x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Maryland
|
83-0511223
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
1985 Cedar Bridge Avenue, Suite 1
|
||
Lakewood, New Jersey
|
08701
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Large accelerated filer ¨
|
Accelerated filer ¨
|
Non-accelerated filer þ
|
Page
|
|||
PART I
|
FINANCIAL INFORMATION
|
||
Item 1.
|
Financial Statements
|
||
Consolidated Balance Sheets as of September 30, 2011 (unaudited) and December 31, 2010
|
3
|
||
Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2011 and 2010
|
4
|
||
Consolidated Statement of Stockholders’ Equity and Comprehensive Loss (unaudited) for the Nine Months Ended September 30, 2011
|
5
|
||
Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2011 and 2010
|
6
|
||
Notes to Consolidated Financial Statements
|
7
|
||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
19
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
29
|
|
Item 4.
|
Controls and Procedures
|
29
|
|
PART II
|
OTHER INFORMATION
|
||
Item 1.
|
Legal Proceedings
|
29
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
29
|
|
Item 3.
|
Defaults Upon Senior Securities
|
31
|
|
Item 4.
|
Removed and Reserved
|
31
|
|
Item 5.
|
Other Information
|
31
|
|
Item 6.
|
Exhibits
|
32
|
September 30, 2011
|
December 31, 2010
|
|||||||
|
(Unaudited)
|
|||||||
Assets
|
||||||||
Investment property, at cost
|
$ | 11,716 | $ | - | ||||
Less accumulated depreciation
|
(198 | ) | - | |||||
Net investment property
|
11,518 | - | ||||||
Investments in unconsolidated affiliated entities
|
6,661 | 3,135 | ||||||
Cash and cash equivalents
|
4,408 | 18,177 | ||||||
Marketable securities, available for sale
|
5,410 | - | ||||||
Restricted escrow
|
388 | 1,053 | ||||||
Mortgage loan receivable, net
|
7,029 | 7,089 | ||||||
Prepaid expenses and other assets
|
962 | 81 | ||||||
Total Assets
|
$ | 36,376 | $ | 29,535 | ||||
Liabilities and Stockholders' Equity
|
||||||||
Accounts payable and other accrued expenses
|
$ | 1,056 | $ | 687 | ||||
Margin loan
|
3,573 | - | ||||||
Due to sponsor
|
71 | 84 | ||||||
Distributions payable
|
674 | 543 | ||||||
Total liabilities
|
5,374 | 1,314 | ||||||
Commitments and contingencies (Note 13)
|
||||||||
Stockholders' Equity:
|
||||||||
Company's stockholders' equity:
|
||||||||
Preferred shares, $0.01 par value, 10,000 shares authorized, none issued and outstanding
|
- | - | ||||||
Common stock, $0.01 par value; 100,000 shares authorized, 4,227 and 3,467 shares issued and outstanding in 2011 and 2010, respectively
|
42 | 35 | ||||||
Additional paid-in-capital
|
33,925 | 28,067 | ||||||
Subscription receivable
|
(27 | ) | (366 | ) | ||||
Accumulated other comprehensive loss
|
(2,505 | ) | - | |||||
Accumulated distributions in excess of net earnings
|
(4,640 | ) | (2,817 | ) | ||||
Total Company stockholders' equity
|
26,795 | 24,919 | ||||||
Noncontrolling interests
|
4,207 | 3,302 | ||||||
Total Stockholders' Equity
|
31,002 | 28,221 | ||||||
Total Liabilities and Stockholders' Equity
|
$ | 36,376 | $ | 29,535 |
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Rental revenue
|
$ | 656 | $ | - | $ | 2,284 | $ | - | ||||||||
Expenses:
|
||||||||||||||||
Property operating expenses
|
369 | - | 1,113 | - | ||||||||||||
Real estate taxes
|
32 | - | 91 | - | ||||||||||||
General and administrative costs
|
246 | 234 | 1,285 | 627 | ||||||||||||
Depreciation and amortization
|
82 | - | 219 | - | ||||||||||||
Total operating expenses
|
729 | 234 | 2,708 | 627 | ||||||||||||
Operating loss
|
(73 | ) | (234 | ) | (424 | ) | (627 | ) | ||||||||
Interest and other income, net
|
510 | 86 | 782 | 228 | ||||||||||||
Income/(loss) from investments in unconsolidated affiliated entities
|
89 | (64 | ) | (270 | ) | (116 | ) | |||||||||
Net income/(loss)
|
526 | (212 | ) | 88 | (515 | ) | ||||||||||
Less: net income attributable to noncontrolling interests
|
(9 | ) | - | (22 | ) | - | ||||||||||
Net income/(loss) attributable to Company's common shares
|
$ | 517 | $ | (212 | ) | $ | 66 | $ | (515 | ) | ||||||
Net income/(loss) per Company's common share, basic and diluted
|
$ | 0.13 | $ | (0.07 | ) | $ | 0.02 | $ | (0.23 | ) | ||||||
Weighted average number of common shares outstanding, basic and diluted
|
4,107 | 2,899 | 3,844 | 2,276 |
Common Shares
|
Accumulated
|
Total
|
||||||||||||||||||||||||||||||||||
Additional
|
Distributions in
|
Company
|
Total
|
|||||||||||||||||||||||||||||||||
Common
|
Paid-In
|
Subscription
|
Accumulated Other
|
Excess of
|
Stockholders'
|
Noncontrolling
|
Total
|
|||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Receivable
|
Comprehensive Loss
|
Net Earnings
|
Equity
|
Interests
|
Equity
|
||||||||||||||||||||||||||||
BALANCE, December 31, 2010
|
3,467 | $ | 35 | $ | 28,067 | $ | (366 | ) | $ | - | $ | (2,817 | ) | $ | 24,919 | $ | 3,302 | $ | 28,221 | |||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||||||||||
Net income
|
- | - | - | - | - | 66 | 66 | 22 | 88 | |||||||||||||||||||||||||||
Unrealized loss on available for sale securities
|
- | - | - | - | (2,505 | ) | - | (2,505 | ) | (2,505 | ) | |||||||||||||||||||||||||
Total comprehensive loss
|
(2,417 | ) | ||||||||||||||||||||||||||||||||||
Distributions paid to noncontrolling interests
|
- | - | - | - | - | - | - | (14 | ) | (14 | ) | |||||||||||||||||||||||||
Distributions declared
|
- | - | - | - | - | (1,889 | ) | (1,889 | ) | - | (1,889 | ) | ||||||||||||||||||||||||
Contribution by noncontrolling interest
|
- | - | - | - | - | - | - | 897 | 897 | |||||||||||||||||||||||||||
Proceeds from offering
|
709 | 7 | 7,068 | 339 | - | - | 7,414 | - | 7,414 | |||||||||||||||||||||||||||
Selling commissions and dealer manager fees
|
- | - | (693 | ) | - | - | - | (693 | ) | - | (693 | ) | ||||||||||||||||||||||||
Other offering costs
|
- | - | (1,018 | ) | - | - | - | (1,018 | ) | - | (1,018 | ) | ||||||||||||||||||||||||
Redemption and cancellation of shares
|
(41 | ) | (1 | ) | (373 | ) | - | - | - | (374 | ) | - | (374 | ) | ||||||||||||||||||||||
Shares issued from distribution reinvestment program
|
92 | 1 | 874 | - | - | - | 875 | - | 875 | |||||||||||||||||||||||||||
BALANCE, September 30, 2011
|
4,227 | $ | 42 | $ | 33,925 | $ | (27 | ) | $ | (2,505 | ) | $ | (4,640 | ) | $ | 26,795 | $ | 4,207 | $ | 31,002 |
For the Nine Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income/(loss)
|
$ | 88 | $ | (515 | ) | |||
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
|
||||||||
Equity in loss from investments in unconsolidated affiliated entities
|
270 | 116 | ||||||
Depreciation and amortization
|
219 | - | ||||||
Changes in assets and liabilities:
|
||||||||
Decrease/(increase) in restricted escrow
|
657 | (540 | ) | |||||
Increase in prepaid expenses and other assets
|
(146 | ) | (232 | ) | ||||
Increase/(decrease) in accounts payable and other accrued expenses
|
20 | (55 | ) | |||||
(Decrease)/increase in due to sponsor
|
(13 | ) | 64 | |||||
Net cash provided by/(used in) operating activities
|
1,095 | (1,162 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of investment property, net
|
(12,473 | ) | - | |||||
Purchase of marketable securities
|
(4,342 | ) | - | |||||
Purchase of investments in unconsolidated affiliated entities
|
(3,796 | ) | - | |||||
Collections on mortgage loan receivable
|
60 | 511 | ||||||
Purchase of mortgage loan receivable
|
- | (7,857 | ) | |||||
Net cash used in investing activities
|
(20,551 | ) | (7,346 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Decrease in due from sponsor
|
- | 25 | ||||||
Proceeds from issuance of common stock
|
7,414 | 18,827 | ||||||
Payment of commissions and offering costs
|
(1,353 | ) | (4,500 | ) | ||||
Contribution of non-controlling interests
|
897 | - | ||||||
Redemption and cancellation of common shares
|
(374 | ) | - | |||||
Distributions to noncontrolling interests
|
(14 | ) | - | |||||
Distributions to common stockholders
|
(883 | ) | (399 | ) | ||||
Net cash provided by financing activities
|
5,687 | 13,953 | ||||||
Net change in cash and cash equivalents
|
(13,769 | ) | 5,445 | |||||
Cash and cash equivalents, beginning of period
|
18,177 | 8,596 | ||||||
Cash and cash equivalents, end of period
|
$ | 4,408 | $ | 14,041 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Distributions declared
|
$ | 1,889 | $ | 1,087 | ||||
Marketable securities purchased with Margin Loan, net | 3,573 | - | ||||||
Value of shares issued from distribution reinvestment program
|
$ | 875 | $ | 372 | ||||
Commissions and other offering costs accrued but not paid
|
$ | 482 | $ | 925 | ||||
Subscription receivable
|
$ | (339 | ) | $ | 90 | |||
Investment in real estate entity in exchange for issuance of subordinated profit interests
|
$ | - | $ | 2,500 | ||||
Restricted escrow deposits and related liability initially established related to acquisition of mortgage loan receivable
|
$ | - | $ | 338 |
1.
|
Organization
|
2.
|
Summary of Significant Accounting Policies
|
3.
|
Investments in Unconsolidated Affiliated Entities
|
As of
|
||||||||||||||
Entity
|
Date of Ownership
|
Ownership
%
|
September 30, 2011
|
December 31,
2010
|
||||||||||
Brownmill LLC ("Brownmill")
|
Various 2010
|
34.413 | % | $ | 3,041 | $ | 3,135 | |||||||
LVP CP Boston, LLC ("CP Boston Joint Venture")
|
March 21, 2011
|
20.000 | % | 1,987 | - | |||||||||
LVP Rego Park, LLC ("Rego Park Joint Venture")
|
April 12, 2011
|
10.000 | % | 1,633 | - | |||||||||
Total investments in unconsolidated affiliated entities
|
$ | 6,661 | $ | 3,135 |
For the Three Months Ended
September 30,
|
For the Nine
Months Ended
September 30,
|
For the Period
April 1 through
September 30
|
||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenue
|
$ | 922 | $ | 888 | $ | 2,860 | $ | 1,788 | ||||||||
Property operating expenses
|
390 | 368 | 1,151 | 730 | ||||||||||||
Depreciation and amortization
|
213 | 220 | 610 | 437 | ||||||||||||
Operating income
|
319 | 300 | 1,099 | 621 | ||||||||||||
Interest expense and other, net
|
(295 | ) | (311 | ) | (878 | ) | (615 | ) | ||||||||
Net income/(loss)
|
24 | (11 | ) | 221 | 6 | |||||||||||
Company's share of net income/(loss)
|
$ | 7 | $ | (3 | ) | $ | 74 | $ | 2 | |||||||
Additional depreciation and amortization expense (1)
|
(32 | ) | (61 | ) | (169 | ) | (118 | ) | ||||||||
Company's loss from investment
|
$ | (25 | ) | $ | (64 | ) | $ | (95 | ) | $ | (116 | ) |
As of
|
As of
|
|||||||
September 30, 2011
|
December 31, 2010
|
|||||||
Investment property, at cost (net)
|
$ | 17,565 | $ | 17,997 | ||||
Cash and restricted cash
|
767 | 559 | ||||||
Other assets
|
1,602 | 1,815 | ||||||
Total assets
|
$ | 19,934 | $ | 20,371 | ||||
Mortgage payable
|
$ | 21,695 | $ | 22,001 | ||||
Other liabilities
|
481 | 833 | ||||||
Members' deficiency
|
(2,242 | ) | (2,463 | ) | ||||
Total liabilities and members' deficiency
|
$ | 19,934 | $ | 20,371 |
Three Months Ended
September 30, 2011
|
For the Period March
21, 2011 through
September 30, 2011
|
|||||||
Revenue
|
$ | 3,604 | $ | 7,819 | ||||
Property operating expenses
|
3,259 | 7,742 | ||||||
Franchise cancellation expense
|
- | 1,234 | ||||||
Depreciation and amortization
|
144 | 288 | ||||||
Operating income/(loss)
|
201 | (1,445 | ) | |||||
Other expense
|
8 | 6 | ||||||
Net income/(loss)
|
$ | 209 | $ | (1,439 | ) | |||
Company's share of net income/(loss)
|
$ | 42 | $ | (288 | ) |
As of
|
||||
September 30, 2011
|
||||
Investment property, at cost (net)
|
$ | 8,582 | ||
Intangible assets
|
1,433 | |||
Cash and restricted cash
|
1,446 | |||
Other assets
|
929 | |||
Total assets
|
$ | 12,390 | ||
Other liabilities
|
2,579 | |||
Members' capital
|
9,811 | |||
Total liabilities and members' capital
|
$ | 12,390 |
Three Months Ended
September 30, 2011
|
For the Period
April 12, 2011
through
September 30,
2011
|
|||||||
Operating expenses
|
$ | - | 202 | |||||
Operating loss
|
- | (202 | ) | |||||
Interest income
|
717 | 1,329 | ||||||
Net income
|
$ | 717 | $ | 1,127 | ||||
Company's share of net income
|
$ | 72 | $ | 113 |
As of
|
||||
September 30, 2011
|
||||
Cash and restricted cash
|
$ | 412 | ||
Mortgage note receivable, net
|
15,765 | |||
Total assets
|
$ | 16,177 | ||
Members' capital
|
16,177 | |||
Total liabilities and members' capital
|
$ | 16,177 |
4.
|
Investment Property
|
As of
|
||||
September 30, 2011
|
||||
Land
|
$ | 2,143 | ||
Buildings and improvements
|
9,040 | |||
Total land, buildings and improvements
|
11,183 | |||
Furniture, fixtures and equipment
|
533 | |||
Investment property at cost
|
11,716 | |||
Less - Accumulated depreciation
|
198 | |||
Investment property at cost, net
|
$ | 11,518 | ||
Construction in progress included above
|
$ | 423 |
5.
|
Marketable Securities and Fair Value Measurements
|
As of September 30, 2011
|
||||||||||||||||
Adjusted Cost
|
Gross Unrealized Gains
|
Gross Unrealized
Losses
|
Fair Value
|
|||||||||||||
Equity Securities
|
$ | 7,915 | $ | - | $ | (2,505 | ) | $ | 5,410 |
|
•
|
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.
|
6.
|
Mortgage Loan Receivable and Restricted Escrow
|
7.
|
Acquisition of a TownePlace Suites Hotel
|
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||
September 30. 2011
|
September 30. 2011
|
|||||||
Revenue
|
$ | 656 | $ | 2,284 | ||||
Net income
|
$ | 168 | $ | 420 |
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Pro forma net revenue
|
$ | 656 | $ | 805 | $ | 2,470 | $ | 2,415 | ||||||||
Pro forma net income/(loss)
|
$ | 526 | $ | (65 | ) | $ | (57 | ) | $ | (195 | ) | |||||
Pro forma earnings/(loss) per share
|
$ | 0.13 | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.08 | ) |
8.
|
Option Agreement to Acquire an Interest in Festival Bay Mall
|
9.
|
Selling Commission, Dealer Manager Fees and Other Offering Costs
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Selling commissions and dealer manager fees
|
$ | 219 | $ | 598 | $ | 693 | $ | 2,258 | ||||||||
Other offering costs
|
$ | 298 | $ | 203 | $ | 1,018 | $ | 577 |
10.
|
Subscription Receivable
|
11.
|
Related Party Transactions
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Acquisition fees
|
$ | - | $ | - | $ | 141 | $ | 75 | ||||||||
Asset management fees
|
71 | 4 | 194 | 12 | ||||||||||||
Total
|
$ | 71 | $ | 4 | $ | 335 | $ | 87 |
12.
|
Financial Instruments
|
13.
|
Commitments and Contingencies
|
14.
|
Subsequent Events
|
Location
|
Year Built
|
Leasable Square Feet
|
Percentage Occupied as of
September 30, 2011
|
Annualized Revenues based
on rents at
September 30, 2011
|
||||||||
Unconsolidated Affiliated Real Estate Entities:
|
||||||||||||
Retail
|
||||||||||||
Brownmill LLC (2 retail properties)
|
Old Bridge and Vauxhall, New Jersey
|
1962
|
156,002 | 88 | % |
$2.7 million
|
Hospitality
|
Year to Date
|
Percentage Occupied
for the Nine Months Ended
|
Revenue per Available Room
for the Nine Months
|
||||||||||||
Location
|
Year Built
|
Available Rooms
|
September 30, 2011
|
Ended September 30, 2011
|
|||||||||||
Wholly-Owned Hospitality Property:
|
|||||||||||||||
Towne Place Suites
|
Harahan, Louisiana
|
2000
|
31,785 | 69 | % | $ | 72 | ||||||||
Unconsolidated Affiliated Hospitality Real Estate Entity:
|
|||||||||||||||
LVP CP Boston, LLC
|
Danvers, Massachusetts
|
1978
|
70,665 | 47 | % | $ | 46 |
For the Three
Months Ended
September 30, 2011
|
For the Three Months
Ended September 30, 2010
|
$ Change
|
% Change
|
|||||||||||||
Rental revenue
|
$ | 656 | $ | - | $ | 656 | * | |||||||||
Property operating expenses
|
369 | - | 369 | * | ||||||||||||
Real estate taxes
|
32 | - | 32 | * | ||||||||||||
General and administrative costs
|
246 | 234 | 12 | 5 | % | |||||||||||
Depreciation and amortization
|
82 | - | 82 | * | ||||||||||||
Total operating expenses
|
729 | 234 | 495 | * | ||||||||||||
Operating income/(loss)
|
(73 | ) | (234 | ) | 161 | * |
For the Nine Months
Ended September 30, 2011
|
For the Nine Months
Ended September 30, 2010
|
$ Change
|
% Change
|
|||||||||||||
Rental revenue
|
$ | 2,284 | $ | - | $ | 2,284 | * | |||||||||
Property operating expenses
|
1,113 | - | 1,113 | * | ||||||||||||
Real estate taxes
|
91 | - | 91 | * | ||||||||||||
General and administrative costs
|
1,285 | 627 | 658 | 105 | % | |||||||||||
Depreciation and amortization
|
219 | - | 219 | * | ||||||||||||
Total operating expenses
|
2,708 | 627 | 2,081 | * | ||||||||||||
Operating loss
|
(424 | ) | (627 | ) | 203 | * |
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Acquisition fees
|
$ | - | $ | - | $ | 141 | $ | 75 | ||||||||
Asset management fees
|
71 | 4 | 194 | 12 | ||||||||||||
Total
|
$ | 71 | $ | 4 | $ | 335 | $ | 87 |
For the Nine Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows provided by/(used in) operating activities
|
$ | 1,095 | $ | (1,162 | ) | |||
Cash flows used in investing activities
|
(20,551 | ) | (7,346 | ) | ||||
Cash flows provided by financing activities
|
5,687 | 13,953 | ||||||
Net change in cash and cash equivalents
|
(13,769 | ) | 5,445 | |||||
Cash and cash equivalents, beginning of the period
|
18,177 | 8,596 | ||||||
Cash and cash equivalents, end of the period
|
$ | 4,408 | $ | 14,041 |
•
|
Other non-cash charges not related to the operating performance or our properties. Straight-line rent adjustment, accretion of discounts on debt investments and other non-cash charges, if any, may be excluded from MFFO if we believe these charges are not useful in the evaluation of our operating performance. Although these charges will be included in the calculation, and result in an increase or decrease, of net income (loss), these charges are adjustments excluded from MFFO because we believe that MFFO provides useful supplemental information by focusing on the changes in our operating fundamentals rather than on events not related to our core operations. However, the exclusion of impairments limits the usefulness of MFFO as a historical operating performance measure since an impairment indicates that the property’s operating performance has been permanently affected.
|
•
|
Organizational and offering expenses and acquisition and other transaction related costs expensed. Although these amounts reduce net income, we fund such costs with proceeds from our offering and acquisition-related indebtedness and do not consider these expenses in the evaluation of our operating performance and determining MFFO. Our calculation of MFFO set forth in the table below reflects such exclusions.
|
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30, 2011
|
September 30, 2010
|
September 30, 2011
|
September 30, 2010
|
|||||||||||||
Net income/(loss)
|
$ | 526 | $ | (212 | ) | $ | 88 | $ | (515 | ) | ||||||
FFO adjustments:
|
||||||||||||||||
Depreciation and amortization of real estate assets
|
82 | - | 219 | - | ||||||||||||
Adjustments to equity in earnings from unconsolidated entities, net
|
134 | 119 | 437 | 232 | ||||||||||||
FFO
|
742 | (93 | ) | 744 | (283 | ) | ||||||||||
MFFO adjustments:
|
||||||||||||||||
Other adjustments:
|
||||||||||||||||
Acquisition and other transaction related costs expensed
|
- | 124 | 499 | 213 | ||||||||||||
Adjustments to equity in earnings from unconsolidated entities, net
|
(54 | ) | - | 133 | (22 | ) | ||||||||||
MFFO
|
$ | 688 | $ | 31 | $ | 1,376 | $ | (92 | ) | |||||||
Net income/(loss)
|
$ | 526 | $ | (212 | ) | $ | 88 | $ | (515 | ) | ||||||
Less: income attributable to noncontrolling interests
|
(2 | ) | - | (16 | ) | - | ||||||||||
Net income/(loss) applicable to company's common shares
|
$ | 524 | $ | (212 | ) | $ | 72 | $ | (515 | ) | ||||||
Net income/(loss) per common share, basic and diluted
|
$ | 0.13 | $ | (0.07 | ) | $ | 0.02 | $ | (0.23 | ) | ||||||
FFO
|
$ | 742 | $ | (93 | ) | $ | 744 | $ | (283 | ) | ||||||
Less: FFO attributable to noncontrolling interests
|
(13 | ) | - | (33 | ) | - | ||||||||||
FFO attributable to company's common shares
|
$ | 729 | $ | (93 | ) | $ | 711 | $ | (283 | ) | ||||||
FFO per common share, basic and diluted
|
$ | 0.18 | $ | (0.03 | ) | $ | 0.18 | $ | (0.12 | ) | ||||||
MFFO
|
$ | 688 | $ | 31 | $ | 1,376 | $ | (92 | ) | |||||||
Less: MFFO attributable to noncontrolling interests
|
(13 | ) | - | (54 | ) | - | ||||||||||
MFFO attributable to company's common shares
|
$ | 675 | $ | 31 | $ | 1,322 | $ | (92 | ) | |||||||
Weighted average number of common shares outstanding, basic and diluted
|
4,107 | 2,899 | 3,844 | 2,276 |
For the period April, 28, 2008
|
||||
(date of inception) through
|
||||
September 30, 2011
|
||||
FFO
|
$ | 71 | ||
Distributions
|
$ | 3,678 |
Year to Date
|
Quarter ended
|
Quarter ended
|
Quarter ended
|
|||||||||||||
September 30, 2011
|
September 30, 2011
|
June 30, 2011
|
March 31, 2011
|
|||||||||||||
Distribution period:
|
Q3 2011 | Q2 2011 | Q1 2011 | |||||||||||||
Date distribution declared
|
August 13, 2011
|
May 13, 2011
|
March 4, 2011
|
|||||||||||||
Date distribution paid
|
October 15, 2011
|
July 15, 2011
|
April 15, 2011
|
|||||||||||||
Distributions Paid
|
$ | 956 | $ | 347 | $ | 319 | $ | 290 | ||||||||
Distributions Reinvested
|
933 | 327 | 319 | 287 | ||||||||||||
Total Distributions
|
$ | 1,889 | $ | 674 | $ | 638 | $ | 577 |
Year to Date
|
Quarter ended
|
Quarter ended
|
Quarter ended
|
|||||||||||||
September 30, 2010
|
September 30, 2010
|
June 30, 2010
|
March 31, 2010
|
|||||||||||||
Distribution period:
|
Q3 2010 | Q2 2010 | Q1 2010 | |||||||||||||
Date distribution declared
|
September 16, 2010
|
July 9, 2010
|
March 23, 2010
|
|||||||||||||
Date distribution paid
|
October 29, 2010
|
July 15, 2010
|
April 15, 2010
|
|||||||||||||
Distributions Paid
|
$ | 555 | $ | 240 | $ | 193 | $ | 122 | ||||||||
Distributions Reinvested
|
532 | 231 | 175 | 126 | ||||||||||||
Total Distributions
|
$ | 1,087 | $ | 471 | $ | 368 | $ | 248 |
Type of Expense:
|
||||
Underwriting discounts and commissions
|
$ | 4,987 | ||
Other expenses incurred to non-affiliates
|
3,218 | |||
Total offering expenses incurred through September 30, 2011
|
$ | 8,205 |
Purchase of investment property, net
|
$ | 12,473 | ||
Purchase of investments in unconsolidated affiliated entities
|
3,796 | |||
Purchase of mortgage loan
|
7,857 | |||
Purchase of marketable securities, net of margin loan
|
4,342 | |||
Cash and cash equivalents (as of September 30, 2011)
|
4,408 | |||
Subscriptions Receivable (as of September 30, 2011)
|
27 | |||
Fund cash distributions
|
1,537 | |||
Other inflows
|
(1,753 | ) | ||
Total uses
|
$ | 32,687 |
Exhibit
Number
|
Description
|
|
31.1*
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
|
|
31.2*
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
|
|
32.1*
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
|
|
32.2*
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
|
LIGHTSTONE VALUE PLUS REAL ESTATE
INVESTMENT TRUST II, INC.
|
||
Date: November 14, 2011
|
By:
|
/s/ David Lichtenstein
|
David Lichtenstein
|
||
Chairman and Chief Executive Officer
(Principal Executive Officer)
|
Date: November 14, 2011
|
By:
|
/s/ Donna Brandin
|
Donna Brandin
|
||
Chief Financial Officer and Treasurer
(Duly Authorized Officer and Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus Real Estate Investment Trust II, 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):
|
/s/ David Lichtenstein
|
David Lichtenstein
|
Chairman and Chief Executive Officer
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus Real Estate Investment Trust II, 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):
|
Donna Brandin
|
/s/ David Lichtenstein
|
David Lichtenstein
|
Chairman and Chief Executive Officer
|
(Principal Executive Officer)
|
/s/ Donna Brandin
|
Donna Brandin
|
Chief Financial Officer and Treasurer
|
(Principal Financial and Accounting Officer)
|
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Preferred shares, par value | $ 0.01 | $ 0.01 |
Preferred shares, shares authorized | 10,000 | 10,000 |
Preferred shares, issued | 0 | 0 |
Preferred shares, outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | 4,227 | 3,467 |
Common stock, shares outstanding | 4,227 | 3,467 |
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Rental revenue | $ 656 | $ 2,284 | ||
Expenses: | ||||
Property operating expenses | 369 | 1,113 | ||
Real estate taxes | 32 | 91 | ||
General and administrative costs | 246 | 234 | 1,285 | 627 |
Depreciation and amortization | 82 | 219 | ||
Total operating expenses | 729 | 234 | 2,708 | 627 |
Operating loss | (73) | (234) | (424) | (627) |
Interest and other income, net | 510 | 86 | 782 | 228 |
Income/(loss) from investments in unconsolidated affiliated entities | 89 | (64) | (270) | (116) |
Net income/(loss) | 526 | (212) | 88 | (515) |
Less: net income attributable to noncontrolling interests | (9) | (22) | ||
Net income/(loss) attributable to Company's common shares | $ 517 | $ (212) | $ 66 | $ (515) |
Net income/(loss) per Company's common share, basic and diluted | $ 0.13 | $ (0.07) | $ 0.02 | $ (0.23) |
Weighted average number of common shares outstanding, basic and diluted | 4,107 | 2,899 | 3,844 | 2,276 |
Document and Entity Information | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Nov. 04, 2011 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II INC | |
Entity Central Index Key | 0001436975 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 4,300,000 |
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Mortgage Loan Receivable and Restricted Escrow | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Mortgage Loan Receivable and Restricted Escrow |
On
June 29, 2010, the Company purchased a fixed-rate of 5.916%,
nonrecourse mortgage note (the “Loan”) for $7.9
million. The Loan was originated by the Seller in August 2007 with
an original principal balance of $18.7 million, and is
collateralized by a 141-room limited service hotel located in East
Rutherford, NJ. The hotel is currently operating under a Marriott
Franchise Agreement as a Fairfield Inn. The Loan was scheduled to
mature in September 2017 under its original term, and has been in
default since February 2009.
The
Company initially recorded the Loan as a mortgage loan receivable
at $7.9 million, net of a discount of $10.8 million, on its
consolidated balance sheet. As the Loan is in default, the Company
was not amortizing the discount as the Company intended to take
ownership in the foreseeable future through foreclosure or
negotiate a transfer of ownership with the existing
borrower.
The
borrower under the loan agreement is required to transfer any
excess cash to the Company on a monthly basis. Prior to April 1,
2011, the Company, was applying the excess cash to required funding
for taxes and insurance and other escrow related disbursements and
any remaining cash was applied to outstanding principal and the
excess, if any, was to be recognized as interest income (the cost
recovery method of income recognition). On April 1, 2011, the
Company determined that it was no longer probable that they would
take ownership in the foreseeable future and stopped applying the
cost recovery method and instead began to apply the cash receipts
method of income recognition, whereby the Company will recognize
any excess cash, after the required funding for taxes and insurance
and other escrow related disbursements, as interest income until
such time as the borrower is current on all amounts owed to the
Company for interest and then any remaining cash will be applied to
outstanding principal. During the three months ended September 30,
2011 and for the period from April 1, 2011 through September 30,
2011 the Company recognized approximately $0.3 million and $0.6
million of interest income, respectively.
|
Related Party Transactions | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions |
In
addition to certain related party payments made to the Dealer
Manager (see Note 9), the Company also has agreements with the
Advisor and Lightstone Value Plus REIT Management LLC (the
“Property Manager”) to pay certain fees in exchange for
services performed by these entities and other affiliated entities.
The Company’s ability to secure financing and subsequent real
estate operations are dependent upon its Advisor, Property Manager
and their affiliates to perform such services as provided in these
agreements.
The
following table represents the fees incurred associated with the
payments to the Company’s Advisor and Property Manager for
the periods indicated:
At
both September 30, 2011 and December 31, 2010, $0.1 million was due
to the Company’s Sponsor for unpaid asset management fees. As
of September 30, 2011, the Company owns a 34.413% membership
interest in Brownmill, a 20% interest in the CP Boston Joint
Venture and a 10% interest in the Rego Park Joint Venture.
Affiliates of the Company’s Sponsor are the majority owners
and managers of these entities.
|
Summary of Significant Accounting Policies | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Summary of Significant Accounting Policies |
Basis of Presentation
The
consolidated financial statements include the accounts of the
Company and the Operating Partnership and its subsidiaries (over
which the Company exercises financial and operating control). As of
September 30, 2011, the Company had a 99.99% general partnership
interest in the common units of the Operating Partnership. All
inter-company balances and transactions have been eliminated in
consolidation.
The
accompanying unaudited interim consolidated financial statements
and related notes should be read in conjunction with the audited
Consolidated Financial Statements of the Company and related notes
as contained in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2010. The unaudited interim
financial statements include all adjustments (consisting only of
normal recurring adjustments) and accruals necessary in the
judgment of management for a fair statement of the results for the
periods presented. The accompanying unaudited consolidated
financial statements of Lightstone Value Plus Real Estate
Investment Trust II, Inc. and its Subsidiaries (collectively, the
"Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America for
interim financial information and with the instructions to Form
10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for
complete financial statements.
The
unaudited consolidated statements of operations for interim periods
are not necessarily indicative of results for the full year or any
other period.
Marketable
Securities
Marketable
securities may consist of equity and debt securities that are
designated as available-for-sale and are recorded at fair value.
Unrealized holding gains or losses are reported as a component of
accumulated other comprehensive income (loss). 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 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 its intent and ability to hold
the investment for a period of time sufficient to allow for any
anticipated recovery in market value.
New Accounting Pronouncements
In
June 2011, the Financial Accounting Standards Board issued amended
guidance for presenting comprehensive income, which will be
effective for the Company beginning January 1, 2012. The amended
guidance eliminates the option to present other comprehensive
income and its components in the statement of stockholders' equity.
The Company may elect to present the items of net income and other
comprehensive income in a single continuous statement of
comprehensive income or in two separate, but consecutive,
statements. Under either method the statement would need to be
presented with equal prominence as the other primary financial
statements. The Company does not expect the adoption of the amended
guidance to have a significant impact on its consolidated financial
statements.
In
May 2011, the FASB issued amended guidance for measuring fair value
and required disclosure information about such measures, which will
be effective for the Company beginning January 1, 2012, and applied
prospectively. The amended guidance requires an entity to disclose
all transfers between Level 1 and Level 2 of the fair value
hierarchy as well as provide quantitative and qualitative
disclosures related to Level 3 fair value measurements.
Additionally, the amended guidance requires an entity to disclose
the fair value hierarchy level which was used to determine the fair
value of financial instruments that are not measured at fair value,
but for which fair value information must be disclosed. The Company
does not expect the adoption of the amended guidance to have a
significant impact on its consolidated financial
statements.
In
December 2010, the Financial Accounting Standards Board
(“FASB”) issued guidance requiring disclosure of pro
forma information for business combinations that occurred in the
current reporting period. The required disclosures include pro
forma revenue and earnings of the combined entity as though the
acquisition date for all business combinations that occurred during
the year had been as of the beginning of the comparable prior
annual reporting period. The guidance is effective prospectively
for business combinations in which the acquisition date is on or
after the first day of the annual period beginning on or after
December 15, 2010. The adoption of this guidance had no impact on
the consolidated financial statements but could result in the
Company providing additional annual pro forma disclosures for
significant business combinations that occur subsequent to December
31, 2010, if applicable.
The
Company has determined that all other recently issued accounting
pronouncements will not have a material impact on its consolidated
financial position, results of operations and cash flows, or do not
apply to its operations.
|
Option Agreement to Acquire an Interest in Festival Bay Mall | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Option Agreement to Acquire an Interest in Festival Bay Mall |
On
December 8, 2010, FB Orlando Acquisition Company, LLC (the
“Owner”), a previously wholly owned entity of David
Lichtenstein (“Lichtenstein”), who does business as the
Lightstone Group and is the sponsor of the Company, acquired
Festival Bay Mall (the “Property”) for cash
consideration of approximately $25.0 million (the “Contract
Price”) from BT Orlando LP, an unrelated third party seller.
Ownership of the Owner was transferred to the A.S. Holdings LLC
(“A.S. Holdings”), a wholly-owned entity of
Lichtenstein, on June 26, 2011 (the “Transfer Date”)
pursuant to the terms of a transfer and exchange agreement between
various entities, including a qualified intermediary.
On
March 4, 2011, the Company, through its Operating Partnership,
entered into an agreement with A.S. Holdings, providing the
Operating Partnership an option to acquire a membership interest of
up to 10% in A.S. Holdings. The option is exercisable in whole or
in part, up to two times, by the Operating Partnership at any time,
but in no event later than June 30, 2012. Although the option may
be exercised immediately, if it is exercised in whole or in part
before the Transfer Date, the closing on the acquisition of the
applicable membership interests in A.S. Holdings will occur within
10 business days after the Transfer Date. The Company has not
exercised its option, in whole or in part, as of the date of this
filing. There can be no assurance that the Company will elect to
exercise its option, in whole or in part, to purchase up to a 10%
ownership interest in Festival Bay Mall.
The
Property, which opened in 2003, consists of an approximately
751,000 square foot enclosed mall situated on 139 acres of land
located at 5250 International Drive in Orlando close to the
convergence of I-4 and the Florida Turnpike. The Property was built
as a hybrid retail center with entertainment, destination retail
and traditional in-line mall tenants. Concurrent with the closing
of the acquisition, management of the Property was assumed by
Paragon Retail Property Management LLC (“Paragon”), an
affiliate of the Company’s sponsor. Paragon is currently
evaluating redevelopment opportunities for the
Property.
|
Commitments and Contingencies | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Commitments and Contingencies |
Legal Proceedings
On
July 13, 2011, JF Capital Advisors, LLC filed a lawsuit in New York
state court against The Lightstone Group, LLC, Lightstone Value
Plus Real Estate Investment Trust, Inc. and the Company seeking
payment for services alleged to have been rendered, and to be
rendered prospectively, under theories of unjust enrichment and
breach of contract. The plaintiff had a limited business
arrangement with The Lightstone Group, LLC; that arrangement has
been terminated. The Company believes this suit to be without merit
and will defend the case vigorously.
From
time to time in the ordinary course of business, the Company 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.
|
Selling Commission, Dealer Manager Fees and Other Offering Costs | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selling Commission, Dealer Manager Fees and Other Offering Costs |
Selling
commissions and dealer manager fees are paid to the Dealer Manager,
pursuant to various agreements, and other third-party offering
expenses such as registration fees, due diligence fees, marketing
costs, and professional fees are accounted for as a reduction
against additional paid-in capital (“APIC”) as costs
are incurred. Any organizational costs are accounted for as general
and administrative costs. The following table represents the
selling commissions and dealer manager and other offering costs for
the periods indicated:
Since
commencement of its initial public offering through September 30,
2011, the Company has incurred approximately $5.0 million in
selling commissions and dealer manager fees and $3.2 million of
other offering costs.
|
Acquisition of a TownePlace Suites Hotel | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Acquisition of a TownePlace Suites Hotel |
On
January 19, 2011, the Company, through LVP Metairie JV, LLC
(“LVP Metairie JV”), a joint venture subsidiary of its
Operating Partnership, completed the acquisition of a 95% ownership
interest in a four-story, limited service extended-stay hotel
located in Harahan, Louisiana (“TownePlace Suites
Hotel”) from Citrus Suites, LLC (the “Seller”).
The remaining 5% ownership interest was acquired by TPS Metairie,
LLC, an unrelated third party. During the three months ended
March 31, 2011, TPS Metairie contributed $0.7 million to LVP
Metairie JV. The TownePlace Suites Hotel, which has immediate
access to the New Orleans Airport, will operate as a
“TownePlace Suites” pursuant to a Relicensing Franchise
Agreement (“Franchise Agreement”) with Marriott
International, Inc. (“Marriott”). The Seller was not
affiliated with the Company or its subsidiaries.
The
aggregate purchase price for the TownePlace Suites Hotel was
approximately $12.2 million, inclusive of closing and other
transaction-related costs. Additionally, in connection with the
acquisition, the Company’s advisor received an acquisition
fee of $0.1 million which was equal to 0.95% of the Company’s
proportionate share of the total contract price of $12.0 million,
or $11.4 million. The acquisition was funded with cash proceeds
from the sale of the Company’s common stock.
The
Company has established a taxable REIT subsidiary, LVP Metairie
Holding Corp. (“LVP Metairie Holding”), which has
entered into an operating lease agreement for the TownePlace Suites
Hotel. LVP Metairie Holding has also entered into management
agreement (the “TownePlace Suites Management
Agreement”) with Trans Inns Management, Inc., an unrelated
third party, for the management of the TownePlace Suites Hotel, and
the Franchise Agreement with Marriott. The Towne Place Suites
Management Agreement, which has an initial term of one-year
commencing on January 19, 2011, provides for (i) monthly base
management fees equal to 3% of gross revenues, as defined and (ii)
certain incentive fees. The TownePlace Suites Management
Agreement provides for nine additional one-year extensions and may
be terminated by either party with no less than 90-days written
notice, by either party, in advance of the anniversary
date.
The
capitalization rate for the acquisition of the TownePlace Suites
during 2011 was 10.7%. The Company calculates the capitalization
rate for real property by dividing the net operating income of the
property by the purchase price of the property, excluding costs.
For purposes of this calculation, net operating income is
determined using the projected or budgeted net operating income of
the property based upon then-current projections. Additionally, net
operating income is all gross revenues from the property less all
operating expenses, including property taxes and management fees
but excluding depreciation and amortization.
The
Company’s interest in TownePlace Suites is a managing
interest. Generally, quarterly distributions from TownePlace Suites
will be made, beginning on May 10, 2011, (i) initially, to the
Company and TPS Metairie, LLC on a pro rata basis in proportion to
each member’s equity interest percentage until an annualized
preferred return of 12% is achieved on their invested capital and
(ii) thereafter, 85% to the Company and TPS Metairie, LLC pro rata
in accordance with their respective ownership interest and 15% to
the Sherman Family Trust, a third party related to TPS Metairie,
LLC but not related to the Company. Beginning on January 19, 2011,
the Company has consolidated the operating results and financial
condition of TownePlace Suites and accounted for the ownership
interest of TPS Metairie, LLC and any allocations of earnings and
distributions to the Sherman Family Trust as noncontrolling
interests.
The
acquisition was accounted for under the purchase method of
accounting with the Company treated as the acquiring entity.
Accordingly, the consideration paid by the Company to complete the
acquisition has been allocated to the assets acquired based upon
their fair values as of the date of the acquisition. The allocation
of purchase price is based upon certain preliminary valuations and
other analyses that have not been completed as of the date of this
filing. Any changes in the estimated fair values of the net assets
recorded for these acquisitions prior to the finalization of more
detailed analyses will change the allocation of the purchase price.
As such, the purchase price allocations for this transaction are
preliminary estimates, which are subject to change within the
measurement period. Any subsequent changes to the purchase price
allocations that are material will be adjusted retroactively. There
was no contingent consideration related to this
acquisition.
Approximately
$2.1 million was allocated to land, $8.9 million was allocated to
building and improvements, $0.5 million was allocated to furniture
and fixtures and the remaining $0.7 million was allocated to finite
lived intangibles with a life of 25 years. The finite lived
intangibles are included in prepaid expenses and other assets on
the consolidated balance sheets. Amortization expense for the
finite lived intangibles was approximately $7 and $19 for the three
and nine months ended September 30, 2011, respectively. Based
solely on the finite lived intangibles acquired from the TownePlace
Suites Hotel acquisition, amortization expense is estimated to be
approximately $7 for the remainder of 2011 and approximately $28
per year for each year for the next five years.
The
following table provides the amounts of revenue and net income
included in the Company’s consolidated statements of
operations from the TownePlace Suites Hotel since the date of
acquisition for the periods indicated:
The
following table provides unaudited pro forma results of operations
for the periods indicated, as if TownePlace Suites had been
acquired at the beginning of each period presented. Such pro forma
results are not necessarily indicative of the results that actually
would have occurred had the acquisition been completed on the dates
indicated, nor are they indicative of the future operating results
of the combined company.
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Investments in Unconsolidated Affiliated Entities |
The
entities listed below are partially owned by the Company. The
Company accounts for these investments under the equity method of
accounting as the Company exercises significant influence, but does
not control these entities. A summary of the Company’s
investments in unconsolidated affiliated entities is as
follows:
Brownmill
On
June 30, 2010 and December 29, 2010, the Company’s Sponsor
contributed a 26.25% membership and an 8.163% membership interest,
respectively, in Brownmill, to its Operating Partnership, in order
to satisfy its obligation to purchase subordinated profit interests
effective as of April 1, 2010 and October 1, 2010, respectively.
Our 34.413% aggregate interest in Brownmill is a non-managing
interest. An affiliate of the Company’s Sponsor is the
majority owner and manager of Brownmill. Profit and cash
distributions are allocated in accordance with each
investor’s ownership percentage. The Company accounts for its
investment in Brownmill in accordance with the equity method of
accounting. The Company commenced allocating its portion of profit
and cash distributions (i) beginning as of April 1, 2010 with
respect to the initial membership interest of 26.25% and (ii)
beginning October 1, 2010 with respect to the additional membership
interest of 8.163%. Because the Company recorded its investment in
Brownmill in accordance with the equity method of accounting, its
portion of Brownmill’s total indebtedness is not included in
the investment. In connection with the contributions of the
interests in Brownmill, the Company did not incur any transactions
fees. The capitalization rate for the Brownmill contributions
during 2010 was 7.3%. The Company calculates the capitalization
rate for real property by dividing the net operating income of the
property by the purchase price of the property, excluding costs.
For purposes of this calculation, net operating income is
determined using the projected or budgeted net operating income of
the property based upon then-current projections. Additionally, net
operating income is all gross revenues from the property less all
operating expenses, including property taxes and management fees
but excluding depreciation and amortization.
Brownmill Financial Information
The
Company’s carrying value of its interest in Brownmill differs
from its share of member’s equity reported in the condensed
balance sheet of Brownmill due to the Company’s basis of its
investment in excess of the historical net book value of Brownmill.
The Company’s additional basis allocated to depreciable
assets is being recognized on a straight-line basis over the lives
of the appropriate assets.
The
following table represents the unaudited condensed income statement
for Brownmill for the period indicated:
1) Additional
depreciation and amortization expense relates to the amortization
of the difference between the cost of the Company’s
investment in Brownmill and the amount of the underlying equity in
net assets of Brownmill.
The
following table represents the condensed balance sheet for
Brownmill:that’s
CP Boston Joint Venture
On
February 17, 2011, the Company’s Sponsor and Advisor, the
Lightstone Group (the “Buyer”), made a successful
auction bid to acquire a 366-room, eight-story, full-service hotel
(the “Hotel”) and a 65,000 square foot water park (the
“Water Park”), collectively, the “CP Boston
Property”, located at 50 Ferncroft Road, Danvers,
Massachusetts (part of the Boston “Metropolitan Statistical
Area”) from WPH Boston, LLC (the “Seller”) for an
aggregate purchase price of approximately $10.1 million, excluding
closing and other related transaction costs. Pursuant to the terms
of the Agreement of Purchase and Sale and Joint Escrow Instructions
(the “PSA”) dated February 17, 2011, between the Buyer
and the Seller, the Buyer made an earnest money deposit of
approximately $1.0 million on February 18, 2011 representing 10% of
the aggregate purchase price.
On
March 4, 2011, the Buyer offered the Company and its other
sponsored public program, the Lightstone Value Plus Real Estate
Investment Trust, Inc. (“Lightstone REIT I”), through
their respective operating partnerships, the opportunity to
purchase, at cost, which approximates fair value, joint venture
ownership interests in LVP CP Boston Holdings, LLC (“the CP
Boston Joint Venture”) which was to acquire the CP Boston
Property through LVP CP Boston, LLC (“LVP CP Boston”),
a wholly owned subsidiary, subject to the Buyer obtaining the
Seller’s consent which was obtained on March 21, 2011. The
Company’s Board of Directors and Lightstone REIT I’s
Board of Directors approved 20% and 80% participations,
respectively, in the CP Boston Joint Venture.
On
March 21, 2011, the CP Boston Joint Venture closed on the
acquisition of the CP Boston Property and the Company’s share
of the aggregate purchase price was approximately $2.0 million.
Additionally, in connection with the acquisition, the
Company’s Advisor received an acquisition fee equal to 0.95%
of the acquisition price, or approximately $19. The Company’s
portion of the acquisition was funded with cash proceeds from the
sale of its common stock. During the second quarter, management of
the CP Boston Property decided to rebrand the hotel property and
incurred a franchise cancellation fee of approximately $1.2 million
(of which approximately $240 is the Company’s proportionate
share and is included in loss from investments in unconsolidated
affiliated entities).
The
CP Boston Joint Venture established a taxable subsidiary, LVP CP
Boston Holding Corp., which has entered into an operating lease
agreement for the CP Boston Property.
The
Seller was not affiliated with the Company or its
affiliates.
The
capitalization rate for the acquisition of the CP Boston Property
during 2011 was 9.0%. The Company calculates the capitalization
rate for real property by dividing the net operating income of the
property by the purchase price of the property, excluding costs.
For purposes of this calculation, net operating income is
determined using the projected or budgeted net operating income of
the property based upon then-current projections. Additionally, net
operating income is all gross revenues from the property less all
operating expenses, including property taxes and management fees
but excluding depreciation and amortization.
Our
interest in the CP Boston Joint Venture is a non-managing interest.
All distributions from the CP Boston Joint Venture will be made on
a pro rata basis in proportion to each member’s equity
interest percentage. The Company accounts for its ownership
interest in the CP Boston Joint Venture in accordance with the
equity method of accounting. The Company commenced allocating its
portion of profit and cash distributions beginning as of March 21,
2011 with respect to its membership interest of 20%. During the
period, the Company made additional capital contributions of
the CP Boston Joint Venture of $0.2 million.
CP Boston Joint Venture Financial Information
The
allocation of purchase price by the CP Boston Joint Venture is
based upon certain preliminary valuations and other analyses that
have not been completed as of the date of this filing. Any changes
in the estimated fair values of the net assets recorded for these
acquisitions prior to the finalization of more detailed analyses
will change the allocation of the purchase price. As such, the
purchase price allocations for this transaction are preliminary
estimates, which are subject to change within the measurement
period. Any subsequent changes to the purchase price allocations
that are material will be adjusted retroactively. There was no
contingent consideration related to this acquisition.
The
following table represents the unaudited condensed income statement
for the CP Boston Joint Venture for the period indicated (based on
a preliminary estimate of the purchase price
allocation):
The
following table represents the unaudited condensed balance sheet
for CP Boston Joint Venture (based on a preliminary estimate of the
purchase price allocation):
Rego
Park Joint Venture
On
April 12, 2011, LVP Rego Park, LLC, (“the Rego Park Joint
Venture”) a joint venture in which the Company and Lightstone
REIT I have 10% and 90%, ownership interests, respectively,
acquired a $19.5 million, nonrecourse second mortgage note (the
“Second Mortgage Loan”) for approximately $15.1 million
from Kelmar Company, LLC (the “Seller”), an
unaffiliated third party. The purchase price reflects a discount of
approximately $4.4 million to the outstanding principal balance.
The Company’s share of the aggregate purchase price was
approximately $1.5 million. The Company accounts for its investment
in the Rego Park Joint Venture in accordance with the equity method
of accounting. Additionally, in connection with the purchase, the
Company’s Advisor received an acquisition fee equal to 0.95%
of its portion of the acquisition price, or approximately $14. The
Company’s portion of the acquisition was funded with
cash.
The
Second Mortgage Loan was originated by the Seller in May 2008 with
an original principal balance of $19.5 million, is due May 31, 2013
and is collateralized by a 417 unit apartment complex located in
Queens, New York. The Second Mortgage Loan bears interest at a
fixed rate of 5.0% per annum with monthly interest only payments of
approximately $0.1 million through maturity. The Second Mortgage
Loan is current with respect to debt service payments. The Rego
Park Joint Venture is amortizing the discount using the effective
interest rate method through maturity.
Rego Park Joint Venture Financial Information
The
following table represents the unaudited condensed income statement
for the Rego Park Joint Venture for the period
indicated:
The
following table represents the unaudited condensed balance sheet
for Rego Park Joint Venture:
|
Investment Property | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Property |
All
of the Company’s investment property resulted from the
TownePlace Suites Hotel acquisition on January 19, 2011. The
Company had no investment property as of December 31, 2010.
Investment property consists of the following:
|
Financial Instruments | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Financial Instruments |
The
carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and margin loan approximate their fair values
because of the short maturity of these instruments. The carrying
amount of the mortgage loan receivable approximates the fair value
based upon current market information that would have been used by
a market participant to estimate the fair value of such
loan.
|
Marketable Securities and Fair Value Measurements | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities and Fair Value Measurements |
Marketable Securities:
The
following is a summary of the Company’s available for sale
securities as of the dates indicated:
Since
the Company purchased all of it equity securities on or after July
1, 2011, all of the equity securities with unrealized losses as of
September 30, 2011 were in a loss position for less than 12 months.
The Company has not sold nor otherwise disposed of any of its
marketable securities during this period.
The
Company has access to a margin loan from a financial institution
that holds custody of certain of the Company’s marketable
securities. The margin loan 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. The amount outstanding under this margin loan is
$3.6 million at September 30, 2011 and is due on demand. The margin
loan bears interest at libor + 0.85% (1.08% at September 30, 2011)
and interest expense on the margin loan was $9 for both the three
and nine months ended September 30, 2011.
The
Company considers the declines in market value of its investment
portfolio to be temporary in nature. When evaluating the
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. As of September 30, 2011 and December 31,
2010, the Company did not recognize any impairment charges. As of
September 30, 2011, the Company does not consider any of its
investments to be other-than-temporarily impaired.
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:
As
of September 30, 2011 all of the Company’s equity securities
were classified as Level 1 assets. The Company did not have any
other significant financial assets or liabilities, which would
require revised valuations that are recognized at fair
value.
|
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