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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission file number 000-55619

 

LIGHTSTONE VALUE PLUS REIT III, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland   46-1140492

(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)

 

(732) 367-0129

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑   No ¨

 

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☑   No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☑ Smaller reporting company ☑
  Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☑

 

As of August 7, 2024, there were approximately 12.8 million outstanding shares of common stock of Lightstone Value Plus REIT III, Inc., including shares issued pursuant to the dividend reinvestment plan.

 

 

 

 

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES

 

INDEX

 

        Page
PART I   FINANCIAL INFORMATION    
         
Item 1.   Financial Statements (unaudited)   1
       
    Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023   1
       
    Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023   2
         
    Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023   3
         
    Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023   4
         
    Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023   5
       
    Notes to Consolidated Financial Statements   6
       
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   22
       
Item 4.   Controls and Procedures   39
       
PART II   OTHER INFORMATION    
       
Item 1.   Legal Proceedings   40
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   40
       
Item 3.   Defaults Upon Senior Securities   40
       
Item 4.   Mine Safety Disclosures   40
       
Item 5.   Other Information   40
       
Item 6.   Exhibits   41

 

i

 

 

PART I. FINANCIAL INFORMATION:

 

ITEM 1. FINANCIAL STATEMENTS:

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data and where indicated in millions)

 

                 
    June 30,
2024		     December 31,
2023		  
    (unaudited)        
Assets                
                 
Investment property:                
Land and improvements   $ 21,732     $ 21,722  
Building and improvements     92,648       92,493  
Furniture and fixtures     16,931       16,960  
Construction in progress     94       27  
Gross investment property     131,405       131,202  
Less: accumulated depreciation     (38,109 )     (36,479 )
Net investment property     93,296       94,723  
                 
Investments in unconsolidated affiliated real estate entities     18,233       20,240  
Cash and cash equivalents     4,531       3,848  
Marketable securities, available for sale     5,339       7,196  
Accounts receivable and other assets     4,197       1,971  
Total Assets   $ 125,596     $ 127,978  
                 
Liabilities and Stockholders’ Equity                
                 
Accounts payable and other accrued expenses   $ 3,560     $ 2,511  
Mortgages payable, net     57,165       57,161  
Distributions payable     -       970  
Due to related parties     1,262       363  
Total Liabilities     61,987       61,005  
                 
Commitments and Contingencies                
                 
Stockholders’ Equity:                
Company’s stockholders’ equity:                
Preferred stock, $0.01 par value; 50.0 million shares authorized, none issued and outstanding     -       -  
Common stock, $0.01 par value; 200.0 million shares authorized, 12.9 million shares issued and outstanding     129       129  
Additional paid-in-capital     110,119       110,462  
Accumulated other comprehensive loss     (125 )     (166 )
Accumulated deficit     (58,606 )     (55,544 )
Total Company stockholders’ equity     51,517       54,881  
                 
Noncontrolling interests     12,092       12,092  
Total Stockholders’ Equity     63,609       66,973  
Total Liabilities and Stockholders’ Equity   $ 125,596     $ 127,978  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1

 

 

PART I. FINANCIAL INFORMATION, CONTINUED:

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)

 

                                 
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
    2024     2023     2024     2023  
Revenues   $ 8,719     $ 7,966     $ 14,989     $ 14,332  
                                 
Expenses:                                
Property operating expenses     5,318       5,103       9,997       9,682  
Real estate taxes     340       267       704       597  
General and administrative costs     823       672       1,496       1,315  
Depreciation and amortization     828       1,114       1,662       2,294  
Total expenses     7,309       7,156       13,859       13,888  
                                 
Interest expense     (1,336 )     (1,333 )     (2,673 )     (2,571 )
Loss from investments in unconsolidated affiliated real estate entities     (253 )     (1,002 )     (1,754 )     (2,180 )
Other income, net     104       242       235       317  
                                 
Net loss     (75 )     (1,283 )     (3,062 )     (3,990 )
                                 
Less: net loss attributable to noncontrolling interests     -       -       -       -  
                                 
Net loss applicable to Company’s common shares   $ (75 )   $ (1,283 )   $ (3,062 )   $ (3,990 )
                                 
Net loss per Company’s common share, basic and diluted   $ (0.01 )   $ (0.10 )   $ (0.24 )   $ (0.31 )
                                 
Weighted average number of common shares outstanding, basic and diluted     12,902       12,973       12,916       12,998  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2

 

 

PART I. FINANCIAL INFORMATION, CONTINUED:

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

(Unaudited)

 

                                 
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
    2024     2023     2024     2023  
Net loss   $ (75 )   $ (1,283 )   $ (3,062 )   $ (3,990 )
                                 
Other comprehensive income:                                
Holding gain on marketable securities, available for sale     23       24       41       24  
Comprehensive loss     (52 )     (1,259 )     (3,021 )     (3,966 )
                                 
Less: Comprehensive loss attributable to noncontrolling interests     -       -       -       -  
                                 
Comprehensive loss attributable to the Company’s common shares   $ (52 )   $ (1,259 )   $ (3,021 )   $ (3,966 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

 

PART I. FINANCIAL INFORMATION, CONTINUED:

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)

 

                                                         
    Common Stock     Additional
Paid-In		     Accumulated Other
Comprehensive		     Accumulated     Total
Noncontrolling		     Total  
    Shares     Amount     Capital     Loss     Deficit     Interests     Equity  
BALANCE, March 31, 2023     13,017     $ 130     $ 111,336     $ (250 )   $ (48,500 )   $ 12,092     $ 74,808  
                                                         
Net loss     -       -       -       -       (1,283 )     -       (1,283 )
Other comprehensive income     -       -       -       24       -       -       24  
Distributions declared(a)     -       -       -       -       (970 )     -       (970 )
Redemption and cancellation of shares     (60 )     (1 )     (615 )     -       -       -       (616 )
                                                         
BALANCE, June 30, 2023     12,957     $ 129     $ 110,721     $ (226 )   $ (50,753 )   $ 12,092     $ 71,963  

 

 
(a) Distributions per share were $0.075.

 

    Common Stock     Additional
Paid-In		     Accumulated
Other
Comprehensive		     Accumulated     Total
Noncontrolling		     Total  
    Shares     Amount     Capital     Loss     Deficit     Interests     Equity  
BALANCE, December 31, 2022     13,043     $ 130     $ 111,585     $ (250 )   $ (44,818 )   $ 12,092     $ 78,739  
                                                         
Net loss     -       -       -       -       (3,990 )     -       (3,990 )
Other comprehensive income     -       -       -       24       -       -       24  
Distributions declared(a)     -       -       -       -       (1,945 )     -       (1,945 )
Redemption and cancellation of shares     (86 )     (1 )     (864 )     -       -       -       (865 )
                                                         
BALANCE, June 30, 2023     12,957     $ 129     $ 110,721     $ (226 )   $ (50,753 )   $ 12,092     $ 71,963  

 

 
(a) Distributions per share were $0.150.

 

    Common Stock     Additional
Paid-In		     Accumulated
Other
Comprehensive		     Accumulated     Total
Noncontrolling		     Total  
    Shares     Amount     Capital     Loss     Deficit     Interests     Equity  
BALANCE, March 31, 2024     12,930     $ 129     $ 110,439     $ (148 )   $ (58,531 )   $ 12,092     $ 63,981  
                                                         
Net loss     -       -       -       -       (75 )     -       (75 )
Other comprehensive income     -       -       -       23               -       23  
Redemption and cancellation of shares     (33 )     -       (320 )     -       -       -       (320 )
                                                         
BALANCE, June 30, 2024     12,897     $ 129     $ 110,119     $ (125 )   $ (58,606 )   $ 12,092     $ 63,609  

 

    Common Stock     Additional
Paid-In		     Accumulated
Other
Comprehensive		     Accumulated     Total
Noncontrolling		     Total  
    Shares     Amount     Capital     Loss     Deficit     Interests     Equity  
BALANCE, December 31, 2023     12,932     $ 129     $ 110,462     $ (166 )   $ (55,544 )   $ 12,092     $ 66,973  
                                                         
Net loss     -       -       -       -       (3,062 )     -       (3,062 )
Other comprehensive income     -       -       -       41               -       41  
Redemption and cancellation of shares     (35 )     -       (343 )     -       -       -       (343 )
                                                         
BALANCE, June 30, 2024     12,897     $ 129     $ 110,119     $ (125 )   $ (58,606 )   $ 12,092     $ 63,609  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

 

PART I. FINANCIAL INFORMATION, CONTINUED:

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

                 
    For the
Six Months Ended
June 30,		  
    2024     2023  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (3,062 )   $ (3,990 )
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities:                
Loss from investments in unconsolidated affiliated real estate entities     1,754       2,180  
Depreciation and amortization     1,662       2,294  
Amortization of deferred financing costs     148       107  
Other non-cash adjustments     63       31  
Changes in assets and liabilities:                
Increase in accounts receivable and other assets     (2,357 )     (1,077 )
Increase in accounts payable and other accrued expenses     1,051       399  
Increase in due to related parties     721       94  
Cash (used in)/provided by operating activities     (20 )     38  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of investment property     (204 )     (307 )
Purchase of marketable securities     (96 )     (10,373 )
Proceeds from sale of marketable securities     2,030       4,403  
Distributions from unconsolidated affiliated real estate entity     627       -  
Investments in unconsolidated affiliated real estate entities     (197 )     (1,002 )
Cash provided by/(used in) investing activities     2,160       (7,279 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Payments on mortgages payable     (144 )     -  
Distributions to common stockholders     (970 )     (975 )
Redemption and cancellation of common shares     (343 )     (865 )
Cash used in financing activities     (1,457 )     (1,840 )
                 
Change in cash, cash equivalents and restricted cash     683       (9,081 )
Cash, cash equivalents and restricted cash, beginning of year     3,853       18,391  
Cash, cash equivalents and restricted cash, end of period   $ 4,536     $ 9,310  
                 
Supplemental cash flow information for the periods indicated is as follows:                
Cash paid for interest   $ 2,545     $ 2,419  
Cash paid for taxes   $ 53     $ 212  
Investments in unconsolidated affiliated real estate entities in due to related parties   $ 178      $ -  
Distributions declared, but not paid   $ -     $ 970  
Holding gain/loss on marketable securities, available for sale   $ 41     $ 24  
                 
The following is a summary of the Company’s cash, cash equivalents and restricted cash total as presented in our statements of cash flows for the periods presented:                
Cash and cash equivalents   $ 4,531     $ 9,310  
Restricted cash     5       -  
Total cash, cash equivalents and restricted cash   $ 4,536     $ 9,310  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

1. Business and Structure

 

Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”) is a Maryland corporation, formed on October 5, 2012, which elected to qualify as a real estate investment trust (“REIT”) for United States (the “U.S.”) federal income tax purposes beginning with the taxable year ended December 31, 2015.

 

Lightstone REIT III is structured as an umbrella partnership REIT, or UPREIT, and substantially all of its current and future business will be conducted through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the “Operating Partnership”). As of June 30, 2024, Lightstone REIT III had a 99% general partnership interest in the Operating Partnership’s common units.

 

Lightstone REIT III 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 these consolidated financial statements refers to Lightstone REIT III, its Operating Partnership or the Company as required by the context in which such pronoun is used.

 

Through the Operating Partnership, the Company owns, operates and develops commercial properties and makes real estate-related investments. Since its inception, the Company has primarily acquired, developed and operated commercial hospitality properties, principally consisting of limited-service hotels and one full-service hotel all located in the U.S. Although the Company has historically acquired hotels, it has and may continue to purchase other types of real estate. Assets other than hotels may include, without limitation, office buildings, shopping centers, business and industrial parks, manufacturing facilities, single-tenant properties, multifamily properties, student housing properties, warehouses and distribution facilities and medical/life sciences office buildings. The Company’s real estate investments are held by it alone or jointly with other parties. In addition, the Company may invest up to 20% of its net assets in collateralized debt obligations, commercial mortgage-backed securities (“CMBS”) and mortgage and mezzanine loans secured, directly or indirectly, by the same types of properties which it may acquire directly. Although most of its investments are these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes are in its best interests. The Company evaluates all of its real estate investments as one operating segment. The Company currently intends to hold its investments until such time as it determines that a sale or other disposition appears to be advantageous to achieve its investment objectives or until it appears that the objectives will not be met.

 

As of June 30, 2024, the Company (i) wholly owned and consolidated the operating results and financial condition of eight limited service hotels containing a total of 872 rooms, (ii) held an unconsolidated 50% membership interest in LVP LIC Hotel JV LLC (the “Hilton Garden Inn Joint Venture”), which owns one limited service hotel, and (iii) held an unconsolidated 25% membership interest in Bedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), which owns one full service hotel. The Company accounts for its unconsolidated membership interests in the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture under the equity method of accounting.

 

The Hilton Garden Inn Joint Venture owns a 183-room, limited-service hotel (the “Hilton Garden Inn – Long Island City”) located in the Long Island City neighborhood in the Queens borough of New York City. The Williamsburg Moxy Hotel Joint Venture developed, constructed and owns a 216-room branded hotel (the “Williamsburg Moxy Hotel”) located in the Williamsburg neighborhood in the Brooklyn borough of New York City, which opened on March 7, 2023. Both the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture are between the Company and related parties.

 

6

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

The Company’s advisor is Lightstone Value Plus REIT III LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. The Advisor also owns 20,000 shares of our common stock (“Common Shares”) which were issued on December 24, 2012 for $200, or $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests of the Lightstone Group, LLC (the “Sponsor”), which served as the Company’s sponsor during its initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on December 11, 2014 for $2.0 million, or $9.00 per share. Pursuant to the terms of an advisory agreement and subject to the oversight of the Company’s board of directors (the “Board of Directors”), the Advisor has primary responsibility for making investment decisions on behalf of the Company and managing its day-to-day operations. Through his ownership and control of the Sponsor, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP III LLC, a Delaware limited liability company (the “Special Limited Partner”), which owns 242 subordinated participation interests (“Subordinated Participation Interests”) in the Operating Partnership which were acquired at a cost of $50,000 per unit, or an aggregate consideration of $12.1 million in connection with the 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 Lightstone REIT III or the Operating Partnership.

 

The Company has no employees. The Company is dependent on the Advisor and certain affiliates of the Sponsor for performing a full range of services that are essential to it, including asset management, property management (excluding its hospitality properties, which are each managed by an unrelated third party property manager) and acquisition, disposition and financing activities, and other general administrative responsibilities, such as tax, accounting, legal, information technology and investor relations services. If the Advisor and its affiliates are unable to provide these services to the Company, it would be required to provide the services itself or obtain the services from other parties.

 

The Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its Common Shares 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 Common Shares at this time. The Company does not anticipate that there would be any active market for its Common Shares until they are listed for trading.

 

Noncontrolling Interests – Partners of the Operating Partnership

 

Limited Partner

 

On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. The Advisor has the right to convert limited partner units into cash or, at the Company’s option, an equal number of its Common Shares.

 

Special Limited Partner

 

In connection with the Company’s Offering, the Special Limited Partner purchased from the Operating Partnership an aggregate of 242 Subordinated Participation Interests at a cost of $50,000 per unit, or aggregate consideration of $12.1 million.

 

As the indirect majority owner of the Special Limited Partner, Mr. Lichtenstein is the beneficial owner of a 99% interest in such Subordinated Participation Interests and will thus receive an indirect benefit from any distributions made in respect thereof.

 

7

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

These Subordinated Participation Interests may entitle the Special Limited Partner to a portion of any regular distributions that the Company makes to its stockholders, but only after its stockholders have received a stated preferred return. However, from inception through June 30, 2024, there have been no distributions declared on the Subordinated Participation Interests. Any future distributions on the Subordinated Participation Interests will always be subordinated until stockholders receive a stated preferred return.

 

The Subordinated Participation Interests may also entitle the Special Limited Partner to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net proceeds available for distribution upon the Company’s liquidation and, therefore, cannot be determined at the present time. Liquidating distributions to the Special Limited Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.

 

Related Parties

 

The Company’s Advisor and certain affiliates of the Sponsor, including the Special Limited Partner, are related parties of the Company as well as the other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, these entities are entitled to compensation and reimbursement for services and costs incurred for services related to the investment, development, management and disposition of the Company’s assets. The compensation is generally 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.

 

2. Summary of Significant Accounting Policies

 

Principles of Consolidation and Basis of Presentation

 

The consolidated financial statements include the accounts of Lightstone REIT III and the Operating Partnership and its subsidiaries (over which Lightstone REIT III exercises financial and operating control). As of June 30, 2024, Lightstone REIT III had a 99% general partnership interest in the common units of the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the U.S. (“GAAP”), and entities deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest or entities which it is not deemed to be the primary beneficiary, it accounts for the investment using the equity method of accounting.

 

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, 2023 (the “2023 Form 10-K”). The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT III, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

 

8

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

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 depreciable lives. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.

 

The consolidated balance sheet as of December 31, 2023 included herein has been derived from the consolidated balance sheet included in the Company’s 2023 Form 10-K.

 

The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

 

Income Taxes

 

The Company elected to be taxed and qualify as a REIT commencing with the taxable year ended December 31, 2015. As a REIT, the Company generally will not be subject to U.S. federal income tax on its net taxable income that it distributes currently to its stockholders. To maintain its REIT qualification under the Internal Revenue Code of 1986, as amended, or the Code, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. Additionally, even if the Company continues to qualify as a REIT for U.S. federal income tax purposes, it may still be subject to some U.S. federal, state and local taxes on its income and property and to U.S. federal income taxes and excise taxes on its undistributed income, if any.

 

To maintain its qualification as a REIT, the Company engages in certain activities through a taxable REIT subsidiary (“TRS”), including when it acquires a hotel it usually establishes a new TRS and enters into an operating lease agreement for the hotel. As such, the Company is subject to U.S. federal and state income taxes and franchise taxes from these activities.

 

The Company’s income tax benefits and expense are included in other income, net on its consolidated statements of operations. During the three and six months ended June 30, 2024, the Company recorded income tax expense of $5 and $48, respectively. During the three and six months ended June 30, 2023, the Company recorded an income tax benefit of $3 and income tax expense of $63, respectively.

 

As of June 30, 2024 and December 31, 2023, the Company had no material uncertain income tax positions.

 

Revenues

 

The following table represents the total revenues from hotel operations on a disaggregated basis:

 

Schedule of revenues from hotel operations                                
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
Revenues   2024     2023     2024     2023  
Room   $ 8,461     $ 7,726     $ 14,516     $ 13,856  
Food, beverage and other     258       240       473       476  
Total revenues   $ 8,719     $ 7,966     $ 14,989     $ 14,332  

 

9

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

New Accounting Pronouncements

 

In November 2023, the FASB issued an accounting standards update which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within segment profit and loss, as well as the title and position of the CODM. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the guidance and the impact it may have on the consolidated financial statements.

 

In December 2023, the FASB issued an accounting standards update which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update is effective for annual periods beginning after December 15, 2024. The Company is evaluating the guidance and the impact it may have on the consolidated financial statements.

 

The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.

 

Concentration of Risk

 

As of June 30, 2024 and December 31, 2023, the Company had cash deposited in certain financial institutions in excess of U.S. federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents.

 

Current Environment

 

The Company’s operating results and financial condition 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, its 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 and uncertainty as a result of recent banking failures, 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, inflation and recession.

 

The Company’s overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation, higher interest rates, labor and supply chain challenges and other changes in economic conditions could adversely affect the Company’s future results from operations and its financial condition.

 

10

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

3. Investments in Unconsolidated Affiliated Real Estate Entities

 

The entities 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 exercise financial and operating control over these entities. A summary of the Company’s investments in unconsolidated affiliated real estate entities is as follows:

 

Schedule of investments in the unconsolidated affiliated real estate                              
                As of  
Entity   Date of
Ownership		     Ownership %     June 30,
2024		     December 31,
2023		  
Hilton Garden Inn Joint Venture   March 27, 2018       50 %   $ 8,523     $ 9,405  
Williamsburg Moxy Hotel Joint Venture   August 5, 2021       25 %     9,710       10,835  
Total investments in unconsolidated affiliated real estate entities                 $ 18,233     $ 20,240  

 

Hilton Garden Inn Joint Venture

 

On March 27, 2018, the Company and Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a REIT also sponsored by the Company’s Sponsor and a related party, acquired, through the Hilton Garden Inn Joint Venture, the Hilton Garden Inn – Long Island City from an unrelated third party, for aggregate consideration of $60.0 million, which consisted of $25.0 million of cash and $35.0 million of proceeds from a five-year term non-recourse mortgage loan, collateralized by the Hilton Garden Inn – Long Island City, from a financial institution (the “Hilton Garden Inn Mortgage”), excluding closing and other related transaction costs. The Company paid $12.9 million for a 50% membership interest in the Hilton Garden Inn Joint Venture.

 

On May 31, 2023, the Hilton Garden Inn Mortgage was further amended to provide for (i) an extension of the maturity date for an additional five years, (ii) the interest rate to be adjusted to SOFR plus 3.25%, subject to a 6.41% floor, interest-only payments for the first two years of its extended term with principal and interest payments pursuant to a 300-month amortization schedule thereafter and the remaining unpaid balance due in full at its maturity date of May 31, 2028, (iii) the ability to draw up to an additional $3.0 million of principal, subject to the satisfaction of certain conditions, and (iv) certain changes to its financial covenants. Additionally, the Hilton Garden Inn Joint Venture will fund $1.3 million, through monthly payments of $37 from May 31, 2023 through June 1, 2026, into a cash collateral reserve account which may be drawn upon for specified capital expenditures.

 

The Company and Lightstone REIT II each have a 50% co-managing membership interest in the Hilton Garden Inn Joint Venture. The Company accounts for its membership interest in the Hilton Garden Inn Joint Venture in accordance with the equity method of accounting because it exerts significant influence over but does not control the Hilton Garden Inn Joint Venture. All capital contributions and distributions of earnings from the Hilton Garden Inn Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the Hilton Garden Inn Joint Venture are made to the members pursuant to the terms of the Hilton Garden Inn Joint Venture’s operating agreement.

 

During the six months ended June 30, 2024, the Company received distributions from the Hilton Garden Joint Venture of $0.6 million and made contributions of $0.1 million to the Hilton Garden Joint Venture. During the six months ended June 30, 2023, the Company made contributions of $0.4 million to the Hilton Garden Inn Joint Venture.

 

As of June 30, 2024, the Hilton Garden Inn Joint Venture is in compliance with all of its financial debt covenants.

 

11

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

Hilton Garden Inn Joint Venture Financial Information

 

The following table represents the condensed statements of operations for the Hilton Garden Inn Joint Venture for the periods indicated:

 

 Schedule of condensed statement of operations                                
    For the
Three Months Ended
June 30,
2024		     For the
Three Months Ended
June 30,
2023		     For the
Six Months Ended
June 30,
2024		     For the
Six Months Ended
June 30,
2023		  
Revenues   $ 3,473     $ 3,115     $ 5,775     $ 5,144  
                                 
Property operating expenses     1,992       1,907       3,803       3,414  
General and administrative costs     13       106        35       132  
Depreciation and amortization     598        596        1,206       1,205  
Operating income     870        506        731       393  
Interest expense     (705 )     (825 )     (1,389 )     (1,451 )
Net income/(loss)   $ 165     $ (319 )   $ (658 )   $ (1,058 )
Company’s share of earnings (50.00%)   $ 83      $ (159 )   $ (329 )   $ (529 )

 

The following table represents the condensed balance sheets for the Hilton Garden Inn Joint Venture as of the dates indicated:

 

Schedule of condensed balance sheet                
    As of     As of  
    June 30,
2024		     December 31,
2023		  
Investment property, net   $ 46,893     $ 48,001  
Cash     820       1,741  
Other assets     2,024       1,816  
Total assets   $ 49,737     $ 51,558  
                 
Mortgage payable, net   $ 32,280     $ 32,273  
Other liabilities     1,011       1,075  
Members’ capital     16,446       18,210  
Total liabilities and members’ capital   $ 49,737     $ 51,558  

 

Williamsburg Moxy Hotel Joint Venture

 

On August 5, 2021, the Company formed a joint venture with Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), a related party REIT also sponsored by the Company’s Sponsor, pursuant to which the Company acquired 25% of Lightstone REIT IV’s membership interest in Bedford Avenue Holdings LLC, which effective on that date became the Williamsburg Moxy Hotel Joint Venture, for aggregate consideration of $7.9 million. In July 2019, Lightstone REIT IV, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC, previously acquired four adjacent parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood in the Brooklyn borough of New York City, from unrelated third parties, for the development of the Williamsburg Moxy Hotel.

 

12

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

As a result, the Company and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. The Company has determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and the Company is not the primary beneficiary, as it was determined that Lightstone REIT IV is the primary beneficiary. Therefore, the Company accounts for its membership interest in the Williamsburg Moxy Hotel Joint Venture in accordance with the equity method because it exerts significant influence over but does not control the Williamsburg Moxy Hotel Joint Venture. All capital contributions and distributions of earnings from the Williamsburg Moxy Hotel Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the Williamsburg Moxy Hotel Joint Venture are made to the members pursuant to the terms of the Williamsburg Moxy Hotel Joint Venture’s operating agreement.

 

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a development agreement (the “Development Agreement”) with an affiliate of the Sponsor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg Moxy Developer was paid a development fee equal to 3% of hard and soft costs, as defined in the Development Agreement, incurred in connection with the development and construction of the Williamsburg Moxy Hotel. Additionally on August 5, 2021, the Williamsburg Moxy Hotel Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. Furthermore, certain affiliates of the Sponsor are reimbursed for various development and development-related costs attributable to the Williamsburg Moxy Hotel.

 

The Williamsburg Moxy Hotel was substantially completed and opened for business on March 7, 2023. In preparation for the opening of the Williamsburg Moxy Hotel, which opened on March 7, 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $0.5 million and $2.2 million during the three and six months ended June 30, 2023, respectively. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs and are expensed as incurred.

 

During the six months ended June 30, 2024, the Company made capital contributions to the Williamsburg Moxy Joint Venture of $0.1 million. During the six months ended June 30, 2023, the Company made capital contributions to the Williamsburg Moxy Joint Venture of $0.6 million.

 

Moxy Construction Loan

 

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility with a financial institution for up to $77.0 million (the “Moxy Construction Loan”) to fund certain of the development, construction and certain pre-opening costs associated with the Williamsburg Moxy Hotel. The Moxy Construction Loan, which was scheduled to initially mature on February 5, 2024, was further extended to May 4, 2024. The Moxy Construction Loan was collateralized by the Williamsburg Moxy Hotel. The Moxy Construction Loan provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective after June 30, 2023, the Moxy Construction Loan’s interest rate converted from LIBOR plus 9.00%, with a floor of 9.50%, to SOFR plus 9.11%, with a floor of 9.61%. The Moxy Construction Loan required monthly interest-only payments based on a rate of 7.50% and the excess was added to the outstanding loan balance due at maturity. SOFR as of June 30, 2024 and December 31, 2023 was 5.34% and 5.35%, respectively.

 

As of December 31, 2023, the outstanding principal balance of the Moxy Construction Loan was $83.8 million (including $6.9 million of excess interest added to principal) which was presented, net of deferred financing fees of $0.1 million, respectively, on the condensed balance sheets and was classified as mortgages payable, net.

 

In connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture provided certain completion and carry cost guarantees. Furthermore, in connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of loan fees and expenses and accrued $0.8 million of loan exit fees which were included in other liabilities on the condensed balance sheets as of December 31, 2023.

 

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LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

Moxy Mortgage Loans

 

On April 19, 2024, the Williamsburg Moxy Joint Venture entered into an $86.0 million senior mortgage loan facility (the “Moxy Senior Loan”) and a $9.0 million junior mortgage loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Mortgage Loans”) with unrelated third parties.

 

The Moxy Mortgage Loans bear interest at SOFR plus 5.10%, subject to a 8.75% floor (10.44% as of June 30, 2024). The Moxy Mortgage Loans initially mature on April 19, 2027, but may be further extended though the exercise of two six-month extension options, subject to the satisfaction of certain conditions. The Moxy Mortgage Loans require monthly interest-only payments with their outstanding principal due in full at maturity and are collateralized by the Williamsburg Moxy Hotel, however, the Moxy Junior Loan is subordinate to the Moxy Senior Loan. The Williamsburg Moxy Hotel Joint Venture used $85.8 million of the aggregate proceeds from the Moxy Mortgage Loans in connection with the payoff of the Moxy Construction Loan consisting of the outstanding indebtedness (principal and interest) of $86.0 million and accrued exit fees of $0.8 million, net of restricted escrows of $1.0 million.

 

As of June 30, 2024, the outstanding principal balance of the Moxy Mortgage Loans was $95.0 million which is presented net of deferred financing fees of $3.1 million on the condensed balance sheet and is classified as mortgages payable, net.

 

In connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture has provided certain interest and carry costs guarantees. Furthermore, in connection with the Moxy Mortgage Loans, $3.2 million of the initial proceeds advanced at closing were used to fund reserves for interest, real estate taxes and insurance. Additionally, in connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture paid an aggregate of $2.8 million of loan fees and expenses and accrued $0.5 million of loan exit fees which were included in other liabilities on the condensed balance sheets as of June 30, 2024.

 

Williamsburg Moxy Hotel Joint Venture Financial Information

 

The following table represents the condensed statements of operations for the Williamsburg Moxy Hotel Joint Venture for the periods indicated:

 

Schedule of condensed statement of operations                                
    For the
Three Months Ended
June 30,
2024		     For the
Three Months Ended
June 30,
2023		     For the
Six Months Ended
June 30,
2024		     For the
Six Months Ended
June 30,
2023		  
Revenues   $ 8,302     $ 7,106     $ 12,861     $ 8,059  
                                 
Property operating expenses     5,778        5,905       10,440       7,245  
Pre-opening costs     -        493        -       2,228  
General and administrative costs     55        47        115       79  
Depreciation and amortization     921       869        1,829       1,140  
Operating income/(loss)     1,548       (208 )     477       (2,633 )
Interest expense     (2,851 )     (3,162 )     (6,139 )     (3,970 )
Net loss   $ (1,303 )   $ (3,370 )   $ (5,662 )   $ (6,603 )
Company’s share of net loss (25.00%)   $ (326 )   $ (843 )   $ (1,416 )   $ (1,651 )
Additional deprecation and amortization expense(1)     (10 )     -       (10 )     -  
Company’s net loss from investment   $ (336 )   $ (843 )   $ (1,426 )   $ (1,651 )

 

 
(1) Additional depreciation and amortization expense relates to the amortization of the difference between the cost of the interest in the Williamsburg Moxy Hotel Joint Venture and the amount of the underlying equity in net assets of the Williamsburg Moxy Hotel Joint Venture.

 

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LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

The following table represents the condensed balance sheets for the Williamsburg Moxy Hotel Joint Venture as of the dates indicated:

 

Schedule of condensed balance sheet                
    As of     As of  
    June 30,
2024		     December 31,
2023		  
Investment property, net   $ 124,931     $ 126,603  
Cash     5,890       3,453  
Other assets     4,476       2,385  
Total assets   $ 135,297     $ 132,441  
                 
Mortgages payable, net   $ 91,861     $ 83,666  
Other liabilities     5,856       6,023  
Members’ capital     37,580       42,752  
Total liabilities and members’ capital   $ 135,297     $ 132,441  

 

4. 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:

 

Schedule of available-for-sale securities reconciliation                                
    As of June 30, 2024  
    Adjusted
Cost		     Gross Unrealized
Gains		     Gross Unrealized
Losses		     Fair
Value		  
Marketable Securities:                                
Equity securities:                                
Preferred Equity Securities   $ 3,456     $ 47     $ -     $ 3,503  
Mutual Funds     1,215       -       -       1,215  
      4,671       47       -       4,718  
Debt securities:                                
Corporate Bonds     746       -       (125 )     621  
Total   $ 5,417     $ 47     $ (125 )   $ 5,339  

 

    As of December 31, 2023  
    Adjusted
Cost		     Gross Unrealized
Gains		     Gross Unrealized
Losses		     Fair
Value		  
Marketable Securities:                                
Equity securities:                                
Preferred Equity Securities   $ 3,456     $ 14     $ (4 )   $ 3,466  
Mutual Funds     3,150       -       -       3,150  
      6,606       14       (4 )     6,616  
Debt securities:                                
Corporate Bonds     746       -       (166 )     580  
Total   $ 7,352     $ 14     $ (170 )   $ 7,196  

 

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LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

As of June 30, 2024, the Company has not recognized an allowance for expected credit losses related to available-for-sale debt securities as the Company has not identified any unrealized losses for these investments attributable to credit factors. The Company’s unrealized loss on investments in corporate bonds was primarily caused by recent rising interest rates. The Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.

 

The Company may sell certain of its investments in marketable debt securities 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.

 

The Company’s mutual funds were classified as Level 1 assets and the Company’s preferred equity securities, corporate bonds and interest rate cap contract were classified as Level 2 assets. There were no transfers between the level classifications during the six months ended June 30, 2024 and 2023.

 

The fair values of the Company’s investments in mutual funds are measured using quoted prices in active markets for identical assets and its 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. The fair value of the Company’s interest rate cap contract is measured using other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

 

The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

 

Schedule of available-for-sale securities        
    As of
June 30,
2024		  
Due in 1 year   $ -  
Due in 1 year through 5 years     -  
Due in 5 year through 10 years     -  
Due after 10 years     621  
Total   $ 621  

 

The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.

 

16

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

5. Mortgages payable, net

 

Mortgages payable, net consists of the following:

 

 Schedule of mortgages payable, net                                        
Description   Interest
Rate		   Weighted Average
Interest Rate
for the
Six Months Ended
June 30,
2024		     Maturity
Date		   Amount Due
at Maturity		     As of
June 30,
2024		     As of
December 31,
2023		  
Revolving Credit Facility   AMERIBOR + 3.15%
(floor of 4.00%)		     8.66 %   July 2027   $ 30,844     $ 30,844     $ 30,844  
                                         
Home2 Suites Tukwila Loan   AMERIBOR + 3.50%
(floor of 3.75%)		     9.02 %   December 2026     15,524       16,123       16,210  
                                         
Home2 Suites Salt Lake City Loan   AMERIBOR + 3.50%
(floor of 3.75%)		     9.02 %   December 2026     10,094       10,483       10,540  
                                         
Total mortgages payable         8.83 %       $ 56,462       57,450       57,594  
                                         
Less: Deferred financing costs                             (285 )     (433 )
                                         
Total mortgage payable, net                           $ 57,165     $ 57,161  

 

AMERIBOR as of June 30, 2024 and December 31, 2023 was 5.44% and 5.43%, respectively.

 

Revolving Credit Facility

 

The Company has a non-recourse revolving credit facility (the “Revolving Credit Facility”) with a financial institution. The Revolving Credit Facility provides it with a line of credit of up to $60 million pursuant to which it may designate properties as collateral that allow borrowings up to a 65% loan-to-value ratio subject to also meeting certain financial debt covenants. The Revolving Credit Facility provides for monthly interest-only payments and the outstanding principal balance due at its final maturity. The Revolving Credit Facility also requires the maintenance of certain financial debt covenants, including a prescribed minimum debt service coverage ratio and a debt yield ratio, which may also be achieved through principal paydowns on the outstanding balance. However, in November 2023 the lender agreed to waive one of the financial ratios and modify the other financial ratio through the scheduled maturity of the Revolving Credit Facility on July 13, 2024.

 

17

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

The Revolving Credit Facility, which had an outstanding balance of $30.8 million as of both June 30, 2024 and December 31, 2023, subsequently matured on July 13, 2024 but the lender agreed to take no actions and the Revolving Credit Facility was subsequently amended and restated on July 31, 2024, at which time its following key terms were adjusted:

 

  ●

The maturity date was extended by three years to July 13, 2027 with two additional one-year extension options at the sole discretion of the lender;

 

  ●

The maximum borrowing amount was reduced to $40.0 million (of which $30.8 million was outstanding);

 

  ●

The interest rate was prospectively changed to SOFR plus 3.30%, subject to a 6.64% floor; and

 

  ●

The financial debt covenants commence with the quarter ended September 30, 2024, but the Revolving Credit Facility provides for phased increases to the prescribed minimum financial ratios throughout the initial three-year term of the Revolving Credit Facility.

 

Six of the Company’s hotel properties are currently pledged as collateral under the Revolving Credit Facility.

 

On December 1, 2023, the Company entered into an interest rate cap contract at a cost of $44 with an unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving Credit Facility. The interest rate cap contract had a notional amount of $30.8 million, matured on July 13, 2024 and effectively capped AMERIBOR at 5.34%.

 

In connection with the amendment and restatement of the Revolving Credit Facility, the Company simultaneously entered into an interest rate cap contract at a cost of $85 with an unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving Credit Facility. The interest rate cap contract has a notional amount of $30.8 million, matures on July 31, 2025 and effectively caps SOFR at 5.34%.

 

Principal Maturities

 

The following table sets forth the estimated contractual principal maturities of the Company’s mortgages payable, including balloon payments due at maturity, as of June 30, 2024 after taking into consideration the aforementioned amendment and restatement of the Revolving Credit Facility:

 

 Schedule of principal maturities                                            
    2024     2025     2026     2027     2028     Thereafter     Total  
Principal maturities   $ 204     $ 409     $ 25,993     $ 30,844     $ -     $ -     $ 57,450  
                                             
Less: Deferred financing costs                                                     (285 )
                                                         
Total principal maturities, net                                                   $ 57,165  

 

Certain of the Company’s debt agreements also contain clauses providing for prepayment penalties. As of June 30, 2024, the Company was in compliance with all its financial debt covenants.

 

18

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

6.

Company’s Stockholder’s Equity

 

Distributions on Common Shares

 

On November 13, 2023, the Board of Directors authorized and the Company declared a Common Share distribution of $0.075 per share for the quarterly period ending December 31, 2023. The distribution is the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. The distribution of $1.0 million was paid on January 15, 2024 to stockholders of record at the close of business on December 31, 2023.

 

On March 18, 2024, the Board of Directors determined to suspend regular quarterly distributions.

 

Future distributions declared, if any, 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, revenues and other sources of income, operating and interest expenses and 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.

 

SRP

 

The Company’s share repurchase program (the “SRP”) may provide eligible stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to the Company, subject to restrictions and applicable law.

 

On March 19, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions.

 

Effective May 10, 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 the Company’s current estimated net asset value per share of common stock, 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.

 

On the above noted date, 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 proration if either type of redemption requests exceeded the annual limitation.

 

For the six months ended June 30, 2024, the Company repurchased 34,514 Common Shares at a weighted average price of $9.95. For the six months ended June 30, 2023, the Company repurchased 86,223 Common Shares at a weighted average price of $10.03.

 

Earnings per Share

 

The Company had no potentially dilutive securities outstanding during the periods presented. Accordingly, basic and diluted earnings per share is calculated by dividing net income/(loss) by the weighted-average number of shares of common stock outstanding during the applicable period.

 

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LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

7. Related Party Transactions

 

The Company’s Sponsor, Advisor and their affiliates, including the Special Limited Partner, are related parties of the Company as well as other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, certain of these entities are entitled to compensation and reimbursement of costs incurred for services related to the investment, development, management and disposition of our assets. The compensation is generally 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.

 

The following table represents the fees incurred associated with the payments to the Company’s Advisor for the periods indicated:

 

Schedule of fees payments to company’s advisor                            
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
    2024     2023     2024     2023  
Asset management fees (general and administrative costs)   $ 365     $ 360     $ 730     $ 677  
Finance fees(1)     178       -       178       -  
Total   $ 543     $ 360     $ 908     $ 677  

 

 
(1) Finances fees were capitalized and are included in the carrying value of the Company’s investment in the Williamsburg Moxy Hotel Joint Venture.

 

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 the Company’s independent directors. Payments to the Advisor or certain affiliates of the Sponsor may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse the Advisor and certain affiliates of the Sponsor for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the Company’s assets, it may pay the Advisor or certain affiliates of the Sponsor a disposition commission.

 

8. Financial Instruments

 

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and other assets, accounts payable and other accrued expenses, distributions payable and due to related parties approximate their fair values because of the short maturity of these instruments.

 

The carrying amount of the mortgages payable approximate fair value because the interest rates are variable and reflective of market rates.

 

20

 

 

LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)

 

9. Commitments and Contingencies

 

Management Agreements

 

The Company’s hotels operate pursuant to management agreements (the “Management Agreements”) with various third-party management companies. The management companies perform management functions including, but not limited to, hiring and supervising employees, establishing room prices, establishing administrative policies and procedures, managing expenditures and arranging and supervising public relations and advertising. The Management Agreements are for initial terms ranging from 1 one year to 10 years however, the agreements can be cancelled for any reason by the Company after giving 60 days’ notice after the one-year anniversary of the commencement of the respective agreement.

 

The Management Agreements provide for the payment of a base management fee equal to 3% to 3.5% of gross revenues, as defined, and an incentive management fee based on the operating results of the hotel, as defined. The base management fee and incentive management fee, if any, are recorded as a component of property operating expenses in the consolidated statements of operations.

 

Franchise Agreements

 

As of June 30, 2024, the Company’s hotels operated pursuant to various franchise agreements. Under the franchise agreements, the Company generally pays a fee equal to 3% to 5.5% of gross room sales, as defined, and a marketing fund charge from 2.0% to 2.5% of gross room sales. The franchise fee and marketing fund charge are recorded as a component of property operating expenses in the consolidated statements of operations.

 

The franchise agreements are generally for initial terms ranging from 15 years to 20 years, expiring between 2028 and 2034.

 

Legal Proceedings

 

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 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.

 

21

 

 

PART I. FINANCIAL INFORMATION, CONTINUED:

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Lightstone Value Plus REIT III, Inc. and Subsidiaries and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Lightstone Value Plus REIT III, Inc., a Maryland corporation, and, as required by context, Lightstone Value Plus REIT III, L.P., which we collectively refer to as the “Operating Partnership”. Dollar amounts are presented in thousands, except per share data, revenue per available room (“RevPAR”), average daily rate (“ADR”), annualized revenue per square foot and where indicated in millions.

 

Forward-Looking Statements

 

Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include discussion and analysis of the financial condition of Lightstone Value Plus REIT III, Inc. and our subsidiaries (which may be referred to herein as the “Company,” “we,” “us” or “our”), including our ability to make accretive real estate or real estate-related investments, to rent space on favorable terms, to address our debt maturities and to fund our liquidity requirements, to sell our assets when we believe advantageous to achieve our investment objectives, to fund our anticipated capital expenditures, to meet the amount and timing of anticipated future cash distributions to our stockholders, to grow the estimated net asset value per share of our common stock (“NAV per Share”), and other matters. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.

 

These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors described below:

 

  ● market and economic challenges experienced by the United States (“U.S.”) and global economies or real estate industry as a whole and the local economic conditions in the markets in which our investments are located. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; such as inflation, recession, political upheaval or uncertainty, terrorism and acts of war, natural and man-made disasters, cybercrime, and outbreaks of contagious diseases;
     
  ● the availability of cash flow from operating activities for distributions, if required to maintain our status as a real estate investment trust (“REIT”);
     
  ● conflicts of interest arising out of our relationships with our advisor and its affiliates;
     
  ● our ability to retain our executive officers and other key individuals who provide advisory and property management services to us;
     
  ● our level of debt and the terms and limitations imposed on us by our debt agreements;
     
  ● the availability of credit generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions and requirements of that debt;
     
  ● our ability to make accretive investments;
     
  ● our ability to diversify our portfolio of assets;

 

22

 

 

  ● changes in market factors that could impact our rental rates and operating costs;
     
  ● our ability to secure leases at favorable rental rates;
     
  ● our ability to sell our assets at a price and on a timeline consistent with our investment objectives;
     
  ● impairment charges;
     
  ● unfavorable changes in laws or regulations impacting our business, our assets or our key relationships; and
     
  ● factors that could affect our ability to qualify as a REIT.

 

Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Quarterly Report on Form 10-Q, and may ultimately prove to be incorrect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.

 

Cautionary Note

 

The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Quarterly Report on Form 10-Q are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties. Moreover, these representations, warranties, or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.

 

Business and Structure

 

Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), is a Maryland corporation formed on October 5, 2012, which elected to qualify as a REIT for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2015.

 

Lightstone REIT III is structured as an umbrella partnership REIT (“UPREIT”), and substantially all of its current and future business is and will be conducted through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the “Operating Partnership”). As of June 30, 2024, Lightstone REIT III had a 99% general partnership interest in the Operating Partnership’s common units.

 

Lightstone REIT III 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 Quarterly Report on Form 10-Q refers to Lightstone REIT III, its Operating Partnership or the Company as required by the context in which such pronoun is used.

 

Through the Operating Partnership, we own, operate and develop commercial properties and make real estate-related investments. Since our inception, we have primarily acquired, developed and operated commercial hospitality properties, principally consisting of limited-service hotels and one full-service hotel all located in the U.S. However, our commercial holdings may also to a lesser extent, consist of retail (primarily multi-tenanted shopping centers), industrial and office properties. Our real estate investments are held by us alone or jointly with other parties. In addition, we may invest up to 20% of our net assets in collateralized debt obligations, commercial mortgage-backed securities (“CMBS”) and mortgage and mezzanine loans secured, directly or indirectly, by the same types of properties which we may acquire directly. Although most of our investments are these types, we may invest in whatever types of real estate or real estate-related investments that we believe are in our best interests. We evaluate all of our real estate investments as one operating segment. We currently intend to hold our investments until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that the objectives will not be met.

 

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As of June 30, 2024, we (i) wholly owned and consolidated the operating results and financial condition of eight limited service hotels containing a total of 872 rooms, (ii) held an unconsolidated 50% membership interest in LVP LIC Hotel JV LLC (the “Hilton Garden Inn Joint Venture”), which owns one limited service hotel, and (iii) held an unconsolidated 25% membership interest in Bedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), which owns one full service hotel. We account for our unconsolidated membership interests in the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture under the equity method of accounting.

 

The Hilton Garden Inn Joint Venture owns a 183-room, limited-service hotel (the “Hilton Garden Inn – Long Island City) located in the Long Island City neighborhood in the Queens borough of New York City. The Williamsburg Moxy Hotel Joint Venture developed, constructed and owns a 216-room branded hotel (the “Williamsburg Moxy Hotel”) located in the Williamsburg neighborhood in the Brooklyn borough of New York City, which opened on June 30, 2023. Both the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture are between us and related parties.

 

Our advisor is Lightstone Value Plus REIT III LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. Our Advisor also owns 20,000 shares of our common stock (“Common Shares”) which were issued on December 24, 2012 for $200, or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of the Lightstone Group, LLC (the Sponsor”), which served as our sponsor during our initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on December 11, 2014 for $2.0 million, or $9.00 per share. Pursuant to the terms of an advisory agreement and subject to the oversight of our board of directors (the “Board of Directors”), the Advisor has primary responsibility for making investment decisions on our behalf and managing our day-to-day operations. Through his ownership and control of the Sponsor, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP III LLC, a Delaware limited liability company (the “Special Limited Partner”), which owns 242 subordinated participation interests (“Subordinated Participation Interests”) in the Operating Partnership which were acquired at a cost of $50,000 per unit, or for aggregate consideration of $12.1 million 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 Lightstone REIT III or the Operating Partnership.

 

We have no employees. We are dependent on the Advisor and certain affiliates of the Sponsor for services that are essential to us, including asset management, property management (excluding our hospitality properties, each of which are managed by an unrelated third-party property manager) and acquisition, disposition, development and financing activities, and other general administrative responsibilities; such as tax, accounting, legal, information technology and investor relations services. If the Advisor and certain affiliates of the Sponsor are unable to provide these services to us, we would be required to provide the services ourselves or obtain the services from other parties.

 

Our Common Shares are not currently listed on a national securities exchange. We may seek to list our Common Shares 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 Common Shares at this time. We do not anticipate that there would be any active market for our Common Shares until they are listed for trading.

 

Noncontrolling Interests – Partners of the Operating Partnership

 

Limited Partner

 

On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. The Advisor has the right to convert its limited partner units into cash or, at our option, an equal number of our Common Shares.

 

24

 

 

Special Limited Partner

 

In connection with our Offering, the Special Limited Partner purchased from the Operating Partnership an aggregate of 242 Subordinated Participation Interests for $50,000 per unit, or aggregate consideration of $12.1 million.

 

As the indirect majority owner of the Special Limited Partner, Mr. Lichtenstein is the beneficial owner of a 99% interest in such Subordinated Participation Interests and thus receives an indirect benefit from any distributions made in respect thereof.

 

These Subordinated Participation Interests may entitle the Special Limited Partner to a portion of any regular distributions that we make to our stockholders, but only after our stockholders have received a stated preferred return. However, from inception through June 30, 2024, there have been no distributions declared on the Subordinated Participation Interests. Any future distributions on the Subordinated Participation Interests will always be subordinated until stockholders receive a stated preferred return.

 

The Subordinated Participation Interests may also entitle the Special Limited Partner to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net proceeds available for distribution upon our liquidation and, therefore, cannot be determined at the present time. Liquidating distributions to the Special Limited Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.

 

Concentration of Credit Risk

 

As of June 30, 2024 and December 31, 2023, we had cash deposited in certain financial institutions in excess of U.S. federally insured levels. We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk with respect to our cash and cash equivalents or restricted cash.

 

Current Environment

 

Our operating results and financial condition 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 and banking failures, 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, inflation and recession.

 

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation, higher interest rates, labor and supply chain challenges and other changes in economic conditions could adversely affect our future results from operations and our financial condition.

 

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-Q. The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”) requires our 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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Portfolio Summary –

 

    Location   Year Built   Date
Acquired		   Year to Date
Available Rooms		     Percentage
Occupied
for the
Six Months Ended
June 30,
2024		     RevPAR
for the
Six Months Ended
June 30,
2024		     ADR
For the
Six Months Ended
June 30,
2024		  
Wholly-Owned and Consolidated Hospitality Properties:                                            
                                             
Hampton Inn – Des Moines   Des Moines, Iowa   1987   2/4/2015     21,840       72 %   $ 84.19     $ 117.14  
                                             
Courtyard – Durham   Durham, North Carolina   1996   5/15/2015     26,572       60 %   $ 71.32     $ 118.14  
                                             
Hampton Inn – Lansing   Lansing, Michigan   2013   3/10/2016     15,652       72 %   $ 91.06     $ 127.17  
                                             
Courtyard – Warwick   Warwick, Rhode Island   2003   3/23/2016     16,744       69 %   $ 96.34     $ 139.95  
                                             
Home2 Suites – Salt Lake   Salt Lake City, Utah   2013   8/2/2016     22,750       70 %   $ 82.83     $ 118.62  
                                             
Home2 Suites – Tukwila   Tukwila, Washington   2015   8/2/2016     25,298       91 %   $ 148.19     $ 162.69  
                                             
Fairfield Inn – Austin   Austin, Texas   2014   9/13/2016     15,288       64 %   $ 66.04     $ 102.64  
                                             
Staybridge Suites – Austin   Austin, Texas   2009   10/7/2016     14,560       71 %   $ 75.63     $ 106.06  
                                             
            Total     158,704       72 %   $ 91.47     $ 127.76  

 

Unconsolidated Affiliated Real Estate Entities:

 

Hospitality   Location   Year Built   Date
Acquired/Opened		   Year to Date
Available Rooms		     Percentage
Occupied
for the
Six Months Ended
June 30,
2024		     RevPAR
for the
Six Months Ended
June 30,
2024		     ADR
For the
Six Months Ended
June 30,
2024		  
Hilton Garden Inn – Long Island City   Long Island City, New York   2014   3/27/2018     33,306       86 %   $ 162.70     $ 190.27  
                                             
Williamsburg Moxy Hotel   Williamsburg, New York   2023   3/7/2023     39,312       86 %   $ 216.79     $ 251.80  

 

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The following information generally applies to our investments in our real estate properties:

 

  ● we believe our real estate properties are adequately covered by insurance and suitable for their intended purpose;
     
  ● our real estate properties are located in markets where we are subject to competition; and
     
  ● depreciation is provided on a straight-line basis over the estimated useful life of the applicable improvements.

 

Critical Accounting Policies and Estimates

 

There were no material changes during the six months ended June 30, 2024 to our critical accounting policies as reported in our Annual Report on Form 10-K, for the year ended December 31, 2023.

 

Results of Operations

 

Comparison of the three months ended June 30, 2024 vs. June 30, 2023

 

Consolidated

 

Our consolidated revenues, property operating expenses, real estate taxes, general and administrative expense and depreciation and amortization for the three months ended June 30, 2024 and 2023 are attributable to our consolidated hospitality properties, all of which were owned by us during the entire periods presented.

 

During the three months ended June 30, 2024 compared to same period in 2023, our consolidated hospitality portfolio experienced increases in the percentage of rooms occupied to 78% from 74%, RevPAR to $106.63 from $97.36 and ADR to $136.94 from $132.14.

 

Revenues

 

Revenues increased by $0.7 million to $8.7 million during the three months ended June 30, 2024 compared to $8.0 million for the same period in 2023. The favorable impact on our revenues during the 2024 period was a result of higher occupancy, RevPAR and ADR.

 

Property operating expenses

 

Property operating expenses increased by $0.2 million to $5.3 million during the three months ended June 30, 2024 compared to $5.1 million for the same period in 2023. This increase is primarily attributable to the higher occupancy during the 2024 period and higher franchise and management fees resulting from the increase in revenues discussed above.

 

Real estate taxes

 

Real estate taxes were unchanged at $0.3 million during both the three months ended June 30, 2024 and 2023.

 

General and administrative expense

 

General and administrative expenses increased slightly by $0.1 million to $0.8 million during the three months ended June 30, 2024 compared to $0.7 million for the same period in 2023.

 

Depreciation and amortization

 

Depreciation and amortization expense decreased by $0.3 million to $0.8 million during the three months ended June 30, 2024 compared to $1.1 million for the same period in 2023.

 

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Interest expense

 

Interest expense was unchanged at $1.3 million during both the three months ended June 30, 2024 and 2023. Interest expense is attributable to the financings associated with our hotels and reflects changes in market interest rates on our mortgage debt, all of which bears interest at variable rates.

 

Loss from investments in unconsolidated affiliated real estate entities

 

Our loss from investments in unconsolidated affiliated real estate entities was $0.3 million and $1.0 million during the three months ended June 30, 2024 and 2023, respectively. Our earnings from investments in unconsolidated affiliated real estate entities are attributable to our unconsolidated 50% membership interest in the Hilton Garden Inn Joint Venture and our unconsolidated 25% membership interest Williamsburg Moxy Hotel Joint Venture.

 

Comparison of the six months ended June 30, 2024 vs. June 30, 2023

 

Consolidated

 

Our consolidated revenues, property operating expenses, real estate taxes, general and administrative expense and depreciation and amortization for the six months ended June 30, 2024 and 2023 are attributable to our consolidated hospitality properties, all of which were owned by us during the entire periods presented.

 

During the six months ended June 30, 2024 compared to same period in 2023, our consolidated hospitality portfolio experienced increases in the percentage of rooms occupied to 72% from 70%, RevPAR to $91.47 from $87.79 and ADR to $127.76 from $126.29.

 

Revenues

 

Revenues increased by $0.7 million to $15.0 million during the six months ended June 30, 2024 compared to $14.3 million for the same period in 2023. The favorable impact on our revenues during the 2024 period was a result of higher occupancy, RevPAR and ADR.

 

Property operating expenses

 

Property operating expenses increased by $0.3 million to $10.0 million during the six months ended June 30, 2024 compared to $9.7 million for the same period in 2023. This increase is primarily attributable to the higher occupancy during the 2024 period and reflects higher franchise and management fees resulting from the increase in revenues discussed above.

 

Real estate taxes

 

Real estate taxes increased slightly by $0.1 million to $0.7 million during the six months ended June 30, 2024 compared to $0.6 million for the same period in 2023.

 

General and administrative expense

 

General and administrative expenses increased by $0.2 million to $1.5 million during the six months ended June 30, 2024 compared to $1.3 million for the same period in 2023.

 

Depreciation and amortization

 

Depreciation and amortization expense decreased by $0.6 million to $1.7 million during the six months ended June 30, 2024 compared to $2.3 million for the same period in 2023.

 

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Interest expense

 

Interest expense increased slightly by $0.1 million to $2.7 million during the six months ended June 30, 2024 compared to $2.6 million for the same period in 2023. Interest expense is attributable to the financings associated with our hotels and reflects changes in market interest rates on our mortgage debt, all of which bears interest at variable rates.

 

Loss from investments in unconsolidated affiliated real estate entities

 

Our loss from investments in unconsolidated affiliated real estate entities was $1.8 million and $2.2 million during the six months ended June 30, 2024 and 2023, respectively. Our earnings from investments in unconsolidated affiliated real estate entities are attributable to our unconsolidated 50% membership interest in the Hilton Garden Inn Joint Venture and our unconsolidated 25% membership interest Williamsburg Moxy Hotel Joint Venture.

 

Financial Condition, Liquidity and Capital Resources

 

Overview:

 

As of June 30, 2024, we had $4.5 million of cash on hand and $5.3 million of marketable securities. We believe that these items along with revenues generated from our properties, interest and dividend income earned on our marketable securities and distributions received from our unconsolidated affiliated real estate entities will be sufficient to satisfy our expected cash requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q, which primarily consist of our anticipated operating expenses, scheduled debt service (excluding balloon payments due at maturity), capital expenditures (excluding non-recurring capital expenditures), capital contributions to our unconsolidated affiliated real estate entities, redemptions and cancellations of Common Shares 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, if necessary, through selective asset dispositions, proceeds received from the sale of marketable securities, joint venture arrangements, new borrowings and refinancing of existing borrowings.

 

As of June 30, 2024, we had mortgage indebtedness totaling $57.5 million. 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. Market conditions will dictate our overall leverage limit; as such our aggregate long-term permanent borrowings may be less than 75% of aggregate fair market value of all properties. We may also incur short-term indebtedness, having a maturity of two years or less.

 

Our charter provides that the aggregate amount of our borrowing, both secured and unsecured, may not exceed 300% of net assets in the absence of a justification showing that a higher level is appropriate, the approval of our Board of Directors and disclosure to stockholders. Net assets mean 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. Market conditions will dictate our overall leverage limit; as such our aggregate borrowings may be less than 300% of net assets. As of June 30, 2024, our total borrowings were $57.5 million which represented 57% of our net assets.

 

Any future properties that we may acquire or develop may be funded through a combination of borrowings and the proceeds received from the disposition of certain of our assets. These borrowing 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 non-recourse debt. 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.

 

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We may also obtain lines of credit to be used to acquire properties. If obtained, 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 and/or permanent financing. Our Sponsor and/or its affiliates may guarantee our lines of credit although they are not 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 an advisory agreement with the Advisor and various agreements with certain affiliates of our Sponsor which provide for us to pay certain fees in exchange for services performed by them on our behalf. Additionally, our ability to secure financing and our real estate operations are dependent upon our Advisor and certain affiliates of our Sponsor to perform such services as specified in these agreements.

 

In addition to meeting working capital needs and making distributions, if any, to maintain our status as a REIT, our capital resources are used to make various payments to our Advisor and certain affiliates of the Sponsor, such as payments of fees related to asset acquisition, development and leasing commissions, asset management fees, and property management (excluding our hospitality properties, each of which is managed by an unrelated third party property manager), as well as the reimbursement of acquisition related expenses and actual expenses it incurred for administrative and other services provided to us. Additionally, in the event of a liquidation of our assets, we may pay our Advisor or certain affiliates of our Sponsor, disposition fees. Furthermore, the Operating Partnership may be required to make distributions to the Special Limited Partner provided stockholders receive a distribution equal to their initial investment plus a stated preferred return. During the first quarter of 2024, the Advisor agreed to allow us to temporarily defer the payment of asset management fees.

 

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.

 

The following table represents the fees incurred associated with the payments to the Advisor for the periods indicated:

 

    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
    2024     2023     2024     2023  
Asset management fees (general and administrative costs)   $ 365     $ 360     $ 730     $ 677  
Finance fees(1)     178       -       178       -  
Total   $ 543     $ 360     $ 908     $ 677  

 

 
(1) Finances fees were capitalized and are included in the carrying value of our investment in the Williamsburg Moxy Hotel Joint Venture.

 

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:

 

    For the
Six Months Ended
June 30,		  
    2024     2023  
Cash (used in)/provided by operating activities   $ (20 )   $ 38  
Cash provided by/(used in) investing activities     2,160       (7,279 )
Cash used in financing activities     (1,457 )     (1,840 )
Change in cash, cash equivalents and restricted cash     683       (9,081 )
Cash, cash equivalents and restricted cash, beginning of year     3,853       18,391  
Cash, cash equivalents and restricted cash, end of the period   $ 4,536     $ 9,310  

 

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Operating activities

 

The cash used in operating activities of $20 during the six months ended June 30, 2024 consisted of our net loss of $3.1 million and the changes in operating assets and liabilities of $0.6 million and which was offset by depreciation and amortization, loss from investments in unconsolidated affiliated real estate entities and other non-cash items aggregating $3.6 million.

 

Investing activities

 

The cash provided by investing activities of $2.2 million during the six months ended June 30, 2024 consisted of net proceeds from the sale of marketable securities of $1.9 million and distributions from the Hilton Garden Inn Joint Venture of $0.6 million offset by capital contributions of $0.2 million made to the Williamsburg Moxy Hotel Joint Venture, purchases of investment property of $0.2 million and purchases of marketable securities of $0.1 million.

 

Financing activities

 

The cash used in financing activities of $1.5 million during the six months ended June 30, 2024 consisted of distributions to common stockholders of $1.0 million, redemptions of Common Shares of $0.3 million and debt principal payments of $0.1 million.

 

Distributions on Common Shares

 

On November 13, 2023, the Board of Directors authorized and we declared a Common Share distribution of $0.075 per share for the quarterly period ending December 31, 2023. The distribution is the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. The distribution of $1.0 million was paid on January 15, 2024 to stockholders of record at the close of business on December 31, 2023.

 

On March 18, 2024, the Board of Directors determined to suspend regular quarterly distributions.

 

Future distributions declared, if any, will be at the discretion of the Board of Directors based on their analysis of our 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, revenues and other sources of income, operating and interest expenses and our 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. We cannot assure that any future distributions will be made or that we will maintain any particular level of distributions that we have previously established or may establish.

 

Subordinated Participation Interests

 

In connection with our Offering, the Special Limited Partner purchased 242 Subordinated Participation Interests in the Operating Partnership at a cost of $50,000 per unit, with an aggregate value of $12.1 million.

 

These Subordinated Participation Interests may entitle the Special limited Partner to a portion of any regular distributions that we make to our stockholders, but only after our stockholders have received a stated preferred return. However, from our inception through June 30, 2024, there have been no distributions declared on the Subordinated Participation Interests. Any future distributions on the Subordinated Participation Interests will always be subordinated until stockholders receive a stated preferred return.

 

The Subordinated Participation Interests may also entitle the Special Limited Partner to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net proceeds available for distribution upon our liquidation and, therefore, cannot be determined at the present time. Liquidating distributions to the Special Limited Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.

 

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SRP

 

Our share repurchase program (the “SRP”) may provide eligible stockholders with limited, interim liquidity by enabling them to sell Common Shares back to us, subject to restrictions and applicable law.

 

On March 19, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions.

 

Effective May 10, 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 estimated NAV per Share, as determined by our board of directors and reported by us 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.

 

On the above noted date, 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 proration if either type of redemption requests exceeded the annual limitation.

 

For the six months ended June 30, 2024, we repurchased 34,514 Common Shares at a weighted average price of $9.95. For the six months ended June 30, 2023, we repurchased 86,223 Common Shares at a weighted average price of $10.03.

 

Contractual Mortgage Obligations

 

The following is a summary of the estimated contractual obligations related to our mortgage payable over the next five years and thereafter as of June 30, 2024, after taking into consideration the amendment and restatement of the Revolving Credit Facility as discussed below.

 

Contractual Mortgage Obligations   2024     2025     2026     2027     2028     Thereafter     Total  
Principal maturities   $ 204     $ 409     $ 25,993     $ 30,844     $ -     $ -     $ 57,450  
Interest payments(1)     2,673       5,077       5,078       1,569       -       -       14,397  
Total Contractual Mortgage Obligations   $ 2,877     $ 5,486     $ 31,071     $ 32,413     $ -     $ -     $ 71,847  

 

 
(1) These amounts represent future interest payments related to mortgage payable obligations based on the interest rate specified in the associated debt agreement. All of our mortgage debt outstanding as of June 30, 2024 bears interest based on one-month AMERIBOR plus a specified spread, subject to a floor. For purposes of calculating future interest amounts on our variable interest rate debt, the one-month SOFR and the one-month AMERIBOR rate as of June 30, 2024 was used.

 

Revolving Credit Facility

 

We have a non-recourse revolving credit facility (the “Revolving Credit Facility”) with a financial institution. The Revolving Credit Facility provides us with a line of credit of up to $60 million pursuant to which we may designate properties as collateral that allow borrowings up to a 65% loan-to-value ratio subject to also meeting certain financial debt covenants. The Revolving Credit Facility provides for monthly interest-only payments and the outstanding principal balance due at its final maturity. The Revolving Credit Facility also requires the maintenance of certain financial debt covenants, including a prescribed minimum debt service coverage ratio and a debt yield ratio, which may also be achieved through principal paydowns on the outstanding balance. However, in November 2023 the lender agreed to waive one of the financial ratios and modify the other financial ratio through the scheduled maturity of the Revolving Credit Facility on July 13, 2024.

 

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The Revolving Credit Facility, which had an outstanding balance of $30.8 million as of both June 30, 2024 and December 31, 2023, subsequently matured on July 13, 2024 but the lender agreed to take no actions and the Revolving Credit Facility was amended and restated on July 31, 2024, at which time its following key terms were adjusted:

 

  ●

The maturity date was extended by three years to July 13, 2027 with two additional one-year extension options at the sole discretion of the lender;

     
  ●

The maximum borrowing amount was reduced to $40.0 million (of which $30.8 million was outstanding);

 

  ●

The interest rate was prospectively changed to SOFR plus 3.30%, subject to a 6.64% floor; and

     
  ●

The financial debt covenants commence with the quarter ended September 30, 2024, but the Revolving Credit Facility provides for phased increases to the prescribed minimum financial ratios throughout the initial three-year term of the Revolving Credit Facility.

 

Six of the Company’s hotel properties are currently pledged as collateral under the Revolving Credit Facility.

 

On December 1, 2023, we entered into an interest rate cap contract at a cost of $44 with an unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving Credit Facility. The interest rate cap contract has a notional amount of $30.8 million, matured on July 13, 2024 and effectively capped AMERIBOR at 5.34%.

 

In connection with the amendment and restatement of the Revolving Credit Facility, we simultaneously entered into an interest rate cap contract at a cost of $85 with an unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving Credit Facility. The interest rate cap contract has a notional amount of $30.8 million, matures on July 31, 2025 and effectively caps SOFR at 5.34%.

 

Certain of our debt agreements also contain clauses providing for prepayment penalties. As of June 30, 2024, the Company was in compliance with all its financial debt covenants.

 

Investments in Unconsolidated Affiliated Entities

 

Hilton Garden Inn Joint Venture

 

On March 27, 2018, we and Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a related party REIT also sponsored by the Sponsor, acquired, through the Hilton Garden Inn Joint Venture, the Hilton Garden Inn - Long Island City from an unrelated third party, for aggregate consideration of $60.0 million, which consisted of $25.0 million of cash and $35.0 million of proceeds from a five-year term non-recourse loan from a financial institution (the “Hilton Garden Inn Mortgage”), excluding closing and other related transaction costs. We paid $12.9 million for a 50% membership interest in the Hilton Garden Inn Joint Venture.

 

On May 31, 2023, the Hilton Garden Inn Mortgage was further amended to provide for (i) an extension of the maturity date for an additional five years, (ii) the interest rate to be adjusted to SOFR plus 3.25%, subject to a 6.41% floor, (iii) interest-only payments for the first two years of its extended term with principal and interest payments pursuant to a 300-month amortization schedule thereafter and the remaining unpaid balance due in full at its maturity date of May 31, 2028, (iv) the ability to draw up to an additional $3.0 million of principal, subject to the satisfaction of certain conditions, and (v) certain changes to its financial covenants. Additionally, the Hilton Garden Inn Joint Venture is required to fund an aggregate of $1.3 million, through monthly payments of $37 from May 31, 2023 through June 1, 2026, into a cash collateral reserve account which may be drawn upon for specified capital expenditures.

 

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We and Lightstone REIT II each have a 50% co-managing membership interest in the Hilton Garden Inn Joint Venture. We account for our membership interest in the Hilton Garden Inn Joint Venture in accordance with the equity method of accounting because we exert significant influence over but do not control the Hilton Garden Inn Joint Venture. All capital contributions and distributions of earnings from the Hilton Garden Inn Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the Hilton Garden Inn Joint Venture are made to the members pursuant to the terms of the Hilton Garden Inn Joint Venture’s operating agreement.

 

During the six months ended June 30, 2024, we received distributions from the Hilton Garden Joint Venture of $0.6 million and made contributions of $0.1 million to the Hilton Garden Joint Venture. During the six months ended June 30, 2023, we made contributions of $0.4 million to the Hilton Garden Inn Joint Venture.

 

As of June 30, 2024, the Hilton Garden Inn Joint Venture was in compliance with all of its financial debt covenants.

 

Williamsburg Moxy Hotel Joint Venture

 

On August 5, 2021, we formed a joint venture with Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), a related party REIT also sponsored by the Sponsor, pursuant to which we acquired 25% of Lightstone REIT IV’s membership interest in the Bedford Avenue Holdings LLC, which effective on that date became the Williamsburg Moxy Hotel Joint Venture, for aggregate consideration of $7.9 million. In July 2019, Lightstone REIT IV, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC, previously acquired four adjacent parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood in the Brooklyn borough of New York City, from unrelated third parties, for the development of the Williamsburg Moxy Hotel.

 

As a result, we and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. We have determined that the Williamsburg Moxy Hotel Joint Venture is a variable interest entity and we are not the primary beneficiary, as it was determined that Lightstone REIT IV is the primary beneficiary. Therefore, we account for our membership interest in the Williamsburg Moxy Hotel Joint Venture in accordance with the equity method because we exert significant influence over but do not control the Williamsburg Moxy Hotel Joint Venture. All capital contributions and distributions of earnings from the Williamsburg Moxy Hotel Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the Williamsburg Moxy Hotel Joint Venture are made to the members pursuant to the terms of the Williamsburg Moxy Hotel Joint Venture’s operating agreement.

 

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a development agreement (the “Development Agreement”) with an affiliate of the Sponsor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg Moxy Developer was paid a development fee equal to 3% of hard and soft costs, as defined in the Development Agreement, incurred in connection with the development and construction of the Williamsburg Moxy Hotel. Additionally on August 5, 2021, the Williamsburg Moxy Hotel Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. Furthermore, certain affiliates of the Sponsor are reimbursed for various development and development-related costs attributable to the Williamsburg Moxy Hotel.

 

The Williamsburg Moxy Hotel was substantially completed and opened for business on March 7, 2023. In connection with the opening of the hotel, including its food and beverage venues, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $0.5 million and $2.2 million during the three and six months ended June 30, 2023, respectively. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.

 

During the six months ended June 30, 2024 and 2023, we made capital contributions to the Williamsburg Moxy Joint Venture of $0.1 million and $0.6 million, respectively.

 

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Moxy Construction Loan

 

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility with a financial institution for up to $77.0 million (the “Moxy Construction Loan”) to fund certain of the development, construction and certain pre-opening costs associated with the Williamsburg Moxy Hotel. The Moxy Construction Loan, which was scheduled to initially mature on February 5, 2024, was further extended to May 4, 2024. The Moxy Construction Loan was collateralized by the Williamsburg Moxy Hotel. The Moxy Construction Loan provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective after June 30, 2023, the Moxy Construction Loan’s interest rate converted from LIBOR plus 9.00%, with a floor of 9.50%, to SOFR plus 9.11%, with a floor of 9.61%. The Moxy Construction Loan required monthly interest-only payments based on a rate of 7.50% and the excess was added to the outstanding loan balance due at maturity. SOFR as of June 30, 2024 and December 31, 2023 was 5.34% and 5.35%, respectively.

 

As of December 31, 2023, the outstanding principal balance of the Moxy Construction Loan was $83.8 million (including $6.9 million of excess interest added to principal), net of deferred financing fees of $0.1 million.

 

In connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture provided certain completion and carry cost guarantees. Furthermore, in connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of loan fees and expenses and accrued $0.8 million of loan exit fees.

 

Moxy Mortgage Loans

 

On April 19, 2024, the Williamsburg Moxy Joint Venture entered into an $86.0 million senior mortgage loan facility (the “Moxy Senior Loan”) and a $9.0 million junior mortgage loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Mortgage Loans”) with unrelated third parties.

 

The Moxy Mortgage Loans bear interest at SOFR plus 5.10%, subject to a 8.75% floor (10.44% as of June 30, 2024). The Moxy Mortgage Loans initially mature on April 19, 2027, but may be further extended though the exercise of two six-month extension options, subject to the satisfaction of certain conditions. The Moxy Mortgage Loans require monthly interest-only payments with their outstanding principal due in full at maturity and are collateralized by the Williamsburg Moxy Hotel, however, the Moxy Junior Loan is subordinate to the Moxy Senior Loan. The Williamsburg Moxy Hotel Joint Venture used $85.8 million of the aggregate proceeds from the Moxy Mortgage Loans in connection with the payoff of the Moxy Construction Loan consisting of the outstanding indebtedness (principal and interest) of $86.0 million and accrued exit fees of $0.8 million, net of restricted escrows of $1.0 million.

 

As of June 30, 2024, the outstanding principal balance of the Moxy Mortgage Loans was $95.0 million and the remaining unamortized deferred financing fees were $3.1 million.

 

In connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture has provided certain interest and carry costs guarantees. Furthermore, in connection with the Moxy Mortgage Loans, $3.2 million of the initial proceeds advanced at closing were used to fund reserves for interest, real estate taxes and insurance. Additionally, in connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture paid an aggregate of $2.8 million of loan fees and expenses and accrued $0.5 million of loan exit fees which were included in other liabilities on the condensed balance sheets as of June 30, 2024.

 

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.

 

35

 

 

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, 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.

 

36

 

 

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 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 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.

 

37

 

 

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
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
    2024     2023     2024     2023  
Net loss   $ (75 )   $ (1,283 )   $ (3,062 )   $ (3,990 )
FFO adjustments:                                
Depreciation and amortization of real estate assets     828       1,114       1,662       2,294  
Adjustments to equity earnings from unconsolidated affiliated real estate entities     539       515       1,070       887  
FFO     1,292       346       (330 )     (809 )
MFFO adjustments:                                
Loss on sale of marketable securities(1)     -       -       -       4  
Unrealized (gain)/loss on sale of marketable equity securities(2)     14       (44 )     (36 )     (4 )
MFFO - IPA recommended format   $ 1,306     $ 302     $ (366 )   $ (809 )
                                 
Net loss   $ (75 )   $ (1,283 )   $ (3,062 )   $ (3,990 )
Less: net loss attributable to noncontrolling interests     -       -       -       -  
Net loss applicable to Company’s common shares   $ (75 )   $ (1,283 )   $ (3,062 )   $ (3,990 )
Net loss per common share, basic and diluted   $ (0.01 )   $ (0.10 )   $ (0.24 )   $ (0.31 )
                                 
FFO   $ 1,292     $ 346     $ (330 )   $ (809 )
Less: FFO attributable to noncontrolling interests     -       -       -       -  
FFO attributable to Company’s common shares   $ 1,292     $ 346     $ (330 )   $ (809 )
FFO per common share, basic and diluted   $ 0.10     $ 0.03     $ (0.03 )   $ (0.06 )
                                 
MFFO - IPA recommended format   $ 1,306     $ 302     $ (366 )   $ (809 )
Less: MFFO attributable to noncontrolling interests     -       -       -       -  
MFFO attributable to Company’s common shares   $ 1,306     $ 302     $ (366 )   $ (809 )
                                 
Weighted average number of common shares outstanding, basic and diluted     12,902       12,973       12,916       12,998  

 

 
(1) 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.
(2) 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. Mark-to-market adjustments are made for items such as ineffective derivative instruments, certain marketable securities and any other items that GAAP requires we make a mark-to-market adjustment for. 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.

 

38

 

 

The table below presents our cumulative distributions paid and FFO attributable to our common shares:

 

    For the period
October 5, 2012
(date of inception)
through June 30,
2024		  
FFO attributable to Company’s common shares   $ 19,995  
Distributions paid   $ 29,764  

 

ITEM 4. CONTROLS AND PROCEDURES.

 

As of the end of the period covered by this report, management, including our chief executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of the evaluation, our chief executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.

 

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no significant deficiencies or material weaknesses identified in the evaluation, and therefore, no corrective actions were taken.

 

39

 

 

PART II. OTHER INFORMATION:

 

ITEM 1. LEGAL PROCEEDINGS.

 

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 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.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Recent Sales of Unregistered Securities

 

During the period covered by this Form 10-Q, the Company did not sell any unregistered securities.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

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.”
101*   XBRL (extensible Business Reporting Language).The following financial information from Lightstone Value Plus REIT III, Inc. on Form 10-Q for the quarter ended June 30, 2024, filed with the SEC on August 14, 2024, formatted in XBRL includes: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Operations, (3) Consolidated Statements of Comprehensive Loss, (4) Consolidated Statements of Stockholders’ Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to the Consolidated Financial Statement.

 

 
* Filed herewith

 

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SIGNATURES

 

Pursuant to the requirements 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 III, INC.
   
Date: August 14, 2024 By: /s/ David Lichtenstein
  David Lichtenstein
   

Chairman and Chief Executive Officer

(Principal Executive Officer)
     
Date: August 14, 2024 By: /s/ Seth Molod
  Seth Molod
 

Chief Financial Officer

(Duly Authorized Officer and Principal Financial and Accounting Officer)

 

42

 

 

EXHIBIT 31.1

 

Certifications

 

I, David Lichtenstein, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus REIT III, 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: August 14, 2024

 

 

 

EXHIBIT 31.2

 

Certifications

 

I, Seth Molod, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus REIT III, 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: August 14, 2024

 

 

 

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 III, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2024 (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: August 14, 2024

 

 

 

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 III, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2024 (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: August 14, 2024

 

 

v3.24.2.u1
Cover - shares
 6 Months Ended
Jun. 30, 2024
Aug. 07, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2024  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 000-55619  
Entity Registrant Name LIGHTSTONE VALUE PLUS REIT III, INC.  
Entity Central Index Key 0001563756  
Entity Tax Identification Number 46-1140492  
Entity Incorporation, State or Country Code MD  
Entity Address, Address Line One 1985 Cedar Bridge Avenue  
Entity Address, Address Line Two Suite 1  
Entity Address, City or Town Lakewood  
Entity Address, State or Province NJ  
Entity Address, Postal Zip Code 08701  
City Area Code (732)  
Local Phone Number 367-0129  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   12,800,000
v3.24.2.u1
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Investment property:    
Land and improvements $ 21,732 $ 21,722
Building and improvements 92,648 92,493
Furniture and fixtures 16,931 16,960
Construction in progress 94 27
Gross investment property 131,405 131,202
Less: accumulated depreciation (38,109) (36,479)
Net investment property 93,296 94,723
Investments in unconsolidated affiliated real estate entities 18,233 20,240
Cash and cash equivalents 4,531 3,848
Marketable securities, available for sale 5,339 7,196
Accounts receivable and other assets 4,197 1,971
Total Assets 125,596 127,978
Liabilities and Stockholders’ Equity    
Accounts payable and other accrued expenses 3,560 2,511
Mortgages payable, net 57,165 57,161
Distributions payable 970
Due to related parties 1,262 363
Total Liabilities 61,987 61,005
Company’s stockholders’ equity:    
Preferred stock, $0.01 par value; 50.0 million shares authorized, none issued and outstanding
Common stock, $0.01 par value; 200.0 million shares authorized, 12.9 million shares issued and outstanding 129 129
Additional paid-in-capital 110,119 110,462
Accumulated other comprehensive loss (125) (166)
Accumulated deficit (58,606) (55,544)
Total Company stockholders’ equity 51,517 54,881
Noncontrolling interests 12,092 12,092
Total Stockholders’ Equity 63,609 66,973
Total Liabilities and Stockholders’ Equity $ 125,596 $ 127,978
v3.24.2.u1
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
shares in Thousands
Jun. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Preferred Stock, par value per share $ 0.01 $ 0.01
Preferred Stock, shares authorized 50,000 50,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Common Stock, par value per share $ 0.01 $ 0.01
Common Stock, shares authorized 200,000 200,000
Common Stock, shares issued 12,900 12,900
Common Stock, shares outstanding 12,900 12,900
v3.24.2.u1
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Income Statement [Abstract]        
Revenues $ 8,719 $ 7,966 $ 14,989 $ 14,332
Expenses:        
Property operating expenses 5,318 5,103 9,997 9,682
Real estate taxes 340 267 704 597
General and administrative costs 823 672 1,496 1,315
Depreciation and amortization 828 1,114 1,662 2,294
Total expenses 7,309 7,156 13,859 13,888
Interest expense (1,336) (1,333) (2,673) (2,571)
Loss from investments in unconsolidated affiliated real estate entities (253) (1,002) (1,754) (2,180)
Other income, net 104 242 235 317
Net loss (75) (1,283) (3,062) (3,990)
Less: net loss attributable to noncontrolling interests
Net loss applicable to Company’s common shares $ (75) $ (1,283) $ (3,062) $ (3,990)
Net (loss)/income per Company's common share, basic $ (0.01) $ (0.10) $ (0.24) $ (0.31)
Net (loss)/income per Company's common share, diluted $ (0.01) $ (0.10) $ (0.24) $ (0.31)
Weighted average number of common shares outstanding, basic 12,902 12,973 12,916 12,998
Weighted average number of common shares outstanding, diluted 12,902 12,973 12,916 12,998
v3.24.2.u1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Income Statement [Abstract]        
Net loss $ (75) $ (1,283) $ (3,062) $ (3,990)
Other comprehensive income:        
Holding gain on marketable securities, available for sale 23 24 41 24
Comprehensive loss (52) (1,259) (3,021) (3,966)
Less: Comprehensive loss attributable to noncontrolling interests
Comprehensive loss attributable to the Company’s common shares $ (52) $ (1,259) $ (3,021) $ (3,966)
v3.24.2.u1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
AOCI Attributable to Parent [Member]
Retained Earnings [Member]
Noncontrolling Interest [Member]
Total
Beginning balance, value at Dec. 31, 2022 $ 130 $ 111,585 $ (250) $ (44,818) $ 12,092 $ 78,739
Beginning balance, shares at Dec. 31, 2022 13,043          
Net loss (3,990) (3,990)
Other comprehensive income 24 24
Distributions declared [1] (1,945) (1,945)
Redemption and cancellation of shares $ (1) (864) (865)
Redemption and cancellation of shares, shares (86)          
Ending balance, value at Jun. 30, 2023 $ 129 110,721 (226) (50,753) 12,092 71,963
Ending balance, shares at Jun. 30, 2023 12,957          
Beginning balance, value at Mar. 31, 2023 $ 130 111,336 (250) (48,500) 12,092 74,808
Beginning balance, shares at Mar. 31, 2023 13,017          
Net loss (1,283) (1,283)
Other comprehensive income 24 24
Distributions declared [2] (970) (970)
Redemption and cancellation of shares $ (1) (615) (616)
Redemption and cancellation of shares, shares (60)          
Ending balance, value at Jun. 30, 2023 $ 129 110,721 (226) (50,753) 12,092 71,963
Ending balance, shares at Jun. 30, 2023 12,957          
Beginning balance, value at Dec. 31, 2023 $ 129 110,462 (166) (55,544) 12,092 66,973
Beginning balance, shares at Dec. 31, 2023 12,932          
Net loss (3,062) (3,062)
Other comprehensive income 41   41
Redemption and cancellation of shares (343) (343)
Redemption and cancellation of shares, shares (35)          
Ending balance, value at Jun. 30, 2024 $ 129 110,119 (125) (58,606) 12,092 63,609
Ending balance, shares at Jun. 30, 2024 12,897          
Beginning balance, value at Mar. 31, 2024 $ 129 110,439 (148) (58,531) 12,092 63,981
Beginning balance, shares at Mar. 31, 2024 12,930          
Net loss (75) (75)
Other comprehensive income 23   23
Redemption and cancellation of shares (320) (320)
Redemption and cancellation of shares, shares (33)          
Ending balance, value at Jun. 30, 2024 $ 129 $ 110,119 $ (125) $ (58,606) $ 12,092 $ 63,609
Ending balance, shares at Jun. 30, 2024 12,897          
[1] Distributions per share were $0.150.
[2] Distributions per share were $0.075.
v3.24.2.u1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (3,062) $ (3,990)
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities:    
Loss from investments in unconsolidated affiliated real estate entities 1,754 2,180
Depreciation and amortization 1,662 2,294
Amortization of deferred financing costs 148 107
Other non-cash adjustments 63 31
Changes in assets and liabilities:    
Increase in accounts receivable and other assets (2,357) (1,077)
Increase in accounts payable and other accrued expenses 1,051 399
Increase in due to related parties 721 94
Cash (used in)/provided by operating activities (20) 38
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of investment property (204) (307)
Purchase of marketable securities (96) (10,373)
Proceeds from sale of marketable securities 2,030 4,403
Distributions from unconsolidated affiliated real estate entity 627
Investments in unconsolidated affiliated real estate entities (197) (1,002)
Cash provided by/(used in) investing activities 2,160 (7,279)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments on mortgages payable (144)
Distributions to common stockholders (970) (975)
Redemption and cancellation of common shares (343) (865)
Cash used in financing activities (1,457) (1,840)
Change in cash, cash equivalents and restricted cash 683 (9,081)
Cash, cash equivalents and restricted cash, beginning of year 3,853 18,391
Cash, cash equivalents and restricted cash, end of period 4,536 9,310
Supplemental cash flow information for the periods indicated is as follows:    
Cash paid for interest 2,545 2,419
Cash paid for taxes 53 212
Investments in unconsolidated affiliated real estate entities in due to related parties 178
Distributions declared, but not paid 970
Holding gain/loss on marketable securities, available for sale 41 24
Cash and cash equivalents 4,531 9,310
Restricted cash 5
Total cash, cash equivalents and restricted cash $ 4,536 $ 9,310
v3.24.2.u1
Business and Structure
 6 Months Ended
Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business and Structure

 

1. Business and Structure

 

Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”) is a Maryland corporation, formed on October 5, 2012, which elected to qualify as a real estate investment trust (“REIT”) for United States (the “U.S.”) federal income tax purposes beginning with the taxable year ended December 31, 2015.

 

Lightstone REIT III is structured as an umbrella partnership REIT, or UPREIT, and substantially all of its current and future business will be conducted through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the “Operating Partnership”). As of June 30, 2024, Lightstone REIT III had a 99% general partnership interest in the Operating Partnership’s common units.

 

Lightstone REIT III 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 these consolidated financial statements refers to Lightstone REIT III, its Operating Partnership or the Company as required by the context in which such pronoun is used.

 

Through the Operating Partnership, the Company owns, operates and develops commercial properties and makes real estate-related investments. Since its inception, the Company has primarily acquired, developed and operated commercial hospitality properties, principally consisting of limited-service hotels and one full-service hotel all located in the U.S. Although the Company has historically acquired hotels, it has and may continue to purchase other types of real estate. Assets other than hotels may include, without limitation, office buildings, shopping centers, business and industrial parks, manufacturing facilities, single-tenant properties, multifamily properties, student housing properties, warehouses and distribution facilities and medical/life sciences office buildings. The Company’s real estate investments are held by it alone or jointly with other parties. In addition, the Company may invest up to 20% of its net assets in collateralized debt obligations, commercial mortgage-backed securities (“CMBS”) and mortgage and mezzanine loans secured, directly or indirectly, by the same types of properties which it may acquire directly. Although most of its investments are these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes are in its best interests. The Company evaluates all of its real estate investments as one operating segment. The Company currently intends to hold its investments until such time as it determines that a sale or other disposition appears to be advantageous to achieve its investment objectives or until it appears that the objectives will not be met.

 

As of June 30, 2024, the Company (i) wholly owned and consolidated the operating results and financial condition of eight limited service hotels containing a total of 872 rooms, (ii) held an unconsolidated 50% membership interest in LVP LIC Hotel JV LLC (the “Hilton Garden Inn Joint Venture”), which owns one limited service hotel, and (iii) held an unconsolidated 25% membership interest in Bedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), which owns one full service hotel. The Company accounts for its unconsolidated membership interests in the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture under the equity method of accounting.

 

The Hilton Garden Inn Joint Venture owns a 183-room, limited-service hotel (the “Hilton Garden Inn – Long Island City”) located in the Long Island City neighborhood in the Queens borough of New York City. The Williamsburg Moxy Hotel Joint Venture developed, constructed and owns a 216-room branded hotel (the “Williamsburg Moxy Hotel”) located in the Williamsburg neighborhood in the Brooklyn borough of New York City, which opened on March 7, 2023. Both the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture are between the Company and related parties.

 

The Company’s advisor is Lightstone Value Plus REIT III LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. The Advisor also owns 20,000 shares of our common stock (“Common Shares”) which were issued on December 24, 2012 for $200, or $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests of the Lightstone Group, LLC (the “Sponsor”), which served as the Company’s sponsor during its initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on December 11, 2014 for $2.0 million, or $9.00 per share. Pursuant to the terms of an advisory agreement and subject to the oversight of the Company’s board of directors (the “Board of Directors”), the Advisor has primary responsibility for making investment decisions on behalf of the Company and managing its day-to-day operations. Through his ownership and control of the Sponsor, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP III LLC, a Delaware limited liability company (the “Special Limited Partner”), which owns 242 subordinated participation interests (“Subordinated Participation Interests”) in the Operating Partnership which were acquired at a cost of $50,000 per unit, or an aggregate consideration of $12.1 million in connection with the 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 Lightstone REIT III or the Operating Partnership.

 

The Company has no employees. The Company is dependent on the Advisor and certain affiliates of the Sponsor for performing a full range of services that are essential to it, including asset management, property management (excluding its hospitality properties, which are each managed by an unrelated third party property manager) and acquisition, disposition and financing activities, and other general administrative responsibilities, such as tax, accounting, legal, information technology and investor relations services. If the Advisor and its affiliates are unable to provide these services to the Company, it would be required to provide the services itself or obtain the services from other parties.

 

The Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its Common Shares 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 Common Shares at this time. The Company does not anticipate that there would be any active market for its Common Shares until they are listed for trading.

 

Noncontrolling Interests – Partners of the Operating Partnership

 

Limited Partner

 

On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. The Advisor has the right to convert limited partner units into cash or, at the Company’s option, an equal number of its Common Shares.

 

Special Limited Partner

 

In connection with the Company’s Offering, the Special Limited Partner purchased from the Operating Partnership an aggregate of 242 Subordinated Participation Interests at a cost of $50,000 per unit, or aggregate consideration of $12.1 million.

 

As the indirect majority owner of the Special Limited Partner, Mr. Lichtenstein is the beneficial owner of a 99% interest in such Subordinated Participation Interests and will thus receive an indirect benefit from any distributions made in respect thereof.

 

These Subordinated Participation Interests may entitle the Special Limited Partner to a portion of any regular distributions that the Company makes to its stockholders, but only after its stockholders have received a stated preferred return. However, from inception through June 30, 2024, there have been no distributions declared on the Subordinated Participation Interests. Any future distributions on the Subordinated Participation Interests will always be subordinated until stockholders receive a stated preferred return.

 

The Subordinated Participation Interests may also entitle the Special Limited Partner to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net proceeds available for distribution upon the Company’s liquidation and, therefore, cannot be determined at the present time. Liquidating distributions to the Special Limited Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.

 

Related Parties

 

The Company’s Advisor and certain affiliates of the Sponsor, including the Special Limited Partner, are related parties of the Company as well as the other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, these entities are entitled to compensation and reimbursement for services and costs incurred for services related to the investment, development, management and disposition of the Company’s assets. The compensation is generally 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.
v3.24.2.u1
Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

 

2. Summary of Significant Accounting Policies

 

Principles of Consolidation and Basis of Presentation

 

The consolidated financial statements include the accounts of Lightstone REIT III and the Operating Partnership and its subsidiaries (over which Lightstone REIT III exercises financial and operating control). As of June 30, 2024, Lightstone REIT III had a 99% general partnership interest in the common units of the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the U.S. (“GAAP”), and entities deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest or entities which it is not deemed to be the primary beneficiary, it accounts for the investment using the equity method of accounting.

 

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, 2023 (the “2023 Form 10-K”). The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT III, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

 

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 depreciable lives. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.

 

The consolidated balance sheet as of December 31, 2023 included herein has been derived from the consolidated balance sheet included in the Company’s 2023 Form 10-K.

 

The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

 

Income Taxes

 

The Company elected to be taxed and qualify as a REIT commencing with the taxable year ended December 31, 2015. As a REIT, the Company generally will not be subject to U.S. federal income tax on its net taxable income that it distributes currently to its stockholders. To maintain its REIT qualification under the Internal Revenue Code of 1986, as amended, or the Code, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. Additionally, even if the Company continues to qualify as a REIT for U.S. federal income tax purposes, it may still be subject to some U.S. federal, state and local taxes on its income and property and to U.S. federal income taxes and excise taxes on its undistributed income, if any.

 

To maintain its qualification as a REIT, the Company engages in certain activities through a taxable REIT subsidiary (“TRS”), including when it acquires a hotel it usually establishes a new TRS and enters into an operating lease agreement for the hotel. As such, the Company is subject to U.S. federal and state income taxes and franchise taxes from these activities.

 

The Company’s income tax benefits and expense are included in other income, net on its consolidated statements of operations. During the three and six months ended June 30, 2024, the Company recorded income tax expense of $5 and $48, respectively. During the three and six months ended June 30, 2023, the Company recorded an income tax benefit of $3 and income tax expense of $63, respectively.

 

As of June 30, 2024 and December 31, 2023, the Company had no material uncertain income tax positions.

 

Revenues

 

The following table represents the total revenues from hotel operations on a disaggregated basis:

 

Schedule of revenues from hotel operations                                
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
Revenues   2024     2023     2024     2023  
Room   $ 8,461     $ 7,726     $ 14,516     $ 13,856  
Food, beverage and other     258       240       473       476  
Total revenues   $ 8,719     $ 7,966     $ 14,989     $ 14,332  

 

New Accounting Pronouncements

 

In November 2023, the FASB issued an accounting standards update which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within segment profit and loss, as well as the title and position of the CODM. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the guidance and the impact it may have on the consolidated financial statements.

 

In December 2023, the FASB issued an accounting standards update which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update is effective for annual periods beginning after December 15, 2024. The Company is evaluating the guidance and the impact it may have on the consolidated financial statements.

 

The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.

 

Concentration of Risk

 

As of June 30, 2024 and December 31, 2023, the Company had cash deposited in certain financial institutions in excess of U.S. federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents.

 

Current Environment

 

The Company’s operating results and financial condition 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, its 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 and uncertainty as a result of recent banking failures, 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, inflation and recession.

 

The Company’s overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation, higher interest rates, labor and supply chain challenges and other changes in economic conditions could adversely affect the Company’s future results from operations and its financial condition.
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities
 6 Months Ended
Jun. 30, 2024
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Unconsolidated Affiliated Real Estate Entities

 

3. Investments in Unconsolidated Affiliated Real Estate Entities

 

The entities 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 exercise financial and operating control over these entities. A summary of the Company’s investments in unconsolidated affiliated real estate entities is as follows:

 

Schedule of investments in the unconsolidated affiliated real estate                              
                As of  
Entity   Date of
Ownership		     Ownership %     June 30,
2024		     December 31,
2023		  
Hilton Garden Inn Joint Venture   March 27, 2018       50 %   $ 8,523     $ 9,405  
Williamsburg Moxy Hotel Joint Venture   August 5, 2021       25 %     9,710       10,835  
Total investments in unconsolidated affiliated real estate entities                 $ 18,233     $ 20,240  

 

Hilton Garden Inn Joint Venture

 

On March 27, 2018, the Company and Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a REIT also sponsored by the Company’s Sponsor and a related party, acquired, through the Hilton Garden Inn Joint Venture, the Hilton Garden Inn – Long Island City from an unrelated third party, for aggregate consideration of $60.0 million, which consisted of $25.0 million of cash and $35.0 million of proceeds from a five-year term non-recourse mortgage loan, collateralized by the Hilton Garden Inn – Long Island City, from a financial institution (the “Hilton Garden Inn Mortgage”), excluding closing and other related transaction costs. The Company paid $12.9 million for a 50% membership interest in the Hilton Garden Inn Joint Venture.

 

On May 31, 2023, the Hilton Garden Inn Mortgage was further amended to provide for (i) an extension of the maturity date for an additional five years, (ii) the interest rate to be adjusted to SOFR plus 3.25%, subject to a 6.41% floor, interest-only payments for the first two years of its extended term with principal and interest payments pursuant to a 300-month amortization schedule thereafter and the remaining unpaid balance due in full at its maturity date of May 31, 2028, (iii) the ability to draw up to an additional $3.0 million of principal, subject to the satisfaction of certain conditions, and (iv) certain changes to its financial covenants. Additionally, the Hilton Garden Inn Joint Venture will fund $1.3 million, through monthly payments of $37 from May 31, 2023 through June 1, 2026, into a cash collateral reserve account which may be drawn upon for specified capital expenditures.

 

The Company and Lightstone REIT II each have a 50% co-managing membership interest in the Hilton Garden Inn Joint Venture. The Company accounts for its membership interest in the Hilton Garden Inn Joint Venture in accordance with the equity method of accounting because it exerts significant influence over but does not control the Hilton Garden Inn Joint Venture. All capital contributions and distributions of earnings from the Hilton Garden Inn Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the Hilton Garden Inn Joint Venture are made to the members pursuant to the terms of the Hilton Garden Inn Joint Venture’s operating agreement.

 

During the six months ended June 30, 2024, the Company received distributions from the Hilton Garden Joint Venture of $0.6 million and made contributions of $0.1 million to the Hilton Garden Joint Venture. During the six months ended June 30, 2023, the Company made contributions of $0.4 million to the Hilton Garden Inn Joint Venture.

 

As of June 30, 2024, the Hilton Garden Inn Joint Venture is in compliance with all of its financial debt covenants.

 

Hilton Garden Inn Joint Venture Financial Information

 

The following table represents the condensed statements of operations for the Hilton Garden Inn Joint Venture for the periods indicated:

 

 Schedule of condensed statement of operations                                
    For the
Three Months Ended
June 30,
2024		     For the
Three Months Ended
June 30,
2023		     For the
Six Months Ended
June 30,
2024		     For the
Six Months Ended
June 30,
2023		  
Revenues   $ 3,473     $ 3,115     $ 5,775     $ 5,144  
                                 
Property operating expenses     1,992       1,907       3,803       3,414  
General and administrative costs     13       106        35       132  
Depreciation and amortization     598        596        1,206       1,205  
Operating income     870        506        731       393  
Interest expense     (705 )     (825 )     (1,389 )     (1,451 )
Net income/(loss)   $ 165     $ (319 )   $ (658 )   $ (1,058 )
Company’s share of earnings (50.00%)   $ 83      $ (159 )   $ (329 )   $ (529 )

 

The following table represents the condensed balance sheets for the Hilton Garden Inn Joint Venture as of the dates indicated:

 

Schedule of condensed balance sheet                
    As of     As of  
    June 30,
2024		     December 31,
2023		  
Investment property, net   $ 46,893     $ 48,001  
Cash     820       1,741  
Other assets     2,024       1,816  
Total assets   $ 49,737     $ 51,558  
                 
Mortgage payable, net   $ 32,280     $ 32,273  
Other liabilities     1,011       1,075  
Members’ capital     16,446       18,210  
Total liabilities and members’ capital   $ 49,737     $ 51,558  

 

Williamsburg Moxy Hotel Joint Venture

 

On August 5, 2021, the Company formed a joint venture with Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), a related party REIT also sponsored by the Company’s Sponsor, pursuant to which the Company acquired 25% of Lightstone REIT IV’s membership interest in Bedford Avenue Holdings LLC, which effective on that date became the Williamsburg Moxy Hotel Joint Venture, for aggregate consideration of $7.9 million. In July 2019, Lightstone REIT IV, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC, previously acquired four adjacent parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood in the Brooklyn borough of New York City, from unrelated third parties, for the development of the Williamsburg Moxy Hotel.

 

As a result, the Company and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. The Company has determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and the Company is not the primary beneficiary, as it was determined that Lightstone REIT IV is the primary beneficiary. Therefore, the Company accounts for its membership interest in the Williamsburg Moxy Hotel Joint Venture in accordance with the equity method because it exerts significant influence over but does not control the Williamsburg Moxy Hotel Joint Venture. All capital contributions and distributions of earnings from the Williamsburg Moxy Hotel Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the Williamsburg Moxy Hotel Joint Venture are made to the members pursuant to the terms of the Williamsburg Moxy Hotel Joint Venture’s operating agreement.

 

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a development agreement (the “Development Agreement”) with an affiliate of the Sponsor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg Moxy Developer was paid a development fee equal to 3% of hard and soft costs, as defined in the Development Agreement, incurred in connection with the development and construction of the Williamsburg Moxy Hotel. Additionally on August 5, 2021, the Williamsburg Moxy Hotel Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. Furthermore, certain affiliates of the Sponsor are reimbursed for various development and development-related costs attributable to the Williamsburg Moxy Hotel.

 

The Williamsburg Moxy Hotel was substantially completed and opened for business on March 7, 2023. In preparation for the opening of the Williamsburg Moxy Hotel, which opened on March 7, 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $0.5 million and $2.2 million during the three and six months ended June 30, 2023, respectively. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs and are expensed as incurred.

 

During the six months ended June 30, 2024, the Company made capital contributions to the Williamsburg Moxy Joint Venture of $0.1 million. During the six months ended June 30, 2023, the Company made capital contributions to the Williamsburg Moxy Joint Venture of $0.6 million.

 

Moxy Construction Loan

 

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility with a financial institution for up to $77.0 million (the “Moxy Construction Loan”) to fund certain of the development, construction and certain pre-opening costs associated with the Williamsburg Moxy Hotel. The Moxy Construction Loan, which was scheduled to initially mature on February 5, 2024, was further extended to May 4, 2024. The Moxy Construction Loan was collateralized by the Williamsburg Moxy Hotel. The Moxy Construction Loan provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective after June 30, 2023, the Moxy Construction Loan’s interest rate converted from LIBOR plus 9.00%, with a floor of 9.50%, to SOFR plus 9.11%, with a floor of 9.61%. The Moxy Construction Loan required monthly interest-only payments based on a rate of 7.50% and the excess was added to the outstanding loan balance due at maturity. SOFR as of June 30, 2024 and December 31, 2023 was 5.34% and 5.35%, respectively.

 

As of December 31, 2023, the outstanding principal balance of the Moxy Construction Loan was $83.8 million (including $6.9 million of excess interest added to principal) which was presented, net of deferred financing fees of $0.1 million, respectively, on the condensed balance sheets and was classified as mortgages payable, net.

 

In connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture provided certain completion and carry cost guarantees. Furthermore, in connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of loan fees and expenses and accrued $0.8 million of loan exit fees which were included in other liabilities on the condensed balance sheets as of December 31, 2023.

 

Moxy Mortgage Loans

 

On April 19, 2024, the Williamsburg Moxy Joint Venture entered into an $86.0 million senior mortgage loan facility (the “Moxy Senior Loan”) and a $9.0 million junior mortgage loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Mortgage Loans”) with unrelated third parties.

 

The Moxy Mortgage Loans bear interest at SOFR plus 5.10%, subject to a 8.75% floor (10.44% as of June 30, 2024). The Moxy Mortgage Loans initially mature on April 19, 2027, but may be further extended though the exercise of two six-month extension options, subject to the satisfaction of certain conditions. The Moxy Mortgage Loans require monthly interest-only payments with their outstanding principal due in full at maturity and are collateralized by the Williamsburg Moxy Hotel, however, the Moxy Junior Loan is subordinate to the Moxy Senior Loan. The Williamsburg Moxy Hotel Joint Venture used $85.8 million of the aggregate proceeds from the Moxy Mortgage Loans in connection with the payoff of the Moxy Construction Loan consisting of the outstanding indebtedness (principal and interest) of $86.0 million and accrued exit fees of $0.8 million, net of restricted escrows of $1.0 million.

 

As of June 30, 2024, the outstanding principal balance of the Moxy Mortgage Loans was $95.0 million which is presented net of deferred financing fees of $3.1 million on the condensed balance sheet and is classified as mortgages payable, net.

 

In connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture has provided certain interest and carry costs guarantees. Furthermore, in connection with the Moxy Mortgage Loans, $3.2 million of the initial proceeds advanced at closing were used to fund reserves for interest, real estate taxes and insurance. Additionally, in connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture paid an aggregate of $2.8 million of loan fees and expenses and accrued $0.5 million of loan exit fees which were included in other liabilities on the condensed balance sheets as of June 30, 2024.

 

Williamsburg Moxy Hotel Joint Venture Financial Information

 

The following table represents the condensed statements of operations for the Williamsburg Moxy Hotel Joint Venture for the periods indicated:

 

Schedule of condensed statement of operations                                
    For the
Three Months Ended
June 30,
2024		     For the
Three Months Ended
June 30,
2023		     For the
Six Months Ended
June 30,
2024		     For the
Six Months Ended
June 30,
2023		  
Revenues   $ 8,302     $ 7,106     $ 12,861     $ 8,059  
                                 
Property operating expenses     5,778        5,905       10,440       7,245  
Pre-opening costs     -        493        -       2,228  
General and administrative costs     55        47        115       79  
Depreciation and amortization     921       869        1,829       1,140  
Operating income/(loss)     1,548       (208 )     477       (2,633 )
Interest expense     (2,851 )     (3,162 )     (6,139 )     (3,970 )
Net loss   $ (1,303 )   $ (3,370 )   $ (5,662 )   $ (6,603 )
Company’s share of net loss (25.00%)   $ (326 )   $ (843 )   $ (1,416 )   $ (1,651 )
Additional deprecation and amortization expense(1)     (10 )     -       (10 )     -  
Company’s net loss from investment   $ (336 )   $ (843 )   $ (1,426 )   $ (1,651 )

 

 
(1) Additional depreciation and amortization expense relates to the amortization of the difference between the cost of the interest in the Williamsburg Moxy Hotel Joint Venture and the amount of the underlying equity in net assets of the Williamsburg Moxy Hotel Joint Venture.

 

 

The following table represents the condensed balance sheets for the Williamsburg Moxy Hotel Joint Venture as of the dates indicated:

 

Schedule of condensed balance sheet                
    As of     As of  
    June 30,
2024		     December 31,
2023		  
Investment property, net   $ 124,931     $ 126,603  
Cash     5,890       3,453  
Other assets     4,476       2,385  
Total assets   $ 135,297     $ 132,441  
                 
Mortgages payable, net   $ 91,861     $ 83,666  
Other liabilities     5,856       6,023  
Members’ capital     37,580       42,752  
Total liabilities and members’ capital   $ 135,297     $ 132,441  
v3.24.2.u1
Marketable Securities and Fair Value Measurements
 6 Months Ended
Jun. 30, 2024
Marketable Securities And Fair Value Measurements  
Marketable Securities and Fair Value Measurements

 

4. 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:

 

Schedule of available-for-sale securities reconciliation                                
    As of June 30, 2024  
    Adjusted
Cost		     Gross Unrealized
Gains		     Gross Unrealized
Losses		     Fair
Value		  
Marketable Securities:                                
Equity securities:                                
Preferred Equity Securities   $ 3,456     $ 47     $ -     $ 3,503  
Mutual Funds     1,215       -       -       1,215  
      4,671       47       -       4,718  
Debt securities:                                
Corporate Bonds     746       -       (125 )     621  
Total   $ 5,417     $ 47     $ (125 )   $ 5,339  

 

    As of December 31, 2023  
    Adjusted
Cost		     Gross Unrealized
Gains		     Gross Unrealized
Losses		     Fair
Value		  
Marketable Securities:                                
Equity securities:                                
Preferred Equity Securities   $ 3,456     $ 14     $ (4 )   $ 3,466  
Mutual Funds     3,150       -       -       3,150  
      6,606       14       (4 )     6,616  
Debt securities:                                
Corporate Bonds     746       -       (166 )     580  
Total   $ 7,352     $ 14     $ (170 )   $ 7,196  

 

 

As of June 30, 2024, the Company has not recognized an allowance for expected credit losses related to available-for-sale debt securities as the Company has not identified any unrealized losses for these investments attributable to credit factors. The Company’s unrealized loss on investments in corporate bonds was primarily caused by recent rising interest rates. The Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.

 

The Company may sell certain of its investments in marketable debt securities 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.

 

The Company’s mutual funds were classified as Level 1 assets and the Company’s preferred equity securities, corporate bonds and interest rate cap contract were classified as Level 2 assets. There were no transfers between the level classifications during the six months ended June 30, 2024 and 2023.

 

The fair values of the Company’s investments in mutual funds are measured using quoted prices in active markets for identical assets and its 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. The fair value of the Company’s interest rate cap contract is measured using other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

 

The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

 

Schedule of available-for-sale securities        
    As of
June 30,
2024		  
Due in 1 year   $ -  
Due in 1 year through 5 years     -  
Due in 5 year through 10 years     -  
Due after 10 years     621  
Total   $ 621  

 

The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.
v3.24.2.u1
Mortgages payable, net
 6 Months Ended
Jun. 30, 2024
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]  
Mortgages payable, net

 

5. Mortgages payable, net

 

Mortgages payable, net consists of the following:

 

 Schedule of mortgages payable, net                                        
Description   Interest
Rate		   Weighted Average
Interest Rate
for the
Six Months Ended
June 30,
2024		     Maturity
Date		   Amount Due
at Maturity		     As of
June 30,
2024		     As of
December 31,
2023		  
Revolving Credit Facility   AMERIBOR + 3.15%
(floor of 4.00%)		     8.66 %   July 2027   $ 30,844     $ 30,844     $ 30,844  
                                         
Home2 Suites Tukwila Loan   AMERIBOR + 3.50%
(floor of 3.75%)		     9.02 %   December 2026     15,524       16,123       16,210  
                                         
Home2 Suites Salt Lake City Loan   AMERIBOR + 3.50%
(floor of 3.75%)		     9.02 %   December 2026     10,094       10,483       10,540  
                                         
Total mortgages payable         8.83 %       $ 56,462       57,450       57,594  
                                         
Less: Deferred financing costs                             (285 )     (433 )
                                         
Total mortgage payable, net                           $ 57,165     $ 57,161  

 

AMERIBOR as of June 30, 2024 and December 31, 2023 was 5.44% and 5.43%, respectively.

 

Revolving Credit Facility

 

The Company has a non-recourse revolving credit facility (the “Revolving Credit Facility”) with a financial institution. The Revolving Credit Facility provides it with a line of credit of up to $60 million pursuant to which it may designate properties as collateral that allow borrowings up to a 65% loan-to-value ratio subject to also meeting certain financial debt covenants. The Revolving Credit Facility provides for monthly interest-only payments and the outstanding principal balance due at its final maturity. The Revolving Credit Facility also requires the maintenance of certain financial debt covenants, including a prescribed minimum debt service coverage ratio and a debt yield ratio, which may also be achieved through principal paydowns on the outstanding balance. However, in November 2023 the lender agreed to waive one of the financial ratios and modify the other financial ratio through the scheduled maturity of the Revolving Credit Facility on July 13, 2024.

 

The Revolving Credit Facility, which had an outstanding balance of $30.8 million as of both June 30, 2024 and December 31, 2023, subsequently matured on July 13, 2024 but the lender agreed to take no actions and the Revolving Credit Facility was subsequently amended and restated on July 31, 2024, at which time its following key terms were adjusted:

 

  ●

The maturity date was extended by three years to July 13, 2027 with two additional one-year extension options at the sole discretion of the lender;

 

  ●

The maximum borrowing amount was reduced to $40.0 million (of which $30.8 million was outstanding);

 

  ●

The interest rate was prospectively changed to SOFR plus 3.30%, subject to a 6.64% floor; and

 

  ●

The financial debt covenants commence with the quarter ended September 30, 2024, but the Revolving Credit Facility provides for phased increases to the prescribed minimum financial ratios throughout the initial three-year term of the Revolving Credit Facility.

 

Six of the Company’s hotel properties are currently pledged as collateral under the Revolving Credit Facility.

 

On December 1, 2023, the Company entered into an interest rate cap contract at a cost of $44 with an unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving Credit Facility. The interest rate cap contract had a notional amount of $30.8 million, matured on July 13, 2024 and effectively capped AMERIBOR at 5.34%.

 

In connection with the amendment and restatement of the Revolving Credit Facility, the Company simultaneously entered into an interest rate cap contract at a cost of $85 with an unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving Credit Facility. The interest rate cap contract has a notional amount of $30.8 million, matures on July 31, 2025 and effectively caps SOFR at 5.34%.

 

Principal Maturities

 

The following table sets forth the estimated contractual principal maturities of the Company’s mortgages payable, including balloon payments due at maturity, as of June 30, 2024 after taking into consideration the aforementioned amendment and restatement of the Revolving Credit Facility:

 

 Schedule of principal maturities                                            
    2024     2025     2026     2027     2028     Thereafter     Total  
Principal maturities   $ 204     $ 409     $ 25,993     $ 30,844     $ -     $ -     $ 57,450  
                                             
Less: Deferred financing costs                                                     (285 )
                                                         
Total principal maturities, net                                                   $ 57,165  

 

Certain of the Company’s debt agreements also contain clauses providing for prepayment penalties. As of June 30, 2024, the Company was in compliance with all its financial debt covenants.
v3.24.2.u1
Company’s Stockholder’s Equity
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
Company’s Stockholder’s Equity

 

6.

Company’s Stockholder’s Equity

 

Distributions on Common Shares

 

On November 13, 2023, the Board of Directors authorized and the Company declared a Common Share distribution of $0.075 per share for the quarterly period ending December 31, 2023. The distribution is the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. The distribution of $1.0 million was paid on January 15, 2024 to stockholders of record at the close of business on December 31, 2023.

 

On March 18, 2024, the Board of Directors determined to suspend regular quarterly distributions.

 

Future distributions declared, if any, 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, revenues and other sources of income, operating and interest expenses and 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.

 

SRP

 

The Company’s share repurchase program (the “SRP”) may provide eligible stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to the Company, subject to restrictions and applicable law.

 

On March 19, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions.

 

Effective May 10, 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 the Company’s current estimated net asset value per share of common stock, 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.

 

On the above noted date, 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 proration if either type of redemption requests exceeded the annual limitation.

 

For the six months ended June 30, 2024, the Company repurchased 34,514 Common Shares at a weighted average price of $9.95. For the six months ended June 30, 2023, the Company repurchased 86,223 Common Shares at a weighted average price of $10.03.

 

Earnings per Share

 

The Company had no potentially dilutive securities outstanding during the periods presented. Accordingly, basic and diluted earnings per share is calculated by dividing net income/(loss) by the weighted-average number of shares of common stock outstanding during the applicable period.
v3.24.2.u1
Related Party Transactions
 6 Months Ended
Jun. 30, 2024
Related Party Transactions [Abstract]  
Related Party Transactions

 

7. Related Party Transactions

 

The Company’s Sponsor, Advisor and their affiliates, including the Special Limited Partner, are related parties of the Company as well as other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, certain of these entities are entitled to compensation and reimbursement of costs incurred for services related to the investment, development, management and disposition of our assets. The compensation is generally 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.

 

The following table represents the fees incurred associated with the payments to the Company’s Advisor for the periods indicated:

 

Schedule of fees payments to company’s advisor                            
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
    2024     2023     2024     2023  
Asset management fees (general and administrative costs)   $ 365     $ 360     $ 730     $ 677  
Finance fees(1)     178       -       178       -  
Total   $ 543     $ 360     $ 908     $ 677  

 

 
(1) Finances fees were capitalized and are included in the carrying value of the Company’s investment in the Williamsburg Moxy Hotel Joint Venture.

 

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 the Company’s independent directors. Payments to the Advisor or certain affiliates of the Sponsor may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse the Advisor and certain affiliates of the Sponsor for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the Company’s assets, it may pay the Advisor or certain affiliates of the Sponsor a disposition commission.
v3.24.2.u1
Financial Instruments
 6 Months Ended
Jun. 30, 2024
Investments, All Other Investments [Abstract]  
Financial Instruments

 

8. Financial Instruments

 

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and other assets, accounts payable and other accrued expenses, distributions payable and due to related parties approximate their fair values because of the short maturity of these instruments.

 

The carrying amount of the mortgages payable approximate fair value because the interest rates are variable and reflective of market rates.
v3.24.2.u1
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

 

9. Commitments and Contingencies

 

Management Agreements

 

The Company’s hotels operate pursuant to management agreements (the “Management Agreements”) with various third-party management companies. The management companies perform management functions including, but not limited to, hiring and supervising employees, establishing room prices, establishing administrative policies and procedures, managing expenditures and arranging and supervising public relations and advertising. The Management Agreements are for initial terms ranging from 1 one year to 10 years however, the agreements can be cancelled for any reason by the Company after giving 60 days’ notice after the one-year anniversary of the commencement of the respective agreement.

 

The Management Agreements provide for the payment of a base management fee equal to 3% to 3.5% of gross revenues, as defined, and an incentive management fee based on the operating results of the hotel, as defined. The base management fee and incentive management fee, if any, are recorded as a component of property operating expenses in the consolidated statements of operations.

 

Franchise Agreements

 

As of June 30, 2024, the Company’s hotels operated pursuant to various franchise agreements. Under the franchise agreements, the Company generally pays a fee equal to 3% to 5.5% of gross room sales, as defined, and a marketing fund charge from 2.0% to 2.5% of gross room sales. The franchise fee and marketing fund charge are recorded as a component of property operating expenses in the consolidated statements of operations.

 

The franchise agreements are generally for initial terms ranging from 15 years to 20 years, expiring between 2028 and 2034.

 

Legal Proceedings

 

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 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.
v3.24.2.u1
Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2024
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 III and the Operating Partnership and its subsidiaries (over which Lightstone REIT III exercises financial and operating control). As of June 30, 2024, Lightstone REIT III had a 99% general partnership interest in the common units of the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the U.S. (“GAAP”), and entities deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest or entities which it is not deemed to be the primary beneficiary, it accounts for the investment using the equity method of accounting.

 

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, 2023 (the “2023 Form 10-K”). The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT III, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

 

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 depreciable lives. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.

 

The consolidated balance sheet as of December 31, 2023 included herein has been derived from the consolidated balance sheet included in the Company’s 2023 Form 10-K.

 

The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

 
Income Taxes

Income Taxes

 

The Company elected to be taxed and qualify as a REIT commencing with the taxable year ended December 31, 2015. As a REIT, the Company generally will not be subject to U.S. federal income tax on its net taxable income that it distributes currently to its stockholders. To maintain its REIT qualification under the Internal Revenue Code of 1986, as amended, or the Code, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. Additionally, even if the Company continues to qualify as a REIT for U.S. federal income tax purposes, it may still be subject to some U.S. federal, state and local taxes on its income and property and to U.S. federal income taxes and excise taxes on its undistributed income, if any.

 

To maintain its qualification as a REIT, the Company engages in certain activities through a taxable REIT subsidiary (“TRS”), including when it acquires a hotel it usually establishes a new TRS and enters into an operating lease agreement for the hotel. As such, the Company is subject to U.S. federal and state income taxes and franchise taxes from these activities.

 

The Company’s income tax benefits and expense are included in other income, net on its consolidated statements of operations. During the three and six months ended June 30, 2024, the Company recorded income tax expense of $5 and $48, respectively. During the three and six months ended June 30, 2023, the Company recorded an income tax benefit of $3 and income tax expense of $63, respectively.

 

As of June 30, 2024 and December 31, 2023, the Company had no material uncertain income tax positions.

 
Revenues

Revenues

 

The following table represents the total revenues from hotel operations on a disaggregated basis:

 

Schedule of revenues from hotel operations                                
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
Revenues   2024     2023     2024     2023  
Room   $ 8,461     $ 7,726     $ 14,516     $ 13,856  
Food, beverage and other     258       240       473       476  
Total revenues   $ 8,719     $ 7,966     $ 14,989     $ 14,332  

 
New Accounting Pronouncements

New Accounting Pronouncements

 

In November 2023, the FASB issued an accounting standards update which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within segment profit and loss, as well as the title and position of the CODM. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the guidance and the impact it may have on the consolidated financial statements.

 

In December 2023, the FASB issued an accounting standards update which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update is effective for annual periods beginning after December 15, 2024. The Company is evaluating the guidance and the impact it may have on the consolidated financial statements.

 

The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.

 
Concentration of Risk

Concentration of Risk

 

As of June 30, 2024 and December 31, 2023, the Company had cash deposited in certain financial institutions in excess of U.S. federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents.

 
Current Environment

Current Environment

 

The Company’s operating results and financial condition 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, its 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 and uncertainty as a result of recent banking failures, 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, inflation and recession.

 

The Company’s overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation, higher interest rates, labor and supply chain challenges and other changes in economic conditions could adversely affect the Company’s future results from operations and its financial condition.
v3.24.2.u1
Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Schedule of revenues from hotel operations
Schedule of revenues from hotel operations                                
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
Revenues   2024     2023     2024     2023  
Room   $ 8,461     $ 7,726     $ 14,516     $ 13,856  
Food, beverage and other     258       240       473       476  
Total revenues   $ 8,719     $ 7,966     $ 14,989     $ 14,332  
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities (Tables)
 6 Months Ended
Jun. 30, 2024
Restructuring Cost and Reserve [Line Items]  
Schedule of investments in the unconsolidated affiliated real estate
Schedule of investments in the unconsolidated affiliated real estate                              
                As of  
Entity   Date of
Ownership		     Ownership %     June 30,
2024		     December 31,
2023		  
Hilton Garden Inn Joint Venture   March 27, 2018       50 %   $ 8,523     $ 9,405  
Williamsburg Moxy Hotel Joint Venture   August 5, 2021       25 %     9,710       10,835  
Total investments in unconsolidated affiliated real estate entities                 $ 18,233     $ 20,240  
Schedule of condensed statement of operations
 Schedule of condensed statement of operations                                
    For the
Three Months Ended
June 30,
2024		     For the
Three Months Ended
June 30,
2023		     For the
Six Months Ended
June 30,
2024		     For the
Six Months Ended
June 30,
2023		  
Revenues   $ 3,473     $ 3,115     $ 5,775     $ 5,144  
                                 
Property operating expenses     1,992       1,907       3,803       3,414  
General and administrative costs     13       106        35       132  
Depreciation and amortization     598        596        1,206       1,205  
Operating income     870        506        731       393  
Interest expense     (705 )     (825 )     (1,389 )     (1,451 )
Net income/(loss)   $ 165     $ (319 )   $ (658 )   $ (1,058 )
Company’s share of earnings (50.00%)   $ 83      $ (159 )   $ (329 )   $ (529 )
Hilton Garden Inn Joint Venture [Member]  
Restructuring Cost and Reserve [Line Items]  
Schedule of condensed balance sheet
Schedule of condensed balance sheet                
    As of     As of  
    June 30,
2024		     December 31,
2023		  
Investment property, net   $ 46,893     $ 48,001  
Cash     820       1,741  
Other assets     2,024       1,816  
Total assets   $ 49,737     $ 51,558  
                 
Mortgage payable, net   $ 32,280     $ 32,273  
Other liabilities     1,011       1,075  
Members’ capital     16,446       18,210  
Total liabilities and members’ capital   $ 49,737     $ 51,558  
Williamsburg Moxy Hotel Joint Venture [Member]  
Restructuring Cost and Reserve [Line Items]  
Schedule of condensed statement of operations
Schedule of condensed statement of operations                                
    For the
Three Months Ended
June 30,
2024		     For the
Three Months Ended
June 30,
2023		     For the
Six Months Ended
June 30,
2024		     For the
Six Months Ended
June 30,
2023		  
Revenues   $ 8,302     $ 7,106     $ 12,861     $ 8,059  
                                 
Property operating expenses     5,778        5,905       10,440       7,245  
Pre-opening costs     -        493        -       2,228  
General and administrative costs     55        47        115       79  
Depreciation and amortization     921       869        1,829       1,140  
Operating income/(loss)     1,548       (208 )     477       (2,633 )
Interest expense     (2,851 )     (3,162 )     (6,139 )     (3,970 )
Net loss   $ (1,303 )   $ (3,370 )   $ (5,662 )   $ (6,603 )
Company’s share of net loss (25.00%)   $ (326 )   $ (843 )   $ (1,416 )   $ (1,651 )
Additional deprecation and amortization expense(1)     (10 )     -       (10 )     -  
Company’s net loss from investment   $ (336 )   $ (843 )   $ (1,426 )   $ (1,651 )

 

 
(1) Additional depreciation and amortization expense relates to the amortization of the difference between the cost of the interest in the Williamsburg Moxy Hotel Joint Venture and the amount of the underlying equity in net assets of the Williamsburg Moxy Hotel Joint Venture.
Schedule of condensed balance sheet
Schedule of condensed balance sheet                
    As of     As of  
    June 30,
2024		     December 31,
2023		  
Investment property, net   $ 124,931     $ 126,603  
Cash     5,890       3,453  
Other assets     4,476       2,385  
Total assets   $ 135,297     $ 132,441  
                 
Mortgages payable, net   $ 91,861     $ 83,666  
Other liabilities     5,856       6,023  
Members’ capital     37,580       42,752  
Total liabilities and members’ capital   $ 135,297     $ 132,441  
v3.24.2.u1
Marketable Securities and Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2024
Marketable Securities And Fair Value Measurements  
Schedule of available-for-sale securities reconciliation
Schedule of available-for-sale securities reconciliation                                
    As of June 30, 2024  
    Adjusted
Cost		     Gross Unrealized
Gains		     Gross Unrealized
Losses		     Fair
Value		  
Marketable Securities:                                
Equity securities:                                
Preferred Equity Securities   $ 3,456     $ 47     $ -     $ 3,503  
Mutual Funds     1,215       -       -       1,215  
      4,671       47       -       4,718  
Debt securities:                                
Corporate Bonds     746       -       (125 )     621  
Total   $ 5,417     $ 47     $ (125 )   $ 5,339  

 

    As of December 31, 2023  
    Adjusted
Cost		     Gross Unrealized
Gains		     Gross Unrealized
Losses		     Fair
Value		  
Marketable Securities:                                
Equity securities:                                
Preferred Equity Securities   $ 3,456     $ 14     $ (4 )   $ 3,466  
Mutual Funds     3,150       -       -       3,150  
      6,606       14       (4 )     6,616  
Debt securities:                                
Corporate Bonds     746       -       (166 )     580  
Total   $ 7,352     $ 14     $ (170 )   $ 7,196  
Schedule of available-for-sale securities
Schedule of available-for-sale securities        
    As of
June 30,
2024		  
Due in 1 year   $ -  
Due in 1 year through 5 years     -  
Due in 5 year through 10 years     -  
Due after 10 years     621  
Total   $ 621  
v3.24.2.u1
Mortgages payable, net (Tables)
 6 Months Ended
Jun. 30, 2024
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]  
Schedule of mortgages payable, net
 Schedule of mortgages payable, net                                        
Description   Interest
Rate		   Weighted Average
Interest Rate
for the
Six Months Ended
June 30,
2024		     Maturity
Date		   Amount Due
at Maturity		     As of
June 30,
2024		     As of
December 31,
2023		  
Revolving Credit Facility   AMERIBOR + 3.15%
(floor of 4.00%)		     8.66 %   July 2027   $ 30,844     $ 30,844     $ 30,844  
                                         
Home2 Suites Tukwila Loan   AMERIBOR + 3.50%
(floor of 3.75%)		     9.02 %   December 2026     15,524       16,123       16,210  
                                         
Home2 Suites Salt Lake City Loan   AMERIBOR + 3.50%
(floor of 3.75%)		     9.02 %   December 2026     10,094       10,483       10,540  
                                         
Total mortgages payable         8.83 %       $ 56,462       57,450       57,594  
                                         
Less: Deferred financing costs                             (285 )     (433 )
                                         
Total mortgage payable, net                           $ 57,165     $ 57,161  
Schedule of principal maturities
 Schedule of principal maturities                                            
    2024     2025     2026     2027     2028     Thereafter     Total  
Principal maturities   $ 204     $ 409     $ 25,993     $ 30,844     $ -     $ -     $ 57,450  
                                             
Less: Deferred financing costs                                                     (285 )
                                                         
Total principal maturities, net                                                   $ 57,165  
v3.24.2.u1
Related Party Transactions (Tables)
 6 Months Ended
Jun. 30, 2024
Related Party Transactions [Abstract]  
Schedule of fees payments to company’s advisor
Schedule of fees payments to company’s advisor                            
    For the
Three Months Ended
June 30,		     For the
Six Months Ended
June 30,		  
    2024     2023     2024     2023  
Asset management fees (general and administrative costs)   $ 365     $ 360     $ 730     $ 677  
Finance fees(1)     178       -       178       -  
Total   $ 543     $ 360     $ 908     $ 677  

 

 
(1) Finances fees were capitalized and are included in the carrying value of the Company’s investment in the Williamsburg Moxy Hotel Joint Venture.
v3.24.2.u1
Business and Structure (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
 1 Months Ended 6 Months Ended
Jul. 16, 2014
Jun. 30, 2024
Dec. 31, 2023
Dec. 11, 2014
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]        
Common Stock, Shares, Issued   12,900,000 12,900,000  
Lichtenstein [Member]        
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]        
Common Stock, Shares, Issued       222,222
Lightstone Value Plus REIT III LLC [Member].        
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]        
Issuance of common shares, shares   20,000    
Issuance of common shares, value   $ 200    
Shares issued, price per share   $ 10.00    
Company Owned By David Lichtenstein [Member]        
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]        
Shares reserved for issuance, price per share       $ 9.00
General Partner [Member]        
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]        
Contribution from advisor $ 2      
Number of limited partner units issued to advisor 200      
Limited Partner [Member]        
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]        
Partners' Capital Account, Units, Contributed   242    
Partners' Capital Account, Contributions   $ 50,000    
Consideration amount   $ 12,100    
Lightstone REIT III [Member]        
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]        
General partner ownership interest   99.00%    
v3.24.2.u1
Summary of Significant Accounting Policies (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Product Information [Line Items]        
Total revenues $ 8,719 $ 7,966 $ 14,989 $ 14,332
Room [Member]        
Product Information [Line Items]        
Total revenues 8,461 7,726 14,516 13,856
Food and Beverage [Member]        
Product Information [Line Items]        
Total revenues $ 258 $ 240 $ 473 $ 476
v3.24.2.u1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Income tax expense $ 5 $ 48 $ 3 $ 63  
Uncertain income tax positions $ 0   $ 0   $ 0
Lightstone REIT III [Member]          
General partner ownership interest     99.00%    
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities (Details) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Schedule of Equity Method Investments [Line Items]    
Total investments in unconsolidated affiliated real estate entities $ 18,233 $ 20,240
Hilton Garden Inn [Member]    
Schedule of Equity Method Investments [Line Items]    
Date of Ownership Mar. 27, 2018  
Ownership Percentage 50.00%  
Total investments in unconsolidated affiliated real estate entities $ 8,523 9,405
Williamsburg Moxy [Member]    
Schedule of Equity Method Investments [Line Items]    
Date of Ownership Aug. 05, 2021  
Ownership Percentage 25.00%  
Total investments in unconsolidated affiliated real estate entities $ 9,710 $ 10,835
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities (Details 1) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Restructuring Cost and Reserve [Line Items]        
Revenues $ 8,719 $ 7,966 $ 14,989 $ 14,332
Property operating expenses 7,309 7,156 13,859 13,888
Hilton Garden Inn [Member]        
Restructuring Cost and Reserve [Line Items]        
Revenues 3,473 3,115 5,775 5,144
Property operating expenses 1,992 1,907 3,803 3,414
General and administrative costs 13 106 35 132
Depreciation and amortization 598 596 1,206 1,205
Operating loss 870 506 731 393
Interest expense (705) (825) (1,389) (1,451)
Net (loss)/income 165 (319) (658) (1,058)
Net Income (Loss) Available to Common Stockholders, Basic $ 83 $ (159) $ (329) $ (529)
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities (Details 2) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Jun. 30, 2023
Restructuring Cost and Reserve [Line Items]      
Cash $ 4,531   $ 9,310
Hilton Garden Inn [Member]      
Restructuring Cost and Reserve [Line Items]      
Investment property, net 46,893 $ 48,001  
Cash 820 1,741  
Other assets 2,024 1,816  
Total assets 49,737 51,558  
Mortgage payable, net 32,280 32,273  
Other liabilities 1,011 1,075  
Members' Capital 16,446 18,210  
[custom:TotalLiabilitiesAndMemberCapital-0] $ 49,737 $ 51,558  
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities (Details 3) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Restructuring Cost and Reserve [Line Items]        
Revenues $ 8,719 $ 7,966 $ 14,989 $ 14,332
Property operating expenses 7,309 7,156 13,859 13,888
Depreciation and amortization 828 1,114 1,662 2,294
Interest expense 1,336 1,333 2,673 2,571
Williamsburg Moxy [Member]        
Restructuring Cost and Reserve [Line Items]        
Revenues 8,302 7,106 12,861 8,059
Property operating expenses 5,778 5,905 10,440 7,245
Pre-opening costs 493 2,228
General and administrative costs 55 47 115 79
Depreciation and amortization 921 869 1,829 1,140
Operating income/(loss) 1,548 (208) 477 (2,633)
Interest expense (2,851) (3,162) (6,139) (3,970)
Net loss (1,303) (3,370) (5,662) (6,603)
Company's share of net loss (25.00%) (326) (843) (1,416) (1,651)
Additional deprecation and amortization expense [1] (10) (10)
Company's net loss from investment $ (336) $ (843) $ (1,426) $ (1,651)
[1] Additional depreciation and amortization expense relates to the amortization of the difference between the cost of the interest in the Williamsburg Moxy Hotel Joint Venture and the amount of the underlying equity in net assets of the Williamsburg Moxy Hotel Joint Venture.
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities (Details 4) - Williamsburg Moxy [Member] - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Restructuring Cost and Reserve [Line Items]    
Investment property, net $ 124,931 $ 126,603
Cash 5,890 3,453
Other assets 4,476 2,385
Total assets 135,297 132,441
Mortgages payable, net 91,861 83,666
Other liabilities 5,856 6,023
Members capitals 37,580 42,752
Total liabilities and members' capital $ 135,297 $ 132,441
v3.24.2.u1
Investments in Unconsolidated Affiliated Real Estate Entities (Details Narrative) - USD ($)
$ in Thousands
 1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Aug. 05, 2024
Aug. 05, 2021
Apr. 19, 2024
Mar. 27, 2018
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Jun. 01, 2026
Mar. 27, 2023
Williamsburg Moxy Hotel [Member]                    
Restructuring Cost and Reserve [Line Items]                    
Capital contributions           $ 100 $ 600      
Aggregate consideration amount   $ 7,900                
Pre-opening costs         $ 500   2,200      
Moxy Construction Loan [Member]                    
Restructuring Cost and Reserve [Line Items]                    
Outstanding principal amount               $ 83,800    
Debt instrument, maturity date May 04, 2024                  
Debt instrument, description of variable rate basis LIBOR plus 9.00%, with a floor of 9.50%, to SOFR plus 9.11%, with a floor of 9.61%.                  
Interest amount               6,900    
Deferred financing fees               100    
Loan fees               3,700    
Accrued exit fees               $ 800    
Moxy Senior Loan [Member]                    
Restructuring Cost and Reserve [Line Items]                    
Outstanding principal amount     $ 86,000              
Moxy Junior Loan [Member]                    
Restructuring Cost and Reserve [Line Items]                    
Outstanding principal amount     $ 9,000     95,000        
Deferred financing fees           3,100        
Moxy Mortgage Loans [Member]                    
Restructuring Cost and Reserve [Line Items]                    
Debt instrument, maturity date     Apr. 19, 2027              
Debt instrument, description of variable rate basis     SOFR plus 5.10%, subject to a 8.75% floor              
Loan fees           2,800        
Accrued exit fees     $ 800              
Proceeds from advance from related party     85,800              
Restricted escrows     $ 1,000              
Loan exit fees           $ 500        
Hilton Garden Inn [Member]                    
Restructuring Cost and Reserve [Line Items]                    
Aggregate purchase price       $ 60,000            
Offering funds used in acquisition       12,900            
Proceeds from Issuance of Debt       35,000            
Outstanding principal amount                 $ 1,300 $ 3,000
Cash collateral                 $ 37  
Membership intersts           50.00%        
Distributions amount           $ 600        
Capital contributions           $ 100 $ 400      
Hilton Garden Inn [Member] | Reportable Legal Entities [Member]                    
Restructuring Cost and Reserve [Line Items]                    
Offering funds used in acquisition       $ 25,000            
Business Acquisition Percent age Of Voting Interest Acquired       50.00%            
v3.24.2.u1
Marketable Securities and Fair Value Measurements (Details) - USD ($)
$ in Thousands
 6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Equity securities, Adjusted Cost $ 4,671 $ 6,606
Equity securities, Gross Unrealized Gains 47 14
Equity securities, gross unrealized losses (4)
Equity securities, Fair Value 4,718 6,616
Debt securities, Adjusted Cost 5,417 7,352
Debt securities, Gross Unrealized Gains 47 14
Debt securities, Gross Unrealized Losses (125) (170)
Debt securities, Fair Value 5,339  
Preferred Equity Securities [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Equity securities, Adjusted Cost 3,456 3,456
Equity securities, Gross Unrealized Gains 47 14
Equity securities, gross unrealized losses (4)
Equity securities, Fair Value 3,503 3,466
Mutual Fund [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Equity securities, Adjusted Cost 1,215 3,150
Equity securities, Gross Unrealized Gains
Equity securities, gross unrealized losses
Equity securities, Fair Value 1,215 3,150
Corporate Bonds [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Debt securities, Adjusted Cost 746 746
Debt securities, Gross Unrealized Gains
Debt securities, Gross Unrealized Losses (125) (166)
Debt securities, Fair Value $ 621 $ 580
v3.24.2.u1
Marketable Securities and Fair Value Measurements (Details 1)
$ in Thousands
Jun. 30, 2024
USD ($)
Marketable Securities And Fair Value Measurements  
Due in 1 year
Due in 1 year through 5 years
Due in 5 year through 10 years
Due after 10 years 621
Total $ 621
v3.24.2.u1
Mortgages payable, net (Details) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Line of Credit Facility [Line Items]    
Weighted Average Interest Rate 8.83%  
Amount Due at Maturity $ 56,462  
Total mortgages payable 57,450 $ 57,594
Less: Deferred financing costs (285) (433)
Total mortgages payable, net $ 57,165 57,161
Revolving Credit Facility [Member]    
Line of Credit Facility [Line Items]    
Interest Rate AMERIBOR + 3.15% (floor of 4.00%)  
Weighted Average Interest Rate 8.66%  
Maturity Date July 2027  
Amount Due at Maturity $ 30,844  
Total mortgages payable $ 30,844 30,844
Home 2 Suites Tukwila Loan [Member]    
Line of Credit Facility [Line Items]    
Interest Rate AMERIBOR + 3.50% (floor of 3.75%)  
Weighted Average Interest Rate 9.02%  
Maturity Date December 2026  
Amount Due at Maturity $ 15,524  
Total mortgages payable $ 16,123 16,210
Home 2 Suites Salt Lake City Loan [Member]    
Line of Credit Facility [Line Items]    
Interest Rate AMERIBOR + 3.50% (floor of 3.75%)  
Weighted Average Interest Rate 9.02%  
Maturity Date December 2026  
Amount Due at Maturity $ 10,094  
Total mortgages payable $ 10,483 $ 10,540
v3.24.2.u1
Mortgages payable, net (Details 1) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]    
2024 $ 204  
2025 409  
2026 25,993  
2027 30,844  
2028  
Thereafter  
Principal maturities 57,450 $ 57,594
Less: Deferred financing costs (285) (433)
Total principal maturities, net $ 57,165 $ 57,161
v3.24.2.u1
Mortgages payable, net (Details Narrative) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Revolving Credit Facility [Member]    
Debt Instrument [Line Items]    
Line of Credit Facility, Maximum Borrowing Capacity $ 60,000  
Line Of Credit Facility Current Borrowing Capacity Percentage 65.00%  
Principal amount $ 30,800 $ 30,800
Maximum borrowing amount $ 40,000  
Spread on variable rate 3.30%  
Floor rate 6.64%  
AMERIBOR [Member]    
Debt Instrument [Line Items]    
Interest rate 5.44% 5.43%
AMERIBOR [Member] | Revolving Credit Facility [Member]    
Debt Instrument [Line Items]    
Spread on variable rate 5.34%  
SOFR [Member] | Revolving Credit Facility [Member]    
Debt Instrument [Line Items]    
Principal amount $ 30,800  
Spread on variable rate 5.34%  
Maturity date Jul. 31, 2025  
v3.24.2.u1
Company’s Stockholder’s Equity (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
 6 Months Ended
Jan. 15, 2024
Nov. 13, 2023
Jun. 30, 2024
Jun. 30, 2023
Equity [Abstract]        
Common share distribution per share   $ 0.075    
Annual distributions paid per share   $ 0.30    
Annualized Distribution Rate   3.00%    
Share Price   $ 10.00    
Distribution paid in cash $ 1,000      
Share redemption program, annual limitation, percentage of weighted average shares outstanding     0.50%  
Repurchase of shares     34,514 86,223
Weighted average price per share     $ 9.95 $ 10.03
v3.24.2.u1
Related Party Transactions (Details) - Advisor [Member] - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Related Party Transaction [Line Items]        
Asset management fees (general and administrative costs) $ 365 $ 360 $ 730 $ 677
Finance fees [1] 178 178
Total $ 543 $ 360 $ 908 $ 677
[1] Finances fees were capitalized and are included in the carrying value of the Company’s investment in the Williamsburg Moxy Hotel Joint Venture.
v3.24.2.u1
Commitments and Contingencies (Details Narrative)
 6 Months Ended
Jun. 30, 2024
Minimum [Member]  
Loss Contingencies [Line Items]  
Management Agreement Term 1 year
Percentage Of Management Fees On Gross Revenue 3.00%
Franchise Agreement Term 15 years
Minimum [Member] | Marketing Fund Charge [Member]  
Loss Contingencies [Line Items]  
Property Management Fee, Percent Fee 2.00%
Maximum [Member]  
Loss Contingencies [Line Items]  
Management Agreement Term 10 years
Percentage Of Management Fees On Gross Revenue 3.50%
Franchise Agreement Term 20 years
Maximum [Member] | Marketing Fund Charge [Member]  
Loss Contingencies [Line Items]  
Property Management Fee, Percent Fee 2.50%
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