedman is our is one of our independent directors. Mr. Friedman is the Founding Partner of Lanx Management LLC, a hedge “fund of funds” founded in 2001. Mr. Friedman co-founded Watermark Press, Inc. in 1989 and served as its Publisher and Chief Executive Officer until 1998 when it was sold to Cendent Corp. Mr. Friedman is a director of Sinclair Broadcast Group, Inc. (NASDAQ: SBGI), where he has served since January 2015. Mr. Friedman also serves on the Compensation Committee and as the chair of the Nominating and Corporate Governance Committee of Sinclair Broadcast Group, Inc. From 2006 to 2010, Mr. Friedman served as President and then Chairman of the Board of the American Israel Public Affairs Committee (AIPAC). From 2010 to 2012, he served as the President of the American Israel Educational Foundation, the charitable arm of AIPAC. He is the past Chair of the Board of The Associated: Jewish Community Federation of Baltimore. From 2004 to 2017, Mr. Friedman served on the advisory board of Johns Hopkins Bloomberg School of Public Health. He currently serves as the Honorary Chairman of the Board of the Union of Orthodox Jewish Congregations of America. In addition, Mr. Friedman serves on the boards of Touro College and University System, Talmudical Academy, and the Simon Wiesenthal Center. Mr. Friedman has been selected to serve as an independent director due to his extensive skills in finance, management and investment matters.
Executive Officers:
The following table presents certain information as of March 15, 2022 concerning each of our executive officers serving in such capacities:
| Name | Age | Principal Occupation and Positions Held | ||
| David Lichtenstein | 61 | Chief Executive Officer and Chairman of the Board of Directors | ||
| Mitchell Hochberg | 69 | President | ||
| Joseph Teichman | 48 | General Counsel | ||
| Seth Molod | 58 | Chief Financial Officer and Treasurer |
David Lichtenstein for biographical information about Mr. Lichtenstein, see “Management — Directors.”
Mitchell Hochberg is our President and Chief Operating Officer and has also served as President and Chief Operating Officer of Lightstone REIT II since December 2013. Mr. Hochberg also serves as the President and Chief Operating Officer of our sponsor. From April 2013 to the present, Mr. Hochberg has served as President and Chief Operating Officer of Lightstone REIT III and its advisor. From September 2014 to the present, Mr. Hochberg has served as President and Chief Operating Officer of Lightstone REIT IV and its advisor. From October 2014 to the present, Mr. Hochberg has served as President of Lightstone Enterprises. Mr. Hochberg was appointed Chief Executive Officer of Behringer Harvard Opportunity REIT I, Inc. (“BH OPP I”) and Lightstone REIT V effective as of September 28, 2017, and on August 31, 2021, was appointed Chairman of the Board of Directors of Lightstone REIT V. Prior to joining The Lightstone Group in August 2012, Mr. Hochberg served as principal of Madden Real Estate Ventures, a real estate investment, development and advisory firm specializing in hospitality and residential projects from 2007 to August 2012 when it combined with our sponsor. Mr. Hochberg held the position of President and Chief Operating Officer of Ian Schrager Company, a developer and manager of innovative luxury hotels and residential projects in the United States from early 2006 to early 2007 and prior to that Mr. Hochberg founded Spectrum Communities, a developer of luxury residential neighborhoods in the Northeast in 1985 where for 20 years he served as its President and Chief Executive Officer. Mr. Hochberg served on the board of directors of Belmond Ltd from 2009 to April 2019. Additionally, through October 2014 Mr. Hochberg served on the board of directors and as Chairman of the board of directors of Orleans Homebuilders, Inc. Mr. Hochberg received his law degree from Columbia University School of Law where he was a Harlan Fiske Stone Scholar and graduated magna cum laude from New York University College of Business and Public Administration with a Bachelor of Science degree in accounting and finance.
Joseph E. Teichman is our General Counsel and also serves as General Counsel of Lightstone REIT II, Lightstone REIT III and Lightstone REIT IV and their respective advisors. Mr. Teichman also serves as Executive Vice President and General Counsel of our Advisor and Sponsor. From October 2014 to the present, Mr. Teichman has served as Secretary and a Director of Lightstone Enterprises. Prior to joining us in January 2007, Mr. Teichman practiced law at the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP in New York, NY from September 2001 to January 2007. Mr. Teichman earned his J.D. from the University of Pennsylvania Law School in May 2001. Mr. Teichman earned a B.A. from Beth Medrash Govoha, Lakewood, NJ. Mr. Teichman is licensed to practice law in New York and New Jersey. Mr. Teichman is also a member of the Board of Directors of Yeshiva Orchos Chaim, Lakewood, NJ and was appointed to the Ocean County College Board of Trustees in February 2016.
44
Seth Molod is our Chief Financial Officer and Treasurer and also serves as Chief Financial Officer and Treasurer of Lightstone REIT II, Lightstone REIT III, Lightstone REIT IV and Lightstone REIT V. Mr. Molod also serves as the Executive Vice President and Chief Financial Officer of our Sponsor and as the Chief Financial Officer of our Advisor and the advisors of Lightstone REIT II, Lightstone REIT III, Lightstone REIT IV and Lightstone REIT V. Prior to joining the Lightstone Group in August of 2018, Mr. Molod served as an Audit Partner, Chair of Real Estate Services and on the Executive Committee of Berdon LLP, a full service accounting, tax, financial and management advisory firm (“Berdon”). Mr. Molod joined Berdon in 1989. He has extensive experience advising some of the nation’s most prominent real estate owners, developers, managers, and investors in both commercial and residential projects. Mr. Molod has worked with many privately held real estate companies as well as institutional investors, REITs, and other public companies. Mr. Molod is a licensed certified public accountant in New Jersey and New York and a member of the American Institute of Certified Public Accountants. Mr. Molod holds a Bachelor of Business Administration degree in Accounting from Muhlenberg College.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires each director, officer and individual beneficially owning more than 10% of our common stock to file initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership (Forms 4 and 5) of our common stock with the Securities Exchange Commission (“SEC”). Officers, directors and greater than 10% beneficial owners are required by SEC rules to furnish us with copies of all such forms they file. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2021, or written representations that no additional forms were required, we believe that all of our officers and directors and persons that beneficially own more than 10% of the outstanding shares of our common stock complied with these filing requirements in 2021.
Information Regarding Audit Committee
Our board of directors (the “Board”) established an audit committee in April 2005. The charter of audit committee is available at www.lightstonecapitalmarkets.com/sec-filings or in print to any shareholder who requests it c/o Lightstone Value Plus REIT, 1985 Cedar Bridge Avenue, Lakewood, NJ 08701. Our audit committee consists of George R. Whittemore, Alan Retkinski and Howard E. Friedman, each of whom is “independent” within the meaning of the NYSE listing standards. The Board determined that Mr. Whittemore is qualified as an audit committee financial expert as defined in Item 401 (h) of Regulation S-K. For more information regarding the relevant professional experience of Mr. Whittemore, Mr. Retkinski and Mr. Friedman, see “Directors”.
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer and principal financial officer. Our Code of Conduct and Ethics can be found at www.lightstonecapitalmarkets.com/sec-filings.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Executive Officers
We currently have no employees. Our Advisor performs our day-to-day management functions. Our executive officers are all employees of the Advisor. We do not pay any of these individuals for serving in their respective positions.
Compensation of Board
We pay each of our independent directors an annual fee of $40 (payable in quarterly installments) and are responsible for reimbursement of their out-of-pocket expenses, as incurred. We also pay our audit committee chair an additional aggregate annual fee of $10 (payable in quarterly installments).
45
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Executive Officers:
The following table presents certain information as of March 15, 2022 concerning each of our directors and executive officers serving in such capacities:
| Name and Business Address (where required) of Beneficial Owner | Number of Shares of Common Stock of the Company Beneficially Owned | Percent
of All Common Shares of the Company | ||||||
| David Lichtenstein | 20,000 | 0.09 | % | |||||
| George R. Whittemore | - | - | ||||||
| Alan Retkinski | - | - | ||||||
| Howard E. Friedman | - | - | ||||||
| Mitchell Hochberg | - | - | ||||||
| Joseph Teichman | - | - | ||||||
| Seth Molod | - | - | ||||||
| Our directors and executive officers as a group (7 persons) | 20,000 | 0.09 | % | |||||
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 6, 2004, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 limited partner common units (“Common Units”) in the Operating Partnership. Our Advisor also owns 20,000 shares of our common stock (“Common Shares”) which were issued on July 6, 2004 for $200,000, or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as the sponsor (the “Sponsor”) during our initial public offering (the “Offering”), which terminated on October 10, 2008. Our Advisor, together with our board of directors (the “Board of Directors”), is primarily responsible for making investment decisions on our behalf and managing our day-to-day operations. Through his ownership and control of The Lightstone Group, LLC, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP, LLC, a Delaware limited liability company, which owns an aggregate of $30.0 million of special general partner interests (“SLP Units”) in the Operating Partnership which were purchased, at a cost of $100,000 per unit, in connection with our Offering. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control the Lightstone REIT I or the Operating Partnership.
On April 22, 2005, we entered into agreements with our Advisor and its affiliates to pay certain fees, as described below, in exchange for services performed by these and other affiliated entities. As the indirect owner of those entities, Mr. Lichtenstein benefits from fees and other compensation that they receive pursuant to these agreements.
Property Managers
Our property managers manage certain of the properties we have acquired and may manage additional properties we acquire. We also use other unaffiliated third-party property managers, principally for the management of our hospitality properties.
We have agreed to pay our property managers a monthly management fee of up to 5% of the gross revenues from our residential and retail properties. In addition, for the management and leasing of our office and industrial properties, we pay to our property managers, property management and leasing fees of up to 4.5% of gross revenues from our office and industrial properties. We may pay our property managers a separate fee for (i) the development of, (ii) the one-time initial rent-up or (iii) leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area. Our Property Manager will also be paid a monthly fee for any extra services equal to no more than that which would be payable to an unrelated party providing the services. During both of the years ended December 31, 2021 and 2020, we incurred property management fees of $0.4 million.
46
Advisor
We have agreed to pay our Advisor an acquisition fee equal to 2.75% of the gross contractual purchase price (including any mortgage indebtedness assumed) of each property we purchase and reimburse our Advisor for expenses that it incurs in connection with the purchase of a property. We anticipate that acquisition expenses will typically be between 1% and 1.5% of a property’s purchase price, and acquisition fees and expenses are capped at 5% of the gross contract purchase price of a property. The Advisor is also paid an advisor asset management fee of 0.55% of our average invested assets and we reimburse some expenses of the Advisor. Additionally, development fees and the reimbursement of development-related costs that we pay to our Advisor and its affiliates are capitalized and are included in the carrying value of the associated development project and classified as development projects on the consolidated balance sheets. We have recorded the following amounts related to the Advisor for the years indicated:
| (in thousands) | 2021 | 2020 | ||||||
| Asset management fees | $ | 849 | $ | 919 | ||||
| Development fees and cost reimbursement | 3,595 | 1,337 | ||||||
| Total | $ | 4,444 | $ | 2,256 | ||||
Sponsor
On April 22, 2005, the Operating Partnership entered into an agreement with Lightstone SLP, LLC pursuant to which the Operating Partnership has issued special general partner interests to Lightstone SLP, LLC in an amount equal to all expenses, dealer manager fees and selling commissions that we incurred in connection with our organization and the Offering. Through December 31, 2021, Lightstone SLP, LLC had contributed $30.0 million to the Operating Partnership in exchange for special general partner interests. As the sole member of our Sponsor, which wholly owns Lightstone SLP, LLC, Mr. Lichtenstein is the indirect, beneficial owner of such special general partner interests and will thus receive an indirect benefit from any distributions made in respect thereof.
These special general partner interests entitle Lightstone SLP, LLC to a portion of any regular and liquidation distributions that we make to stockholders, but only after stockholders have received a stated preferred return. Although the actual amounts are dependent upon results of operations and, therefore, cannot be determined at the present time, distributions to Lightstone SLP, LLC, as holder of the special general partner interests, could be substantial.
Acquisitions and Investments in Entities Affiliated with Sponsor
Preferred Investments
We have entered into several agreements with various related party entities that provide for us to make preferred contributions pursuant to certain instruments (the “Preferred Investments”) that entitle us to certain prescribed monthly preferred distributions. The Preferred Investments had an aggregate balance of $14.5 million as of December 31, 2021 and 2020, and are classified as held-to-maturity securities, recorded at cost and included in investments in related parties on the consolidated balance sheets. The fair value of these investments approximated their carrying values based on market rates for similar instruments. During the year ended December 31, 2021, we redeemed $11.0 million of the 40 East End Avenue Preferred Investment and the entire remaining Miami Moxy Preferred Investment of $9.0 million. Additionally, during the years ended December 31, 2021 and 2020, we recognized investment income of $1.8 million and $2.0 million, respectively, which is included in interest and dividend income on the consolidated statements of operations.
The Preferred Investments are summarized as follows:
| Preferred Investment Balance | Investment Income(1) | |||||||||||||||||||
| Dividend | As
of December 31, | As
of December 31, | For
the December 31, | |||||||||||||||||
| Preferred Investments | Rate | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| 40 East End Avenue | 12 | % | $ | 6,000 | $ | 6,000 | $ | 730 | $ | 886 | ||||||||||
| East 11th Street | 12 | % | 8,500 | 8,500 | 1,034 | 1,040 | ||||||||||||||
| Miami Moxy | 12 | % | - | - | - | 45 | ||||||||||||||
| Total Preferred Investments | $ | 14,500 | $ | 14,500 | $ | 1,764 | $ | 1,971 | ||||||||||||
Note:
| (1) | Included in interest and dividend income on the statements of operations. |
47
40 East End Avenue Preferred Investment
In May 2015, we entered into an agreement pursuant to which it made aggregate contributions of $30.0 million in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”), a related party entity. The 40 East End Ave. Joint Venture is a joint venture between an affiliate of our Sponsor and Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), a related-party REIT also sponsored by the our Sponsor, which developed and constructed a luxury residential condominium project consisting of 29 units (the “40 East End Avenue Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final temporary certificates of occupancy, or TCO, in March 2020 and through December 31, 2021, fifteen of the condominium units had been sold.
Contributions were made pursuant to an instrument, the “40 East Side Avenue Preferred Investment,” that is entitled to monthly preferred distributions, initially at a rate of 8% per annum which increased to 12% per annum upon procurement of construction financing in March 2017, and is redeemable by us beginning on April 27, 2022. During the fourth quarter of 2019, we redeemed $13.0 million of the 40 East End Avenue Preferred Investment. During 2020, we redeemed an additional $11.0 million of the 40 East End Avenue Preferred Investment which reduced the remaining outstanding balance to $6.0 million.
East 11th Street Preferred Investment
On April 21, 2016, we entered into an agreement, as amended, with various related party entities pursuant to which it to made aggregate contributions of $57.5 million in an affiliate of our Sponsor (the “East 11th Street Developer”) which developed and constructed a Marriott Moxy Hotel located at 112-120 East 11th Street in New York, New York. Contributions were made pursuant to an instrument, the “East 11th Street Preferred Investment,” that entitled us to monthly preferred distributions at a rate of 12% per annum. We may redeem our investment in the East 11th Street Preferred Investment upon the consummation of certain capital transactions. Additionally, the East 11th Street Developer may redeem our investment at any time or upon the consummation of any capital transaction. Any redemption by us or the East 11th Street Developer under the East 11th Street Preferred Investment will be made at an amount equal to the amount we have invested plus a 12.0% annual cumulative, pre-tax, non-compounded return on the aggregate amount we have invested. During 2019 and 2018, we redeemed $34.5 million and $14.5 million, respectively of the East 11th Street Preferred Investment which reduced the remaining outstanding balance to $8.5 million.
Miami Moxy Preferred Investment
On September 30, 2016, we entered into an agreement with various related party entities pursuant to which it made aggregate contributions of $20.0 million in an affiliate of its Sponsor (the “Miami Moxy Developer”), which owns parcels of land located at 915 through 955 Washington Avenue in Miami Beach, Florida, on which it constructed a 205-room Marriott Moxy hotel (the “Miami Moxy”). Contributions were made pursuant to an instrument, the “Miami Moxy Preferred Investment,” that entitled us to monthly preferred distributions at a rate of 12% per annum. During the fourth quarter of 2019, we redeemed $11.0 million of the Miami Moxy Preferred Investment and during the first quarter of 2020, we redeemed the entire remaining Miami Moxy Preferred Investment of $9.0 million.
Consolidated Joint Venture
In August 2011, the Operating Partnership and its Sponsor formed the 2nd Street Joint Venture, which owns Gantry Park Landing, a multi-family apartment building located in Queens, New York. The Operating Partnership has a 59.2% membership interest in the 2nd Street Joint Venture (the “2nd Street JV Interest”). The 2nd Street JV Interest is a managing membership interest. The Sponsor and other related parties have an aggregate 40.8% non-managing membership interest with certain consent rights with respect to major decisions. Contributions are allocated in accordance with each investor’s ownership percentage. Profit and cash distributions are allocated in accordance with each investor’s ownership percentage. As the Operating Partnership through the 2nd Street Joint Venture Interest has the power to direct the activities of the 2nd Street Joint Venture that most significantly impact the performance, we consolidate the operating results and financial condition of the 2nd Street Joint Venture and has accounts for the ownership interests of the Sponsor and other related parties as noncontrolling interests.
48
The Joint Venture
During 2015, the Company formed a joint venture (the “Joint Venture”) with Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a related party real estate investment trust also sponsored by the Company’s Sponsor. We have a 2.5% membership interest in the Joint Venture and Lightstone REIT II holds the remaining 97.5% membership interest. The Joint Venture previously acquired our membership interests in a portfolio of 11 hotels in a series of transactions completed during 2015. The Joint Venture holds ownership interests in seven hotels as of December 31, 2021.
We account for our 2.5% membership interest in the Joint Venture using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any, and as of December 31, 2021 and 2020, the carrying value of our investment was $1.0 million and $1.1 million, respectively, which is included in investments in related parties on the consolidated balance sheets.
Notes Receivable
We formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).
The NR Subsidiaries and NR Affiliates have varying ownership interests in the NR Joint Ventures and certain other wholly-owned subsidiaries of the Operating Partnership serve as the manager and are the sole decision-maker for each of the NR Joint Ventures.
We determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, we have consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.
The Joint Venture Promissory Notes generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with the initial funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from 1.00% to 1.50%) based on the principal commitment under the loan and retain a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”). The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.
The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional one-year extension options subject to satisfaction of certain conditions, including the funding of additional Loan Reserves and payment of extension fees. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.
Origination fees are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the initial term.
The Notes Receivable are summarized as follows:
| As
of December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Company’s | Loan | Contractual | Unamortized | ||||||||||||||||||||||||||||||||||||||
| Joint | Ownership | Commitment | Origination | Origination | Maturity | Interest | Outstanding | Origination | Carrying | Unfunded | |||||||||||||||||||||||||||||||
| Venture/Lender | Percentage | Amount | Fee | Date | Date | Rate | Principal | Reserves | Fee | Value | Commitment | ||||||||||||||||||||||||||||||
| LSC 1543 7th LLC (1) | 50 | % | 20,000 | 1.00 | % | August 27, 2019 | February 28, 2022 | Libor plus 5.40% (Floor of 7.90%) | 17,500 | - | (33 | ) | 17,467 | - | |||||||||||||||||||||||||||
| LSC 11640 Mayfield LLC (2) | 50 | % | 18,000 | 1.50 | % | March 4, 2020 | March 1, 2022 | Libor plus 11.00% (Floor of 13.00%) | 10,040 | (629 | ) | (24 | ) | 9,387 | 6,960 | ||||||||||||||||||||||||||
| Total | $ | 27,540 | $ | (629 | ) | $ | (57 | ) | $ | 26,854 | $ | 6,960 | |||||||||||||||||||||||||||||
49
| As
of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Company’s | Loan | Contractual | Unamortized | ||||||||||||||||||||||||||||||||||||||
| Joint | Ownership | Commitment | Origination | Origination | Maturity | Interest | Outstanding | Origination | Carrying | Unfunded | |||||||||||||||||||||||||||||||
| Venture/Lender | Percentage | Amount | Fee | Date | Date | Rate | Principal | Reserves | Fee | Value | Commitment | ||||||||||||||||||||||||||||||
| LSC 162nd Capital I LLC (3) | 45.45 | % | $ | 4,234 | 1.50 | % | February 5, 2019 | September 11, 2021 | LIBOR + 7.50% (Floor of 11%) | $ | 4,076 | $ | (338 | ) | $ | (33 | ) | $ | 3,705 | $ | - | ||||||||||||||||||||
| LSC 162nd Capital II LLC (3) | 45.45 | % | 9,166 | 1.50 | % | February 5, 2019 | September 11, 2021 | LIBOR + 7.50% (Floor of 11%) | 8,824 | (732 | ) | (71 | ) | 8,021 | - | ||||||||||||||||||||||||||
| LSC 1543 7th LLC | 50 | % | 20,000 | 1.00 | % | August 27, 2019 | August 26, 2021 | LIBOR + 5.40% (Floor of 7.90%) | 20,000 | - | (33 | ) | 19,967 | - | |||||||||||||||||||||||||||
| LSC 1650 Lincoln LLC (3) | 50 | % | 24,000 | 1.00 | % | August 27, 2019 | August 26, 2021 | LIBOR + 5.40% (Floor of 7.90%) | 24,000 | - | (40 | ) | 23,960 | - | |||||||||||||||||||||||||||
| LSC 11640 Mayfield LLC | 50 | % | 18,000 | 1.50 | % | March 4, 2020 | March 1, 2022 | LIBOR + 10.50% (Floor of 12.50%) | 10,750 | (2,369 | ) | (158 | ) | 8,223 | 7,250 | ||||||||||||||||||||||||||
| LSC 87 Newkirk LLC (4) | 50 | % | 42,700 | 1.25 | % | July 2, 2020 | December 1, 2021 | LIBOR + 6.00% (Floor of 7.00%) | 42,700 | (1,597 | ) | (355 | ) | 40,748 | - | ||||||||||||||||||||||||||
| Total | $ | 110,350 | $ | (5,036 | ) | $ | (690 | ) | $ | 104,624 | $ | 7,250 | |||||||||||||||||||||||||||||
Notes:
| (1) | Repaid in full during March 2022. |
| (2) | Repaid in full during February 2022. |
| (3) | Repaid in full during December 2021. |
| (4) | Repaid in full during April 2021. |
The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:
| For the | For the | |||||||
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| Joint Venture/Lender | 2021 | 2020 | ||||||
| LSC 162nd Capital I LLC | $ | 491 | $ | 641 | ||||
| LSC 162nd Capital II LLC | 1,063 | 1,387 | ||||||
| LSC 1543 7th LLC | 1,802 | 1,770 | ||||||
| LSC 1650 Lincoln LLC | 2,317 | 2,124 | ||||||
| LSC 11640 Mayfield LLC | 1,875 | 1,243 | ||||||
| LSC 87 Newkirk LLC | 1,585 | 1,625 | ||||||
| Total | $ | 9,133 | $ | 8,790 | ||||
50
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Independent Registered Public Accounting Firm
Our independent public accounting firm is EisnerAmper LLP, New York, New York, Auditor ID 274.
Audit and Non-Audit Fees
The following table presents the aggregate fees billed to the Company for the years indicated by the Company’s principal accounting firm:
| (in thousands) | 2021 | 2020 | ||||||
| Audit Fees (a) | $ | 276 | $ | 286 | ||||
| Tax Fees (b) | 149 | 150 | ||||||
| Total Fees | $ | 425 | $ | 436 | ||||
| a) | Fees for audit services consisted of the audit of the Company’s annual consolidated financial statements, interim reviews of the Company’s quarterly consolidated financial statements and services normally provided in connection with statutory and regulatory filings including registration statement consents. |
| b) | Fees for tax services. |
In considering the nature of the services provided by the independent auditor, the audit committee determined that such services are compatible with the provision of independent audit services. The audit committee discussed these services with the independent auditor and the Company’s management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the related requirements of the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.
51
AUDIT COMMITTEE REPORT
To the Directors of Lightstone Value Plus REIT I, Inc.:
We have reviewed and discussed with management Lightstone Value Plus REIT I, Inc.’s audited consolidated financial statements as of and for the year ended December 31, 2021.
We have discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standard No. 16, “Communication with Audit Committees,” as amended, as adopted by the Public Company Accounting Oversight Board.
We have received and reviewed the written disclosures and the letter from the independent auditors required by the Public Company Accounting Oversight Board Rule 3526, Communication with Audit Committees Concerning Independence and have discussed with the auditors the auditors’ independence.
Based on the reviews and discussions referred to above, we recommend to the Board that the consolidated financial statements referred to above be included in Lightstone Value Plus REIT I, Inc.’s Annual Report on consolidated Form 10-K for the year ended December 31, 2021.
Audit Committee
George R. Whittemore
Alan Retkinski
Howard E. Friedman
52
INDEPENDENT DIRECTORS’ REPORT
To the Stockholders of Lightstone Value Plus REIT I, Inc.:
We have reviewed the Company’s policies and determined that they are in the best interest of the Company’s stockholders. Set forth below is a discussion of the basis for that determination.
General
The Company’s primary objective is to achieve capital appreciation with a secondary objective of income without subjecting principal to undue risk. The Company intends to achieve this goal primarily through acquisitions and development of real estate properties and other real estate-related investments.
The Company, to date, has acquired and developed residential and commercial properties principally, all of which are located in the United States and made real estate-related investments. The Company’s acquisitions have included both portfolios and individual properties. The Company current operating properties consist of one retail outlet shopping center) and one multi-family residential apartment building. The Company also has acquired various parcels of land and air rights related to the development and construction of real estate properties. Additionally, the Company has made certain preferred equity investments in related parties and originated notes receivables through joint venture arrangements.
The following is descriptive of the Company’s:
Acquisition and investment policies:
| ● | Reflecting a flexible operating style, the Company’s portfolio is likely to be diverse and include properties of different types (such as retail, lodging, office, industrial and residential properties); both passive and active investments; real estate-related investments (such as preferred equity investments) and joint venture transactions. The portfolio is likely to be determined largely by the purchase opportunities that the market offers, whether on an upward or downward trend. This is in contrast to those funds that are more likely to hold investments of a single type, usually as outlined in their charters. |
| ● | The Company may invest in properties that are not sold through conventional marketing and auction processes. The Company’s investments may be at a dollar cost level lower than levels that attract those funds that hold investments of a single type. |
| ● | The Company may be more likely to make investments that are in need of rehabilitation, redirection, remarketing and/or additional capital investment. |
| ● | The Company may place major emphasis on a bargain element in its purchases, and often on the individual circumstances and motivations of the sellers. The Company will search for bargains that become available due to circumstances that occur when real estate cannot support the mortgages securing the property. |
| ● | The Company intends to pursue returns in excess of the returns targeted by real estate investors who target a single type of property investment. |
Financing Policies
The Company utilizes leverage to acquire and develop properties. The number of different properties the Company acquires and develops is affected by numerous factors, including, the amount of funds available to us. When interest rates on loans are high or financing is otherwise unavailable on terms that are satisfactory to the Company, the Company may purchase or develop certain properties for cash with the intention of obtaining a loan for a portion of the purchase price or development costs at a later time. There is no limitation on the amount the Company may invest in any single property or on the amount the Company can borrow for any property.
53
The Company currently intends to limit its aggregate long-term permanent borrowings to 75% of the aggregate fair market value of all properties unless any excess borrowing is approved by a majority of the independent directors and is disclosed to the Company’s stockholders. The Company may also incur short-term indebtedness, having a maturity of two years or less. By operating on a leveraged basis, the Company may have more funds available for investment in properties. This may allow the Company to make more investments than would otherwise be possible, resulting in a more diversified portfolio. Although the Company’s liability for the repayment of indebtedness is expected to be limited to the value of the property securing the liability and the rents or profits derived therefrom, the Company’s use of leveraging increases the risk of default on the mortgage payments and a resulting foreclosure of a particular property. To the extent that the Company does not obtain loans on the Company’s properties, the Company’s ability to acquire or develop additional properties may be restricted. The Company will endeavor to obtain financing on the most favorable terms available.
Policy on Sale or Disposition of Properties
The Company’s Board will determine whether a particular property should be sold or otherwise disposed of after considering the relevant factors, including performance or projected performance of the property and market conditions, with a view toward achieving its principal investment objectives.
The Company may, sell properties at any time and if so, may invest the proceeds from any sale, financing, refinancing or other disposition of its properties into acquiring or developing additional properties. Alternatively, the Company may use these proceeds to fund maintenance or repair of existing properties or to increase reserves for such purposes. The Company may choose to reinvest the proceeds from the sale, financing and refinancing of its properties to increase its real estate assets and its net income. Notwithstanding this policy, the Board, in its discretion, may distribute all or part of the proceeds from the sale, financing, refinancing or other disposition of all or any of the Company’s properties to the Company’s stockholders. In determining whether to distribute these proceeds to stockholders, the Board will consider, among other factors, the desirability of properties available for purchase, real estate market conditions and compliance with the applicable requirements under federal income tax laws.
When the Company sells a property, it intends to obtain an all-cash sale price. However, the Company may take a purchase money obligation secured by a mortgage on the property as partial payment, and there are no limitations or restrictions on the Company’s ability to take such purchase money obligations. The terms of payment to the Company will be affected by custom in the area in which the property being sold is located and the then prevailing economic conditions. If the Company receives notes and other property instead of cash from sales, these proceeds, other than any interest payable on these proceeds, will not be available for distributions until and to the extent the notes or other property are actually paid, sold, refinanced or otherwise disposed. Therefore, the distribution of the proceeds of a sale to the stockholders may be delayed until that time. In these cases, the Company will receive payments in cash and other property in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years.
Independent Directors
George
R. Whittemore
Alan Retkinski
Howard E. Friedman
54
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
LIGHTSTONE VALUE PLUS REIT I, INC.
Annual Report on Form 10-K
For the fiscal year ended December 31, 2021
EXHIBIT INDEX
The following exhibits are filed as part of this Annual Report on Form 10-K or incorporated by reference herein:
| * | Filed herewith. |
| (1) | Incorporated by reference from Lightstone Value Plus REIT I, Inc.’s Amended Registration Statement on Form S-11/A (File No. 333-166930), filed with the Securities and Exchange Commission on October 19, 2010. |
| (2) | Incorporated by reference from Lightstone Value Plus REIT I, Inc.’s Registration Statement on Form S-11 (File No. 333-166930), filed with the Securities and Exchange Commission on May 18, 2010. |
| (3) | Incorporated by reference from Lightstone Value Plus REIT I, Inc.’s Post-Effective Amendment No. 1 to its Registration Statement on Form S-11 (File No. 333-117367), filed with the Securities and Exchange Commission on May 23, 2005. |
| (4) | Previously filed as an exhibit to the Annual Report on Form 10-K that we filed with the Securities and Exchange Commission on March 19, 2021 |
| (5) | Previously filed as an exhibit to the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on September 21, 2021. |
Item 16. Form 10-K Summary
None.
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
LIGHTSTONE VALUE PLUS REIT I, INC. | |
| Date: March 23, 2022 | By: | /s/ David Lichtenstein |
| David Lichtenstein | ||
| Chief Executive Officer and Chairman of the Board | ||
|
(Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| NAME | CAPACITY | DATE | ||
| /s/ David Lichtenstein | Chief Executive Officer and Chairman of the Board | March 23, 2022 | ||
| David Lichtenstein | (Principal Executive Officer) | |||
| /s/ Seth Molod | Chief Financial Officer and Treasurer | March 23, 2022 | ||
| Seth Molod | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ George R. Whittemore | Director | March 23, 2022 | ||
| George R. Whittemore | ||||
| /s/ Alan Retkinski | Director | March 23, 2022 | ||
| Alan Retkinski | ||||
| /s/ Howard E. Friedman | Director | March 23, 2022 | ||
| Howard E. Friedman |
56
EXHIBIT 21.1
Subsidiaries of Registrant
| Property Name | State Organization | |
| Lightstone Value Plus REIT, LP | Delaware | |
| LVP St. Augustine Outlets LLC | Delaware | |
| PRO DFJV Holdings, LLC | Delaware | |
| 50-01 2nd Street Associates LLC | Delaware | |
| 50-01 2nd Street Associates Holdings LLC | Delaware | |
| 50-01 2nd Street Development LLC | Delaware | |
| LVP OP Hold Co LLC | Delaware | |
| LVP OP Hold Co II LLC | Delaware | |
| LVP OP Hold Co III LLC | Delaware | |
| LVP OP Holdings Corp. | Delaware | |
| Bowery Street Associates LLC | Delaware |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement of Lightstone Value Plus REIT I, Inc. on Form S-3D (File No. 333-227864) of our report dated March 23, 2022, on our audits of the financial statements as of December 31, 2021 and 2020 and for each of the years then ended, which report is included in this Annual Report on Form 10-K to be filed March 23, 2022.
/s/ EisnerAmper LLP
EISNERAMPER LLP
New York, NY
March 23, 2022
EXHIBIT 31.1
Certifications
I, David Lichtenstein, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Lightstone Value Plus REIT I, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ David Lichtenstein
David Lichtenstein
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: March 23, 2022
EXHIBIT 31.2
Certifications
I, Seth Molod, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Lightstone Value Plus REIT I, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Seth Molod
Seth Molod
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Date: March 23, 2022
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, David Lichtenstein, the Chief Executive Officer and Chairman of the Board of Directors of Lightstone Value Plus REIT I, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) The Annual Report on Form 10-K of the Company for the year ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ David Lichtenstein
David Lichtenstein
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: March 23, 2022
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Seth Molod, the Chief Financial Officer, Treasurer and Principal Accounting Officer of Lightstone Value Plus REIT I, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) The Annual Report on Form 10-K of the Company for the year ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Seth Molod
Seth Molod
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Date: March 23, 2022
Exhibit 99.1
CONSENT OF INDEPENDENT VALUER
We hereby consent to the reference of our name and description of our role in the valuation process of the estimated net asset values per common share of Lightstone Value Plus REIT I, Inc. and its subsidiaries being included or incorporated by reference in the Registration Statement on Form S-3D (File No. 333-227864) of Lightstone Value Plus REIT I, Inc., which reference and description are included in this Annual Report on Form 10-K of Lightstone Value Plus REIT I, Inc. filed March 23, 2022.
In giving such consent, we do not thereby admit that we are in the category of person whose consent is required under Section 7 of the Securities Act of 1933.
/s/ Robert A. Stanger & Co., Inc.
Robert A. Stanger & Co., Inc.
March 23, 2022
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred shares, par value | $ 0.01 | $ 0.01 |
| Preferred shares, shares authorized | 10,000 | 10,000 |
| Preferred shares, shares issued | 0 | 0 |
| Preferred shares, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 60,000 | 60,000 |
| Common stock, shares issued | 22,200 | 22,300 |
| Common stock, shares outstanding | 22,200 | 22,300 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income Statement [Abstract] | ||
| Net income/(loss) | $ 23,963 | $ (1,087) |
| Other comprehensive loss: | ||
| Holding gain/(loss) on available for sale debt securities | 5,455 | (21) |
| Reclassification adjustment for gain included in net income | (5,882) | 0 |
| Other comprehensive loss: | (427) | (21) |
| Comprehensive income/(loss) | 23,536 | (1,108) |
| Less: Comprehensive income attributable to noncontrolling interests | (4,871) | (3,211) |
| Comprehensive income/(loss) attributable to the Company’s common shares | $ 18,665 | $ (4,319) |
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net income/(loss) | $ 23,963 | $ (1,087) |
| Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||
| Depreciation and amortization | 5,523 | 3,956 |
| Unrealized (gain)/loss on marketable equity securities | (16,481) | 12,204 |
| (Gain)/loss on sale of marketable securities | (5,882) | 230 |
| Amortization of deferred financing costs | 445 | 601 |
| Noncash interest income | (5,387) | (5,422) |
| Gain on disposition of real estate | (3,947) | (1,562) |
| Other non-cash adjustments | 208 | 374 |
| Impairment charge | 11,341 | (0) |
| Changes in assets and liabilities: | ||
| (Increase)/decrease in prepaid expenses and other assets | (298) | 47 |
| Increase/(decrease) in tenant allowances and deposits payable | 19 | (419) |
| Increase in accounts payable, accrued expenses and other liabilities | 735 | 1,350 |
| Decrease in due to related parties | (33) | (3) |
| Decrease in deferred rental income | (205) | (125) |
| Net cash provided by operating activities | 10,001 | 10,144 |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Purchase of investment property | (59,465) | (29,442) |
| Purchase of marketable securities | (8,434) | (8,048) |
| Proceeds from sale of marketable securities | 13,627 | 4,260 |
| Proceeds from disposition of real estate | 20,197 | 2,082 |
| Investment in joint venture | (78) | (129) |
| Proceeds from joint venture | 158 | 263 |
| Funding of notes receivable | 0 | (43,979) |
| Proceeds from notes receivable | 83,156 | 500 |
| Proceeds from investments in related parties | (0) | 20,000 |
| Net cash provided by/(used in) investing activities | 49,161 | (54,493) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Proceeds from mortgage financing | 67,302 | 27,839 |
| Mortgage principal payments | (89,085) | (1,260) |
| Payment of loan fees and expenses | (6,114) | (651) |
| Redemption, cancellation and tender of common shares | (1,611) | (3,432) |
| Contributions received from noncontrolling interests | 186 | 22,330 |
| Distributions paid to noncontrolling interests | (18,805) | (18,078) |
| Distributions paid to Company’s common stockholders | (15,284) | (15,358) |
| Net cash (used in)/provided by financing activities | (63,411) | 11,390 |
| Net change in cash, cash equivalents and restricted cash | (4,249) | (32,959) |
| Cash, cash equivalents and restricted cash, beginning of year | 46,841 | 79,800 |
| Cash, cash equivalents and restricted cash, end of period | $ 42,592 | $ 46,841 |
Structure |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2021 | ||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Structure |
Lightstone Value Plus REIT I, Inc., which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September 16, 2021, a Maryland corporation (“Lightstone REIT I”), formed on June 8, 2004, which has elected to be taxed and qualify as a real estate investment trust for U.S. federal income tax purposes (“REIT”). The Lightstone REIT I was formed primarily for the purpose of engaging in the business of investing in and owning commercial and residential real estate properties located throughout the United States.
The Lightstone REIT I is structured as an umbrella partnership real estate investment trust, or UPREIT, and substantially all of the Company’s current and future business is and will be conducted through Lightstone Value Plus REIT, L.P. (the “Operating Partnership”), a Delaware limited partnership formed on July 12, 2004. As of December 31, 2021, the Company held a 98% general partnership interest in the Company’s Operating Partnership’s common units (“Common Units”).
The Lightstone REIT I and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to the Lightstone REIT I, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through its Operating Partnership, the Company owns, operates and develops commercial, residential, and hospitality properties and makes real estate-related investments, principally in the United States. The Company’s real estate investments are held alone or jointly with other parties. The Company also originates or acquires mortgage loans secured by real estate. Although most of its investments are of these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes is in its best interests.
Since its inception, the Company has owned and managed various commercial and residential properties located throughout the United States. The Company evaluates all of its real estate investments as one operating segment. As of December 31, 2021, the Company has ownership interests in (i) two consolidated operating properties, (ii) two consolidated development properties and (iii) seven unconsolidated operating properties. With respect to its consolidated operating properties, the Company wholly owns the St. Augustine Outlet Center, a retail property containing 0.3 million square feet of gross leasable area, and has a majority ownership interest of 59.2% in Gantry Park Landing, a multi-family residential property containing 199 apartment units. With respect to its consolidated development properties, the Company wholly owns two projects consisting of the Lower East Side Moxy Hotel and the Exterior Street Project. The Company also holds a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”) which the Company accounts for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any. The Joint Venture is between the Company and the operating partnership of Lightstone Value Plus REIT II, Inc., a REIT also sponsored by the Company’s Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, the Company has other real estate-related investments, including preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers.
The Company’s advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units. The Company’s Advisor also owns shares of the Company’s common stock (“Common Shares”) which were issued on July 6, 2004 for $200, or $ per share. Mr. Lichtenstein also is the majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as the sponsor (the “Sponsor”) during the Company’s initial public offering (the “Offering”), which terminated on October 10, 2008. The Company’s Advisor, together with its board of directors (the “Board of Directors”), is primarily responsible for making investment decisions on the Company’s behalf and managing its day-to-day operations. Through his ownership and control of The Lightstone Group, LLC, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP, LLC, a Delaware limited liability company, which owns an aggregate of $30.0 million of special general partner interests (“SLP Units”) in the Operating Partnership which were purchased, at a cost of $100,000 per unit, in connection with the Company’s Offering. 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 I or the Operating Partnership.
The Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management of the Company’s assets.
The Company’s Advisor has affiliates which may manage and develop certain of its properties. However, the Company also contracts with other unaffiliated third-party property managers.
The Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its stock for trading on a national securities exchange only if a majority of independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares of common stock until they are listed for trading.
Related Parties:
The Advisor and its affiliates, and Lightstone SLP, LLC are related parties of the Company. Certain of these entities are entitled to compensation for services related to the investment, management and disposition of the Company’s assets. The compensation is based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements as outlined in each of the respective agreements. See Note 12 for additional information.
Noncontrolling Interests
Partners of Operating Partnership
On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units in the Operating Partnership. The Advisor has the right to convert the Common Units into cash or, at the option of the Company, an equal number of shares of Common Shares.
In connection with the Offering, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $30.0 million of SLP Units. As the majority owner of the SLP Units, Mr. Lichtenstein is the beneficial owner of a 99% interest in such SLP Units and thus receives an indirect benefit from any distributions made in respect thereof. These SLP Units may be entitled to a portion of any regular and liquidation distributions that the Company makes to its stockholders, but only after the Company’s stockholders have received a stated preferred return.
In addition, an aggregate 497,209 Common Units were issued to other unrelated parties during the years ended December 31, 2008 and 2009 and remain outstanding as of December 31, 2021.
Other Noncontrolling Interests in Consolidated Subsidiaries
Other noncontrolling interests in consolidated subsidiaries include ownership interests in (i) Pro-DFJV Holdings LLC (“PRO”) held by the Company’s Sponsor (see Note 11), (ii) 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”), held by the Company’s Sponsor and other affiliates (see Note 11) and (iii) various joint ventures held by affiliates of the Sponsor that have originated promissory notes to unaffiliated third parties (see Note 5). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note 6). The 2nd Street Joint Venture owns Gantry Park Landing, a multi-family apartment building located in Queens, New York.
See Note 11 for further discussion of noncontrolling interests.
COVID-19 Pandemic
The World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future.
As a result of previously imposed restrictions, the Company temporarily closed its St. Augustine Outlet Center from March 20, 2020 through May 7, 2020. During the COVID-19 pandemic, the property’s occupancy declined and because of limited leasing success, the Company began exploring various strategic alternatives for its St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that it would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at scheduled expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, the Company recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021. See Note 8 for additional information.
Additionally, as a result of the COVID-19 pandemic, during 2020 the Company saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted. However, both occupancy and rental rates have improved considerably throughout 2021 and have returned to pre-COVID-19 levels.
To-date, the COVID-19 pandemic has not had any significant impact on the Company’s development projects. Furthermore, the Company’s other real estate-related investments (both its preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers) also relate to various development projects which are at different stages in their respective development process. These investments, which are subject to similar restrictions and other measures, have also not yet been significantly impacted by the COVID-19 pandemic.
The overall extent to which the Company’s business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.
If the Company’s operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on the Company’s preferred investments in related parties, the Company’s business and financial results could be materially and adversely impacted.
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Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Lightstone REIT I and the Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). As of December 31, 2021, Lightstone REIT I had a 98% general partnership interest in the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation.
The consolidated 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 and real estate-related investments, depreciable lives, 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.
Investments in entities where the Company has the ability to exercise significant influence, but does not exercise financial and operating control, and is not considered to be the primary beneficiary of a variable interest entity will be accounted for using the equity method. Investments in entities where the Company has virtually no influence are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for cash contributions and distributions.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less when made to be cash equivalents.
As required by the Company’s lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate taxes, and other reserves for certain of its consolidated properties. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions, and major capital expenditures. Alternatively, a lender may require its own formula for an escrow of capital reserves. Restricted cash may also include certain funds temporarily placed in escrow with qualified intermediaries to facilitate potential like-kind exchange transactions in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended.
The following is a summary of the Company’s cash, cash equivalents, and restricted cash total as presented in the statements of cash flows for the periods presented:
Supplemental cash flow information for the periods indicated is as follows:
Marketable Securities
Marketable securities consist of equity and debt securities that are designated as available-for-sale. Marketable debt securities are recorded at fair value and unrealized holding gains or losses are reported as a component of accumulated other comprehensive income. The Company’s marketable equity securities are recorded at fair value and unrealized holding gains and losses are recognized on the consolidated statements of operations.
Realized gains or losses resulting from the sale of these securities are determined based on the specific identification of the securities sold. An impairment charge is recognized when the decline in the fair value of a debt security below the amortized cost basis is determined to be other-than-temporary. The Company considers various factors in determining whether to recognize an impairment charge, including the duration and severity of any decline in fair value below our amortized cost basis, any adverse changes in the financial condition of the issuers and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The Board of Directors has authorized the Company from time to time to invest the Company’s available cash in marketable securities of real estate related companies. The Board of Directors has approved investments of marketable securities of real estate companies up to 30% of the Company’s total assets to be made at the Company’s discretion, subject to compliance with any REIT or other restrictions.
Revenue Recognition
Minimum rents are recognized on a straight-line accrual basis, over the terms of the related leases. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to rental income over the initial lease term, including any below-market renewal periods taken into account. Percentage rents, which are based on commercial tenants’ sales, are recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants’ leases. Recoveries from commercial tenants for real estate taxes, insurance and other operating expenses, and from residential tenants for utility costs, are recognized as revenues in the period that the applicable costs are incurred.
Consolidated VIEs
The Company consolidates certain joint ventures which have originated nonrecourse loans to unaffiliated third-party borrowers (see Note 5) which are variable interest entities, or VIEs, for which the Company is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership, or legal entities such as an LLC, are considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to our business activities and the business activities of the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
Investments in Real Estate
Accounting for Asset Acquisitions
The cost of the real estate assets acquired in an asset acquisition is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, based in each case on their relative fair values. Fees incurred related to asset acquisitions are capitalized as part of the cost of the investment.
Accounting for Business Combinations
Upon the acquisition of real estate operating properties that meet the definition of a business, the Company estimates the fair value of acquired tangible assets and identified intangible assets and liabilities and assumed debt at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, the Company evaluates the existence of goodwill or a gain from a bargain purchase and allocates the initial purchase price to the applicable assets, liabilities and noncontrolling interests, if any. As final information regarding fair value of the assets acquired, liabilities assumed and noncontrolling interests is received and estimates are refined, appropriate adjustments are made to the purchase price allocation. The allocations are finalized as soon as all the information necessary is available.
Accounting for Development Projects
The Company incurs a variety of costs in the development of a property. The costs of land and building under development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development. The Company ceases capitalization when the development project is substantially complete and placed in service, which may occur in phases. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment.
Once a development project is placed in service, which may occur in phases or for an entire building or project, the costs capitalized to that development project are transferred to land and improvements, buildings and improvements, and furniture and fixtures on the Company’s consolidated balance sheets at the historical cost of the property.
Impairment Evaluation
The Company evaluates the recoverability of its investments in real estate assets at the lowest identifiable level, the individual property level. An impairment loss is recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.
The Company evaluates the long-lived assets for potential impairment whenever events or changes in circumstances indicate that the undiscounted projected cash flows are less than the carrying amount for a particular property. No single indicator would necessarily result in the Company preparing an estimate to determine if a long-lived asset’s future undiscounted cash flows are less than its book value. The Company uses judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a long-lived asset requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The estimated cash flows used for the impairment analysis are subjective and require the Company to use its judgment and the determination of estimated fair value are based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company’s plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, may be substantial.
Notes Receivable and Preferred Investments
Notes receivable and preferred investments that we intend to hold to maturity are carried at cost, net of any unamortized origination costs, fees, discounts, premiums and unfunded commitments.
Investment income will be recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to investment income in the Company’s statements of operations.
Income recognition is suspended when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal is not in doubt, contractual interest is recorded as investment income when received, under the cash basis method, until an accrual is resumed when the instrument becomes contractually current and performance is demonstrated to be resumed.
Credit Losses and Impairment on Notes Receivable
Notes receivable are considered impaired when, based on current information and events, it is probable that we will not be able to collect principal and interest amounts due according to the contractual terms. We assess the credit quality of our notes receivable and adequacy of reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management is required in this analysis. We consider the estimated net recoverable value of the notes receivable 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 is 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 notes receivable, a reserve is recorded with a corresponding charge to investment income. The reserve for each note receivable is maintained at a level that is determined to be adequate by management to absorb probable losses.
Credit Losses and Impairment on Preferred Investments
Preferred investments that are accounted for as held to maturity are assessed for impairment at the individual investment level when there is a decline in fair value below the amortized cost basis that is deemed to be other than temporary. In making the determination of an other-than-temporary impairment assessment, the Company considers all available information relevant to the collectability of the investment, including information about past events, current conditions, and reasonable and supportable forecasts when developing the estimate of cash flows expected to be collected. This information includes the remaining redemption terms of the investment, financial condition of the issuer, expected defaults and the value of any underlying collateral. In assessing whether the entire amortized cost basis of the investment will be recovered, the Company compares the present value of cash flows expected to be collected from the investment with the amortized cost basis and records an impairment based on the amount by which the present value of cash flows expected to be collected is less than the amortized cost basis of the investment.
Depreciation and Amortization
Depreciation expense is computed based on the straight-line method over the estimated useful life of the applicable real estate asset. The Company generally uses estimated useful lives of up to 39 years for buildings and improvements and five to 10 years for furniture and fixtures. Expenditures for tenant improvements and construction allowances paid to commercial tenants are capitalized and amortized over the initial term of each lease or the estimated useful life, if shorter. Expenditures for ordinary maintenance and repairs are charged to expense as incurred.
Leases
The Company’s retail property (St. Augustine Outlet Center) and its multi-family residential property (Gantry Park Landing) are both leased to tenants under operating leases. Substantially all of our multi-family residential property leases have initial terms of 12 months or less. Our remaining retail space leases expire from 2022 through 2024.
Deferred Costs
The Company capitalizes initial direct costs associated with financing activities. The costs are capitalized upon the execution of the loan, presented in the consolidated balance sheets as a direct deduction from the carrying value of the corresponding loan and amortized over the initial term of the corresponding loan. Amortization of deferred loan costs begin in the period during which the loan is originated using the effective interest method over the term of the loan. The Company capitalizes initial direct costs associated with leasing activities. The costs are capitalized upon the execution of the lease and amortized over the initial term of the corresponding lease.
Income Taxes
The Company has elected to be taxed as a REIT commencing with the taxable year ended December 31, 2005. 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 the regular corporate rate, 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.
To maintain its qualification as a REIT, the Company engages in certain activities through wholly-owned taxable REIT subsidiaries (“TRSs”). As such, the Company is subject to U.S. federal and state income and franchise taxes from these activities.
As of December 31, 2021 and 2020, the Company had no material uncertain income tax positions. Additionally, even if the Company continues to qualify as a REIT, it may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on its undistributed income.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities, due to related parties, tenant allowances and deposits payable and deferred rental income approximate their fair values because of the short maturity of these instruments. The carrying amounts of the notes receivable approximate their fair values because the interest rates are variable and reflective of market rates.
The estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:
The fair value of the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated current market interest rates.
Accounting for Derivative Financial Investments 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 records all derivative instruments at fair value on the consolidated balance sheets and changes in the fair value of the instruments are recorded in the consolidated statements of operations.
Stock-Based Compensation
The Company had a stock-based incentive award plan for the independent directors of its Board pursuant to which awards were granted at fair market value as of the date of grant. This plan expired in April 2015. For the years ended December 31, 2021 and 2020, the Company had compensation costs related to the incentive award plan.
Concentration of Risk
The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed 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 its cash and cash equivalents.
Basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the applicable period. Dilutive income per share includes the potentially dilutive effect, if any, which would occur if our outstanding options to purchase our common stock were exercised. For all periods presented dilutive net income per share is equivalent to basic net income per share.
New Accounting Pronouncements
In June 2016, the FASB issued an accounting standards update which replaces the incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects that the adoption of this standard will not have a material effect on its consolidated financial position, results of operations or cash flows.
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 current operations.
Reclassifications
Certain prior period amounts may have been reclassified to conform to the current year presentation.
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Development Projects |
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| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development Projects |
Lower East Side Moxy Hotel
On December 3, 2018, the Company, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land located at 147-151 Bowery, New York, New York from unaffiliated third parties for aggregate consideration of $56.5 million, excluding closing and other acquisition related costs. Additionally, on December 6, 2018, the Company, though a subsidiary of the Operating Partnership, acquired certain air rights located at 329 Broome Street, New York, New York from an unaffiliated third party for $2.4 million, excluding closing and other acquisition related costs. The Company is using the land and air rights for the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”). On June 3, 2021, the Company entered into a development agreement (the “Development Agreement”) with an affiliate of the Advisor (the “Moxy Lower East Side Developer”) pursuant to which the Lower East Side Moxy Developer will be paid a development fee equal to 3% of hard and soft costs incurred in connection with the development and construction of the Lower East Side Moxy Hotel. Additionally on June 3, 2021, the Company obtained construction financing for the Lower East Side Moxy Hotel. The Lower East Side Moxy Hotel is currently under construction and expected to open during the fourth quarter of 2022. See Notes 7 and 12 for additional information.
Exterior Street Project
On February 27, 2019, the Company, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located at 355 and 399 Exterior Street, New York, New York from unaffiliated third parties for an aggregate purchase price of $59.0 million, excluding closing and other acquisition related costs. In September 2021, the Company subsequently acquired an additional adjacent parcel of land at cost from an affiliate of its Advisor for $1.0 million in order to achieve certain zoning compliance. The Company is using the land parcels for the development of a multi-family residential property (the “Exterior Street Project”).
Santa Clara Data Center
On January 10, 2019, the Company acquired a parcel of land located at 2175 Martin Avenue, Santa Clara, California (the “Martin Avenue Land”) from an unaffiliated third party for $10.6 million. Subsequently, the Company completed certain activities associated with the potential development and construction of a data center on the Martin Avenue Land (the “Santa Clara Data Center”).
On July 7, 2021, the Company disposed of the Santa Clara Data Center to an unrelated third party for a contractual sales price of $13.9 million. In connection with the disposition of the Santa Clara Data Center, the Company recognized a gain of $0.2 million during the third quarter of 2021, which is included in gain on disposition of real estate, net on the consolidated statements of operations.
The disposition of the Santa Clara Data Center did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of the Santa Clara Data Center are reflected in the Company’s results from continuing operations for all periods presented through its date of disposition.
The following is a summary of the amounts incurred and capitalized to each of the Company’s development projects as of the dates indicated and the amounts of interest capitalized to each of the Company’s development projects for the periods indicated:
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Investments in Related Parties |
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| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Related Parties |
Preferred Investments
The Company has entered into agreements with various related party entities that provide for it to make preferred contributions pursuant to certain instruments (the “Preferred Investments”) that entitle it to certain prescribed monthly preferred distributions (see below for additional information). The Preferred Investments had an aggregate balance of $14.5 million as of December 31, 2021 and 2020, and are classified as held-to-maturity securities, recorded at cost and included in investments in related parties on the consolidated balance sheets. The fair value of these investments approximated their carrying values based on market rates for similar instruments. During the year ended December 31, 2020, the Company redeemed $11.0 million of the 40 East End Avenue Preferred Investment and the entire remaining Miami Moxy Preferred Investment of $9.0 million. Additionally, during the years ended December 31, 2021 and 2020, the Company recognized investment income of $1.8 million and $2.0 million, respectively.
The Preferred Investments are summarized as follows:
Note:
40 East End Avenue Preferred Investment
In May 2015, the Company entered into an agreement pursuant to which it made aggregate contributions of $30.0 million in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”), a related party entity. The 40 East End Ave. Joint Venture is a joint venture between an affiliate of our Sponsor and Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), a related-party REIT also sponsored by the Company’s Sponsor, which developed and constructed a luxury residential condominium project consisting of 29 units (the “40 East End Avenue Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final temporary certificates of occupancy, or TCO, in March 2020 and through December 31, 2021, fifteen of the condominium units had been sold.
Contributions were made pursuant to an instrument, the “40 East End Avenue Preferred Investment,” that is entitled to monthly preferred distributions, initially at a rate of 8% per annum which increased to 12% per annum upon procurement of construction financing in March 2017, and is redeemable by the Company beginning on April 27, 2022. During the fourth quarter of 2019, the Company redeemed $13.0 million of the 40 East End Avenue Preferred Investment. In February 2020, the Company redeemed an additional $11.0 million of the 40 East End Avenue Preferred Investment which reduced the remaining outstanding balance to $6.0 million.
East 11th Street Preferred Investment
On April 21, 2016, the Company entered into an agreement, as amended, with various related party entities pursuant to which it to made aggregate contributions of $57.5 million in an affiliate of its Sponsor (the “East 11th Street Developer”) which developed and constructed a Marriott Moxy Hotel located at 112-120 East 11th Street in New York, New York. Contributions were made pursuant to an instrument, the “East 11th Street Preferred Investment,” that entitled us to monthly preferred distributions at a rate of 12% per annum. Upon the consummation of certain capital transactions, the Company may redeem its investment in the East 11th Street Preferred Investment. Additionally, the East 11th Street Developer may redeem the Company’s investment at any time or upon the consummation of any capital transaction. Any redemption by the Company or the East 11th Street Developer under the East 11th Street Preferred Investment will be made at an amount equal to the amount invested by the Company plus a 12.0% annual cumulative, pre-tax, non-compounded return on the aggregate amount invested by the Company. During 2019 and 2018, the Company redeemed $34.5 million and $14.5 million, respectively of the East 11th Street Preferred Investment which reduced the remaining outstanding balance to $8.5 million.
Miami Moxy Preferred Investment
On September 30, 2016, the Company entered into an agreement with various related party entities pursuant to which it made aggregate contributions of $20.0 million in an affiliate of its Sponsor (the “Miami Moxy Developer”), which owns parcels of land located at 915 through 955 Washington Avenue in Miami Beach, Florida, on which it constructed a 205-room Marriott Moxy hotel (the “Miami Moxy”). Contributions were made pursuant to an instrument, the “Miami Moxy Preferred Investment,” that entitled the Company to monthly preferred distributions at a rate of 12% per annum. During the fourth quarter of 2019, the Company redeemed $11.0 million of the Miami Moxy Preferred Investment and during the first quarter of 2020, the Company redeemed the entire remaining Miami Moxy Preferred Investment of $9.0 million.
The Joint Venture
During 2015, the Company formed the Joint Venture with Lightstone REIT II. The Company has a 2.5% membership interest in the Joint Venture and Lightstone REIT II holds the remaining 97.5% membership interest. The Joint Venture previously acquired our membership interests in a portfolio of 11 hotels in a series of transactions completed during 2015. The Joint Venture holds ownership interests in seven hotels as of December 31, 2021.
The Company accounts for its 2.5% membership interest in the Joint Venture using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any, and as of December 31, 2021 and 2020, the carrying value of its investment was $1.0 million and $1.1 million, respectively, which is included in investments in related parties on the consolidated balance sheets.
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Notes Receivable |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Receivable |
The Company has formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).
The NR Subsidiaries and NR Affiliates have varying ownership interests in the NR Joint Ventures and certain other wholly-owned subsidiaries of the Operating Partnership serve as the manager and are the sole decision-maker for each of the NR Joint Ventures.
The Company has determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, the Company has consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.
The Joint Venture Promissory Notes generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with the initial funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from 1.00% to 1.50%) based on the principal commitment under the loan and retain a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”). The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.
The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional extension options subject to satisfaction of certain conditions, including the funding of additional Loan Reserves and payment of extension fees. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.
Origination fees are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the term.
During the year ended December 31, 2021, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint Ventures of $0.2 million. Additionally, during the year ended December 31, 2021, the NR Joint Ventures made aggregate distributions of $16.3 million to both the NR Subsidiaries and NR Affiliates, based on their respective membership interests. During the year ended December 31, 2020, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint Ventures of $22.3 million, principally to fund their respective shares of the Joint Venture Promissory Notes that were originated. Additionally, during the year ended December 31, 2020, the NR Joint Ventures made aggregate distributions of $15.0 million to both the NR Subsidiaries and NR Affiliates, based on their respective membership interests.
The Notes Receivable are summarized as follows:
Notes:
The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:
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Marketable Securities, Fair Value Measurements and Notes Payable |
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| Marketable Securities Fair Value Measurements And Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable Securities, Fair Value Measurements and Notes Payable |
Marketable Securities:
The following is a summary of the Company’s available for sale securities as of the dates indicated:
As of both December 31, 2021 and 2020, the Company held an aggregate of 209,243 Marco OP Units and Marco II OP Units, of which 89,695 were owned by PRO. The Marco OP Units and the Marco II OP Units are both exchangeable for a similar number of common operating partnership units (“Simon OP Units”) of Simon Property Group, L.P., (“Simon OP”), the operating partnership of Simon Property Group, Inc. (“Simon Inc.”), a public REIT that is an owner and operator of shopping malls and outlet centers. Subject to the various conditions, the Company may elect to exchange the Marco OP Units and/or the Marco II OP Units to Simon OP Units which must be immediately delivered to Simon Inc. in exchange for cash or similar number of shares of Simon Inc.’s common stock (“Simon Stock”). Accordingly, the Marco OP Units and Marco II OP Units are valued based on the closing price of Simon Stock, which was $ per share and $ per share as of December 31, 2021 and 2020, respectively. Additionally, the closing price of Simon Stock was $ per share as of December 31, 2019.
Beginning with the onset of the COVID-19 pandemic in March 2020, financial markets have experienced significant volatility resulting in swings in market interest rates and market prices of certain equity securities. Primarily because of this volatility, particularly due to the above noted changes in the closing prices of Simon Stock, the Company incurred an unrealized gain of $16.5 million for the year ended December 31, 2021 and an unrealized loss of $12.2 million for the year ended December 31, 2020. These unrealized gains and losses incurred on the Company’s marketable equity securities are included in its consolidated statements of operations.
Additionally, as of December 31, 2021 and 2020, certain of the Company’s marketable debt securities had gross unrealized losses of $28 and $148. However, the Company does not consider these declines in market value to be other than temporary in nature. When evaluating the debt investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis. During the years ended December 31, 2021 and 2020, the Company did not recognize any other-than-temporary impairment charges. As of both December 31, 2021 and 2020, the Company does not consider any of its investments to be other-than-temporarily impaired.
The Company may sell certain of its investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Marketable securities, available for sale, measured at fair value on a recurring basis as of the dates indicated are as follows:
The fair values of the Company’s common equity securities are measured using readily quoted prices for these investments which are listed for trade on active markets. The fair values of the Company’s preferred equity securities and corporate bonds are measured using readily available quoted prices for these securities; however, the markets for these securities are not active. Additionally, as noted and disclosed above, the Company’s Marco OP and OP II units are both ultimately exchangeable for cash or similar number of shares of Simon Stock, therefore the Company uses the quoted market price of Simon Stock to measure the fair value of the Company’s Marco OP and OP II units.
Nonrecurring Fair Value Measurements
During the third quarter of 2021, the Company recorded a non-cash impairment charge of $11.3 million to reduce the carrying value of the St. Augustine Outlet Center to its estimated fair value of $23.3 million as of September 30, 2021. In estimating the fair value of the St. Augustine Outlet Center, the Company used management’s internal comparable sales analysis prepared with consideration of local market conditions, which was considered a Level 3 under the fair value hierarchy described above. The carrying value of the St. Augustine Outlet Center is included in investment property on the consolidated balance sheets. See Note 8.
The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.
Notes Payable
Margin Loan
The Company has access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain of the Company’s marketable securities. The Margin Loan, which is due on demand, bears interest at LIBOR + 0.85% (0.95% as of December 31, 2021) and is collateralized by the marketable securities in the Company’s account. The amounts available to the Company under the Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in its account. There were no amounts outstanding under this Margin Loan as of December 31, 2021 and 2020.
Line of Credit
The Company has a non-revolving credit facility (the “Line of Credit”) that provides for borrowings up to a maximum of $20.0 million, subject to a 55% loan-to-value ratio based on the fair value of the underlying collateral, matures on November 30, 2022 and bears interest at LIBOR + 1.35% (1.45% as of December 31, 2021). The Line of Credit is collateralized by an aggregate of of Marco OP Units and Marco II OP Units and is guaranteed by PRO. As of December 31, 2021, the amount of borrowings available to be drawn under the Line of Credit was $18.4 million. No amounts were outstanding under the Line of Credit as of both December 31, 2021 and 2020.
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Mortgages Payable |
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| SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgages Payable |
Mortgages payable, net consists of the following:
LIBOR as of December 31, 2021 and 2020 was 0.10% and 0.14%, respectively. The Company’s mortgages are secured by the indicated real estate/investment and are non-recourse to the Company, unless otherwise indicated.
The following table shows the Company’s contractually scheduled principal maturities during the next five years and thereafter:
On June 3, 2021, the Company, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy Senior Loan”) providing for up to $90.0 million of funds for the development and construction of the Lower East Side Moxy Hotel. At closing, $35.6 million of proceeds were initially advanced under the Moxy Senior Loan, which were used to repay in full the Lower East Side Moxy Mortgage. The Moxy Senior Loan bears interest at LIBOR + 7.50%, subject to an 8.00% floor, and initially matures on June 3, 2024, with two one-year extension options, subject to the satisfaction of certain conditions. The Moxy Senior Loan is collateralized by the Lower East Side Moxy Hotel. As of December 31, 2021, the outstanding principal balance of the Moxy Senior Loan was $35.6 million and the remaining availability under the facility was up to $54.4 million.
Simultaneously on June 3, 2021, the Company, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) providing for up to $40.0 million of additional funds for the development and construction of the Lower East Side Moxy Hotel. The Moxy Junior Loan bears interest at LIBOR + 13.50%, subject to a 14.00% floor, and initially matures on June 3, 2024, with two one-year extension options, subject to the satisfaction of certain conditions. The Moxy Junior Loan is subordinate to the Moxy Senior Loan but also collateralized by the Lower East Side Moxy Hotel. The Company has provided a principal guarantee of up to $7.0 million with respect to the Moxy Junior Loan. As of December 31, 2021, the outstanding principal balance of the Moxy Junior Loan was $24.6 million and the remaining availability under the facility was up to $15.4 million.
Future draws to cover the costs associated with the development and construction of the Lower East Side Moxy Hotel will first be advanced under the Moxy Junior Loan until it has been fully funded and thereafter, funds will be advanced under the remaining availability of the Moxy Senior Loan.
In connection with the Moxy Construction Loans, the Company has provided certain completion and carry cost guarantees. The Company has also entered into an interest rate cap agreement pursuant to which the LIBOR rate will be capped at 3.00% on the Moxy Senior Loan through June 3, 2024 at a cost of $0.2 million. Furthermore, in connection with the Moxy Construction Loans, the Company paid $5.3 million of loan fees and expenses and accrued $1.1 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2021.
On July 22, 2020, the Company, through the 87 Newkirk Joint Venture, entered into a $27.5 million loan (the “87 Newkirk Loan”) which bore interest at LIBOR + 3.80%, subject to a 4.80% floor. The 87 Newkirk Loan required monthly interest-only payments with the outstanding principal balance due in full at its maturity date and was collateralized by a nonrecourse loan originated by the 87 Newkirk Joint Venture (the “87 Newkirk Note Receivable” - see Note 5). On April 5, 2021, the 87 Newkirk Joint Venture repaid the 87 Newkirk Loan in full using a portion of the proceeds it received from the repayment in full of the 87 Newkirk Note Receivable.
On November 12, 2019, the Company, through LSC 1543 7th LLC and LSC 1650 Lincoln LLC (collectively, the “Santa Monica Joint Ventures”), entered into a $25.0 million loan (the “Santa Monica Loan”) which bore interest at LIBOR + 3.75%, subject to a 5.50% floor. The Santa Monica Loan required monthly interest-only payments and was cross-collateralized by two nonrecourse loans originated by the Santa Monica Joint Ventures (the “Santa Monica Note Receivables” - see Note 5). During December 2021, the Santa Monica Joint Ventures repaid the Santa Monica Loan in full using a portion of the proceeds it received from the repayment in full of the Santa Monica Notes Receivable.
On March 29, 2019, the Company entered into a $35.0 million loan (the “Exterior Street Loan”) which, commencing on October 10, 2020, bears interest at LIBOR + 2.25% through its scheduled maturity date. The Exterior Street Loan requires monthly interest-only payments with the outstanding principal balance due in full at its maturity date. The Exterior Street Loan was initially scheduled to mature on April 9, 2021 but during April 2021, its maturity date was further extended to April 9, 2022. Additionally, on December 21, 2021, the loan agreement was amended to provide an additional six-month extension and an additional $7.0 million loan (the “Exterior Street Supplemental Loan” and collectively with the Exterior Street Loan, the “Exterior Street Loans”) which bears interest at LIBOR + 2.50% and requires monthly interest-only payments through its maturity date. The Exterior Street Loans are scheduled to mature on April 9, 2022, with a six-month extension option, subject to certain conditions and are collateralized by the Exterior Street Project.
On November 19, 2014, the 2nd Street Joint Venture entered into a $74.5 million mortgage loan (the “Gantry Park Mortgage Loan”). The Gantry Park Mortgage Loan has a 10-year term with a maturity date of November 19, 2024, bears interest at 4.48%, and required monthly interest-only payments for the first three years and monthly principal and interest payments pursuant to a 30-year amortization schedule thereafter. The Gantry Park Mortgage Loan is collateralized by Gantry Park Landing.
Certain of the Company’s debt agreements require the maintenance of certain ratios, including debt service coverage. As of December 31, 2021, the Company was in compliance with all of its financial debt covenants. Additionally, certain of our mortgages payable also contain clauses providing for prepayment penalties.
Debt Maturities
The Exterior Street Loans (outstanding aggregate principal balance of $42.0 million as of December 31, 2021) mature on April 9, 2022. The Company currently intends to seek to extend or refinance the Exterior Street Loans on or before their maturity date.
However, if the Company is unable to extend or refinance its maturing indebtedness at favorable terms, it will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. The Company has no additional significant maturities of mortgage debt over the next 12 months.
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St. Augustine Outlet Center |
12 Months Ended | |||
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Dec. 31, 2021 | ||||
| St. Augustine Outlet Center | ||||
| St. Augustine Outlet Center |
Investment Impairment
During the COVID-19 pandemic, the St. Augustine Outlet Center’s occupancy declined and because of limited leasing success, the Company began been exploring various strategic alternatives for the property and as a result determined during the third quarter of 2021 that it would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at scheduled expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, the Company recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021 to reduce the carrying value of the St. Augustine Outlet Center to its estimated fair value of $23.3 million as of September 30, 2021. In estimating the fair value of the St. Augustine Outlet Center, the Company used management’s internal analysis prepared with consideration of local market conditions.
The Company believes the carrying value of the St. Augustine Outlet Center, as of December 31, 2021, is recoverable. However, if market conditions worsen unexpectedly or if changes in its strategy significantly affect any key assumptions used in determining the property’s estimated fair value, the Company may need to take additional impairment charges in future periods.
Land Parcel Sales
On May 25, 2021, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center to an unrelated third party for a contractual sales price of $6.8 million and recognized a gain of $3.6 million during the second quarter of 2021, which is included in gain on disposition of real estate, net on the consolidated statements of operations.
On April 6, 2020, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center to an unrelated third party for a contractual sales price of $2.1 million and recognized a gain on of $1.6 million during the second quarter of 2020, which is included in gain on disposition of real estate, net on the consolidated statements of operations. |
Distributions Payable |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2021 | ||||
| Distributions Payable | ||||
| Distributions Payable |
On November 8, 2021 and November 6, 2020 the Board of Directors authorized and the Company declared distributions of $ per share for the quarterly periods ending December 31, 2021 and 2020. The quarterly distributions are the pro rata equivalent of annual distributions of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $10.00 per share. The distributions will be paid on or about the 15th day of the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders had an option to elect the receipt of shares under the Company’s DRIP at a discounted price of $11.16 and $10.62 per share, equal to 95% of the Company’s most recently published estimated net asset value per share as of September 30, 2021 and 2020, respectively. The distributions payable as of December 31, 2021 and 2020 were paid in January 2022 and 2021, respectively.
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Company’s Stockholder’s Equity |
12 Months Ended | |||
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Dec. 31, 2021 | ||||
| Equity [Abstract] | ||||
| Company’s Stockholder’s Equity |
Preferred Shares
Shares of preferred stock may be issued in the future in one or more series as authorized by the Board of Directors. Prior to the issuance of shares of any series, the Board of Directors is required by the Company’s charter to fix the number of shares to be included in each series and the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each series. Because the Board of Directors has the power to establish the preferences, powers and rights of each series of preferred stock, it may provide the holders of any series of preferred stock with preferences, powers and rights, voting or otherwise, senior to the rights of holders of our common stock. The issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of the Company, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of the Company’s common stock. As of December 31, 2021 and 2020, the Company had outstanding preferred shares.
Common Shares
All of the common stock offered by the Company will be duly authorized, fully paid and nonassessable. Subject to the preferential rights of any other class or series of stock and to the provisions of its charter regarding the restriction on the ownership and transfer of shares of our stock, holders of the Company’s common stock will be entitled to receive distributions if authorized by the Board of Directors and to share ratably in the Company’s assets available for distribution to the stockholders in the event of a liquidation, dissolution or winding-up.
Each outstanding share of the Company’s common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors. There is no cumulative voting in the election of directors, which means that the holders of a majority of the outstanding common stock can elect all of the directors then standing for election, and the holders of the remaining common stock will not be able to elect any directors.
Holders of the Company’s common stock have no conversion, sinking fund, redemption or exchange rights, and have no preemptive rights to subscribe for any of its securities. Maryland law provides that a stockholder has appraisal rights in connection with some transactions. However, the Company’ charter provides that the holders of its stock do not have appraisal rights unless a majority of the Board of Directors determines that such rights shall apply. Shares of the Company’s common stock have equal dividend, distribution, liquidation and other rights.
Under its charter, the Company cannot make some material changes to its business form or operations without the approval of stockholders holding at least a majority of the shares of our stock entitled to vote on the matter. These include (1) amendment of its charter, (2) its liquidation or dissolution, (3) its reorganization, and (4) its merger, consolidation or the sale or other disposition of its assets. Share exchanges in which the Company is the acquirer, however, do not require stockholder approval.
Distributions, Share Repurchase Program and Tender Offer
The Board of Directors commenced declaring and the Company began paying regular quarterly distributions on its Common Shares at the pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $ per share, beginning February 1, 2006. Subsequently, the Board of Directors has declared regular quarterly distributions at the annualized rate of rate of 7.0% assuming a purchase price of $10.00 per share, with the exception of the three-month period ended June 30, 2010. The distributions for the three-month period ended June 30, 2010 were at an aggregate annualized rate of 8% based on the share price of $10.00.
Total distributions declared during both of the years ended December 31, 2021 and 2020 were $15.6 million.
On March 18, 2022, the Board of Directors authorized and the Company declared a distribution of $ per share for the quarterly period ending March 31, 2022. The quarterly distribution is the pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $ per share. The distribution will be paid on or about the 15th day of the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders have an option to elect the receipt of shares under the Company’s distribution reinvestment program (the “DRIP”).
The Company’s stockholders have the option to elect the receipt of shares in lieu of cash under the Company’s DRIP. The Company’s DRIP Registration Statement on Form S-3D was filed and became effective under the Securities Act of 1933 on October 25, 2018. The purchase price for shares under the DRIP will be equal to 95% of our current NAV per Share, as determined by the Board of Directors and reported by the Company from time to time. On December 16, 2021, the Board of Directors determined our NAV per Share of $, as of September 30, 2021, which resulted in a purchase price for shares under the DRIP of $ per share. As of December 31, 2021, million shares remain available for issuance under our DRIP.
Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of the Company’s performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, the Company’s ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. The Company cannot assure that any future distributions will be made or that it will maintain any particular level of distributions that it has previously established or may establish.
Share Repurchase Program
The Company’s share repurchase program (the “SRP”) may provide its stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to the Company, subject to restrictions.
On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.
Effective March 18, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to our current NAV per Share of Common Stock (“NAV per Share”), as determined by the Board of Directors and reported by the Company from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by the Company within one year of the stockholder’s date of death for consideration.
At the above noted dates, the Board of Directors established that on an annual basis, the Company would not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Additionally, redemption requests generally would be processed on a quarterly basis and would be subject to pro ration if either type of redemption requests exceeded the annual limitation.
For the year ended December 31, 2021, the Company repurchased shares of common stock for $ per share, pursuant to its share repurchase program. For the period from January 1 through March 24, 2020, the Company repurchased shares of common stock for $ per share, pursuant to the share repurchase program.
On March 18, 2022, the Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0%.
2020 Tender Offer
The Company commenced a tender offer on June 15, 2020, pursuant to which the Company offered to acquire up to of its shares of common stock at a purchase price of $ per share, or $1.1 million in the aggregate (the “2020 Tender Offer”). Pursuant to the terms of the 2020 Tender Offer, which expired on July 24, 2020, the Company repurchased million shares of its common stock for an aggregate of $0.3 million in August 2020.
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Noncontrolling Interests |
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Dec. 31, 2021 | ||||
| Noncontrolling Interest [Abstract] | ||||
| Noncontrolling Interests |
The Company’s noncontrolling interests consist of (i) parties of the Company that hold units in the Operating Partnership, and (ii) certain interests in consolidated subsidiaries. The units held by noncontrolling interests in the Operating Partnership include SLP Units and Common Units. The noncontrolling interests in consolidated subsidiaries include ownership interests in (i) PRO held by the Company’s Sponsor and (ii) 50-01 2nd St Associates LLC (the “2nd Street Joint Venture”) held by the Company’s Sponsor and other affiliates and (iii) various joint ventures held by affiliates of our Sponsor that have originated promissory notes to unaffiliated third parties (see Note 5). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note 6). The 2nd Street Joint Venture owns Gantry Park Landing, a multi-family apartment building located in Queens, New York. See below for additional information.
Share Description
See Note 12 for discussion of rights related to SLP Units. The Common Units of the Operating Partnership have similar rights as those of the Company’s stockholders including distribution rights.
Distributions
During the years ended December 31, 2021 and 2020, the Company paid distributions to noncontrolling interests of $18.8 million and $18.1 million, respectively. As of December 31, 2021 and 2020, the total distributions declared and not paid to noncontrolling interests was $0.6 million (paid on or about January 15, 2022) and $0.6 million (paid on or about January 15, 2021), respectively.
Noncontrolling Interest of Subsidiary within the Operating Partnership
During 2009, the Operating Partnership acquired certain membership interests in Prime Outlets Acquisition Company (“POAC”) and Mill Run, LLC (“Mill Run”), which were subsequently contributed to PRO in exchange for a 99.99% managing membership interest in PRO. In addition, the Company contributed $2,900 for a 0.01% non-managing membership interest in PRO. Because the Operating Partnership is the managing member with control, PRO is consolidated into the results and financial position of the Company. In connection with the acquisitions of the memberships interests in POAC and Mill Run, the Advisor accepted a 19.17% profit membership interest in PRO in lieu of an acquisition fee and assigned its rights to receive distributions to the Sponsor, who assigned the same to David Lichtenstein. Distributions are split between the three members in proportion to their respective profit interests. PRO subsequently disposed of all of its membership interests in POAC and Mill Run in August 2010 and its current holdings primarily consist of Marco OP Units and Marco II OP Units (see Note 6).
On September 19, 2018, the Company’s Sponsor transferred 9.14% of its profit membership interest in PRO to the Operating Partnership. As of both December 31, 2021 and 2020, the Sponsor had a 10.03% profit membership interest in PRO, which is accounted for as a noncontrolling interest.
Consolidated Joint Venture
In August 2011, the Operating Partnership and the Sponsor and other related parties formed the 2nd Street Joint Venture, which owns Gantry Park Landing, a multi-family apartment building located in Queens, New York. The Operating Partnership has a 59.2% membership interest in the 2nd Street Joint Venture (the “2nd Street JV Interest”). The 2nd Street JV Interest is a managing membership interest. The Sponsor and other related parties have an aggregate 40.8% non-managing membership interest with certain consent rights with respect to major decisions. Contributions are allocated in accordance with each investor’s ownership percentage. Profit and cash distributions are allocated in accordance with each investor’s ownership percentage. As the Operating Partnership through the 2nd Street Joint Venture Interest has the power to direct the activities of the 2nd Street Joint Venture that most significantly impact the performance, the Company consolidates the operating results and financial condition of the 2nd Street Joint Venture and accounts for the ownership interests of the Sponsor and other related parties as noncontrolling interests.
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Related Party Transactions |
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| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions |
The Company has agreements with the Advisor and its affiliates to pay certain fees, as follows, in exchange for services performed by these entities and other related parties. The Company’s ability to secure financing and subsequent real estate operations are dependent upon its Advisor and their affiliates to perform such services as provided in these agreements.
Lightstone SLP, LLC, an affiliate of the Company’s Sponsor, has purchased SLP Units in the Operating Partnership. These SLP Units, the purchase price of which will be repaid only after stockholders receive a stated preferred return and their net investment, entitle Lightstone SLP, LLC to a portion of any regular distributions made by the Operating Partnership. From our inception through March 31, 2010, cumulative distributions declared to Lightstone SLP, LLC were $4.9 million, all of which had been paid as of April 2010. For the three months ended June 30, 2010, the Operating Partnership did not declare a distribution related to the SLP Units as the distribution to the stockholders was less than 7% for this period. On August 30, 2010, the Company declared additional distributions to the stockholders to bring the annualized distribution to at least 7%. As such, the Company as of August 30, 2010 recommenced declaring distributions to Lightstone SLP, LLC at the 7% annualized rate, except for the three months ended June 30, 2010 which was at an 8% annualized rate which represents the same rate paid to the stockholders.
During each of the years ended December 31, 2021 and 2020, distributions of $2.1 million were declared and distributions of $2.1 million were paid related to the SLP Units and are part of noncontrolling interests. Such distributions, paid currently at a 7% annualized rate of return to Lightstone SLP, LLC through December 31, 2021, with the exception of the distribution related to the three months ended June 30, 2010, which was paid at an 8% annualized rate will always be subordinated until stockholders receive a stated preferred return, as described below.
Additionally, on March 18, 2022, the Board of Directors declared a quarterly distribution for the quarterly period ending March 31, 2022 on the SLP Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive a stated preferred return.
The SLP Units also entitle Lightstone SLP, LLC to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net sale proceeds upon the liquidation of the Lightstone REIT I and, therefore, cannot be determined at the present time. Liquidating distributions to Lightstone SLP, LLC will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return, as described below:
The following table represents the fees incurred associated with the payments to the Company’s Advisor and its affiliates for the period indicated
See Notes 3, 4 and 5 for other related party transactions.
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | ||||
| Commitments and Contingencies |
Legal Proceedings
From time to time in the ordinary course of business, the Lightstone REIT I may become subject to legal proceedings, claims or disputes.
As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.
Tax Protection Agreements
On December 8, 2009, the Company, the Operating Partnership and PRO, (collectively, the LVP Parties”) entered into a definitive agreement (the “Contribution Agreement”) with Simon Inc. and certain of its affiliates (collectively, “Simon”) providing for the disposition of a substantial portion of the Company’s portfolio of retail properties at that time to Simon, including (i) the St. Augustine Outlet Center, which is wholly owned, (ii) a 40.0% aggregate interest in its investment in POAC, which included POAC’s properties (the “POAC Properties”), Grand Prairie Holdings LLC (“GPH”) and Livermore Holdings LLC (“LVH”) and (iii) a 36.8% aggregate interest in Mill Run, which included Mill Run’s properties (the “Mill Run Properties”). On June 28, 2010, the Contribution Agreement was amended to remove the previously contemplated dispositions of the St. Augustine Outlet Center, GPH and LVH. The transactions contemplated by the Contribution Agreement are referred to herein as the “POAC/Mill Run Transaction.” On August 30, 2010, the LVP Parties completed POAC/Mill Run Transaction and contemporaneously entered into a tax matters agreement with Simon. Additionally, the Company was advised by an independent law firm that it was “more likely than not” that the POAC/Mill Run Transaction did not give rise to current taxable income or loss. Pursuant to the terms of the tax matters agreement, Simon generally could not have engaged in a transaction that would have resulted in the recognition of the “built-in gain” with respect to POAC and Mill Run at the time of the closing for specified periods of up to eight years following the closing date. Simon has a number of obligations with respect to the allocation of partnership liabilities to the LVP Parties. For example, Simon agreed to maintain certain of the outstanding mortgage loans that were secured by POAC Properties and Mill Run Properties until their respective maturities, and the LVP Parties provided and had the opportunity to continue to provide guaranties of collection with respect to a revolving credit facility (or indebtedness incurred to refinance the revolving credit facility) for at least four years following the closing of the POAC/Mill Run Transaction. The LVP Parties were also given the opportunity to enter into agreements to make specified capital contributions to Simon OP in the event that it defaults on certain of its indebtedness. If Simon breached its obligations under the tax matters agreement, Simon was required to indemnify the LVP Parties for certain taxes that they were deemed to incur, including taxes relating to the recognition of “built-in gains” with respect to POAC Properties and Mill Run Properties, and gains recognized as a result of a reduction in the allocation of partnership liabilities. These indemnification payments would have been “grossed up” such that the amount of the payments would have equaled, on an after-tax basis, to the tax liability deemed incurred because of the breach.
On December 9, 2011 and December 4, 2012, GPH, LVH and certain of their subsidiaries (collectively, the “Holding Entities”) completed the disposition of their ownership interests in two outlet centers and a parcel of land (collectively, the “Outlet Centers Transactions”) to Simon. In connection with the closing of the Outlet Centers Transactions, the Holdings Entities, the Company, the Operating Partnership, PRO and certain affiliates of the Sponsor (collectively, the “Outlet Centers Parties”) entered into a tax matters agreement with Simon pursuant to which Simon generally may not engage in a transaction that could result in the recognition of the “built-in gain” with respect to the two outlets centers at the time of the closing for specified periods of up to eight years following the closing date. Simon had a number of obligations with respect to the allocation of partnership liabilities to the Outlet Centers Parties. For example, Simon agreed to maintain a debt level of no less than the cash portion of the proceeds from the Outlet Centers Transaction until at least the fourth anniversary of the closing, and the Outlet Centers Parties provided and had the opportunity to continue to provide guaranties of collection with respect to a revolving credit facility (or indebtedness incurred to refinance the revolving credit facility) for at least four years following the closing of the Outlet Centers Transactions. The Outlet Centers Parties were also given the opportunity to enter into agreements to make specified capital contributions to Simon OP in the event that it defaults on certain of its indebtedness. If Simon breaches its obligations under the tax matters agreement, Simon will be required to indemnify the Outlet Centers Parties for certain taxes that they are deemed to incur, including taxes relating to the recognition of “built-in gains” with respect to the two outlet centers, and gains recognized as a result of a reduction in the allocation of partnership liabilities. These indemnification payments will be “grossed up” such that the amount of the payments will equal, on an after-tax basis, the tax liability deemed incurred because of the breach. |
Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Lightstone REIT I and the Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). As of December 31, 2021, Lightstone REIT I had a 98% general partnership interest in the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation.
The consolidated 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 and real estate-related investments, depreciable lives, 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.
Investments in entities where the Company has the ability to exercise significant influence, but does not exercise financial and operating control, and is not considered to be the primary beneficiary of a variable interest entity will be accounted for using the equity method. Investments in entities where the Company has virtually no influence are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for cash contributions and distributions.
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| Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less when made to be cash equivalents.
As required by the Company’s lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate taxes, and other reserves for certain of its consolidated properties. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions, and major capital expenditures. Alternatively, a lender may require its own formula for an escrow of capital reserves. Restricted cash may also include certain funds temporarily placed in escrow with qualified intermediaries to facilitate potential like-kind exchange transactions in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended.
The following is a summary of the Company’s cash, cash equivalents, and restricted cash total as presented in the statements of cash flows for the periods presented:
Supplemental cash flow information for the periods indicated is as follows:
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| Marketable Securities | Marketable Securities
Marketable securities consist of equity and debt securities that are designated as available-for-sale. Marketable debt securities are recorded at fair value and unrealized holding gains or losses are reported as a component of accumulated other comprehensive income. The Company’s marketable equity securities are recorded at fair value and unrealized holding gains and losses are recognized on the consolidated statements of operations.
Realized gains or losses resulting from the sale of these securities are determined based on the specific identification of the securities sold. An impairment charge is recognized when the decline in the fair value of a debt security below the amortized cost basis is determined to be other-than-temporary. The Company considers various factors in determining whether to recognize an impairment charge, including the duration and severity of any decline in fair value below our amortized cost basis, any adverse changes in the financial condition of the issuers and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The Board of Directors has authorized the Company from time to time to invest the Company’s available cash in marketable securities of real estate related companies. The Board of Directors has approved investments of marketable securities of real estate companies up to 30% of the Company’s total assets to be made at the Company’s discretion, subject to compliance with any REIT or other restrictions.
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| Revenue Recognition | Revenue Recognition
Minimum rents are recognized on a straight-line accrual basis, over the terms of the related leases. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to rental income over the initial lease term, including any below-market renewal periods taken into account. Percentage rents, which are based on commercial tenants’ sales, are recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants’ leases. Recoveries from commercial tenants for real estate taxes, insurance and other operating expenses, and from residential tenants for utility costs, are recognized as revenues in the period that the applicable costs are incurred.
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| Consolidated VIEs | Consolidated VIEs
The Company consolidates certain joint ventures which have originated nonrecourse loans to unaffiliated third-party borrowers (see Note 5) which are variable interest entities, or VIEs, for which the Company is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership, or legal entities such as an LLC, are considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to our business activities and the business activities of the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
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| Investments in Real Estate | Investments in Real Estate
Accounting for Asset Acquisitions
The cost of the real estate assets acquired in an asset acquisition is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, based in each case on their relative fair values. Fees incurred related to asset acquisitions are capitalized as part of the cost of the investment.
Accounting for Business Combinations
Upon the acquisition of real estate operating properties that meet the definition of a business, the Company estimates the fair value of acquired tangible assets and identified intangible assets and liabilities and assumed debt at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, the Company evaluates the existence of goodwill or a gain from a bargain purchase and allocates the initial purchase price to the applicable assets, liabilities and noncontrolling interests, if any. As final information regarding fair value of the assets acquired, liabilities assumed and noncontrolling interests is received and estimates are refined, appropriate adjustments are made to the purchase price allocation. The allocations are finalized as soon as all the information necessary is available.
Accounting for Development Projects
The Company incurs a variety of costs in the development of a property. The costs of land and building under development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development. The Company ceases capitalization when the development project is substantially complete and placed in service, which may occur in phases. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment.
Once a development project is placed in service, which may occur in phases or for an entire building or project, the costs capitalized to that development project are transferred to land and improvements, buildings and improvements, and furniture and fixtures on the Company’s consolidated balance sheets at the historical cost of the property.
Impairment Evaluation
The Company evaluates the recoverability of its investments in real estate assets at the lowest identifiable level, the individual property level. An impairment loss is recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.
The Company evaluates the long-lived assets for potential impairment whenever events or changes in circumstances indicate that the undiscounted projected cash flows are less than the carrying amount for a particular property. No single indicator would necessarily result in the Company preparing an estimate to determine if a long-lived asset’s future undiscounted cash flows are less than its book value. The Company uses judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a long-lived asset requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The estimated cash flows used for the impairment analysis are subjective and require the Company to use its judgment and the determination of estimated fair value are based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company’s plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, may be substantial.
Notes Receivable and Preferred Investments
Notes receivable and preferred investments that we intend to hold to maturity are carried at cost, net of any unamortized origination costs, fees, discounts, premiums and unfunded commitments.
Investment income will be recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to investment income in the Company’s statements of operations.
Income recognition is suspended when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal is not in doubt, contractual interest is recorded as investment income when received, under the cash basis method, until an accrual is resumed when the instrument becomes contractually current and performance is demonstrated to be resumed.
Credit Losses and Impairment on Notes Receivable
Notes receivable are considered impaired when, based on current information and events, it is probable that we will not be able to collect principal and interest amounts due according to the contractual terms. We assess the credit quality of our notes receivable and adequacy of reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management is required in this analysis. We consider the estimated net recoverable value of the notes receivable 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 is 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 notes receivable, a reserve is recorded with a corresponding charge to investment income. The reserve for each note receivable is maintained at a level that is determined to be adequate by management to absorb probable losses.
Credit Losses and Impairment on Preferred Investments
Preferred investments that are accounted for as held to maturity are assessed for impairment at the individual investment level when there is a decline in fair value below the amortized cost basis that is deemed to be other than temporary. In making the determination of an other-than-temporary impairment assessment, the Company considers all available information relevant to the collectability of the investment, including information about past events, current conditions, and reasonable and supportable forecasts when developing the estimate of cash flows expected to be collected. This information includes the remaining redemption terms of the investment, financial condition of the issuer, expected defaults and the value of any underlying collateral. In assessing whether the entire amortized cost basis of the investment will be recovered, the Company compares the present value of cash flows expected to be collected from the investment with the amortized cost basis and records an impairment based on the amount by which the present value of cash flows expected to be collected is less than the amortized cost basis of the investment.
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| Depreciation and Amortization | Depreciation and Amortization
Depreciation expense is computed based on the straight-line method over the estimated useful life of the applicable real estate asset. The Company generally uses estimated useful lives of up to 39 years for buildings and improvements and five to 10 years for furniture and fixtures. Expenditures for tenant improvements and construction allowances paid to commercial tenants are capitalized and amortized over the initial term of each lease or the estimated useful life, if shorter. Expenditures for ordinary maintenance and repairs are charged to expense as incurred.
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| Leases | Leases
The Company’s retail property (St. Augustine Outlet Center) and its multi-family residential property (Gantry Park Landing) are both leased to tenants under operating leases. Substantially all of our multi-family residential property leases have initial terms of 12 months or less. Our remaining retail space leases expire from 2022 through 2024.
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| Deferred Costs | Deferred Costs
The Company capitalizes initial direct costs associated with financing activities. The costs are capitalized upon the execution of the loan, presented in the consolidated balance sheets as a direct deduction from the carrying value of the corresponding loan and amortized over the initial term of the corresponding loan. Amortization of deferred loan costs begin in the period during which the loan is originated using the effective interest method over the term of the loan. The Company capitalizes initial direct costs associated with leasing activities. The costs are capitalized upon the execution of the lease and amortized over the initial term of the corresponding lease.
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| Income Taxes | Income Taxes
The Company has elected to be taxed as a REIT commencing with the taxable year ended December 31, 2005. 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 the regular corporate rate, 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.
To maintain its qualification as a REIT, the Company engages in certain activities through wholly-owned taxable REIT subsidiaries (“TRSs”). As such, the Company is subject to U.S. federal and state income and franchise taxes from these activities.
As of December 31, 2021 and 2020, the Company had no material uncertain income tax positions. Additionally, even if the Company continues to qualify as a REIT, it may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on its undistributed income.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities, due to related parties, tenant allowances and deposits payable and deferred rental income approximate their fair values because of the short maturity of these instruments. The carrying amounts of the notes receivable approximate their fair values because the interest rates are variable and reflective of market rates.
The estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:
The fair value of the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated current market interest rates.
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| Accounting for Derivative Financial Investments and Hedging Activities. | Accounting for Derivative Financial Investments 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 records all derivative instruments at fair value on the consolidated balance sheets and changes in the fair value of the instruments are recorded in the consolidated statements of operations.
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| Stock-Based Compensation | Stock-Based Compensation
The Company had a stock-based incentive award plan for the independent directors of its Board pursuant to which awards were granted at fair market value as of the date of grant. This plan expired in April 2015. For the years ended December 31, 2021 and 2020, the Company had compensation costs related to the incentive award plan.
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| Concentration of Risk | Concentration of Risk
The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed 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 its cash and cash equivalents.
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| Net Earnings per Share |
Basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the applicable period. Dilutive income per share includes the potentially dilutive effect, if any, which would occur if our outstanding options to purchase our common stock were exercised. For all periods presented dilutive net income per share is equivalent to basic net income per share.
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| New Accounting Pronouncements | New Accounting Pronouncements
In June 2016, the FASB issued an accounting standards update which replaces the incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects that the adoption of this standard will not have a material effect on its consolidated financial position, results of operations or cash flows.
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 current operations.
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| Reclassifications | Reclassifications
Certain prior period amounts may have been reclassified to conform to the current year presentation.
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Company’s cash, cash equivalents |
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| Summary of supplemental cash flow information |
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| Schedule of mortgage debt |
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Development Projects (Tables) |
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| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of development projects |
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Investments in Related Parties (Tables) |
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| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Preferred Investments |
Note:
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Notes Receivable (Tables) |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Notes Receivable |
Notes:
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| Summarizes the interest earned for each of the Joint Venture Promissory Notes |
|
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Marketable Securities, Fair Value Measurements and Notes Payable (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable Securities Fair Value Measurements And Notes Payable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of available for sale securities and other investments |
|
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| Schedule of Marketable securities measured at fair value on a recurring basis |
|
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Mortgages Payable (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Mortgages Payable |
|
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| Scheduled of Contractually Principal Maturities During Next Five Years |
|
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Related Party Transactions (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Amount recorded in pursuant to related party arrangement |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Structure (Details Narrative) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
12 Months Ended | |||||
|---|---|---|---|---|---|---|
Jul. 06, 2004 |
Dec. 31, 2021 |
Dec. 31, 2009 |
Dec. 31, 2008 |
Dec. 16, 2021 |
Sep. 30, 2021 |
|
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||||
| Cash contributed for units | $ 2 | |||||
| Partners units acquired | 200 | |||||
| Shares issued, price per share | $ 11.18 | $ 11.75 | $ 11.16 | |||
| Issuance of common units, shares | 497,209 | 497,209 | ||||
| Non-cash impairment charge | $ 11,300 | |||||
| Noncontrolling Interest [Member] | ||||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||||
| Cash contributed for units | $ 2 | |||||
| Partners units acquired | 200 | |||||
| Lightstone Value Plus R E I T [Member] | ||||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||||
| Number of common shares held | 20,000 | |||||
| Proceeds from issue of shares | $ 200 | |||||
| Shares issued, price per share | $ 10.00 | |||||
| Lightstone Slp Llc [Member] | ||||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||||
| Aggregate SLP units owned in operating partnership | $ 30,000 | |||||
| Purchase cost per SLP unit of operating partnership | $ 100,000 | |||||
| Aggregate SLP units purchased in operating partnership | $ 30,000 | |||||
| Beneficial ownership interest (as a percent) | 99.00% | |||||
| Lightstone Value Plus R E I T [Member] | Wholly Owned Properties [Member] | Industrial Properties [Member] | ||||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||||
| General partner ownership interest | 59.20% | |||||
| Lightstone Value Plus R E I T [Member] | Wholly Owned Properties [Member] | Seven Hotel Properties [Member] | ||||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||||
| General partner ownership interest | 2.50% | |||||
| Lightstone Value Plus R E I T [Member] | Wholly Owned Properties [Member] | Residential Real Estate Properties [Member] | ||||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||||
| General partner ownership interest | 97.50% | |||||
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|---|
| Accounting Policies [Abstract] | |||
| Cash and cash equivalents | $ 39,405 | $ 44,446 | |
| Restricted cash | 3,187 | 2,395 | |
| Total cash, cash equivalents and restricted cash | $ 42,592 | $ 46,841 | $ 79,800 |
Summary of Significant Accounting Policies (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Accounting Policies [Abstract] | ||
| Cash paid for interest | $ 9,395 | $ 8,860 |
| Distributions declared but not paid | 3,885 | 3,905 |
| Accrued development costs | 4,602 | 3,995 |
| Amortization of deferred financing costs included in development projects | 1,399 | 1,151 |
| Holding gain/loss on available for sale debt securities | 427 | 21 |
| Value of shares issued from distribution reinvestment program | 324 | 329 |
| Accrued loan exit fee included in deferred financing costs | $ 1,100 | $ (0) |
Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Carrying Amount | $ 171,753 | $ 193,536 |
| Mortgages Payable [Member] | ||
| Debt Instrument [Line Items] | ||
| Carrying Amount | 171,800 | 193,500 |
| Estimated Fair Value | $ 174,400 | $ 198,000 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Property, Plant and Equipment [Line Items] | ||
| Percentage Of Investments on Marketable Securities Of Real Estate | 30.00% | |
| Uncertain income tax positions | $ 0 | $ 0 |
| Stock-Based Compensation | $ 0 | $ 0 |
| Building and Building Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Estimated Useful Lives | 39 years | |
| Furniture and Fixtures [Member] | Minimum [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Estimated Useful Lives | five to 10 years | |
| Lightstone REIT [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Equity Method Investment, Ownership Percentage | 98.00% | |
Development Projects (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Property, Plant and Equipment [Line Items] | ||
| Amounts Capitalized to Construction in Progress | $ 234,214 | $ 186,188 |
| Capitalized Interest | 8,237 | 7,800 |
| Lower East Side Moxy Hotel [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Amounts Capitalized to Construction in Progress | 146,747 | 98,608 |
| Capitalized Interest | 6,251 | 4,425 |
| Exterior Street Project [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Amounts Capitalized to Construction in Progress | 87,467 | 74,230 |
| Capitalized Interest | 1,986 | 3,080 |
| Santa Clara Data Center [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Amounts Capitalized to Construction in Progress | (0) | 13,350 |
| Capitalized Interest | $ (0) | $ 295 |
Development Projects (Details Narrative) - USD ($) $ in Thousands |
1 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jul. 07, 2021 |
Jan. 10, 2019 |
Dec. 03, 2018 |
May 25, 2021 |
Feb. 27, 2019 |
Jun. 30, 2021 |
|
| Business Acquisition [Line Items] | ||||||
| Sales Contract Price | $ 13,900 | |||||
| Gain on disposition of real estate | $ 200 | $ 6,800 | $ 3,600 | |||
| Bowery Land [Member] | ||||||
| Business Acquisition [Line Items] | ||||||
| Business combination, consideration transferred | $ 56,500 | |||||
| Borden Realty Corp And 399 Exterior Street Associates Llc [Member] | ||||||
| Business Acquisition [Line Items] | ||||||
| Business combination, consideration transferred | $ 59,000 | |||||
| The Chioini Living Trust [Member] | ||||||
| Business Acquisition [Line Items] | ||||||
| Business combination, consideration transferred | $ 10,600 | |||||
Investments in Related Parties (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|||
| Forty East End Avenue Preferred Investment [Member] | ||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | ||||
| Preferred Investments, Dividend Rate, Percentage | 12.00% | |||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | $ 6,000 | $ 6,000 | ||
| Preferred Stock Dividend Income | [1] | $ 730 | 886 | |
| East Eleventh Street [Member] | ||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | ||||
| Preferred Investments, Dividend Rate, Percentage | 12.00% | |||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | $ 8,500 | 8,500 | ||
| Preferred Stock Dividend Income | [1] | $ 1,034 | 1,040 | |
| Miami Moxy [Member] | ||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | ||||
| Preferred Investments, Dividend Rate, Percentage | 12.00% | |||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | $ (0) | (0) | ||
| Preferred Stock Dividend Income | [1] | (0) | 45 | |
| Preferred Investments [Member] | ||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | ||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | 14,500 | 14,500 | ||
| Preferred Stock Dividend Income | [1] | $ 1,764 | $ 1,971 | |
| ||||
Investments in Related Parties (Details Narrative) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 29, 2020 |
Sep. 30, 2016 |
Apr. 21, 2016 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 15, 2021 |
May 31, 2015 |
Jun. 30, 2010 |
|
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||||||
| Annual distribution rate | 7.00% | 8.00% | |||||||||
| Preferred Investments [Member] | |||||||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | $ 14,500 | $ 14,500 | |||||||||
| Preferred Stock Investments Income | $ 2,000 | 1,800 | |||||||||
| Miami Moxy [Member] | |||||||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | (0) | (0) | |||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Reductions | $ 9,000 | $ 11,000 | 11 | ||||||||
| Proceeds from Contributions from Affiliates | $ 20,000 | ||||||||||
| Percentage Of Preferred Distribution Rate | 12.00% | ||||||||||
| Miami Moxy Preferred [Member] | |||||||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | 9,000 | ||||||||||
| Forty East End Avenue Preferred Investment [Member] | |||||||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | 6,000 | 6,000 | |||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Reductions | $ 11,000 | $ 13,000 | |||||||||
| Preferred Equity Distributions Additional Investment Available | $ 30,000 | ||||||||||
| Annual distribution rate | 8.00% | ||||||||||
| Annualized Distribution Rate Upon Procurement Of Construction Financing | 12.00% | ||||||||||
| East Eleven Street Member | |||||||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||||||
| Proceeds from Contributions from Affiliates | $ 57,500 | ||||||||||
| Percentage Of Preferred Distribution Rate | 12.00% | ||||||||||
| East Eleventh Street [Member] | |||||||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | 8,500 | 8,500 | |||||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Reductions | $ 34,500 | $ 14,500 | |||||||||
Notes Receivable (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
||||||||||
| Maturity Date | Apr. 09, 2022 | ||||||||||
| Notes Receivable [Member] | |||||||||||
| Outstanding Principal | $ 27,540 | $ 110,350 | |||||||||
| Reserves | (629) | (5,036) | |||||||||
| Unamortized Origination Fee | (57) | (690) | |||||||||
| Carrying value | 26,854 | 104,624 | |||||||||
| Unfunded Commitment | $ 6,960 | $ 7,250 | |||||||||
| Lsc15437th Llc [Member] | Notes Receivable [Member] | |||||||||||
| Company's Ownership percentage | 50.00% | [1] | 50.00% | ||||||||
| Original Loan Amount | $ 20,000 | [1] | $ 20,000 | ||||||||
| Origination Fee (as a percent) | 1.00% | [1] | 1.00% | ||||||||
| Origination Date | Aug. 27, 2019 | [1] | Aug. 27, 2019 | ||||||||
| Maturity Date | Feb. 28, 2022 | [1] | Aug. 26, 2021 | ||||||||
| Contractual Interest Rate | Libor plus 5.40% (Floor of 7.90%) | [1] | LIBOR + 5.40% (Floor of 7.90%) | ||||||||
| Outstanding Principal | $ 17,500 | [1] | $ 20,000 | ||||||||
| Reserves | (0) | [1] | (0) | ||||||||
| Unamortized Origination Fee | (33) | [1] | (33) | ||||||||
| Carrying value | 17,467 | [1] | 19,967 | ||||||||
| Unfunded Commitment | $ (0) | [1] | $ (0) | ||||||||
| Lsc 11640 Mayfield Llc [Member] | Notes Receivable [Member] | |||||||||||
| Company's Ownership percentage | 50.00% | [2] | 50.00% | ||||||||
| Original Loan Amount | $ 18,000 | [2] | $ 18,000 | ||||||||
| Origination Fee (as a percent) | 1.50% | [2] | 1.50% | ||||||||
| Origination Date | Mar. 04, 2020 | [2] | Mar. 04, 2020 | ||||||||
| Maturity Date | Mar. 01, 2022 | [2] | Mar. 01, 2022 | ||||||||
| Contractual Interest Rate | Libor plus 11.00% (Floor of 13.00%) | [2] | LIBOR + 10.50% (Floor of 12.50%) | ||||||||
| Outstanding Principal | $ 10,040 | [2] | $ 10,750 | ||||||||
| Reserves | (629) | [2] | (2,369) | ||||||||
| Unamortized Origination Fee | (24) | [2] | (158) | ||||||||
| Carrying value | 9,387 | [2] | 8,223 | ||||||||
| Unfunded Commitment | $ 6,960 | [2] | $ 7,250 | ||||||||
| Lsc162nd Capital I Llc [Member] | Notes Receivable [Member] | |||||||||||
| Company's Ownership percentage | [3] | 45.45% | |||||||||
| Original Loan Amount | [3] | $ 4,234 | |||||||||
| Origination Fee (as a percent) | [3] | 1.50% | |||||||||
| Origination Date | [3] | Feb. 05, 2019 | |||||||||
| Maturity Date | [3] | Sep. 11, 2021 | |||||||||
| Contractual Interest Rate | [3] | LIBOR + 7.50% (Floor of 11%) | |||||||||
| Outstanding Principal | [3] | $ 4,076 | |||||||||
| Reserves | [3] | (338) | |||||||||
| Unamortized Origination Fee | [3] | (33) | |||||||||
| Carrying value | [3] | 3,705 | |||||||||
| Unfunded Commitment | [3] | $ (0) | |||||||||
| Lsc162nd Capital Ii Llc [Member] | Notes Receivable [Member] | |||||||||||
| Company's Ownership percentage | [3] | 45.45% | |||||||||
| Original Loan Amount | [3] | $ 9,166 | |||||||||
| Origination Fee (as a percent) | [3] | 1.50% | |||||||||
| Origination Date | [3] | Feb. 05, 2019 | |||||||||
| Maturity Date | [3] | Sep. 11, 2021 | |||||||||
| Contractual Interest Rate | [3] | LIBOR + 7.50% (Floor of 11%) | |||||||||
| Outstanding Principal | [3] | $ 8,824 | |||||||||
| Reserves | [3] | (732) | |||||||||
| Unamortized Origination Fee | [3] | (71) | |||||||||
| Carrying value | [3] | 8,021 | |||||||||
| Unfunded Commitment | [3] | $ (0) | |||||||||
| Lsc1650 Lincoln Llc [Member] | Notes Receivable [Member] | |||||||||||
| Company's Ownership percentage | [3] | 50.00% | |||||||||
| Original Loan Amount | [3] | $ 24,000 | |||||||||
| Origination Fee (as a percent) | [3] | 1.00% | |||||||||
| Origination Date | [3] | Aug. 27, 2019 | |||||||||
| Maturity Date | [3] | Aug. 26, 2021 | |||||||||
| Contractual Interest Rate | [3] | LIBOR + 5.40% (Floor of 7.90%) | |||||||||
| Outstanding Principal | [3] | $ 24,000 | |||||||||
| Reserves | [3] | (0) | |||||||||
| Unamortized Origination Fee | [3] | (40) | |||||||||
| Carrying value | [3] | 23,960 | |||||||||
| Unfunded Commitment | [3] | $ (0) | |||||||||
| Lsc87 Newkirk Llc [Member] | Notes Receivable [Member] | |||||||||||
| Company's Ownership percentage | [4] | 50.00% | |||||||||
| Original Loan Amount | [4] | $ 42,700 | |||||||||
| Origination Fee (as a percent) | [4] | 1.25% | |||||||||
| Origination Date | [4] | Jul. 02, 2020 | |||||||||
| Maturity Date | [4] | Dec. 01, 2021 | |||||||||
| Contractual Interest Rate | [4] | LIBOR + 6.00% (Floor of 7.00%) | |||||||||
| Outstanding Principal | [4] | $ 42,700 | |||||||||
| Reserves | [4] | (1,597) | |||||||||
| Unamortized Origination Fee | [4] | (355) | |||||||||
| Carrying value | [4] | 40,748 | |||||||||
| Unfunded Commitment | [4] | $ (0) | |||||||||
| |||||||||||
Notes Receivable (Details 1) - Notes Receivable [Member] - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Interest Income Purchased Receivables | $ 9,133 | $ 8,790 |
| Lsc162nd Capital I Llc [Member] | ||
| Interest Income Purchased Receivables | 491 | 641 |
| Lsc162nd Capital Ii Llc [Member] | ||
| Interest Income Purchased Receivables | 1,063 | 1,387 |
| Lsc15437th Llc [Member] | ||
| Interest Income Purchased Receivables | 1,802 | 1,770 |
| Lsc1650 Lincoln Llc [Member] | ||
| Interest Income Purchased Receivables | 2,317 | 2,124 |
| Lsc 11640 Mayfield Llc [Member] | ||
| Interest Income Purchased Receivables | 1,875 | 1,243 |
| Lsc87 Newkirk Llc [Member] | ||
| Interest Income Purchased Receivables | $ 1,585 | $ 1,625 |
Notes Receivable (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Debt Instrument [Line Items] | ||
| Payment for distributions | $ 18,800 | $ 18,100 |
| Notes Receivable [Member] | Nr Affiliates [Member] | ||
| Debt Instrument [Line Items] | ||
| Notes receivable, related parties, noncurrent | 200 | 22,300 |
| Payment for distributions | 16,300 | 15,000 |
| Notes Receivable [Member] | Nr Subsidiaries [Member] | ||
| Debt Instrument [Line Items] | ||
| Notes receivable, related parties, noncurrent | 200 | 22,300 |
| Payment for distributions | $ 16,300 | $ 15,000 |
| Minimum [Member] | Notes Receivable [Member] | ||
| Debt Instrument [Line Items] | ||
| Percentage of origination fee on notes receivables | 1.00% | |
| Maximum [Member] | Notes Receivable [Member] | ||
| Debt Instrument [Line Items] | ||
| Percentage of origination fee on notes receivables | 1.50% | |
Marketable Securities, Fair Value Measurements and Notes Payable (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Equity Securities, primarily REITs [Member] | ||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | $ 24,932 | $ 9,386 |
| Equity securities, gross unrealized gains | 16,745 | 2,054 |
| Equity securities, gross unrealized losses | (135) | (575) |
| Equity securities, fair value | 27,338 | 10,865 |
| Equity securities, gross unrealized losses | 135 | 575 |
| Equity Securities [Member] | ||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 44,159 | 28,613 |
| Equity securities, gross unrealized gains | 2,541 | 2,054 |
| Equity securities, gross unrealized losses | (135) | (1,958) |
| Equity securities, fair value | 60,769 | 28,709 |
| Equity securities, gross unrealized losses | 135 | 1,958 |
| Marco Op Units And Op Two Units [Member] | ||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 19,227 | 19,227 |
| Equity securities, gross unrealized gains | 14,204 | (0) |
| Equity securities, gross unrealized losses | 0 | (1,383) |
| Equity securities, fair value | 33,431 | 17,844 |
| Equity securities, gross unrealized losses | (0) | 1,383 |
| Corporate Bond Securities [Member] | ||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 2,073 | 16,964 |
| Equity securities, gross unrealized gains | (0) | 546 |
| Equity securities, gross unrealized losses | (28) | (148) |
| Equity securities, fair value | 2,045 | 17,362 |
| Equity securities, gross unrealized losses | 28 | 148 |
| Debt Securities [Member] | ||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 46,232 | 45,577 |
| Equity securities, gross unrealized gains | 16,745 | 2,600 |
| Equity securities, gross unrealized losses | (163) | (2,106) |
| Equity securities, fair value | 62,814 | 46,071 |
| Equity securities, gross unrealized losses | $ 163 | $ 2,106 |
Marketable Securities, Fair Value Measurements and Notes Payable (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | $ 62,814 | $ 46,071 |
| Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 27,338 | 10,865 |
| Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 33,431 | 17,844 |
| Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 2,045 | 17,362 |
| Fair Value, Inputs, Level 1 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 6,825 | 10,865 |
| Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 6,825 | 10,865 |
| Fair Value, Inputs, Level 1 [Member] | Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | (0) | (0) |
| Fair Value, Inputs, Level 1 [Member] | Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | (0) | (0) |
| Fair Value, Inputs, Level 2 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 55,989 | 35,206 |
| Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 20,513 | (0) |
| Fair Value, Inputs, Level 2 [Member] | Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 33,431 | 17,844 |
| Fair Value, Inputs, Level 2 [Member] | Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 2,045 | 17,362 |
| Fair Value, Inputs, Level 3 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | (0) | (0) |
| Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | (0) | (0) |
| Fair Value, Inputs, Level 3 [Member] | Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | (0) | (0) |
| Fair Value, Inputs, Level 3 [Member] | Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | $ (0) | $ (0) |
Marketable Securities, Fair Value Measurements and Notes Payable (Details Narrative) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
12 Months Ended | ||||
|---|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 18, 2022 |
Sep. 30, 2021 |
Mar. 24, 2020 |
|
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | |||||
| Share price | $ 10.00 | $ 148.96 | $ 10.00 | $ 10.87 | |
| Marketable securities unrealized gain | $ 16,481 | $ (12,204) | |||
| Marketable securities unrealized loss | 5,882 | (230) | |||
| Marketable securities losses | 28 | 148 | |||
| Non-cash impairment charge | $ 11,300 | ||||
| Carrying value estimated fair value | $ 23,300 | ||||
| Non-revolving credit facility [Member] | |||||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | |||||
| Debt instrument, interest rate terms | at LIBOR + 1.35% | ||||
| Debt instrument, interest rate at end of period | 1.45% | ||||
| Borrowing capacity | $ 20,000 | ||||
| Line of credit, maturity date | Nov. 30, 2022 | ||||
| Shares for collateralized | 209,243 | ||||
| Remaining capacity | $ 18,400 | ||||
| Line of credit | $ 0 | 0 | |||
| Margin Loan [Member] | |||||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | |||||
| Debt instrument, interest rate terms | LIBOR + 0.85% | ||||
| Debt instrument, interest rate at end of period | 0.95% | ||||
| Notes payable | $ 0 | $ 0 | |||
| Marco Op Units And Op Two Units [Member] | |||||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | |||||
| Equity Securities Securities Held During Period | 209,243 | 209,243 | |||
| Share price | $ 159.77 | $ 85.28 | |||
| Marketable securities unrealized gain | $ 16,500 | ||||
| Marketable securities unrealized loss | $ 12,200 | ||||
| PRO [Member] | |||||
| Debt Securities, Held-to-maturity, Allowance for Credit Loss [Line Items] | |||||
| Equity Securities Securities Held During Period | 89,695 | 89,695 | |||
Mortgages Payable (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Real Estate Properties [Line Items] | ||
| Weighted average interest rate | 6.01% | |
| Amount due at maturity | $ 167,530 | |
| Total mortgages payable | 171,753 | $ 193,536 |
| Less: Deferred financing costs | (6,183) | (1,151) |
| Total mortgages payable, net | $ 165,570 | 192,385 |
| Gantry Park Landing [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | 4.48 | |
| Weighted average interest rate | 4.48% | |
| Maturity date | November 2024 | |
| Amount due at maturity | $ 65,317 | |
| Total mortgages payable | 69,540 | 70,868 |
| Lower East Side Moxy Hotel [Member] | ||
| Real Estate Properties [Line Items] | ||
| Amount due at maturity | (0) | |
| Total mortgages payable | $ (0) | 35,168 |
| Lower East Side Moxy Hotel Senior [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 7.25% (floor of 7.75%) | |
| Weighted average interest rate | 7.75% | |
| Maturity date | June 2024 | |
| Amount due at maturity | $ 35,610 | |
| Total mortgages payable | $ 35,610 | (0) |
| Lower East Side Moxy Hotel Junior [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 13.50% (floor of 14.00%) | |
| Weighted average interest rate | 14.00% | |
| Maturity date | June 2024 | |
| Amount due at maturity | $ 24,603 | |
| Total mortgages payable | $ 24,603 | (0) |
| Exterior Street Project [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 2.25% | |
| Weighted average interest rate | 2.34% | |
| Maturity date | April 2022 | |
| Amount due at maturity | $ 35,000 | |
| Total mortgages payable | $ 35,000 | 35,000 |
| Exterior Street Project Supplemental [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 2.50% | |
| Weighted average interest rate | 2.60% | |
| Maturity date | April 2022 | |
| Amount due at maturity | $ 7,000 | |
| Total mortgages payable | 7,000 | (0) |
| Santa Monica [Member] | ||
| Real Estate Properties [Line Items] | ||
| Amount due at maturity | (0) | |
| Total mortgages payable | (0) | 25,000 |
| 87 Newkirk [Member] | ||
| Real Estate Properties [Line Items] | ||
| Amount due at maturity | (0) | |
| Total mortgages payable | $ (0) | $ 27,500 |
Mortgages Payable (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | ||
| 2021 | $ 43,389 | |
| 2022 | 1,454 | |
| 2023 | 126,910 | |
| 2024 | (0) | |
| 2025 | (0) | |
| Thereafter | (0) | |
| Total | 171,753 | $ 193,536 |
| Less: Deferred financing costs | (6,183) | (1,151) |
| Total principal maturities, net | $ 165,570 | $ 192,385 |
Mortgages Payable (Details Narrative) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
Jun. 03, 2021 |
Nov. 12, 2019 |
Dec. 03, 2018 |
Dec. 21, 2021 |
Mar. 29, 2019 |
Nov. 19, 2014 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Jul. 22, 2020 |
|
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument interest london interbank offered rate | 0.10% | 0.14% | |||||||
| Debt instrument, collateral amount | $ 90,000 | $ 54,400 | |||||||
| Debt instrument, maturity date | Apr. 09, 2022 | ||||||||
| At cost | $ 200 | ||||||||
| Loan fees | 5,300 | ||||||||
| Accrued loan | 1,100 | ||||||||
| Carrying Amount | 171,753 | $ 193,536 | |||||||
| Santa Monica [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, description of variable rate basis | LIBOR + 3.75% | ||||||||
| Original Loan Amount | $ 25,000 | ||||||||
| Exterior Street Loan [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, description of variable rate basis | LIBOR + 2.50% | LIBOR + 2.25% | |||||||
| Original Loan Amount | $ 7,000 | $ 35,000 | |||||||
| Carrying Amount | 42 | ||||||||
| Gantry Park Mortgage Loan [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, maturity date | Nov. 19, 2024 | ||||||||
| Original Loan Amount | $ 74,500 | ||||||||
| Debt instrument, term | 10 years | ||||||||
| Debt instrument, interest rate | 4.48% | ||||||||
| Moxy Senior Loan [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, description of variable rate basis | LIBOR + 7.50%, subject to an 8.00% | ||||||||
| Lower East Side Moxy Hotel [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, collateral amount | $ 7,000 | ||||||||
| Lower East Side Moxy Hotel [Member] | Moxy Construction Loans [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, collateral amount | $ 40,000 | ||||||||
| Moxy Junior Loan [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, collateral amount | 15,400 | ||||||||
| Debt instrument, description of variable rate basis | LIBOR + 13.50%, subject to a 14.00% | ||||||||
| Moxy Junior Loan [Member] | Lower East Side Moxy Hotel [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, collateral amount | 24,600 | ||||||||
| 87 Newkirk [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, description of variable rate basis | LIBOR + 3.80%, subject to a 4.80% | ||||||||
| Original Loan Amount | $ 27,500 | ||||||||
| Moxy Senior Loan [Member] | |||||||||
| Line of Credit Facility [Line Items] | |||||||||
| Debt instrument, collateral amount | $ 35,600 | ||||||||
| Debt instrument, maturity date | Jun. 03, 2024 | ||||||||
St. Augustine Outlet Center (Details Narrative) - USD ($) $ in Thousands |
1 Months Ended | 6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|
Jul. 07, 2021 |
Apr. 06, 2020 |
May 25, 2021 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2021 |
Sep. 30, 2021 |
|
| Defined Benefit Plan Disclosure [Line Items] | |||||||
| Other Asset Impairment Charges | $ 11,300 | ||||||
| [custom:CarryingValueEstimatedFairValue-0] | $ 23,300 | ||||||
| Gain on disposition of real estate | $ 200 | $ 6,800 | $ 3,600 | ||||
| St Augustine [Member] | |||||||
| Defined Benefit Plan Disclosure [Line Items] | |||||||
| Gain on disposition of real estate | $ 2,100 | $ 1,600 | |||||
Distributions Payable (Details Narrative) - $ / shares |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Distributions Payable | ||
| Dividend, per share | $ 0.175 | $ 0.175 |
Company’s Stockholder’s Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|
Jun. 15, 2020 |
Mar. 24, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 18, 2022 |
Dec. 16, 2021 |
Sep. 30, 2021 |
Mar. 15, 2021 |
Jun. 30, 2010 |
|
| Subsidiary, Sale of Stock [Line Items] | |||||||||
| Preferred stock, shares outstanding | 0 | 0 | |||||||
| Share price | $ 10.87 | $ 10.00 | $ 148.96 | $ 10.00 | |||||
| Annual distribution rate | 7.00% | 8.00% | |||||||
| Dividend declared | $ 15,600 | $ 15,600 | |||||||
| Dividend, per share | $ 0.175 | $ 0.175 | |||||||
| Share price | $ 11.18 | $ 11.75 | $ 11.16 | ||||||
| Shares reserved for future issuance | 9,900,000 | ||||||||
| Number of shares repurchased | 287,987 | 143,918 | |||||||
| Treasury Stock Acquired, Repurchase Authorization | On March 18, 2022, the Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0% | ||||||||
| 2020 Tender Offer [Member] | |||||||||
| Subsidiary, Sale of Stock [Line Items] | |||||||||
| Number of shares repurchased | 100,000 | ||||||||
| Shares offered to acquired | 225,000 | ||||||||
| Purchase price per share | $ 5.00 | ||||||||
| Aggregate proceeds on share offered | $ 1,100 | ||||||||
| Aggregate payments on repurchase of shares | $ 300 | ||||||||
| Subsequent Event [Member] | |||||||||
| Subsidiary, Sale of Stock [Line Items] | |||||||||
| Annual distribution rate | 70.00% | ||||||||
| Dividend, per share | $ 0.175 | ||||||||
Noncontrolling Interests (Details Narrative) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Sep. 19, 2018 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Jan. 15, 2022 |
Jan. 15, 2021 |
|
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Distributions to non controlling interests | $ 18,800 | $ 18,100 | |||
| Cumulative Dividends | $ 600 | ||||
| POAC and Mill Run [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Limited Liability Company (LLC) or Limited Partnership (LP), Managing Member or General Partner, Ownership Interest | 99.99% | ||||
| PRO [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Limited Liability Company (LLC) or Limited Partnership (LP), Managing Member or General Partner, Ownership Interest | 0.01% | ||||
| Payments to Acquire Additional Interest in Subsidiaries | $ 2,900 | ||||
| Pro Dfjvholdings Limited Liability Company [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Profit ship Ownership Interest | 9.14% | ||||
| Noncontrolling interest, ownership percentage by noncontrolling owners | 10.03% | 10.03% | |||
| Second Street Joint Venture [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Limited Liability Company (LLC) or Limited Partnership (LP), Managing Member or General Partner, Ownership Interest | 59.20% | ||||
| Noncontrolling interest, ownership percentage by noncontrolling owners | 40.80% | ||||
| Subsequent Event [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Cumulative Dividends | $ 600 | ||||
Related Party Transactions (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Related Party Transactions [Abstract] | ||
| Asset management fees (general and administrative costs) | $ 919 | $ 849 |
| Property management fees (property operating expenses) | 388 | 362 |
| Development fees and leasing commissions | 1,337 | 3,595 |
| Total | $ 2,644 | $ 4,806 |
Related Party Transactions (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2010 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 18, 2022 |
Jan. 15, 2021 |
Mar. 24, 2020 |
|
| Related Party Transaction [Line Items] | ||||||
| Acquisition Fees And Expenses Percentage Of Purchase Price | 2.75% | |||||
| Property Management Fees, Residential Hospitality Retail Properties, Maximum Percentage Gross Revenues | 5.00% | |||||
| Property Management Fees, Office Industrial Properties, Maximum Percentage Gross Revenues | 4.50% | |||||
| Asset Management Fees, Percentage Of Average Invested Assets | 0.55% | |||||
| Asset Management Fees Payout Terms | payable quarterly in an amount equal to 0.1375 of 1% of average invested assets as of the last day of the immediately preceding quarter | |||||
| Minimum Percentage Of Other Operating Expenses For Reimbursement | 2.00% | |||||
| Minimum Percentage Of Net Income For Reimbursement | 25.00% | |||||
| Cumulative Dividends | $ 600 | |||||
| Payments of Ordinary Dividends, Noncontrolling Interest | $ 18,805 | $ 18,078 | ||||
| Share Price | $ 10.00 | $ 148.96 | $ 10.00 | $ 10.87 | ||
| Liquidating Stage Distributions One [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Stockholder Return Threshold, Percent | 7.00% | |||||
| Liquidating Stage Distribution One [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Distribution Due Cumulative Rate Of Return | 7.00% | |||||
| Stockholder Return Threshold, Percent | 7.00% | |||||
| Operating Stage Distribution One [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Share Price | $ 10 | |||||
| Liquidating Stage Distribution Two [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Stockholder Return Threshold, Percent | 12.00% | |||||
| Liquidating Stages Distribution Two [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Distribution Due Cumulative Rate Of Return | 7.00% | |||||
| Stockholder Return Threshold, Percent | 12.00% | |||||
| Operating Stage Distribution Two [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Additional Distributions Percent Payable To Related Party | 70.00% | |||||
| Liquidating Stage Distribution Three [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Stockholder Return Threshold, Percent | 12.00% | |||||
| Operating Stage Distribution Three [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Stockholder Return Threshold, Percent | 12.00% | |||||
| Additional Distributions Percent Payable To Related Party | 60.00% | |||||
| Liquidating Stage Distributions Two [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Distribution Due Cumulative Rate Of Return | 7.00% | |||||
| Slp Units [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Payments of Ordinary Dividends, Noncontrolling Interest | $ 2,100 | $ 2,100 | ||||
| Receivables from Stockholder [Member] | Operating Stage Distribution Two [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Additional Distributions Percent Payable To Related Party | 70.00% | |||||
| Receivables from Stockholder [Member] | Liquidating Stage Distribution Three [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Additional Distributions Percent Payable To Related Party | 60.00% | |||||
| Lightstone Slp Llc [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Cumulative Dividends | $ 4,900 | |||||
| Distributions Annualized Rate Of Return | 8.00% | |||||
| Lightstone Slp Llc [Member] | Liquidating Stage Distribution Two [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Additional Distributions Percent Payable To Related Party | 30.00% | |||||
| Lightstone Slp Llc [Member] | Liquidating Stages Distribution Two [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Additional Distributions Percent Payable To Related Party | 30.00% | |||||
| Lightstone Slp Llc [Member] | Liquidating Stage Distribution Three [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Additional Distributions Percent Payable To Related Party | 40.00% | |||||
| Lightstone Slp Llc [Member] | Operating Stage Distribution Three [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Additional Distributions Percent Payable To Related Party | 40.00% | |||||
| Lightstone Slp Llc [Member] | Slp Units [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Distribution Due Cumulative Rate Of Return | 7.00% | |||||
| Distributions Annualized Rate Of Return | 8.00% | |||||
Commitments and Contingencies (Details Narrative) |
Dec. 08, 2009 |
|---|---|
| Poac Properties Gph And Lvh [Member] | |
| Real Estate Properties [Line Items] | |
| Equity Method Investment, Ownership Percentage | 40.00% |
| Mill Run Properties [Member] | |
| Real Estate Properties [Line Items] | |
| Equity Method Investment, Ownership Percentage | 36.80% |
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