EDGAR 10-K Filing

Company CIK: 1619312
Filing Year: 2022
Filename: 1619312_10-K_2022_0001829126-22-006634.json

---

ITEM 1. BUSINESS
ITEM
1. BUSINESS:
General
Description of Business
Structure
Lightstone
Value Plus REIT IV, Inc. (“Lightstone REIT IV”), which was formerly known as Lightstone Real Estate Income
Trust, Inc. before September 15, 2021, is a Maryland corporation, formed on September 9, 2014, which elected to qualify as a real estate
investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2016.
Lightstone
REIT IV, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,” “our,”
“us” or similar pronouns refers to Lightstone REIT IV or the Company as required by the context in which any such pronoun
is used.
We
have and intend to continue to seek opportunities to invest in real estate and real estate-related investments. Our real estate investments
may include operating properties and development projects and our real estate-related investment may include mezzanine loans, mortgage
loans, bridge loans and preferred equity interests, with a focus on development-related investments, including investments intended to
finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets.
A portion of our investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly
or indirectly owned by The Lightstone Group, LLC (the “Sponsor”), its affiliates or other sponsored real estate investment
programs it sponsors. Although we expect that most of our investments will be of these various types, we may also invest in whatever
types of investments that we believe are in our best interests.
We
currently have one operating segment. As of December 31, 2021, we majority owned and consolidated the operating results of a joint venture
(the “Williamsburg Moxy Hotel Joint Venture”), in which it has a 75% membership interest, and held an unconsolidated
approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”). We account
for our unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.
Our
advisor is Lightstone Real Estate Income LLC, a Delaware limited liability company (the “Advisor”), which is
majority owned by David Lichtenstein. On September 12, 2014, the Advisor contributed $200,000 to Lightstone REIT IV in exchange for 20,000
shares of common stock (“Common Shares”), or $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests
of The Lightstone Group, LLC. The Lightstone Group, LLC served as the 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 June 15, 2015 for $2.0 million,
or $9.00 per share. Subject to the oversight of our board of directors (the “Board of Directors”) and pursuant to the terms
of an advisory agreement, the Advisor has the primary responsibility for making investment decisions on our behalf and managing our day-to-day
operations. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not
control Lightstone REIT IV.
We
do not have any employees. The Advisor receives compensation and fees for services related to the investment and management of our assets.
The Advisor has certain affiliates which may manage the properties we acquire. However, we may also contract with other unaffiliated
third-party property managers.
Our
Common Shares are not currently listed on a national securities exchange. We may seek to list our 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 its stockholders.
We do not intend to list our shares at this time. We do not anticipate that there would be any market for our Common Shares until they
are listed for trading.
On
December 16, 2021, our stockholders approved an amendment and restatement to our charter pursuant to which we are no longer required
to either (a) amend our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) hold a stockholders
meeting to vote on a proposal for an orderly liquidation of its portfolio.
Noncontrolling
Interests in Consolidated Subsidiaries
Noncontrolling
interests in consolidated subsidiaries represents the noncontrolling member’s 25% share of the equity in the Williamsburg Moxy
Hotel Joint Venture held by Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), a REIT also sponsored by the Sponsor
and a related party. Income and losses attributable to the Williamsburg Moxy Hotel Joint Venture are allocated to the noncontrolling
interest holder based on its ownership percentage. See Note 3 of the Notes to Consolidated Financial Statements for additional information.
Related
Parties
On
March 18, 2016, we and the Sponsor entered into a subordinated unsecured loan agreement (the “Subordinated Agreement”) pursuant
to which the Sponsor made aggregate principal advances of $12.6 million to us through March 31, 2017 (the termination date of the Offering).
The outstanding principal advances bear interest at a rate of 1.48%, but no interest or principal is due and payable to the Sponsor until
holders of our Common Shares have received liquidation distributions equal to their respective net investments (defined as $10.00 per
Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments.
Distributions
in connection with a liquidation of the Company initially will be made to holders of our Common Shares until holders of our Common Shares
have received liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return
of 8.0% on their respective net investments. Thereafter, only if additional liquidating distributions are available, we will be obligated
to repay the outstanding principal advances and related accrued interest to the Sponsor. In the event that additional liquidation distributions
are available after we repay our holders of common stock their respective net investments plus their 8% return on investment and then
the outstanding principal advances and related accrued interest to the Sponsor, such additional distributions will be paid to holders
of our Common Shares and the Sponsor as follows: 85.0% of the aggregate amount will be payable to holders of our Common Shares and the
remaining 15.0% will be payable to the Sponsor.
The
principal advances and the related interest are subordinate to all of our obligations as well as to the holders of our Common Shares
in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0% and only
potentially payable in the event of a liquidation of the Company.
In
connection with the termination of the Offering on March 31, 2017, we and the Sponsor simultaneously terminated the Subordinated Agreement
and as a result, the Sponsor is no longer obligated to make any additional principal advances to us. Interest will continue to accrue
on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will still be made
according to the terms of the Subordinated Agreement disclosed above.
As
of December 31, 2021, $13.6 million of principal advances and related accrued interest were outstanding.
Our
Advisor and its affiliates are related parties. Certain of these entities are entitled to compensation and fees for services related
to the investment of our assets during our acquisition, development, operational and liquidation stages. The compensation levels during
our acquisition and operational stages are based on percentages of the cost of acquired properties or other investments and the annual
revenue earned from such properties or other investments, and other such fees and expense reimbursement outlined in each of the respective
agreements.
Primary
Investment Objectives
Our
primary investment objectives are:
● to
pay periodic distributions to our stockholders as required to maintain our qualification as a REIT; and
● to
preserve and protect our shareholders’ capital contribution.
Acquisition
and Investment Policies
We
have and intend to continue to seek opportunities to invest in real estate and real estate-related investments. Our real estate investments
may include operating properties and development projects and our real estate-related investments may include mezzanine loans, mortgage
loans, bridge loans and preferred equity interests, with a focus on development-related investments, including those intended to finance
development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets. A portion
of our investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly,
owned by, the Sponsor, its affiliates or other real estate investment programs sponsored by it. Although we expect that most of our investments
will be of these various types, we may make other investments. In fact, we may invest in whatever types of investments that we believe
are in our best interests.
We
have and expect to continue to focus our acquisition and origination activity on real estate properties and real estate-related investments
located in the United States, including certain related-party investments generally conducted through joint venture arrangements. We
sometimes refer to the foregoing types of investments as our targeted investments. We expect to target investments that generally will
offer predictable current cash flow and/or attractive risk-adjusted returns based on the underwriting criteria established and employed
by our advisor, which may include the anticipated leverage point, market and economic conditions, the location and quality of the underlying
collateral and the borrower’s exit or refinancing plan. Our ability to continue to execute our investment strategy may be enhanced
through access to the Sponsor’s extensive experience in both financing and developing real estate projects as well as in buying
assets in the open market from third-parties. We have and will continue to seek to build a portfolio that may include some of or all
the following investment characteristics: (a) provides current income; (b) is secured by high-quality commercial real estate; (c) includes
subordinate capital investments by strong sponsors that support its investments and provide downside protection; and (d) possesses strong
structural features that maximize repayment potential, such as a clear exit or refinancing plan by the borrower.
We
have and intend to also continue to seek to invest in real estate-related loans and debt securities both by directly originating them
and by purchasing them from third-party sellers. Although we generally prefer the benefits of direct origination, situations may arise
to purchase real estate-related loans and debt securities, possibly at discounts to par, which compensate for the lack of control or
structural enhancements typically associated with directly structured investments.
Financing
Strategy and Policies
There
is no limitation on the amount we may invest or borrow for the purchase or origination of any single property or investment. Our charter
allows us to incur leverage up to 300% of our total “net assets” (as defined in our charter) as of the date of any borrowing,
which is generally expected to be approximately 75% of the cost of our investments. We may only exceed this 300% limit if a majority
of our independent directors approves each borrowing in excess of this limit and we disclose such borrowing to our stockholders in our
next quarterly report along with a justification for the excess borrowing. In all events, we expect that our secured and unsecured borrowings
will be reasonable in relation to the net value of our assets and will be reviewed by our Board of Directors at least quarterly.
We
do not currently intend to exceed the leverage limit in our charter. We believe that careful use of debt helps us to achieve our diversification
goals because we may have more funds available for investment. However, high levels of debt could cause us to incur higher interest charges
and higher debt service payments, which would decrease the amount of cash available for distributions, if any, to our investors.
Distributions
and Distributions Declared
Our
Board of Directors commenced declaring and we began paying distributions on our Common Shares at the pro rata equivalent of an annual
distribution of $0.80 per share, or an annualized rate of 8.0% assuming a purchase price of $10.00 per share, beginning with the period
from June 22, 2015 through November 30, 2015 and monthly thereafter beginning with the month ending December 31, 2015 through the month
ending June 30, 2019. Beginning with the month ending July 31, 2019, our Board of Directors decreased the regular monthly distributions
on our Common Shares to the pro rata equivalent of an annual distribution of $0.40 per share, or an annualized rate of 4.0% assuming
a purchase price of $10.00 per share. Distributions were payable to stockholders of record at the close of business on the last day of
the month-end. All distributions were paid on or about the 15th day of the month following the month-end.
On
January 15, 2020, February 15, 2020, March 15, 2020 and April 29, 2020, we paid distributions to our stockholders for the months ended
December 31, 2019, January 31, 2020, February 29, 2020 and March 31, 2020, respectively, totaling $1.1 million. These distributions were
all paid in cash.
On
March 25, 2020, the Board of Directors determined to suspend regular monthly distributions.
Special Distribution
On
December 21, 2020, the Board of Directors authorized and we declared a special distribution of $0.37 per common share payable to stockholders
of record as of December 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution of $3.2 million,
which represented a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.
Special Distribution
On
August 9, 2021, the Board of Directors authorized and we declared a special distribution of $0.215 per common share payable to stockholders
of record as of September 30, 2021 (the “2021 Special Distribution”). The total 2021 Special Distribution of $1.8 million,
which represented a portion of the proceeds generated from asset sales and was paid on or about October 15, 2021.
Total
distributions declared during the years ended December 31, 2021 and 2020 were $1.8 million and $4.0 million, respectively.
Future
distributions, if any, declared 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, operating and interest expenses, 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.
Share Repurchase Program
Our
share repurchase program may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back
to us, subject to restrictions.
On
March 25, 2020, the Board of Directors amended the share repurchase program to remove stockholder notice requirements and also approved
the suspension of all redemptions effective immediately.
Effective
May 10, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s
death or hardship and set the price for all such purchases at our current estimated net asset value per share (“NAV per Share”)
which was $8.50 as of December 31, 2020.
Deaths
that occurred subsequent to January 1, 2020 are 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
an annual basis, we will 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. Redemption requests are expected to be processed on a quarterly basis and may be
subject to pro ration if either type of redemption requests exceed the annual limitation.
For
the period from January 1 through March 24, 2020, we repurchased 57,800 Common Shares at an average price of $9.53 per share. For the
year ended December 31, 2021, we repurchased 59,745 Common Shares at an average price per share of $8.50 per share.
Effective
March 18, 2022, in connection with the Board of Directors determination and approval of the NAV per Share of $8.58, as of December 31,
2021, the redemption price was automatically adjusted.
Tax
Status
We
elected to qualify and be taxed as a REIT commencing with the taxable year ended December 31, 2016. As a REIT, we generally will not
be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT
qualification under the Internal Revenue Code of 1986, as amended, (the “Code”), we must meet a number of organizational
and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable
income (which does not equal net income, as calculated in accordance with generally accepted accounting principles in the United States
of America (“GAAP”)), determined without regard to the deduction for dividends paid and excluding any net capital gain. If
we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify for certain statutory relief provisions,
our income for that year will be taxed at the regular corporate rate, and we may be precluded from qualifying for treatment as a REIT
for the four-year period following our failure to qualify as a REIT. Such an event could materially adversely affect our net income and
net cash available for distribution to our stockholders.
To
qualify or maintain our qualification as a REIT, we engage in certain activities through a wholly-owned taxable REIT subsidiary (“TRS”).
As such, we are subject to U.S. federal and state income and franchise taxes from these activities, if any.
As
of December 31, 2021 and 2020, we had no material uncertain income tax positions. Additionally, even if we qualify as a REIT for U.S.
federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S.
federal income taxes and excise taxes on our undistributed income, if any.
Market Overview and Opportunity
We
believe that the market for investment in real estate and/or real estate-related investments secured by or related to real estate located
primarily in the United States continues to be compelling from a risk-return perspective. We have and intend primarily to continue to
focus on investing in development or redevelopment opportunities because of increased demand for development and/or redevelopment projects;
funding sources to fund such projects have not kept pace with demand; and traditional lenders have tightened lending standards, making
it more difficult for some developers to obtain traditional financing.
We
favor a strategy weighted toward targeting debt investments that balance current income with significant subordinate capital and downside
structural protections. We believe that our investment strategy, combined with the experience and expertise of our Advisor’s management
team, provides opportunities to: (a) originate loans with attractive current returns and strong structural features directly with borrowers,
thereby taking advantage of market conditions in order to seek the best risk-return dynamic for our stockholders; and (b) purchase real
estate-related investments from third parties, in some instances at discounts to their face amounts (or par value). We believe the combination
of these strategies and the application of prudent leverage to our investments may also allow us to (i) realize appreciation opportunities
in the portfolio and (ii) diversify our capital and enhance returns.
COVID-19
Pandemic
The
World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions
and other measures which were instituted in response have been subsequently reduced or lifted. However, the continuing COVID-19 pandemic
remains highly unpredictable and dynamic and its ultimate duration and extent continue to be dependent on various developments, such
as the emergence of variants to the virus that may cause additional strains of COVID-19, the ongoing administration and ultimate effectiveness
of vaccines, including booster shots, and the eventual timeline to achieve a sufficient level of herd immunity among the general population.
Accordingly, the ongoing COVID-19 pandemic may have negative effects on the health of the U.S. economy for the foreseeable future.
To-date,
the COVID-19 pandemic has not had any significant impact on our 210-room branded hotel (the “Williamsburg Moxy Hotel”) development
project. Our other investment is our approximately 33.3% membership interest in the 40 East End Ave. Joint Venture, which developed and
constructed a 29-unit luxury residential condominium project (the “40 East End Avenue Project”) located at the corner of
81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final
temporary certificates of occupancy, or TCO, in March 2020 which was at the onset of the COVID-19 pandemic. Thereafter, the pace of condominium
unit sales has been impacted by the ongoing COVID-19 pandemic and through December 31, 2021, 15 of the condominium units had been sold.
Additionally, because of the pace of condominium sales, the 40 East End Joint Venture obtained an amendment, including an extension of
the maturity date, to the loan secured by the remaining unsold condominium units. See Note 4 of the Notes to Consolidated Financial Statements
for additional information.
The
extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments,
all of which are highly uncertain and cannot be reasonably predicted. If our investments in the Williamsburg Moxy Hotel development project
and/or 40 East End Ave. Joint Venture are negatively impacted, our business and financial results could be materially and adversely impacted.
We
are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to
have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred
to above or throughout this Form 10-K. The preparation of financial statements in conformity with 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.
Environmental
As
an owner of real estate, we are subject to various environmental laws of U.S. federal, state and local governments. Compliance with existing
laws has not had a material adverse effect on our financial condition or results of operations, and management does not believe it will
have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed
laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly in the future.
Employees
We
do not have employees. We entered into an advisory agreement with our Advisor pursuant to which our Advisor supervises and manages our
day-to-day operations and selects our real estate and real estate related investments, subject to oversight by our Board of Directors.
We pay our Advisor fees for services related to the investment and management of our assets, and we reimburse our Advisor for certain
expenses incurred on our behalf.
Available
Information
We
electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports, and proxy statements, with the SEC. Stockholders may obtain copies of our filings with the SEC, free of charge, from the website
maintained by the SEC at http://www.sec.gov, or at the SEC’s Public Reference Room at 100 F. Street, N.E., Washington, D.C.
20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our office
is located at 1985 Cedar Bridge Avenue, Lakewood, NJ 08701. Our telephone number is (732) 367-0129. Our website is www.lightstonecapitalmarkets.com.

---

ITEM 1A. RISK FACTORS

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM
1B. UNRESOLVED STAFF COMMENTS:
None
applicable.

---

ITEM 2. PROPERTIES
ITEM
2. PROPERTIES:
As
of December 31, 2021, we majority owned and consolidated the operating results of the Williamsburg Moxy Hotel Joint Venture, which is
currently developing and constructing the Williamsburg Moxy Hotel, a 210-room branded hotel.
As
of December 31, 2021, we held an unconsolidated approximate 33.3% membership interest in the 40 East End Ave. Joint Venture, an
affiliated real estate entity which owns the 40 East End Project, a luxury residential condominium project consisting of 29 units located
at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. We account for our unconsolidated
membership interests in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM
3. LEGAL PROCEEDINGS:
From
time to time in the ordinary course of business, we may become subject to legal proceedings, claims or disputes.
As
of the date hereof, we are not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible
to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the
contingency and possible range of loss.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
PART II.

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES:
Shareholder
Information
As
of March 15, 2022, we had 8.4 million shares of common stock outstanding, held by a total of 2,042 stockholders. The number of stockholders
is based on the records of DST Systems Inc., which serves as our registrar and transfer agent.
Market
Information
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 its stockholders.
We do not intend to list our shares at this time. We do not anticipate that there would be any market for our Common Shares until they
are listed for trading.
On
December 16, 2021, our stockholders approved an amendment and restatement to our charter pursuant to which we are no longer required
to either (a) amend our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) hold a stockholders
meeting to vote on a proposal for an orderly liquidation of its portfolio.
Estimated
Net Asset Value (“NAV”) and NAV per Share of Common Stock (“NAV per Share”)
On March 18, 2022, our Board
of Directors determined and approved our estimated NAV of $72.7 million and resulting estimated NAV per Share of $8.58, both as of December 31,
2021. In connection with our Offering, which terminated on March 31, 2017, our Sponsor funded an aggregate of $12.6 million of principal
advances under the Subordinated Agreement. However, in the calculation of our estimated NAV as of December 31, 2021, no allocation of
value was made to Subordinated advances - related party because the estimated NAV per Share did not exceed an aggregate $10.00 price
per share plus a cumulative, pre-tax non-compounded annual return of 8.0% as of that date.
The estimated NAV of our shares
was calculated as of a particular point in time. The estimated NAV of our shares will fluctuate over time in response to developments
related to individual assets in the portfolio and the management of those assets and in response to the real estate and finance markets.
There is no assurance of the extent to which the current estimated valuation should be relied upon for any purpose after its effective
date regardless that it may be published on any statement issued by us or otherwise.
Process and Methodology
Our Advisor, along with any necessary
material assistance or confirmation of a third-party valuation expert or service, is responsible for calculating our NAV, which we currently
expect will be done on at least an annual basis unless our Common Shares are approved for listing on a national securities exchange. Our
Board of Directors will review each estimate of NAV and approve the resulting NAV per Share.
Our estimated NAV per Share as
of December 31, 2021 was calculated with the assistance of both our Advisor and Marshall & Steven’s Incorporated (“M&S”),
an independent third-party valuation firm engaged by us to assist with the valuation of our assets, liabilities and any allocations of
value to the Sponsor’s subordinated advances. Our Advisor recommended and our Board of Directors established the estimated NAV per
Share as of December 31, 2021 based upon the analyses and reports provided by our Advisor and M&S. The process for estimating
the value of our assets, liabilities and allocations of value to our Sponsor’s subordinated advances is performed in accordance
with the provisions of the Investment Program Association (the “IPA”) Practice Guideline 2013-01, “Valuations of Publicly
Registered Non-Listed REITs,” issued April 29, 2013. We believe that our valuations were developed in a manner reasonably designed
to ensure their reliability.
The engagement of M&S with
respect to our NAV per Share as of December 31, 2021 was approved by our Board of Directors, including all of our independent directors.
M&S has extensive experience in conducting asset valuations, included valuations of commercial real estate, debt, properties and real
estate-related investments.
With respect to our NAV per Share
as of December 31, 2021, M&S prepared appraisal reports (the “M&S Appraisal Reports”) summarizing key inputs
and assumptions on the two properties (collectively, the “M&S Appraised Properties”) in which we held ownership interests
as of December 31, 2021.
M&S also prepared a NAV report
(the “December 2021 NAV Report”) which estimated the NAV per Share as of December 31, 2021. The December 2021
NAV Report relied upon (i) M&S’s Appraisal Reports for the M&S Appraised Properties and (ii) our Advisor’s
estimate of the value of cash and cash equivalents, other assets, mortgage payable and other liabilities to calculate our estimated NAV
and NAV per Share as of December 31, 2021.
The table below sets forth the calculation of our estimated
NAV and resulting estimated NAV per Share as of December 31, 2021 as well as the comparable calculation as of December 31, 2020.
Certain amounts are reflected net of noncontrolling interests, as applicable.
As of
December 31,
As of
December 31,
Value Per Share Value Per Share
Net Assets:
Real
Estate Assets:
Construction in progress $ 68,175,000
$ 45,800,000
Investments in unconsolidated affiliated real estate enity 10,846,832
15,582,758
Total real estate assets 79,021,832 $ 9.32 61,382,758 $ 7.19
Non-Real
Estate Assets:
Cash and cash equivalents 11,930,192
31,406,204
Restricted escrows and other assets 335,345
116,419
Total non-real estate assets 12,265,537 1.45 31,522,623 3.69
Total Assets 91,287,369 10.77 92,905,381 10.88
Liabilities:
Mortgage payable (11,132,802 )
(16,000,000 )
Distributions payable -
(3,151,447 )
Accounts payable, accrued expenses and other liabilities (7,444,065 )
(1,178,674 )
Total liabilities (18,576,867 ) (2.19 ) (20,330,121 ) (2.38 )
NAV $ 72,710,502 $ 8.58 $ 72,575,260 $ 8.50
Shares of Common Stock Outstanding 8,477,679
8,537,424
Use of an Independent Valuation Firm
As discussed above, our Advisor
is responsible for calculating our NAV. In connection with determining our NAV, our Advisor may rely on the material assistance or confirmation
of a third-party valuation expert or service. In this regard, M&S was selected by our Board of Directors to assist our Advisor in
the calculation of our estimated NAV and resulting estimated NAV per Share as of December 31, 2021. M&S services included appraising
the M&S Appraised Properties and preparing the December 2021 NAV Report. M&S is engaged in the business of appraising commercial
real estate properties and is not affiliated with us or the Advisor. The compensation we paid to M&S was based on the scope of work
and not on the appraised values of our real estate properties. The appraisals were performed in accordance with the Code of Ethics and
the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal
Foundation. The M&S Appraisal Reports were reviewed, approved, and signed by an individual with the professional designation of MAI
licensed in the state where each real property is located. The use of the reports is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives. In preparing its reports, M&S did not, and was not requested to; solicit
third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any
part of us. In preparing its reports, M&S did not, and was not requested to solicit third-party indications of interest for our common
stock in connection with possible purchases thereof or the acquisition of all or any part of us.
M&S collected reasonably available
material information that it deemed relevant in appraising these real estate properties. M&S relied in part on property-level information
provided by our Advisor, including (i) property historical and projected operating revenues and expenses; and/or (ii) information
regarding recent or planned capital expenditures.
In conducting their investigation
and analyses, M&S took into account customary and accepted financial and commercial procedures and considerations as they deemed relevant.
Although M&S reviewed information supplied or otherwise made available by us or the Advisor for reasonableness, they assumed and relied
upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to them by any
other party and did not independently verify any such information. M&S assumed that any operating or financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with M&S were reasonably prepared in good faith on bases reflecting
the then best currently available estimates and judgments of our management, our Board of Directors, and/or the Advisor. M&S relied
on us to advise them promptly if any information previously provided became inaccurate or was required to be updated during the period
of their review.
In performing its analyses, M&S
made numerous other assumptions as of various points in time with respect to industry performance, general business, economic, and regulatory
conditions, and other matters, many of which are beyond their control and our control. M&S also made assumptions with respect to certain
factual matters. For example, unless specifically informed to the contrary, M&S assumed that our joint ventures have clear and marketable
title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that
no hazardous materials are present or were present previously, that no significant deed restrictions exist, and that no changes to zoning
ordinances or regulations governing use, density, or shape are pending or being considered. Furthermore, M&S’s analyses, opinions,
and conclusions were necessarily based upon market, economic, financial, and other circumstances and conditions existing as of or prior
to the date of the M&S Appraisal Reports, and any material change in such circumstances and conditions may affect M&S’s
analyses and conclusions. The M&S Appraisal Reports contain other assumptions, qualifications, and limitations that qualify the analyses,
opinions, and conclusions set forth therein. Furthermore, the prices at which the real estate properties may actually be sold could differ
from M&S’s analyses.
M&S is actively engaged in
the business of appraising commercial real estate properties and real estate related-investments similar to those owned or invested by
us in connection with public security offerings, private placements, business combinations, and similar transactions. We do not believe
that there are any material conflicts of interest between M&S, on the one hand, and us, the Sponsor, the Advisor, and our affiliates,
on the other hand. Our Advisor engaged M&S on behalf of our Board of Directors to deliver their reports to assist in the NAV calculation
as of December 31, 2021 and M&S received compensation for those efforts. In addition, we agreed to indemnify M&S against
certain liabilities arising out of this engagement. M&S has previously assisted in our prior NAV calculations and has also been engaged
by us for certain valuation services with respect to our investments. M&S may from time to time in the future perform other services
for us and our Sponsor or other affiliates of the Sponsor, so long as such other services do not adversely affect the independence of
M&S as certified in the M&S Appraisal Reports. During the past two years M&S has also been engaged to provide appraisal services
to another non-traded REIT sponsored by our Sponsor for which it was paid usual and customary fees.
Although M&S considered any
comments received from us and the Advisor relating to their reports, the final estimated fair values for the M&S Appraised Properties
were determined by M&S. The reports were addressed to our Board of Directors to assist our Board of Directors in calculating an estimated
NAV per Share as of December 31, 2021. The reports were not addressed to the public, may not be relied upon by any other person to
establish an estimated NAV per Share, and do not constitute a recommendation to any person to purchase or sell any shares of our common
stock.
Our goal in calculating our estimated
NAV is to arrive at values that are reasonable and supportable using what we deem to be appropriate valuation methodologies and assumptions.
The reports, including the analysis, opinions, and conclusions set forth in such reports, are qualified by the assumptions, qualifications,
and limitations set forth in the respective reports. The following is a summary of our valuation methodologies used to value our assets
and liabilities by key component:
Real Estate Assets
As of December 31, 2021, our real estate
assets consist of (i) one 75% majority owned and consolidated development property (the “Williamsburg Moxy Hotel”) and
(ii) one unconsolidated condominium project (the “40 East End Project”), held through our approximate 33.3% membership
interest in a joint venture (the “40 East End Ave Joint Venture” (collectively, the “Real Estate Assets”).
As described above, we engaged M&S to provide
an appraisal of the M&S Appraised Properties as of December 31, 2021 consisting of the Williamsburg Moxy Hotel and the 40 East End
Ave. Project.
In preparing
their appraisal reports, the scope of the work performed by M&S included the following procedures, as well other factors:
● A
review of all property level information provided by our Advisor;
● A
review of the historical performance of our real estate investments and business plans related
to operations of the investments;
● A
review of the data models prepared by the Advisor supporting the valuation for each investment;
and
● A
review of the applicable markets by means of publications and other resources to measure
current market conditions, supply and demand factors, and growth patterns.
M&S
employed the income approach and/or the sales comparison approach to estimate the value of the appraised properties. The income approach
involves an economic analysis of the property based on its potential to provide future net annual income. As part of the valuation, a
discounted cash flow analysis (“DCF Analysis”) and/or direct capitalization analysis was used in the income approach
to determine the value of our interest in the portfolio. The indicated value by the income approach represents the amount an investor
may pay for the expectation of receiving the net cash flow from the property.
The direct capitalization analysis is based upon
the net operating income of the property capitalized at an appropriate capitalization rate for the property based upon property characteristics
and competitive position and market conditions at the date of the appraisal.
In applying the DCF Analysis, pro forma statements
of operations for the property including revenues and expenses are analyzed and projected over a multi-year period or the expected “sell
out” period for a condominium project. If applicable, the property is assumed to be sold at the end of the multi-year holding period.
If applicable, the reversion value of the property which can be realized upon sale at the end of the holding period is calculated based
on the capitalization of the estimated net operating income of the property in the year of sale, utilizing a capitalization rate deemed
appropriate in light of the age, anticipated functional and economic obsolescence and competitive position of the property at the time
of sale. Net proceeds to owners are determined by deducting appropriate costs of sale. The discount rate selected for the DCF Analysis
is based upon estimated target rates of return for buyers of similar properties.
The sales comparison approach utilizes indices
of value derived from actual or proposed sales of comparable properties to estimate the value of the subject property. The appraiser analyzed
such comparable sale data as was available to develop a market value conclusion for the subject property.
M&S prepared the M&S Appraisal Reports
summarizing key inputs and assumptions, for each of the appraised properties using financial information provided by us and our Advisor.
From such review, M&S selected the appropriate cash flow discount rate, residual discount rate, and terminal capitalization rate in
the DCF Analysis, if applicable, the appropriate capitalization rate in the direct capitalization analysis and the appropriate price per
unit in the sales comparison analysis. As for those properties consolidated on our financials, and for which we do not own 100% of the
ownership interest, the property value was adjusted to reflect our ownership interest in such property after consideration of the distribution
priorities associated with such property.
The estimated values for our investments in real
estate may or may not represent current market values and do not equal the book values of our real estate investments in accordance with
US GAAP. Our consolidated investment in real estate is currently carried in our consolidated financial statements at its amortized cost
basis, adjusted for any loss impairments and bargain purchase gains recognized to date. Our unconsolidated investments in real estate
are currently accounted for under the cost method of accounting in our consolidated financial statements.
The following summarizes the valuation approaches
used for our Real Estate Assets:
Construction in progress:
As of December 31, 2021, we had a 75% membership
interest in Bedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), which we consolidate. The Williamsburg
Moxy Hotel Joint Venture is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”) on land parcels
located at 353-361 Bedford Avenue in Brooklyn, New York. The Williamsburg Moxy Hotel is currently under construction and expected to open
during the fourth quarter of 2022.
M&S deemed it appropriate
to determine the estimated fair value of the Williamsburg Moxy Hotel as December 31, 2021 of $90.9 million using a DCF Analysis taking
into consideration the expected net operating income (“NOI”) of the property upon stabilization less the remaining estimated
costs to complete. M&S used a capitalization rate of 6.50% and a discount rate of 8.75% in their DCF Analysis. NOI is all gross revenues
from the property less all operating expenses, including property taxes and management fees but excluding depreciation.
Accordingly, the estimated
fair value of our 75% ownership interest in the Williamsburg Moxy Hotel was $68.2 million as of December 31, 2021.
The estimated fair value of our 75% ownership
interest in the Williamsburg Moxy Hotel of $68.2 million compared to our relative carrying value of $54.8 million, both as of December 31,
2021, equates to an increase in value of 24.5%.
While we believe that the assumptions utilized
in the DCF Analysis are reasonable, a change in these assumptions would affect the calculation of the value of the Williamsburg Moxy Hotel.
The table below presents the estimated increase or decrease to our estimated NAV per Share resulting from a 25-basis point increase and
decrease in the discount rate and capitalization rate used in the DCF Analysis. The table is presented to provide a hypothetical illustration
of possible results if only one change in assumptions was made with all other factors remaining constant. Further, each of these assumptions
could change by more or less than 25-basis points or not at all.
Change in NAV per Share
Increase of 25
basis points Decrease of
25 basis points
Capitalization rate $ (0.34 ) $ 0.36
Discount rate $ (0.12 ) $ 0.12
Investment in unconsolidated affiliated real estate
entity:
We have an approximate 33.3% membership
interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”), an affiliated real estate entity, which
we account for in accordance with the equity method of accounting.
The 40 East End Ave. Joint Venture,
through affiliates, owns the 40 East End Avenue Project, a luxury residential 29-unit condominium project located at the corner of 81st
Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final temporary
certificates of occupancy, or TCO, in March 2020 and through December 31, 2021, 15 of the condominium units have been sold.
M&S deemed it
appropriate to determine the estimated fair value of the 40 East End Project as December 31, 2021 of $74.7 million
based on a DCF Analysis of the estimated net sales proceeds taking into consideration the expected timing of the sales for the remaining
14 unsold condominium units, as well as the remaining estimated carrying costs. M&S used a discount rate of 5.0% in the DCF Analysis.
While we believe that the assumptions utilized
in the DCF Analysis are reasonable, a change in these assumptions would affect the calculation of the value of the 40 East End Avenue
Project. The estimated increase or decrease to our estimated NAV per Share resulting from a 25-basis point increase and decrease in the
discount rate used in the DCF Analysis are $(0.01) and $0.01, respectively. These amounts are presented to provide a hypothetical illustration
of possible results assuming just a change was made to the discount rate with all other factors remaining constant. Further, the discount
rate could change by more or less than 25-basis points or not at all.
As of December 31, 2021,
the estimated fair value of our approximate 33.3% ownership interest in the 40 East End Ave. Joint Venture of approximately $10.8 million
was calculated based on the appraised value of the 40 East End Project of $74.7 million plus all non-real estate assets, net of $0.2 million;
less (i) the estimated fair value of its outstanding mortgage indebtedness of $36.4 million and (ii) the preferred member’s
equity interest of $6.0 million. The estimated fair value of our approximate 33.3% ownership interest in the 40 East End Ave. Joint Venture
approximated our carrying value as of December 31, 2021.
Cash and cash
equivalents: The estimated value of our cash and cash equivalents equals its carrying value.
Restricted escrows and
other assets: The estimated values of our restricted escrows and other assets approximate their carrying values due to their
short maturities.
Mortgage payable: We
have a mortgage payable that bears interest at a variable rate. The estimated value of our variable-rate mortgage loan was deemed to approximate
its carrying value because its interest rate moves in conjunction with changes to market interest rates.
Accounts payable,
accrued expenses and other liabilities: The carrying values of our accounts payable, accrued expenses and other liabilities
were considered to equal their fair value due to their short maturities.
Subordinated advances
- related party: Our Subordinated advances -related party, consisting of $12.6 million of principal advances
made by our Sponsor under the Subordinated Agreement and the related accrued interest, are classified as a liability on our
consolidated balance sheets. However, for purposes of our NAV, we do not estimate their fair value in accordance with US GAAP.
Rather, the IPA’s Practice Guideline 2013-01provides for adjustments to the NAV for preferred securities, special interests
and incentive fees based on the aggregate NAV of the company and payable to the Sponsor in a hypothetical liquidation of the company
as of the valuation date in accordance with the provisions of the partnership or Advisory agreements and the terms of the preferred
securities. Because our Subordinated advances - related party are only payable to our Sponsor in a liquidation event, we
believe they should be valued for our NAV in accordance with these provisions.
Accordingly, no allocations of value are made to our
Subordinated advances - related party unless the estimated NAV per Share would have exceeded $10.00 per share plus a cumulative,
pre-tax non-compounded annual return of 8.0% as of the indicated valuation date. In connection with our Offering, which terminated on
March 31, 2017, our Sponsor funded an aggregate of $12.6 million of principal advances under the Subordinated Agreement. In the calculation
of our estimated NAV as of December 31, 2021, no allocation of value was made to our Subordinated advances - related party,
because the estimated NAV per Share did not exceed an aggregate $10.00 price per share plus a cumulative, pre-tax non-compounded annual
return of 8.0% as of that date.
Historical Estimated NAV and NAV per Share
Additional information on our
historical reported estimated NAV and NAV per Share as of December 31, 2020 may be found in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020 filed on March 19, 2021.
Limitations and Risks
As with
any valuation methodology, the methodology used to determine our estimated NAV and resulting estimated NAV per Share is based upon a
number of estimates and assumptions that may prove later not to be accurate or complete. Further, different market participants with
different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive different
estimated NAVs per share, which could be significantly different from the estimated NAV per Share approved by our Board of directors.
The estimated NAV per Share approved by our Board of Directors
does not represent the fair value of our assets less liabilities in accordance with US GAAP, and such estimated NAV per Share is not
a representation, warranty or guarantee that:
● A
stockholder would be able to resell his or her shares at the estimated NAV per Share;
● A
stockholder would ultimately realize distributions per share of common stock equal to the estimated NAV per Share upon liquidation of
our assets and settlement of our liabilities or a sale of the Company;
● Our
shares of common stock would trade at the estimated NAV per Share on a national securities exchange;
● An
independent third-party appraiser or other third-party valuation firm would agree with the estimated NAV per Share; or
● The
methodology used to estimate our NAV per Share would be acceptable to FINRA or under the Employee Retirement Income Security Act with
respect to their respective requirements.
The
Internal Revenue Service and the Department of Labor do not provide any guidance on the methodology an issuer must use to determine its
estimated NAV per Share.
FINRA guidance provides that NAV
valuations be derived from a methodology that conforms to industry practice.
As with any valuation methodology,
our methodology is based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different
assumptions and estimates could derive different estimated NAVs per share, and these differences could be significant. The estimated NAV
per Share is not audited and does not represent the fair value of our assets less our liabilities in accordance with US GAAP, nor do they
represent an actual liquidation value of our assets and liabilities or the price that shares of our common stock would trade at on a national
securities exchange. As of the date of this filing, although we have not sought stockholder approval to adopt a plan of liquidation of
the Company, certain distributions may be payable to our Sponsor in connection with a liquidation event. Accordingly, our estimated NAV
per Share reflects any allocation of value to the Sponsor’s subordinated advances representing the amount that would be payable
to the sponsor in connection with a liquidation event pursuant to the guidelines for estimating NAV contained in IPA Practice Guideline
2013-01, “Valuation of Publicly Registered Non-Listed REITs”. Our estimated NAV per Share is based on the estimated value
of our assets less the estimated value of our liabilities less any allocations of value to the Sponsor’s subordinated advances divided
by the number of our diluted shares of common stock outstanding, all as of the date indicated. Our estimated NAV per Share does not reflect
a discount for the fact we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the
individual property values. Our estimated NAV per Share does not take into account estimated disposition costs or fees or penalties, if
any, that may apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of certain
debt. Our NAV per Share will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets, developments
related to individual assets and the management of those assets and changes in the real estate and capital markets. Different parties
using different assumptions and estimates could derive different NAVs and resulting estimated NAVs per share, and these differences could
be significant. Markets for real estate and real estate-related investments can fluctuate and values are expected to change in the future.
We currently expect that our Advisor will estimate our NAV on at least an annual basis. Our Board of Directors will review and approve
each estimate of NAV.
The following factors may cause
a stockholder not to ultimately realize distributions per share of common stock equal to the estimated NAV per Share upon liquidation:
● The
methodology used to determine estimated NAV per Share includes a number of estimates and
assumptions that may not prove to be accurate or complete as compared to the actual amounts
received in the liquidation;
● In
a liquidation, certain assets may not be liquidated at their estimated values because of
transfer fees and disposition fees, which are not reflected in the estimated NAV calculation;
● In
a liquidation, debt obligations may have to be prepaid and the costs of any prepayment penalties
may reduce the liquidation amounts. Prepayment penalties are not included in determining
the estimated value of liabilities in determining estimated NAV;
● In
a liquidation, the real estate assets may derive a portfolio premium which premium is not
considered in determining estimated NAV;
● In
a liquidation, the potential buyers of the assets may use different estimates and assumptions
than those used in determining estimated NAV;
● If
the liquidation occurs through a listing of the common stock on a national securities exchange,
the capital markets may value the Company’s net assets at a different amount than the
estimated NAV. Such valuation would likely be based upon customary REIT valuation methodology
including funds from operation (‘‘FFO’’) multiples of other comparable
REITs, FFO coverage of dividends and adjusted FFO payout of the Company’s anticipated
dividend; and
● If the liquidation occurs through a merger of the Company
with another REIT, the amount realized for the common stock may not equal the estimated NAV per Share because of many factors including
the aggregate consideration received, the make-up of the consideration (e.g., cash, stock or both), the performance of any stock received
as part of the consideration during the merger process and thereafter, the reception of the merger in the market and whether the market
believes the pricing of the merger was fair to both parties.
Share
Repurchase Program
Our
share repurchase program may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back
to us, subject to restrictions.
On
March 25, 2020, the Board of Directors amended the share repurchase program to remove stockholder notice requirements and also approved
the suspension of all redemptions effective immediately.
Effective
May 10, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s
death or hardship and set the price for all such purchases at our current estimated net asset value per share (“NAV per Share”)
which was $8.50 as of December 31, 2020.
Deaths
that occurred subsequent to January 1, 2020 are eligible for consideration. 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
an annual basis, we will 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. Redemption requests are expected to be processed on a quarterly basis and may be
subject to pro ration if either type of redemption requests exceed the annual limitation.
For
the period from January 1 through March 24, 2020, we repurchased 57,800 Common Shares at an average price of $9.53 per share. For the
year ended December 31, 2021, we repurchased 59,745 Common Shares at an average price per share of $8.50 per share.
Effective
March 18, 2022, in connection with the Board of Directors determination and approval of the NAV per Share of $8.58, as of December 31,
2021, the redemption price was automatically adjusted.
Distributions
Distributions
and Distributions Declared
Our
Board of Directors commenced declaring and we began paying distributions on our Common Shares at the pro rata equivalent of an annual
distribution of $0.80 per share, or an annualized rate of 8.0% assuming a purchase price of $10.00 per share, beginning with the period
from June 22, 2015 through November 30, 2015 and monthly thereafter beginning with the month ending December 31, 2015 through the month
ending June 30, 2019. Beginning with the month ending July 31, 2019, our Board of Directors decreased the regular monthly distributions
on our Common Shares to the pro rata equivalent of an annual distribution of $0.40 per share, or an annualized rate of 4.0% assuming
a purchase price of $10.00 per share. Distributions are payable to stockholders of record at the close of business on the last day of
the month-end. All distributions were paid on or about the 15th day of the month following the month-end.
On
January 15, 2020, February 15, 2020, March 15, 2020 and April 29, 2020, we paid distributions to our stockholders for the months ended
December 31, 2019, January 31, 2020, February 29, 2020 and March 31, 2020, respectively, totaling $1.1 million. These distributions were
all paid in cash.
On
March 25, 2020, the Board of Directors determined to suspend regular monthly distributions.
Special Distribution
On
December 21, 2020, the Board of Directors authorized and we declared a special distribution of $0.37 per common share payable to stockholders
of record as of December 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution of $3.2 million,
which represented a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.
Special Distribution
On
August 9, 2021, the Board of Directors authorized and we declared a special distribution of $0.215 per common share payable to stockholders
of record as of September 30, 2021 (the “2021 Special Distribution”). The total 2021 Special Distribution of $1.8 million,
which represented a portion of the proceeds generated from asset sales and was paid on or about October 15, 2021.
Total
distributions declared during the years ended December 31, 2021 and 2020 were $1.8 million and $4.0 million, respectively.
Future
distributions, if any, declared 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, operating and interest expenses, 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.
Recent
Sales of Unregistered Securities
During
the period covered by this Form 10-K, we did not sell any equity securities that were not registered under the Securities Act of 1933.

---

ITEM 6. SELECTED FINANCIAL DATA

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
You
should read the following discussion and analysis together with our consolidated financial statements and notes thereto included in this
Annual Report on Form 10-K. The following information contains forward-looking statements, which are subject to risks and uncertainties.
Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied
by the forward-looking statements. Please see “Special Note Regarding Forward-Looking Statements” above for a description
of these risks and uncertainties. Dollar amounts are presented in whole numbers, except per share data and where indicated
in millions.
Overview
Lightstone
Value Plus REIT IV, Inc. (“Lightstone REIT IV’’), which was formerly known as Lightstone Real Estate Income Trust,
Inc. before September 15, 2021, is a Maryland corporation, formed on September 9, 2014, which elected to qualify as
a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31,
2016.
Lightstone
REIT IV, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,” “our,”
“us” or similar pronouns refers to Lightstone REIT IV or the Company as required by the context in which any such pronoun
is used.
We
have and intend to continue to seek opportunities to invest in real estate and real estate-related investments. Our real estate investments
may include operating properties and development projects and its real estate-related investment may include mezzanine loans, mortgage
loans, bridge loans and preferred equity interests, with a focus on development-related investments, including investments intended to
finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets.
A portion of our investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly
or indirectly owned by, The Lightstone Group, LLC (the “Sponsor”), its affiliates or other real estate investment programs
it sponsors. Although we expect that most of our investments will be of these various types, we may also make other investments. In fact,
we may invest in whatever types of investments that we believe are in its best interests.
We
currently have one operating segment. As of December 31, 2021, we majority owned and consolidated the operating results of a joint venture
(the “Williamsburg Moxy Hotel Joint Venture”), in which we have a 75% membership interest, and held an unconsolidated
approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”). We account
for our unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.
We
do not have employees. We entered into an advisory agreement with Lightstone Real Estate Income LLC, a Delaware limited liability company,
which we refer to as the “Advisor,” pursuant to which the Advisor supervises and manages our day-to-day operations and selects
our real estate and real estate related investments, subject to oversight by our Board of Directors. We pay the Advisor fees for services
related to the investment and management of our assets, and we reimburse the Advisor for certain expenses incurred on our behalf.
On
March 18, 2016, we and the Sponsor entered into a subordinated unsecured loan agreement (the “Subordinated Agreement”) pursuant
to which the Sponsor made aggregate principal advances of $12.6 million to us through March 31, 2017 (the termination date of the Offering).
The outstanding principal advances bear interest at a rate of 1.48%, but no interest or principal is due and payable to the Sponsor until
holders of our Common Shares have received liquidation distributions equal to their respective net investments (defined as $10.00 per
Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments.
Distributions
in connection with a liquidation of the Company initially will be made to holders of our Common Shares until holders of our Common Shares
have received liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return
of 8.0% on their respective net investments. Thereafter, only if additional liquidating distributions are available, we will be obligated
to repay the outstanding principal advances and related accrued interest to the Sponsor. In the event that additional liquidation distributions
are available after the we repay our holders of common stock their respective net investments plus their 8% return on investment and
then the outstanding principal advances and related accrued interest to the Sponsor, such additional distributions will be paid to holders
of our Common Shares and the Sponsor as follows: 85.0% of the aggregate amount will be payable to holders of our Common Shares and the
remaining 15.0% will be payable to the Sponsor.
The
principal advances and the related interest are subordinate to all of our obligations as well as to the holders of our Common Shares
in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0% and only
potentially payable in the event of a liquidation of the Company.
In
connection with the termination of the Offering on March 31, 2017, we and the Sponsor simultaneously terminated the Subordinated Agreement
and as a result, the Sponsor is no longer obligated to make any additional principal advances to us. Interest will continue to accrue
on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will still be made
according to the terms of the Subordinated Agreement disclosed above.
As
of December 31, 2021, $13.6 million of principal advances and related accrued interest were outstanding.
To
qualify or maintain our qualification as a REIT, we engage in certain activities through a wholly-owned taxable REIT subsidiary (“TRS”).
As such, we are subject to U.S. federal and state income and franchise taxes from these activities, if any.
Acquisitions
and Investment Strategy
Our
strategy is to originate, acquire and manage a diverse portfolio of real estate or real estate-related investments located primarily
in the United States. A substantial portion of our investments currently are related-party investments located in relatively large metropolitan
areas. We generally have sought to create a portfolio of investments that either generate or are expected to generate attractive cash
flow for distributions. However, we have and still may target capital appreciation from our investments.
We
have not established any limits on the percentage of our portfolio that may be comprised of various categories of assets which present
differing levels of risk. The allocation of our assets under management is dependent, in part, upon the then-current commercial real
estate market, the investment opportunities it presents and available financing, if any, as well as other micro and macro market conditions.
We
have and intend to continue to seek opportunities to invest in real estate and real estate-related investments. Our real estate investments
may include operating properties and development projects and its real estate-related investments may include mezzanine loans, mortgage
loans, bridge loans and preferred equity interests, with a focus on development-related investments, including those intended to finance
development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets. A portion
of our investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly,
owned by, our sponsor, its affiliates or other real estate investment programs sponsored by it. Although we expect that most of our investments
will be of these various types, we may make other investments. In fact, we may invest in whatever types of investments that we believe
are in our best interests.
We
have and expect to continue to focus our acquisition and origination activity on real estate properties and real estate-related investments
located in the United States, including certain related-party investments generally conducted through joint venture arrangements. We
sometimes refer to the foregoing types of investments as our targeted investments. We expect to target investments that generally will
offer predictable current cash flow and/or attractive risk-adjusted returns based on the underwriting criteria established and employed
by our advisor, which may include the anticipated leverage point, market and economic conditions, the location and quality of the underlying
collateral and the borrower’s exit or refinancing plan. Our ability to continue to execute our investment strategy may be enhanced
through access to the sponsor’s extensive experience in both financing and developing real estate projects as well as in buying
assets in the open market from third-parties. We have and will continue to seek to build a portfolio that may include some of or all
the following investment characteristics: (a) provides current income; (b) is secured by high-quality commercial real estate; (c) includes
subordinate capital investments by strong sponsors that support its investments and provide downside protection; and (d) possesses strong
structural features that maximize repayment potential, such as a clear exit or refinancing plan by the borrower.
We
have and intend to also continue to seek to invest in real estate-related loans and debt securities both by directly originating them
and by purchasing them from third-party sellers. Although we generally prefer the benefits of direct origination, situations may arise
to purchase real estate-related loans and debt securities, possibly at discounts to par, which compensate for the lack of control or
structural enhancements typically associated with directly structured investments.
Current
Environment
Our
operating results are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced
by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future
economic and other conditions; including, but not limited to, availability or terms of financings, financial markets volatility, political
upheaval or uncertainty, natural and man-made disasters, terrorism and acts of war, unfavorable changes in laws and regulations, outbreaks
of contagious diseases, cybercrime, loss of key relationships, and recession.
COVID-19
Pandemic
The
World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions
and other measures which were instituted in response have been subsequently reduced or lifted. However, the continuing COVID-19 pandemic
remains highly unpredictable and dynamic and its ultimate duration and extent continue to be dependent on various developments, such
as the emergence of variants to the virus that may cause additional strains of COVID-19, the ongoing administration and ultimate effectiveness
of vaccines, including booster shots, and the eventual timeline to achieve a sufficient level of herd immunity among the general population.
Accordingly, the ongoing COVID-19 pandemic may have negative effects on the health of the U.S. economy for the foreseeable future.
To-date,
the COVID-19 pandemic has not had any significant impact on our 210-room branded hotel (the “Williamsburg Moxy Hotel”) development
project. Our other investment is our approximately 33.3% membership interest in the 40 East End Ave. Joint Venture, which developed and
constructed a 29-unit luxury residential condominium project (the “40 East End Avenue Project”) located at the corner of
81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received
its final temporary certificates of occupancy, or TCO, in March 2020 which was at the onset of the COVID-19 pandemic. Thereafter, the
pace of condominium unit sales has been impacted by the ongoing COVID-19 pandemic and through December 31, 2021, 15 of the condominium
units had been sold. Additionally, because of the pace of condominium sales, the 40 East End Joint Venture obtained an amendment, including
an extension of the maturity date, to the loan secured by the remaining unsold condominium units. See Note 4 of the Notes to Consolidated
Financial Statements for additional information.
The
extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments,
all of which are highly uncertain and cannot be reasonably predicted. If our investments in the Williamsburg Moxy Hotel development project
and/or 40 East End Ave. Joint Venture are negatively impacted, our business and financial results could be materially and adversely impacted.
Use
of Estimates in the Preparation of Financial Statements
The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“GAAP”). GAAP requires the Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses
during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and investments in other
real estate entities. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result,
actual results could differ from these estimates.
Critical
Accounting Estimates and Policies
To
assist in understanding our results of operations and financial position, we have identified our critical accounting policies and discussed
them below. These accounting policies are most important to the portrayal of our results and financial position, either because of the
significance of the financial statement items to which they relate or because they require management’s most difficult, subjective
or complex judgments.
Principles
of Consolidation and Basis of Presentation
Our
consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control. All inter-company
transactions, balances, and profits have been eliminated in consolidation. In addition, interests in entities acquired are evaluated
based on applicable GAAP, and deemed to be variable interest entities (“VIE”) in which we are 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 we have control, substantive participating rights or both under the respective
ownership agreement. For entities in which we have less than a controlling interest or entities which we are not deemed to be the primary
beneficiary, we account for the investment using the equity method of accounting.
There
are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we
are the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage
of equity being risked compared to the total equity of the entity. Determining expected future losses involves assumptions of
various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a
discount rate to determine the net present value of those future losses. A change in the judgments, assumptions, and estimates
outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the
equity method that should in fact be consolidated, the effects of which could be material to our financial statements.
Accounting
for Development Projects
We
incur a variety of costs in the development of a property. The costs of land and building under development include specifically identifiable
costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the property, development
costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development. We cease capitalization
when the development project is substantially complete and placed in service, which may occur in phases. Determination of when a
development project is substantially complete and capitalization must cease involves a degree of judgment.
Once
the development project is placed in service, which may occur in phases or for an entire building or project, the costs capitalized to
construction in progress are transferred to land and improvements, buildings and improvements, and furniture and fixtures on our consolidated
balance sheets at the historical cost of the property.
Investments
in Unconsolidated Entities
We
evaluate our investments in other entities for consolidation. We consider our percentage interest in the joint venture, evaluation of
control and whether a VIE exists when determining if the investment qualifies for consolidation or if it should be accounted for as an
unconsolidated investment under the equity method of accounting.
If
an investment qualifies for the equity method of accounting, our investment is recorded initially at cost, and subsequently adjusted
for equity in net income (loss) and cash contributions and distributions. The net income or loss of an unconsolidated investment is allocated
to its investors in accordance with the provisions of the operating agreement of the entity. The allocation provisions in these agreements
may differ from the ownership interest held by each investor. Differences, if any, between the carrying amount of our investment in the
respective joint venture and our share of the underlying equity of such unconsolidated entity are amortized over the respective lives
of the underlying assets as applicable. These items are reported as a single line item in the consolidated statements of operations as
income or loss from investments in unconsolidated affiliated entities.
We
review investments for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such investment
may not be recoverable. An investment is impaired only if management’s estimate of the fair value of the investment is less than
the carrying value of the investment, and such decline in value is deemed to be other than temporary. The ultimate realization of our
investment in partially owned entities is dependent on a number of factors including the performance of that entity and market conditions.
If we determine that a decline in the value of a partially owned entity is other than temporary, we will record an impairment charge.
Noncontrolling
Interest
Noncontrolling
interest represents the noncontrolling member’s share of the equity in certain of the Company’s consolidated real estate
investments. Income and losses are allocated to noncontrolling interest holders based generally on their ownership percentage.
Treatment
of Management Compensation and Expense Reimbursements
Management
of our operations is outsourced to our Advisor and certain other affiliates of the Sponsor. Fees related to each of these services are
accounted for based on the nature of such service and the relevant accounting literature. Such fees include acquisition fees associated
with the purchase of interests in real estate entities; and asset management fees paid to our Advisor. These fees are expensed or capitalized
to the basis of acquired assets, as appropriate.
Income
Taxes
We
elected to qualify and be taxed as a REIT commencing with the taxable year ended December 31, 2016. As a REIT, we generally will not
be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT
qualification under the Internal Revenue Code of 1986, as amended, (the “Code”), we must meet a number of organizational
and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable
income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends
paid and excluding any net capital gain. If we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify
for certain statutory relief provisions, our income for that year will be taxed at the regular corporate rate, and we may be precluded
from qualifying for treatment as a REIT for the four-year period following our failure to qualify as a REIT. Such an event could materially
adversely affect our net income and net cash available for distribution to our stockholders.
To
qualify or maintain our qualification as a REIT, we engage in certain activities through a wholly-owned taxable REIT subsidiary (“TRS”).
As such, we are subject to U.S. federal and state income and franchise taxes from these activities, if any.
As
of December 31, 2021 and 2020, we had no material uncertain income tax positions. Additionally, even if we qualify as a REIT for U.S.
federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S.
federal income taxes and excise taxes on our undistributed income, if any.
Results
of Operations
Investments
For
the periods presented, we had ownership interests in the following real estate and real estate-related investments:
The
Cove Joint Venture
On
January 31, 2017, we along with LSG Cove LLC, an affiliate of our Sponsor, our Sponsor’s other public program, Lightstone
Value Plus REIT III, Inc. (“Lightstone III”) and Maximus Cove Investor LLC (“Maximus”), an unrelated third
party acquired the membership interests in RP Maximus Cove L.L.C. (the “Cove Joint Venture”) from an unrelated third party.
We, LSG Cove LLC, Lightstone REIT III and Maximus had 22.5%, 45.0%, 22.5% and 10.0% membership interests in the Cove Joint Venture, respectively.
The Cove Joint Venture owned and operated The Cove at Tiburon (the “Cove”), a multi-family complex consisting of 281-units,
or 289,690 square feet, contained within 32 apartment buildings over 20.1 acres, located in Tiburon, California from January
31, 2017 through February 12, 2020 (see below).
We
accounted for our 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting.
On
February 12, 2020, we, LSG Cove LLC and Lightstone REIT III subsequently redeemed our respective membership interests in the Cove
Joint Venture for an aggregate redemption price of $87.6 million. In connection, with the redemption of our 22.5% membership interest
in the Cove Joint Venture, we received proceeds of $21.9 million which resulted in the recognition of a gain on the disposition of unconsolidated
affiliated real estate entity of $8.2 million during the first quarter of 2020. As a result of the redemption of our 22.5% membership
interest in the Cove Joint Venture on February 12, 2020, we no longer have an ownership interest in the Cove Joint Venture. During August
2020, we received $0.1 million of additional proceeds related to the redemption of our membership interest in the Cove Joint Venture
and recognized a gain on the disposition of investment in unconsolidated affiliated real estate entity of $0.1 million during the third
quarter of 2020. As a result, we have recognized an aggregate gain on the disposition of investment in unconsolidated affiliated real
estate entity of $8.3 million during the year ended December 31, 2020.
East End Ave. Joint Venture
On
March 31, 2017, we entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco
LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, and a related party,
(the “40 East End Seller”), providing for us to acquire an approximate 33.3% of the 40 East End Seller’s approximate
100% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”).
The
40 East End Ave. Joint Venture, through affiliates, owns the 40 East End Avenue Project, a luxury residential 29-unit condominium project
located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East
End Avenue Project received its final TCO in March 2020 and through December 31, 2021, 15 condominium units have been sold.
We
account for our approximately 33.3% membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of
accounting.
Williamsburg
Moxy Hotel
On
July 17, 2019, we, through our then wholly owned subsidiary, Bedford Avenue Holdings LLC acquired four adjacent parcels of land
located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Williamsburg Land”) on which we are currently
developing and constructing the Williamsburg Moxy Hotel.
On
August 5, 2021, we formed the Williamsburg Moxy Hotel Joint Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired
25% of our membership interest in the Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to the initial
acquisition, Lightstone REIT III made additional capital contributions to the Williamsburg Moxy Hotel Joint Venture of $4.3 million through
December 31, 2021.
As
a result, we and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.
Additionally,
during 2019, we acquired corporate bonds that were publicly traded on the Tel Aviv Stock Exchange (the “Israeli Bonds”) and
denominated in New Israeli Shekel (“ILS”) that we subsequently sold during the first quarter of 2020.
The
operating results of these investments have been reflected in our consolidated statements of operations commencing from their respective
dates of acquisition through their respective dates of disposition.
See
the Notes to Consolidated Financial Statements for additional information on our investments.
For
the Year Ended December 31, 2021 vs. December 31, 2020
Investment
income
Our
investment income was $32,166 and $166,119 for the years ended December 31, 2021 and 2020, respectively. During the year ended December
31, 2021, our investment income consisted solely of interest income on our cash and cash equivalents. Our investment income during the
year ended December 31, 2020 consisted of interest income on our cash and cash equivalents plus interest income on the Israeli Bonds
of $63,688 which was earned in the first quarter of 2020.
Loss
from investments in unconsolidated affiliated real estate entities
Our
loss from investments in unconsolidated affiliated real estate entities during the year ended December 31, 2021 was $0.4 million
compared to $2.8 million for the same period in 2020. For the year ended December 31, 2021, our loss from investments in unconsolidated
affiliated real estate entities is attributable to our ownership interest in the 40 East End Ave. Joint Venture. For the year ended December
31, 2020, our loss from investments in unconsolidated affiliated real estate entities is attributable to our ownership interests in the
40 East End Ave. Joint Venture and the Cove Joint Venture through the date of redemption of our membership interest on February 12,
2020. We account for our investments in unconsolidated affiliated real estate entities in accordance with the equity method of accounting.
General
and administrative expenses
General
and administrative expenses for the year ended December 31, 2021 was $0.8 million, a decrease of $0.1 million, compared to $0.9 million
for the same period in 2020 which was primarily attributable to lower asset management fees as a result of the redemption of our membership
interest in the Cove Joint Venture on February 12, 2020.
Foreign
currency transaction loss
We
previously maintained funds in a bank account that was denominated in New ILS and was re-measured into U.S. Dollars at the current exchange
rate at the end of each reporting period. During the first quarter of 2020, we converted all of our ILS to U.S. Dollars and as a result,
no longer have any ILS in the bank account. For the year ended December 31, 2020, our foreign currency transaction loss was $47,648,
all of which was incurred in the first quarter of 2020.
Interest
expense
Interest
expense is attributable to interest accrued on the outstanding principal advances of $12.6 million included in Subordinated Advances
- Related Party. Interest expense, net, was $186,954 for both of the years ended December 31, 2021 and 2020. Additionally, during
the years ended December 31, 2021 and 2020, $1.7 million and $1.0 million of interest was capitalized to construction in progress for
our Williamsburg Moxy Hotel development project.
Financial
Condition, Liquidity and Capital Resources
Overview:
As
of December 31, 2021, we had cash and cash equivalents of $12.0 million. We currently believe that our current available cash on hand
will be sufficient to satisfy our expected cash requirements primarily consisting of our anticipated operating expenses, scheduled debt
service, and any necessary capital contributions for our investment in unconsolidated affiliated real estate entity and distributions
to our shareholders, if any, required to maintain our qualification as a REIT for the foreseeable future. The remaining costs associated
with the development and construction of the Williamsburg Moxy Hotel are expected to be funded from the availability under the construction
financing. See “Williamsburg Moxy Hotel” for additional information.
We
intend 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 satisfactory showing that a higher level is appropriate, the approval of our Board of Directors and disclosure to stockholders.
Net assets means our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our
total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets
level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders,
along with justification for such excess. Market conditions will dictate our overall leverage limit; as such our aggregate borrowings
may be less than 300% of net assets.
Our
future borrowings may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages
may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may
acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not
exclusively, we intend to seek to encumber our properties with 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.
In
general the type of future financing executed by us to a large extent will be dictated by the nature of the investment and current market
conditions. For long-term real estate investments, it is our intent to finance future acquisitions using long-term fixed rate debt. However
there may be certain types of investments and market circumstances which may result in variable rate debt being the more appropriate
choice of financing. To the extent floating rate debt is used to finance the purchase of real estate, management will evaluate a number
of protections against significant increases in interest rates, including the purchase of interest rate cap instruments.
We
may also obtain lines of credit to be used to acquire real estate and/or real estate related investments. If obtained, these lines of
credit will be at prevailing market terms and will be repaid from the sale or refinancing of real estate and/or real estate related investments,
working capital and/or permanent financing. The 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 the 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 agreements with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated entities.
As of December 31, 2021, we owed the Advisor and its affiliated entities $0.3 million, which is included in accounts payable, accrued
expenses and other liabilities on the consolidated balance sheets. Additionally, as of December 31, 2020, the Advisor and its affiliated
entities owed us $122, which was included in restricted cash and other assets on the consolidated balance sheets.
The
following table represents the fees incurred associated with the payments to our Advisor and its affiliates for the periods indicated:
For the
Years Ended
December 31,
Development fees and cost reimbursement (1) $ 1,722,882 $ 304,366
Asset management fees (general and administrative costs) - 77,313
Total $ 1,722,882 $ 381,679
(1) Development
fees and the reimbursement of development-related costs that the Williamsburg Moxy Joint
Venture pays to the Advisor and its affiliates are capitalized and included in the carrying
value of the investment in the Williamsburg Moxy Hotel, which is classified as construction
in progress on the consolidated balance sheets. See Note 3 of the Notes to Consolidated Financial Statements for additional
information.
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 our Advisor and our independent directors. Payments to our Advisor or its affiliates 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. We may also reimburse our Advisor and its affiliates
for actual expenses it incurs for administrative and other services provided for us. Upon the liquidation of our assets, we may pay our
Advisor or its affiliates a disposition commission.
Summary
of Cash Flows
The
following summary discussion of our cash flows is based on the statements of cash flows and is not meant to be an all-inclusive discussion
of the changes in our cash flows for the periods presented below:
Year Ended
December 31,
Year Ended
December 31,
Net cash flows used in operating activities $ (720,925 ) $ (730,702 )
Net cash flows (used in)/provided by investing activities (23,996,691 ) 19,694,626
Net cash flows provided by/(used in) financing activities 5,423,909 (1,688,632 )
Effect of exchange rate changes on cash and cash equivalents - (47,648 )
Net change in cash, cash equivalents and restricted cash (19,293,707 ) 17,227,644
Cash, cash equivalents and restricted cash, beginning of the year 31,490,826 14,263,182
Cash, cash equivalents and restricted cash, end of the period $ 12,197,119 $ 31,490,826
Operating
activities
The
net cash used in operating activities of $0.7 million during the year ended December 31, 2021 consisted of our net loss of $1.3 million
after adjustments for the noncash effect of our loss from our investment in unconsolidated affiliated real estate entity of $0.4 million
and changes in assets and liabilities of $0.2 million.
Investing
activities
The
cash used in investing activities during the year ended December 31, 2021 of $24.0 million consisted primarily of $23.8 million development
and construction costs associated with the Williamsburg Moxy Hotel and contributions to the 40 East End Ave. Joint Venture of $0.2 million.
Financing
activities
The
cash provided by financing activities during the year ended December 31, 2021 of $5.4 million consisted of contributions of $12.2 million
by Lightstone REIT III to the Williamsburg Moxy Hotel Joint Venture, proceeds from a construction loan of $18.4 million partially offset
by the $16.0 million repayment in full of an existing mortgage payable, the payment of loan fees and expenses of $3.7 million, a special
distribution for 2021 of $1.8 million paid to our common stockholders in October 2021 and a special distribution for 2020 of $3.2 million
paid to our common stockholders in January 2021, and redemption and cancellation of common stock of $0.5 million.
Williamsburg
Moxy Hotel
On
July 17, 2019, we, through our then wholly owned subsidiary, Bedford Avenue Holdings LLC acquired four adjacent parcels of land
located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Williamsburg Land”), from unaffiliated third
parties, for an aggregate purchase price of $30.4 million, excluding closing and other acquisition related costs, on which we are developing
and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). In connection with the acquisition of the Williamsburg
Land, we simultaneously entered into a $16.0 million nonrecourse mortgage loan (the “Williamsburg Mortgage”) collateralized
by the Williamsburg Land.
Williamsburg
Moxy Joint Venture
On
August 5, 2021, we formed the Williamsburg Moxy Hotel Joint Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired
25% of our membership interest in the Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to the initial
acquisition, Lightstone REIT III made additional capital contributions to the Williamsburg Moxy Hotel Joint Venture of $4.3 million through
December 31, 2021.
As
a result, we and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.
Additionally, we are the managing member of the Williamsburg Moxy Hotel Joint Venture and Lightstone REIT III has consent rights with
respect to all major decisions.
We
determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and we are the primary beneficiary. As we are the member most
closely associated with the Williamsburg Moxy Hotel Joint Venture and therefore have the power to direct the activities of the Williamsburg
Moxy Hotel Joint Venture that most significantly impact its performance, we consolidate the operating results and financial condition
of the Williamsburg Moxy Hotel Joint Venture and account for the ownership interest of Lightstone REIT III as noncontrolling interests.
Contributions are allocated in accordance with each investor’s ownership percentage. Profit and cash distributions are allocated
in accordance with each investor’s ownership percentage.
On
August 4, 2021, the Williamsburg Joint Venture entered into a development agreement (the “Development Agreement”) with
an affiliate of the Advisor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg Moxy Developer will
be 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 (See Note 6 of the Notes to Consolidated Financial Statements for additional information). Additionally, on August 5, 2021, the Williamsburg Moxy
Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. The Williamsburg Moxy Hotel is currently under construction and expected to open during the fourth quarter of 2022.
As
of December 31, 2021, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to construction in progress an aggregate of
$73.0 million (including capitalized interest of $3.2 million) consisting of acquisition and other costs attributable to the development
of the Williamsburg Moxy Hotel. During the years ended December 31, 2021 and 2020, we capitalized interest of $1.7 million and $1.0 million,
respectively, in connection with the development of the Williamsburg Moxy Hotel.
Moxy
Construction Loan
On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility for up to $77.0 million
(the “Moxy Construction Loan”) scheduled to mature on February 5, 2024, with two, six-month extension options, subject
to the satisfaction of certain conditions. The Moxy Construction Loan bears interest at LIBOR plus 9.00%, subject to a 9.50% floor,
with monthly interest-only payments based on a rate of 7.50% with the accrued and unpaid interest added to the outstanding loan balance
and due at maturity. The Moxy Construction Loan is collateralized by the Williamsburg Moxy Hotel. The Williamsburg Moxy Hotel Joint Venture
received initial proceeds of $16.0 million under the Moxy Construction Loan and repaid the Williamsburg Mortgage ($16.0 million) in full.
As of December 31, 2021, the outstanding principal balance of the Moxy Construction Loan was $18.6 million (including $0.1 million of
interest capitalized to principal) which is presented, net of deferred financing fees of $3.7 million, on the consolidated balance
sheet and is classified as Mortgage Payable, net and the remaining availability under the facility was up to $58.6 million.
In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture has 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 are due at the initial maturity date and are included in accounts
payable, accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2021.
East End Ave. Joint Venture
On
March 31, 2017, we entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco LLC,
an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls our Sponsor, and a related party,
(the “40 East End Seller”), providing for us to acquire approximately 33.3% of the 40 East End Seller’s approximate
100% membership interest in the 40 East End Ave. Joint Venture for aggregate consideration of $10.3 million.
Our
ownership interest in the 40 East End Ave. Joint Venture is a non-managing interest. Because we exert significant influence over but
do not control the 40 East End Ave. Joint Venture, we account for our ownership interest in the 40 East End Ave. Joint Venture in accordance
with the equity method of accounting. All contributions to and distributions of earnings from the 40 East End Ave. 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 40 East End Ave. Joint Venture are made to the members pursuant to the terms of its operating agreement. We commenced recording our
allocated portion of earnings and cash distributions, if any, from the 40 East End Ave. Joint Venture beginning as of March 31, 2017
with respect to our membership interest of approximately 33.3% in the 40 East End Ave. Joint Venture. Additionally, Lightstone Value
Plus REIT I, Inc.(“Lightstone REIT I”), a real estate investment trust also sponsored by our Sponsor, made $30.0 million
of preferred equity contributions (the “Preferred Contributions”) to a subsidiary of the 40 East End Ave. Joint Venture,
pursuant to an instrument that entitles Lightstone REIT I to monthly preferred distributions at a rate of 12% per annum. No distributions
may be paid to the members until the Preferred Contributions are redeemed in full.
The
40 East End Ave. Joint Venture, through affiliates, owns the 40 East End Avenue Project, a luxury residential 29-unit condominium project
located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue
Project received its final TCO in March 2020 and through December 31, 2021, 15 condominium units have been sold.
On
December 19, 2019, the 40 East End Ave. Joint Venture obtained financing (the “Condo Loan”) from a financial institution
of $95.2 million, of which $90.2 million was initially funded at closing and the remaining $5.0 million was subsequently advanced in
April 2020. The Condo Loan, which was previously scheduled to mature on December 19, 2021, bears interest at LIBOR plus 2.45%, which
is payable monthly, and requires principal payments to be made at certain prescribed amounts from proceeds from the sales of condominium
units with any remaining outstanding balance due in full at maturity.
On
December 30, 2021, the 40 East End Ave. Joint Venture and the financial institution amended the Condo Loan providing for an extension
of the maturity date to December 20, 2022 and revisions to the timing and amounts of required principal payments to be made from proceeds
from the sale of condominium units. Pursuant to the amended terms of the Condo Loan, the 40 East End Ave. Joint Venture will be required
to make a principal paydown on May 20, 2022, if the then outstanding principal balance of the Condo Loan has not been paid down to at
least $26.5 million as of that date, with any remaining outstanding balance due in full at maturity. As of December 31, 2021, the Condo
Loan had an outstanding principal balance of $36.5 million. Based on the outstanding balance of the Condo Loan as of December 31, 2021
and assuming no additional condominium units are sold through May 20, 2022, our share of the required principal paydown would be $3.3
million.
As
discussed above, the Condo Loan is currently scheduled to mature on December 20, 2022. If the Condo Loan has not been repaid in full
before its maturity date, the 40 East End Ave. Joint Venture intends to seek a further extension to the maturity date. However, there
can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors.
Our
Sponsor and its affiliates (collectively, the “40 East End Guarantors”) have provided certain guarantees with respect to
the Condo Loan and the members have agreed to reimburse the 40 East End Guarantors for any balance that may become due under the guarantees
(the “40 East End Guarantee”), of which our share is approximately 33.3%. We have determined that the fair value of our share
of the 40 East End Guarantee is immaterial.
In
connection with the closing of the Condo Loan, the 40 East End Ave. Joint Venture used a portion of the initial loan proceeds to (i)
fully repay an aggregate of $80.5 million of principal and interest under a construction loan and (ii) redeem $9.5 million of Lightstone
REIT I’s Preferred Contributions. The 40 East End Ave. Joint Venture subsequently redeemed an additional $3.5 million and $11.0
million of Preferred Contributions on December 26, 2019 and February 13, 2020, respectively, reducing Lightstone REIT I’s Preferred
Contributions to $6.0 million, which remains outstanding as of December 31, 2021.
Subsequent
to our acquisition through December 31, 2021, we have made an aggregate of $5.9 million of additional capital contributions to the 40
East End Ave. Joint Venture, of which $0.2 million were made during the year ended December 31, 2021.
Because
proceeds from sales of condominium units must first be used to fully pay-down the Condo Loan and thereafter to redeem Lightstone REIT
I’s remaining Preferred Contributions, we currently do not expect to receive any distributions from the 40 East End Ave. Joint
Venture over the next 12 months.
LIBOR
The
Moxy Construction Loan and Condo Loan are indexed to LIBOR. In late 2021, it was announced LIBOR interest rates will cease publication
altogether by June 30, 2023. We have and intend continue to incorporate relatively standardized replacement rate provisions into our
LIBOR-indexed debt documents, including a spread adjustment mechanism designed to equate to the current LIBOR “all in” rate.
There is significant uncertainty with respect to the implementation of the phase out and what alternative indexes will be adopted which
will ultimately be determined by the market as a whole. It therefore remains uncertain how such changes will be implemented and the effects
such changes would have on us and the financial markets generally.
Distributions
and Distributions Declared
Our
Board of Directors commenced declaring and we began paying distributions on our Common Shares at the pro rata equivalent of an annual
distribution of $0.80 per share, or an annualized rate of 8.0% assuming a purchase price of $10.00 per share, beginning with the period
from June 22, 2015 through November 30, 2015 and monthly thereafter beginning with the month ending December 31, 2015 through the month
ending June 30, 2019. Beginning with the month ending July 31, 2019, our Board of Directors decreased the regular monthly distributions
on our Common Shares to the pro rata equivalent of an annual distribution of $0.40 per share, or an annualized rate of 4.0% assuming
a purchase price of $10.00 per share. Distributions are payable to stockholders of record at the close of business on the last day of
the month-end. All distributions were paid on or about the 15th day of the month following the month-end.
On
January 15, 2020, February 15, 2020, March 15, 2020 and April 29, 2020, we paid distributions to our stockholders for the months ended
December 31, 2019, January 31, 2020, February 29, 2020 and March 31, 2020, respectively, totaling $1.1 million. These distributions were
all paid in cash.
On
March 25, 2020, the Board of Directors determined to suspend regular monthly distributions for months ending after March 2020.
Special Distribution
On
December 21, 2020, the Board of Directors authorized and we declared a special distribution of $0.37 per common share payable to stockholders
of record as of December 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution of $3.2 million,
which represented a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.
Special Distribution
On
August 9, 2021, the Board of Directors authorized and we declared a special distribution of $0.215 per common share payable to stockholders
of record as of September 30, 2021 (the “2021 Special Distribution”). The total 2021 Special Distribution of $1.8 million,
which represented a portion of the proceeds generated from asset sales and was paid on or about October 15, 2021.
Total
distributions declared during the years ended December 31, 2021 and 2020 were $1.8 million and $4.0 million, respectively.
Future
distributions, if any, declared 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, operating and interest expenses, 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.
Share
Repurchase Program
Our
share repurchase program may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back
to us, subject to restrictions.
On
March 25, 2020, the Board of Directors amended the share repurchase program to remove stockholder notice requirements and also approved
the suspension of all redemptions effective immediately.
Effective
May 10, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s
death or hardship and set the price for all such purchases at our current estimated net asset value per share (“NAV per Share”)
which was $8.50 as of December 31, 2020.
Deaths
that occurred subsequent to January 1, 2020 are 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
an annual basis, we will 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. Redemption requests are expected to be processed on a quarterly basis and may be subject
to pro ration if either type of redemption requests exceed the annual limitation.
For
the period from January 1 through March 24, 2020, we repurchased 57,800 Common Shares pursuant to its share repurchase program at an
average price of $9.53 per share. For the year ended December 31, 2021, we repurchased 59,745 Common Shares at an average price per share
of $8.50 per share.
Effective
March 18, 2022, in connection with the Board of Directors determination and approval of the NAV per Share of $8.58, as of December 31,
2021, the redemption price was automatically adjusted.
New
Accounting Pronouncements
See
Note 2 to the Notes to Consolidated Financial Statements for further information concerning accounting standards that we have not yet
been required to adopt and may be applicable to our future operations.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS
Lightstone Value Plus REIT IV, Inc. and Subsidiaries
(a Maryland corporation)
Index
Page
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
Lightstone
Value Plus REIT IV, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Lightstone Value Plus REIT IV, Inc. and Subsidiaries (the “Company”) as of
December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity,
and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2021 and 2020, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Investment Property and Investment in Unconsolidated Affiliated Real Estate Entity - Impairment Evaluation
As of December 31, 2021, the Company had investment property (construction in progress) of $72,999,787 and an investment in unconsolidated affiliated real estate entity of $10,793,084. As more fully described in Note 2 to the financial statements, the Company reviews investment property at the lowest identifiable level, the individual property level, for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment property may not be recoverable. When such events or changes in circumstances are present, the Company assesses potential impairment by comparing estimated undiscounted future operating cash flows expected to be generated over the holding period of the investment property and from its eventual disposition to the carrying amount. The estimates include significant assumptions such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. An investment property is impaired only if management’s estimate of the fair value of the investment property is less than the carrying value and not recoverable. The ultimate realization of the Company’s investment in unconsolidated affiliated real estate entity is dependent on a number of factors including the performance of that entity and market conditions. If the Company determines that a decline in the value of an investment in unconsolidated affiliated real estate entity is other than temporary, it will record an impairment charge.
We identified the impairment evaluation as a critical audit matter due to significant judgment by management in identifying indicators of impairment and in determining the estimated recoverability of an investment property and investment in unconsolidated affiliated real estate entity. This in turn led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures to evaluate the reasonableness of management's significant estimates and assumptions related to the impairment evaluation including identifying events and circumstances that exist that would indicate the carrying amount of the investment property and investment in unconsolidated affiliated real estate entity may not be recoverable, as well as future operating income, holding period and residual values.
Addressing the matter involved performing procedures and evaluating audit evidence, in connection with forming our overall opinion on the financial statements. We obtained an understanding and evaluated the design of controls over the Company’s impairment evaluation. Our procedures included, among others, assessing the methodologies applied and identifying the existence of any triggering events. We assessed the development stage of the hotel project and its related progression to completion in comparing the overall cost basis to the potential developed value. For the investment in unconsolidated affiliated real estate entity, we considered the number of condo sales made during the year, as well as subsequent to year end, taking into account the current market and the individual unit sales margins. We also evaluated the forecast prepared by management to consider if the determination was reasonable considering the past and current performance of the investment and if consistent with evidence obtained in other areas of the audit. We tested the completeness and accuracy of the underlying data used by management in its evaluations. We held discussions with management about the current status of both the development project and the investment to understand how management’s significant estimates and assumptions are developed considering potential future market conditions. In addition, we evaluated the mathematical accuracy of the calculations included in the Company’s evaluation.
/s/
EisnerAmper LLP
We
have served as the Company’s auditor since 2014.
EISNERAMPER
LLP
Iselin,
New Jersey
March
23, 2022
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
December 31,
December 31,
Assets
Investment property:
Construction in progress $ 72,999,787 $ 40,479,640
Investment in unconsolidated affiliated real estate entity 10,793,084 10,988,023
Cash and cash equivalents 11,955,515 31,406,204
Restricted cash and other assets 440,855 116,419
Total Assets $ 96,189,241 $ 82,990,286
Liabilities and Stockholders’ Equity
Mortgage payable, net $ 14,843,736 $ 16,000,000
Accounts payable, accrued expenses and other liabilities 9,895,523 1,178,674
Distributions payable - 3,151,447
Subordinated advances - related party 13,638,646 13,451,692
Total Liabilities 38,377,905 33,781,813
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, 8.5 million shares issued and outstanding 84,777 85,374
Additional paid-in-capital 71,157,978 71,665,213
Accumulated deficit (25,651,846 ) (22,542,114 )
Total Company’s Stockholders’ Equity 45,590,909 49,208,473
Noncontrolling interests 12,220,427 -
Total Stockholders’ Equity 57,811,336 49,208,473
Total Liabilities and Stockholders’ Equity $ 96,189,241 $ 82,990,286
The accompanying notes are an integral part of these consolidated financial statements.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the
Years Ended
December 31,
(Loss)/income:
Investment income $ 32,166 $ 166,119
Gain from disposition of investment in unconsolidated affiliated real estate entity - 8,300,837
Gain on sale of marketable securities - 264,589
Loss from investments in unconsolidated affiliated real estate entities (366,597 ) (2,840,359 )
Total (loss)/income (334,431 ) 5,891,186
Expenses:
General and administrative costs 759,807 870,606
Interest expense 186,954 186,954
Foreign currency transaction loss - 47,648
Total expenses 946,761 1,105,208
Net (loss)/income (1,281,192 ) 4,785,978
Less: net loss attributable to noncontrolling interests -
Net (loss)/income attributable to Company’s common shares $ (1,280,482 ) $ 4,785,978
Net (loss)/income per common share, basic and diluted $ (0.15 ) $ 0.56
Weighted average number of common shares outstanding, basic and diluted 8,523,976 8,542,162
The
accompanying notes are an integral part of these consolidated financial statements.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
For the
Years Ended
December 31,
Net (loss)/income $ (1,281,192 ) $ 4,785,978
Other comprehensive loss:
Holding loss on marketable securities, available for sale - (135,500 )
Reclassification adjustment for gain included in net income - (264,589 )
Other comprehensive loss - (400,089 )
Comprehensive (loss)/income $ (1,281,192 ) $ 4,385,889
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
Additional Accumulated Other
Common Paid-In Comprehensive Accumulated Noncontrolling Total
Shares Amount Capital Income Deficit Interests Equity
BALANCE, December 31, 2019 8,595,224 $ 85,952 $ 72,215,685 $ 400,089 $ (23,324,903 ) $ - $ 49,376,823
Net income - - - - 4,785,978 - 4,785,978
Distributions declared (a) - - - - (4,003,189 ) - (4,003,189 )
Other comprehensive loss - - - (400,089 ) - - (400,089 )
Redemption and cancellation of shares (57,800 ) (578 ) (550,472 ) - - - (551,050 )
BALANCE, December 31, 2020 8,537,424 $ 85,374 $ 71,665,213 $ - $ (22,542,114 ) $ - $ 49,208,473
Net loss - - - - (1,280,482 ) (710 ) (1,281,192 )
Distributions declared (b) - - - - (1,829,250 ) - (1,829,250 )
Contributions of noncontrolling interests - - - - - 12,221,137 12,221,137
Redemption and cancellation of shares (59,745 ) (597 ) (507,235 ) - - - (507,832 )
BALANCE, December 31, 2021 8,477,679 $ 84,777 $ 71,157,978 $ - $ (25,651,846 ) $ 12,220,427 $ 57,811,336
(a) Dividends per share were $0.47.
(b) Dividends per share were $0.215.
The
accompanying notes are an integral part of these consolidated financial statements.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the
Year Ended
December 31,
For the
Year Ended
December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income $ (1,281,192 ) $ 4,785,978
Adjustments to reconcile net
(loss)/income to net cash used in operating activities:
Loss from investments in unconsolidated affiliated real estate entities 366,597 2,840,359
Gain from disposition of investment in unconsolidated affiliated real estate entity - (8,300,837 )
Gain on sale of marketable securities - (264,589 )
Amortization of discount on debt securities - (30,196 )
Foreign currency transaction loss - 47,648
Changes in assets and liabilities:
Increase in other assets (167,455 ) (36,678 )
Increase in accounts payable, accrued
expenses and other liabilities 174,171 40,659
Increase in accrued interest on subordinated advances - related party 186,954 186,954
Net cash used in operating activities (720,925 ) (730,702 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment property (23,825,033 ) (5,316,829 )
Proceeds from sale of marketable securities - 4,141,195
Proceeds from disposition of investment in unconsolidated affiliated real estate entity - 21,989,574
Investments in unconsolidated affiliated real estate entities (171,658 ) (1,119,314 )
Net cash (used in)/provided by investing activities (23,996,691 ) 19,694,626
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage financing 18,421,236 -
Mortgage payments (16,000,000 ) -
Payment of loan fees and expenses (3,729,935 ) -
Contributions of noncontrolling interests 12,221,137 -
Redemption and cancellation of common stock (507,832 ) (551,050 )
Distributions paid to Company’s common stockholders (4,980,697 ) (1,137,582 )
Net cash provided by/(used in) financing activities 5,423,909 (1,688,632 )
Effect of exchange rate changes on cash and cash equivalents and restricted cash - (47,648 )
Net change in cash and cash equivalents and restricted cash (19,293,707 ) 17,227,644
Cash and cash equivalents and restricted cash, beginning of year 31,490,826 14,263,182
Cash and cash equivalents and restricted cash, end of year $ 12,197,119 $ 31,490,826
Supplemental disclosure of cash flow information:
Non-cash purchase of investment property $ 8,892,440 $ 980,649
Unpaid interest accrued and capitalized as mortgage payable and construction in progress $ 139,113 $ -
Distributions declared, but not paid $ - $ 3,151,447
Amortization of deferred financing costs included in construction in progress $ 783,323 $ 343,759
Accrued exit fee $ 770,000 $ -
The
accompanying notes are an integral part of these consolidated financial statements.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
1.
Structure
Lightstone
Value Plus REIT IV, Inc. (“Lightstone REIT IV’’), which was formerly known as Lightstone Real Estate Income Trust,
Inc. before September 15, 2021, is a Maryland corporation, formed on September 9, 2014, which elected to qualify as a real estate investment
trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2016.
Lightstone
REIT IV, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,”
“our,” “us” or similar pronouns refers to Lightstone REIT IV or the Company as required
by the context in which any such pronoun is used.
The
Company has and intends to continue to seek opportunities to invest in real estate and real estate-related investments. The Company’s
real estate investments may include operating properties and development projects and its real estate-related investment may include
mezzanine loans, mortgage loans, bridge loans and preferred equity interests, with a focus on development-related investments, including
investments intended to finance development or redevelopment opportunities. The Company may also invest in debt and derivative securities
related to real estate assets. A portion of the Company’s investments by value may be secured by or related to properties or entities
advised by, or wholly or partially, directly or indirectly owned by, The Lightstone Group, LLC (the “Sponsor”), its affiliates
or other real estate investment programs it sponsors. Although the Company expects that most of its investments will be of these various
types, it may also make other investments. In fact, it may invest in whatever types of investments that it believes are in its best interests.
The
Company currently has 1 one operating segment. As of December 31, 2021, the Company majority owned and consolidated the operating
results of a joint venture (the “Williamsburg Moxy Hotel Joint Venture”), in which it has a 75% membership interest, and
held an unconsolidated approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint
Venture”). The Company accounts for its unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance
with the equity method of accounting.
The
Company’s advisor is Lightstone Real Estate Income LLC (the “Advisor”), which is majority owned by David Lichtenstein.
On September 12, 2014, the Advisor contributed $200,000 for 20,000 shares of common stock (“Common Shares”), or $10.00 per
share of the Lightstone REIT IV. Mr. Lichtenstein also is a majority owner of the equity interests of The Lightstone Group, LLC. The
Lightstone Group, LLC served as the Sponsor during the Company’s initial public offering (the “Offering”) which terminated
on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on June 15, 2015 for $2.0 million, or $9.00 per share.
Subject to the oversight of the Company’s board of directors (the “Board of Directors”) and pursuant to the terms of
an advisory agreement, the Advisor has the primary responsibility for making investment decisions on behalf of the Company and managing
its day-to-day operations. Mr. Lichtenstein also acts as the Company’s Chairman and Chief Executive Officer. As a result, he exerts
influence over but does not control Lightstone REIT IV.
The
Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management
of the Company’s assets. The Advisor has certain affiliates which may manage the properties the Company acquires. However, the
Company may also contract with other unaffiliated third-party property managers.
The
Company’s stock is not currently listed on a national securities exchange. The Company may seek to list its stock for trading on
a national securities exchange only if a majority of its independent directors believe listing would be in the best interest of its stockholders.
The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares
of common stock until they are listed for trading.
On
December 16, 2021, the Company’s stockholders approved an amendment and restatement to the Company’s charter pursuant
to which the Company is no longer required to either
(a) amend its charter to extend the deadline to begin the process of achieving a liquidity event, or (b) hold a stockholders meeting
to vote on a proposal for an orderly liquidation of its portfolio.
Noncontrolling
Interests in Consolidated Subsidiaries
Noncontrolling
interests in consolidated subsidiaries represents the noncontrolling member’s 25% share of the equity in the Williamsburg Moxy
Hotel Joint Venture held by Lightstone Value Plus REIT III, Inc (“Lightstone REIT III”), a REIT also sponsored by the Sponsor
and a related party. Income and losses attributable to the Williamsburg Moxy Hotel Joint Venture are allocated to the noncontrolling
interest holder based on its ownership percentage. See Note 3 for additional information.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
2.
Summary of Significant Accounting Policies
Use
of Estimates in the Preparation of Financial Statements
The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“GAAP”). GAAP requires the Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses
during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and investments in other
real estate entities. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result,
actual results could differ from these estimates.
Principles
of Consolidation and Basis of Presentation
The
consolidated financial statements include the accounts of Lightstone REIT IV and its subsidiaries (over which it exercises financial
and operating control). All inter-company balances and transactions have been eliminated in consolidation. In addition, interests
in entities acquired are evaluated based on applicable GAAP, and if deemed to be variable interest entities (“VIE”) in which
we are 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 we have control, substantive participating
rights or both under the respective ownership agreement. Investments in other real estate entities where the Company has the ability
to exercise significant influence, but does not exercise financial and operating control, and is not considered to be the primary
beneficiary are accounted for using the equity method.
There
are judgments and estimates involved in determining if an entity in which the Company has made an investment is a VIE and, if so,
whether the Company is the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things,
calculating the percentage of equity being risked compared to the total equity of the entity. Determining expected future losses
involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each
possibility and using a discount rate to determine the net present value of those future losses. A change in the judgments,
assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for
an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial
statements.
Cash
and Cash Equivalents and Restricted Cash
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company maintains its cash in bank deposit accounts, which, at times, may exceed U.S. federally insured limits. The Company
has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on its cash and
cash equivalents.
If
required by the Company’s lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate
taxes, and/or other reserves for certain of our consolidated properties. Capital reserves are typically utilized for non-operating expenses
such as major capital expenditures. Alternatively, a lender may require its own formula for an escrow of capital reserves.
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:
Schedule of cash, cash equivalents, and restricted cash
December 31,
Cash and cash equivalents $ 11,955,515 $ 31,406,204
Restricted cash 241,604 84,622
Total cash, cash equivalents and restricted cash $ 12,197,119 $ 31,490,826
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
Investments
in Real Estate
Accounting
for Asset Acquisitions
When
the Company makes an investment in real estate assets, the cost of real estate assets acquired in an asset acquisition are allocated
to the acquired tangible assets, consisting of land, building and improvements, furniture and fixtures and identified intangible assets
and liabilities, consisting of the value of above-market and below-market leases, acquired in-place leases, and the value of tenant relationships,
based in each case on their relative fair values, at the date of acquisition, based on evaluation of information including independent
appraisals that may be obtained in connection with the acquisition or financing of the respective property and other relevant market
data. Fees incurred related to asset acquisitions are capitalized as part of the cost of the investment.
Accounting
for Development Projects
The
Company incurs a variety of costs in the development of a property. The costs of land and building under development include specifically
identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the
property, development costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development.
The Company ceases capitalization when the development project is substantially complete and placed
in service, which may occur in phases. Determination of when a development project is substantially complete and capitalization
must cease involves a degree of judgment.
Once
the development project is placed in service, which may occur in phases or for an entire building or project, the costs capitalized to
construction in progress are transferred to land and improvements, buildings and improvements, and furniture and fixtures on the Company’s
consolidated balance sheets at the historical cost of the property.
Carrying
Value of Assets
The
amounts to be capitalized as a result of periodic improvements and additions to real estate property, when applicable, and the periods
over which the assets are depreciated or amortized, are determined based on the application of accounting standards that may require
estimates as to fair value and the allocation of various costs to the individual assets. Differences in the amount attributed to the
assets may be significant based upon the assumptions made in calculating these estimates.
Impairment
Evaluation
Management
evaluates the recoverability of its investments in real estate assets at the lowest identifiable level, the individual property level.
Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not
be recoverable. An impairment loss is recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its
fair value.
The
Company evaluates the long-lived assets for potential impairment whenever events or changes in circumstances indicate that their carrying
amount may not be recoverable and records an impairment charge when the undiscounted projected cash flows are less than the carrying
amount for a particular property. The estimated cash flows used for the impairment analysis and the determination of estimated fair value
is based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions. The
estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects
of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the
Company’s plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable
accounting guidance, may be substantial.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
Investments
in Unconsolidated Entities
The
Company evaluates its investments in other entities for consolidation. It considers its percentage interest in the joint venture, evaluation
of control and whether a VIE exists when determining whether or not the investment qualifies for consolidation or if it should be accounted
for as an unconsolidated investment under either the equity method of accounting.
If
an investment qualifies for the equity method of accounting, the Company’s investment is recorded initially at cost, and subsequently
adjusted for equity in net income (loss) and cash contributions and distributions. The net income or loss of an unconsolidated investment
is allocated to its investors in accordance with the provisions of the operating agreement of the entity. The allocation provisions in
these agreements may differ from the ownership interest held by each investor. Differences, if any, between the carrying amount of our
investment in the respective joint venture and the Company’s share of the underlying equity of such unconsolidated entity are amortized
over the respective lives of the underlying assets as applicable. These items are reported as a single line item in the statements of
operations as income or loss from investments in unconsolidated affiliated entities.
We
review investments for impairment in value whenever events or changes in circumstances indicate
that the carrying amount of such investment may not be recoverable. An investment is impaired only if management’s estimate
of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other
than temporary. The ultimate realization of the Company’s investment in partially owned entities is dependent on a number of factors
including the performance of that entity and market conditions. If the Company determines that a decline in the value of a partially
owned entity is other than temporary, it will record an impairment charge.
Deferred
Financing Costs
Deferred
financing costs are recorded at cost and consist of loan fees and other direct costs incurred in issuing debt. Amortization of deferred
financing costs is computed using a method that approximates the effective interest method over the term of the related debt and is included
in interest expense in the consolidated statements of operations. Unamortized deferred financing costs are included as a direct deduction
from the related debt in the consolidated balance sheets.
Income
Taxes
The
Company elected to qualify and be taxed as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December
31, 2016. 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 the regular corporate rate, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its
failure to qualify as a REIT. Such an event could materially adversely affect the Company’s net income and net cash available for
distribution to stockholders.
The
Company engages in certain activities through taxable REIT subsidiaries (“TRSs”). As such, the Company is subject to U.S.
federal and state income taxes and franchise taxes from these activities.
As
of December 31, 2021 and 2020, the Company had no material uncertain income tax positions. Additionally, even if the Company continues
to qualify as a REIT, it may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal
income taxes and excise taxes on its undistributed income.
Foreign
Currency Transactions
We
previously maintained funds in a bank account that was denominated in New Israeli Shekels (“ILS”) and was re-measured into
U.S. Dollars at the current exchange rate at the end of each reporting period. During the first quarter of 2020, we converted all of
our ILS to U.S. Dollars and as a result, no longer have any ILS in the bank account. For
the year ended December 31, 2020, the Company recorded a foreign currency transaction loss of $47,648, all of which was incurred in the
first quarter of 2020.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
Financial
Instruments
The
carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash and other assets, accounts
payable and accrued expenses and other liabilities approximate their fair values because of the short maturity of these instruments.
The
estimated fair value our mortgage payable approximated its carrying value because of the floating interest rate.
Noncontrolling
Interest
Noncontrolling
interest represents the noncontrolling member’s share of the equity in certain of the Company’s consolidated real estate
investments. Income and losses are allocated to noncontrolling interest holders based generally on their ownership percentage.
Net
Earnings per Common Share
Net
earnings per Common Share on a basic and fully diluted basis is earnings divided by the weighted average number of shares of common stock
outstanding. The Company does not have any potentially dilutive securities.
COVID-19
Pandemic
The
World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions
and other measures which were instituted in response have been subsequently reduced or lifted. However, the continuing COVID-19 pandemic
remains highly unpredictable and dynamic and its ultimate duration and extent continue to be dependent on various developments, such
as the emergence of variants to the virus that may cause additional strains of COVID-19, the ongoing administration and ultimate effectiveness
of vaccines, including booster shots, and the eventual timeline to achieve a sufficient level of herd immunity among the general population.
Accordingly, the ongoing COVID-19 pandemic may have negative effects on the health of the U.S. economy for the foreseeable future.
To-date,
the COVID-19 pandemic has not had any significant impact on the Company’s 210-room branded hotel (the “Williamsburg Moxy
Hotel”) development project. The Company’s other investment is its approximately 33.3% membership interest in the 40 East
End Ave. Joint Venture, which developed and constructed a 29-unit luxury residential condominium project (the “40 East End Avenue
Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40
East End Avenue Project received its final temporary certificates of occupancy, or TCO, in March 2020 which was at the onset of the COVID-19
pandemic. Thereafter, the pace of condominium unit sales has been impacted by the ongoing COVID-19 pandemic and through December 31,
2021, 15 of the condominium units had been sold. Additionally, because of the pace of condominium sales, the 40 East End Joint Venture
obtained an amendment, including an extension of the maturity date, to the loan secured by the remaining unsold condominium units. See
Note 4 for additional information.
The
extent to which the Company’s business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and
future developments, all of which are highly uncertain and cannot be reasonably predicted. If the Company’s investments in the
Williamsburg Moxy Hotel development project and/or 40 East End Ave. Joint Venture are negatively impacted, its business and financial
results could be materially and adversely impacted.
New
Accounting Pronouncements
The
Company has reviewed and determined that 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.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
3.
Williamsburg Moxy Hotel
On
July 17, 2019, the Company, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC acquired four adjacent parcels
of land located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Williamsburg Land”), from unaffiliated
third parties, for an aggregate purchase price of approximately $30.4 million, excluding closing and other acquisition related costs,
on which it is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). In connection with the
acquisition of the Williamsburg Land, the Company simultaneously entered into a $16.0 million nonrecourse mortgage loan (the “Williamsburg
Mortgage”) collateralized by the Williamsburg Land.
On
August 5, 2021, the Company formed the Williamsburg Moxy Hotel Joint Venture with Lightstone REIT III, pursuant to which Lightstone REIT
III acquired 25% of the Company’s membership interest in the Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million.
Subsequent to the initial acquisition, Lightstone REIT III made additional capital contributions to the Williamsburg Moxy Hotel Joint
Venture of $4.3 million through December 31, 2021.
As
a result, the Company and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint
Venture. Additionally, the Company is the managing member of the Williamsburg Moxy Hotel Joint Venture and Lightstone REIT III has consent
rights with respect to all major decisions.
The
Company has determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and the Company is the primary beneficiary. As the
Company is the member most closely associated with the Williamsburg Moxy Hotel Joint Venture and therefore has the power to direct the
activities of the Williamsburg Moxy Hotel Joint Venture that most significantly impact its performance, the Company consolidates the
operating results and financial condition of the Williamsburg Moxy Hotel Joint Venture and accounts for the ownership interest of Lightstone
REIT III as noncontrolling interests. Contributions are allocated in accordance with each investor’s ownership percentage. Profit
and cash distributions are allocated in accordance with each investor’s ownership percentage.
On
August 4, 2021, the Williamsburg Joint Venture entered into a development agreement (the “Development Agreement”) with
an affiliate of the Advisor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg Moxy Developer will
be 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 (See Note 6 for additional information). Additionally, on August 5, 2021, the Williamsburg Moxy
Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. The Williamsburg Moxy Hotel is
currently under construction and expected to open during the fourth quarter of 2022.
As
of December 31, 2021, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to construction in progress an aggregate of
$73.0 million (including capitalized interest of $3.2 million) consisting of acquisition and other costs attributable to the development
of the Williamsburg Moxy Hotel. During the years ended December 31, 2021 and 2020, the Company capitalized interest of $1.7 million and
$1.0 million, respectively, in connection with the development of the Williamsburg Moxy Hotel.
Moxy
Construction Loan
On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility for up to $77.0 million
(the “Moxy Construction Loan”) scheduled to mature on February 5, 2024, with two, six-month extension options, subject
to the satisfaction of certain conditions. The Moxy Construction Loan bears interest at LIBOR plus 9.00%, subject to a 9.50% floor,
with monthly interest-only payments based on a rate of 7.50% with the accrued and unpaid interest added to the outstanding loan balance
and due at maturity. The Moxy Construction Loan is collateralized by the Williamsburg Moxy Hotel. The Williamsburg Moxy Hotel Joint Venture
received initial proceeds of $16.0 million under the Moxy Construction Loan and repaid the Williamsburg Mortgage ($16.0 million) in full.
As of December 31, 2021, the outstanding principal balance of the Moxy Construction Loan was $18.6 million (including $0.1 million of
interest capitalized to principal) which is presented, net of deferred financing fees of $3.7 million, on the consolidated balance
sheet and is classified as Mortgage Payable, net and the remaining availability under the facility was up to $58.6 million.
In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture has 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 are due at the initial maturity date and are included in accounts
payable, accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2021.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
4.
Investments in Unconsolidated Affiliated Real Estate Entities
East End Ave. Joint Venture
On
March 31, 2017, the Company entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master
Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, a related
party (the “40 East End Seller”), providing for the Company to acquire approximately 33.3% of the 40 East End Seller’s
approximate 100% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”) for aggregate
consideration of $10.3 million.
The
Company’s ownership interest in the 40 East End Ave. Joint Venture is a non-managing interest. Because the Company exerts significant
influence over but does not control the 40 East End Ave. Joint Venture, it accounts for its ownership interest in the 40 East End Ave.
Joint Venture in accordance with the equity method of accounting. All contributions to and distributions of earnings from the 40 East
End Ave. 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 40 East End Ave. Joint Venture are made to the members pursuant to the terms of its operating agreement.
The Company commenced recording its allocated portion of earnings and cash distributions, if any, from the 40 East End Ave. Joint Venture
beginning as of March 31, 2017 with respect to its membership interest of approximately 33.3% in the 40 East End Ave. Joint Venture.
Additionally, Lightstone Value Plus REIT I, Inc. (“Lightstone REIT I”), a REIT also sponsored by the Sponsor, made $30.0
million of preferred equity contributions (the “Preferred Contributions”) to a subsidiary of the 40 East End Ave. Joint Venture,
pursuant to an instrument that entitles Lightstone REIT I to monthly preferred distributions at a rate of 12% per annum. No distributions
may be paid to the members until the Preferred Contributions are redeemed in full.
The
40 East End Ave. Joint Venture, through affiliates, owns the 40 East End Avenue Project, a luxury residential 29-unit condominium project
located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue
Project received its final TCO in March 2020 and through December 31, 2021, 15 of the condominium units have been sold.
On
December 19, 2019, the 40 East End Ave. Joint Venture obtained financing (the “Condo Loan”) from a financial institution
of $95.2 million, of which $90.2 million was initially funded at closing and the remaining $5.0 million was subsequently advanced in
April 2020. The Condo Loan, which was previously scheduled to mature on December 19, 2021, bears interest at LIBOR plus 2.45%, which
is payable monthly, and requires principal payments to be made at certain prescribed amounts from proceeds from the sales of condominium
units with any remaining outstanding balance due in full at maturity.
On
December 30, 2021, the 40 East End Ave. Joint Venture and the financial institution amended the Condo Loan providing for an extension
of the maturity date to December 20, 2022 and revisions to the timing and amounts of required principal payments to be made from proceeds
from the sale of condominium units. Pursuant to the amended terms of the Condo Loan, the 40 East End Ave. Joint Venture will be required
to make a principal paydown on May 20, 2022, if the then outstanding principal balance of the Condo Loan has not been paid down to at
least $26.5 million as of that date, with any remaining outstanding balance due in full at maturity. As of December 31, 2021, the Condo
Loan had an outstanding principal balance of $36.5 million. Based on the outstanding balance of the Condo Loan as of December 31, 2021
and assuming no additional condominium units are sold through May 20, 2022, the Company’s share of the required principal paydown
would be $3.3 million.
As
discussed above, the Condo Loan is currently scheduled to mature on December 20, 2022. If the Condo Loan has not been repaid in full
before its maturity date, the 40 East End Ave. Joint Venture intends to seek a further extension to the maturity date.
However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors.
The
Sponsor and its affiliates (collectively, the “40 East End Guarantors”) have provided certain guarantees with respect to
the Condo Loan and the members have agreed to reimburse the 40 East End Guarantors for any balance that may become due under the guarantees
(the “40 East End Guarantee”), of which the Company’s share is approximately 33.3%. The Company has determined that
the fair value of its share of the 40 East End Guarantee is immaterial.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
In
connection with the closing of the Condo Loan, the 40 East End Ave. Joint Venture used a portion of the initial loan proceeds to (i)
fully repay an aggregate of $80.5 million of principal and interest under a construction loan and (ii) redeem $9.5 million of Lightstone
REIT I’s Preferred Contributions. The 40 East End Ave. Joint Venture subsequently redeemed an additional $3.5 million and $11.0
million of Preferred Contributions on December 26, 2019 and February 13, 2020, respectively, reducing Lightstone REIT I’s Preferred
Contributions to $6.0 million, which remains outstanding as of December 31, 2021.
Subsequent
to the Company’s acquisition through December 31, 2021, it has made an aggregate of $5.9 million of additional capital contributions
to the 40 East End Ave. Joint Venture, of which $0.2 million was made during the year ended December 31, 2021.
The
40 East End Ave. Joint Venture Financial Information
The
following table represents the condensed income statements for the 40 East End Ave. Joint Venture:
Schedule of financial information of joint venture
(amounts in thousands) For the
Year Ended
December 31,
For the
Year Ended
December 31,
Revenues $ 58,529 $ 15,448
Cost of goods sold 52,138 14,347
Other expenses 2,509 2,630
Impairment of real estate inventory 1,553 2,288
Depreciation and amortization - -
Operating income/(loss) 2,329 (3,817 )
Interest expense and other, net (3,430 ) (4,238 )
Net loss $ (1,101 ) $ (8,055 )
Company’s share of net loss (33.3%) $ (367 ) $ (2,683 )
The
following table represents the condensed balance sheets for the 40 East End Ave. Joint Venture:
As of As of
(amounts
in thousands) December 31,
December 31,
Real estate inventory $ 74,481 $ 125,086
Cash and restricted cash 4,446
Other assets
Total assets $ 75,684 $ 130,119
Mortgage payable, net $ 36,391 $ 89,876
Other liabilities 1,309
Members’ capital 38,321 38,934
Total liabilities and members’ capital $ 75,684 $ 130,119
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
The
Cove Joint Venture
On
January 31, 2017, the Company, through its wholly owned subsidiary, REIT IV COVE LLC along with LSG Cove LLC, an affiliate of the Sponsor
and a related party, REIT III COVE LLC, a subsidiary of the operating partnership of Lightstone REIT III and Maximus Cove Investor LLC
(“Maximus”), an unrelated third party, completed the acquisition of all of RP Cove, L.L.C’s membership interest in
RP Maximus Cove, L.L.C. (the “Cove Joint Venture”) for aggregate consideration of approximately $255.0 million (the “Cove
Transaction”). Excluding mortgage financing obtained by the Cove Joint Venture in connection with the Cove Transaction, the Company
paid $20.0 million for a 22.5% non-managing membership interest in the Cove Joint Venture.
The
Cove Joint Venture owned and operated The Cove at Tiburon (the “Cove”), a 281-unit, luxury waterfront multifamily residential
property located in Tiburon, California from January 31, 2017 through February 12, 2020, As discussed below, the Company disposed of
its 22.5% membership interest in the Cove Joint Venture on February 12, 2020.
The
Company accounted for its 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting because
it exercised significant influence, but did not exercise financial and operating control over this entity. For the period from January
1, 2020 through February 12, 2020, the Company’s share of the Cove Joint Venture’s loss of $0.7 million was $0.2 million
which is recorded as a loss from investments in unconsolidated affiliated real estate entities on the consolidated statements of operations.
On
February 12, 2020, REIT IV Cove LLC, LSG Cove LLC and REIT III COVE LLC each redeemed their respective membership interests in the
Cove Joint Venture for an aggregate redemption price of $87.6 million. In connection, with the redemption of the Company’s 22.5%
membership interest in the Cove Joint Venture, it received proceeds of $21.9 million which resulted in the recognition of a gain on the
disposition of unconsolidated affiliated real estate entity of $8.2 million during the first quarter of 2020.
As
a result of the redemption of the Company’s 22.5% membership interest in the Cove Joint Venture on February 12, 2020, it no longer
had an ownership interest in the Cove Joint Venture. During August 2020, the Company received $0.1 million of additional proceeds related
to the redemption of its membership interest in the Cove Joint Venture and recognized a gain on the disposition of investment in unconsolidated
affiliated real estate entity of $0.1 million during the third quarter of 2020. As a result, the Company recognized an aggregate gain
on the disposition of investment in unconsolidated affiliated real estate entity of $8.3 million during the year ended December 31,
2020.	
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
5.
Stockholders’ Equity
Preferred
Stock
The
Company’s charter authorizes the Company’s board of directors to designate and issue one or more classes or series of preferred
stock without approval of the holders of Common Shares. On February 11, 2015, the Company amended and restated its charter to authorize
the issuance of 50,000,000 shares of preferred stock. Prior to the issuance of shares of each class or series, the board of directors
will be required by Maryland law and by the charter to set, subject to the charter restrictions on ownership and transfer of stock, the
terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications
and terms and conditions of redemption of each class or series of preferred stock so issued, which may be more beneficial than the rights,
preferences and privileges attributable to Common Shares. The issuance of preferred stock could have the effect of delaying, deferring
or preventing a change in control of the Company. As of December 31, 2021, the Company had not issued any shares of preferred stock.
Common
Shares
On
February 11, 2015, the Company amended and restated its charter to authorize the issuance of 200,000,000 Common Shares. Under the charter,
the Company will not be able to make certain material changes to its business form or operations without the approval of stockholders
holding at least a majority of the Common Shares entitled to vote on the matter.
Subject
to the restrictions on ownership and transfer of stock contained in the Company’s charter and except as may otherwise be specified
in the charter, the holders of Common Shares are entitled to one vote per Common Share on all matters submitted to a stockholder vote,
including the election of the Company’s directors. There is no cumulative voting in the election of directors. Therefore, the holders
of a majority of outstanding Common Shares are able to elect the Company’s entire Board of Directors. Except as the Company’s
charter may provide with respect to any series of preferred stock that the Company may issue in the future, the holders of Common Shares
possess exclusive voting power.
Holders
of the Company’s Common Shares are entitled to receive distributions as authorized from time to time by the Company’s Board
of Directors and declared out of legally available funds, subject to any preferential rights of any preferred stock that the Company
issues in the future. In any liquidation, each outstanding Common Share will entitle its holder to share (based on the percentage of
Common Shares held) in the assets that remain after the Company pays its liabilities and any preferential distributions owed to preferred
stockholders. Holders of Common Shares do not have preemptive rights, which means that there is no automatic option to purchase any new
Common Shares that the Company issues, nor do holders of Common Shares have any preference, conversion, exchange, sinking fund or redemption
rights. Holders of Common Shares do not have appraisal rights unless the Board of Directors determines that appraisal rights apply, with
respect to all or any classes or series of stock, to a particular transaction or all transactions occurring after the date of such determination
in connection with which holders of such Common Shares would otherwise be entitled to exercise appraisal rights. Common Shares are nonassessable
by the Company upon its receipt of the consideration for which the Board of Directors authorized their issuance.
Distributions
and Distributions Declared
The
Company’s Board of Directors commenced declaring and it began paying distributions on its Common Shares at the pro rata equivalent
of an annual distribution of $0.80 per share, or an annualized rate of 8.0% assuming a purchase price of $10.00 per share, beginning
with the period from June 22, 2015 through November 30, 2015 and monthly thereafter beginning with the month ending December 31, 2015
through the month ending June 30, 2019. Beginning with the month ending July 31, 2019, the Company’s Board of Directors decreased
the regular monthly distributions on our Common Shares to the pro rata equivalent of an annual distribution of $0.40 per share, or an
annualized rate of 4.0% assuming a purchase price of $10.00 per share. Distributions were payable to stockholders of record at the close
of business on the last day of the month-end. All distributions were paid on or about the 15th day of the month following the month-end.
On
January 15, 2020, February 15, 2020, March 15, 2020 and April 29, 2020, the Company paid distributions to its stockholders for the months
ended December 31, 2019, January 31, 2020, February 29, 2020 and March 31, 2020, respectively, totaling $1.1 million. These distributions
were all paid in cash.
On
March 25, 2020, the Board of Directors determined to suspend regular monthly distributions.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
Special Distribution
On
December 21, 2020, the Board of Directors authorized and the Company declared a special distribution of $0.37 per common share payable
to stockholders of record as of December 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution
of $3.2 million, which represented a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.
Special Distribution
On
August 9, 2021, the Board of Directors authorized and the Company declared a special distribution of $0.215 per common share payable
to stockholders of record as of September 30, 2021 (the “2021 Special Distribution”). The total 2021 Special Distribution
of $1.8 million, which represented a portion of the proceeds generated from asset sales and was paid on or about October 15, 2021.
Total
distributions declared during the years ended December 31, 2021 and 2020 were $1.8 million and $4.0 million, respectively.
Future
distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of the Company’s performance
over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in
its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, the Company’s
ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90%
of their taxable income. The Company cannot assure that any future distributions will be made or that it will maintain any particular
level of distributions that it has previously established or may establish.
Share
Repurchase Program
The
Company’s share repurchase program may provide its stockholders with limited, interim liquidity by enabling them to sell their
Common Shares back to the Company, subject to restrictions.
On
March 25, 2020, the Board of Directors amended the share repurchase program to remove stockholder notice requirements and also approved
the suspension of all redemptions effective immediately.
Effective
May 10, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s
death or hardship and set the price for all such purchases at the Company’s current estimated net asset value per share (“NAV
per Share”) which was $8.50 as of December 31, 2020.
Deaths
that occurred subsequent to January 1, 2020 are 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
an annual basis, the Company will 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. Redemption requests are expected to be processed on a quarterly basis and
may be subject to pro ration if either type of redemption requests exceed the annual limitation.
For
the period from January 1 through March 24, 2020, the Company repurchased 57,800 Common Shares pursuant to its share repurchase program
at an average price of $9.53 per share. For the year ended December 31, 2021, the Company repurchased 59,745 Common Shares at an average
price per share of $8.50 per share.
Effective
March 18, 2022, in connection with the Board of Directors determination and approval of the Company’s NAV per Share of $8.58, as
of December 31, 2021, the redemption price was automatically adjusted.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
6.
Related Party Transactions and Other Arrangements
The
Company has agreements with the Advisor and its affiliates to pay certain fees, as follows, in exchange for services performed by these
entities and other related party entities. The Company’s ability to secure financing and acquire real estate and real estate-related
investments are dependent upon its Advisor and affiliates to perform such services as provided in these agreements.
Operational
Stage
Fees
Amount
Acquisition Fee
The
Company pays to the Advisor or its affiliates 1% of the amount funded by it to originate or acquire an investment (including the Company’s
pro rata share (direct or indirect) of debt incurred in respect of such investment, but excluding acquisition fees and acquisition expenses).
Notwithstanding the foregoing, the Company will not pay any acquisition fee to the Advisor or any of its affiliates with respect to any
transaction between the Company and the Sponsor, any of its affiliates or any program sponsored by it.
Acquisition Expenses
The Company reimburses the Advisor for expenses actually incurred related to selecting, originating or acquiring investments on the Company’s behalf, regardless of whether or not the Company acquires the related investments. In addition, the Company pays third parties, or reimburses the Advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to, legal fees and expenses, travel and communications expenses, accounting fees and expenses and other closing costs and miscellaneous expenses, regardless of whether or not the Company acquires the related investments. In no event will the total of all acquisition fees and acquisition expenses (including those paid to third parties, as described above) with respect to a particular investment be unreasonable or, except in limited circumstances, exceed 5% of the amount funded by us to originate or acquire an investment (including the Company’s pro rata share (direct or indirect) of debt attributable to such investment, but exclusive of acquisition fees and acquisition expenses).
Asset Management Fee
The Company pays the Advisor or its assignees a monthly asset management fee equal to one-twelfth (1⁄12) of 1% of the cost of the Company’s assets. The cost of the Company’s assets means the amount funded by the Company for investments, including expenses and any financing attributable to such investments, less any principal received on such investments.
Operating Expenses
The Company reimburses the Advisor’s costs of providing administrative services, subject to the limitation that the Company generally will not reimburse the Advisor for any amount by which the total operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (i) 2% of average invested assets (as defined in the advisory agreement), and (ii) 25% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of investments for that period. After the end of any fiscal quarter for which the Company’s total operating expenses exceed this 2%/25% limitation for the four fiscal quarters then ended, if the Company’s independent directors exercise their right to conclude that this excess was justified, this fact will be disclosed in writing to the holders of Common Shares within 60 days. If the Company’s independent directors do not determine such excess expenses are justified, the Advisor is required to reimburse the Company, at the end of the four preceding fiscal quarters, by the amount that the Company’s aggregate annual total operating expenses paid or incurred exceed this 2%/25% limitation.
Additionally, the Company reimburses the Advisor for personnel
costs in connection with other services; however, the Company does not reimburse the Advisor for (a) services for which the Advisor or
its affiliates are entitled to compensation in the form of a separate fee, or (b) the salaries and benefits of the Company’s named
executive officers.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
Liquidation/Listing
Stage
Fees
Amount
Disposition Fee
For
substantial assistance in connection with the sale of investments and based on the services provided, as determined by the Company’s
independent directors, the Company will pay to the Advisor or any of its affiliates a disposition fee equal to up to 1% of the contractual
sales price of each investment sold. The Company will not pay a disposition fee upon the maturity, prepayment, workout, modification
or extension of a debt instrument unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be
the lesser of: (a) 1% of the principal amount of the debt prior to such transaction; and (b) the amount of the fee paid by the borrower
in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of debt, the
Company will pay a disposition fee upon the sale of such property.
Annual Subordinated Performance
Fee
The
Company will pay the Advisor an annual subordinated performance fee calculated on the basis of the annual return to holders of Common
Shares, payable annually in arrears. Specifically, in any year in which holders of Common Shares receive payment of an 8% annual cumulative,
pre-tax, non- compounded return on the aggregate capital contributed by them, the Advisor will be entitled to 15% of the amount in excess
of the 8% per annum return; provided, that the annual subordinated performance fee will not exceed 10% of the aggregate return
paid to the holders of Common Shares for the applicable year, and provided, further, that the annual subordinated performance
fee will not be paid unless and until holders of Common Shares receive a return of the aggregate capital contributed by them. This fee
will be payable only from net sales proceeds, which results in, or is deemed to result in, the return on the aggregate capital contributed
by holders of Common Shares plus 8% per annum thereon.
Subordinated
Participation in Net Sales Proceeds (payable only if the Company is not listed on an exchange and the advisory agreement is not terminated
or non-renewed)
The
Advisor will receive from time to time, when available, including in connection with a merger, consolidation or sale, or other disposition
of all or substantially all the Company’s assets, 15% of remaining “net sales proceeds” (as defined in the Company’s
charter) after return of capital contributions plus payment to holders of Common Shares of an 8% annual cumulative, pre-tax, non-compounded
return on the aggregate capital contributed by them.
Subordinated
Incentive Listing Fee (payable only if the Company is listed on an exchange)
Upon the listing of the Common
Shares on a national securities exchange, including a listing in connection with a merger or other business combination, the Advisor
will receive a fee equal to 15% of the amount by which the sum of the Company’s market value (determined after listing) plus
distributions attributable to net sales proceeds paid to the holders of Common Shares exceeds the sum of the aggregate capital contributed
by them plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded return.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
The
following table represents the fees incurred associated with the payments to the Company’s Advisor and its affiliates for the period
indicated:
Schedule of Fees and offering costs
For the
Years Ended
December 31,
Development fees and cost reimbursement (1) $ 1,722,882 $ 304,366
Asset management fees (general and administrative costs) - 77,313
Total $ 1,722,882 $ 381,679
(1) Development
fees and the reimbursement of development-related costs that the Williamsburg Moxy Joint
Venture pays to the Advisor and its affiliates are capitalized and included in the carrying
value of the investment in the Williamsburg Moxy Hotel, which is classified as construction
in progress on the consolidated balance sheets. See Note 3 for additional information.
The
Company has agreements with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated
entities. As of December 31, 2021, the Company owed the Advisor and its affiliated entities
$0.3 million, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. Additionally,
as of December 31, 2020, the Advisor and its affiliated entities owed us $122, which was included in restricted cash and other assets
on the consolidated balance sheets.
Subordinated
Advances - Related Party
On
March 18, 2016, the Company entered into a subordinated unsecured loan agreement (the “Subordinated Agreement”) with the
Sponsor pursuant to which the Sponsor made aggregate principal advances of $12.6 million through March 31, 2017 (the termination date
of the Offering). The outstanding principal advances bear interest at a rate of 1.48%, but no interest or principal is due or payable
to the Sponsor until holders of the Company’s Common Shares have received liquidating distributions equal to their respective net
investments (defined as $10.00 per Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective
net investments.
Distributions
in connection with a liquidation of the Company initially will be made to holders of its Common Shares until holders of its Common Shares
have received liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return
of 8.0% on their respective net investments. Thereafter, only if additional liquidating distributions are available, the Company will
be obligated to repay the outstanding principal advances and related accrued interest to the Sponsor, as described in the Subordinated
Agreement. In the event that additional liquidation distributions are available after the Company repays its holders of common stock
their respective net investments plus their 8% return on investment and then the outstanding principal advances under the Subordinated
Agreement and accrued interest to the Sponsor, such additional distributions will be paid to holders of its Common Shares and the Sponsor:
85.0% of the aggregate amount will be payable to holders of the Company’s Common Shares and the remaining 15.0% will be payable
to the Sponsor.
The
principal advances and the related interest are subordinate to all of the Company’s obligations as well as to the holders of its
Common Shares in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of
8.0% and only potentially payable in the event of a liquidation of the Company.
In
connection with the termination of the Offering, on March 31, 2017, the Company and the Sponsor simultaneously terminated the Subordinated
Agreement. As a result of the termination, the Sponsor is no longer obligated to make any additional principal advances to the Company.
Interest will continue to accrue on the outstanding principal advances and repayment, if any, of the principal advances and related accrued
interest will be made according to the terms of the Subordinated Agreement disclosed above.
As
of both December 31, 2021 and 2020, an aggregate of approximately $12.6 million of principal advances have been funded, which along with
the related accrued interest of $1,006,633 and $819,679, respectively, are classified as Subordinated Advances - Related Party,
a liability on the consolidated balance sheets. During both of the years ended December 31, 2021 and 2020, the Company accrued $186,954
of interest expense on the principal advances.
LIGHTSTONE
VALUE PLUS REIT IV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
7.
Commitments and Contingencies
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, we are not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible
to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the
contingency and possible range of loss.
PART II.
CONTINUED:

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures. As of December 31, 2021, we conducted an evaluation under the supervision and with the participation
of the Advisor’s management, including our Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and
other procedures of a company that are designed to ensure that information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated
to the Company’s management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chairman and Chief
Executive Officer and Chief Financial Officer concluded as of December 31, 2021 that our disclosure controls and procedures were adequate
and effective.
Management’s
Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control
system is a process designed by, or under the supervision of, our Chairman and Chief Executive Officer and Chief Financial Officer and
effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting
principles.
Our
internal control over financial reporting includes policies and procedures that:
● pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and disposition of assets;
● provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorization of our management
and directors; and
● provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could
have a material effect on our financial statements.
Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, they
used the control criteria framework of the Committee of Sponsoring Organizations of the Treadway Commission published in its report entitled Internal
Control-Integrated Framework (2013). Based on this evaluation, our management has concluded that our internal control over
financial reporting was effective as of December 31, 2021.
This
annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered
public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s
report in this annual report.
Changes
in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the
quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

---

ITEM 9B. OTHER INFORMATION
ITEM
9B. OTHER INFORMATION:
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT
Directors
The
following table presents certain information as of March 15, 2022 concerning each of our directors serving in such capacity:
Name
Age
Principal Occupation and Positions Held
Year Term of
Office Will Expire
Served as a
Director Since
David Lichtenstein
Chief Executive Officer and Chairman of the Board of Directors
Steven Spinola
Director
Michael J. Demarco
Director
David
Lichtenstein is our Chief Executive Officer and Chairman of our board of directors. Mr. Lichtenstein founded both American Shelter
Corporation and The Lightstone Group. From 1988 to the present, Mr. Lichtenstein has served as Chairman of the Board of Directors and
Chief Executive Officer of The Lightstone Group, directing all aspects of the acquisition, financing and management of a diverse portfolio
of multifamily, lodging, retail and industrial properties located in 20 states and Puerto Rico. From June 2004 to the present, Mr. Lichtenstein
has served as the Chairman of the Board of Directors and Chief Executive Officer of Lightstone Value Plus REIT I, Inc. (“Lightstone
REIT I”) and Chief Executive Officer of Lightstone Value Plus REIT LLC, its advisor. From April 2008 to the present, Mr. Lichtenstein
has served as the Chairman of the Board of Directors and Chief Executive Offer of Lightstone Value Plus REIT II, Inc. (“Lightstone
REIT II”) and Lightstone Value Plus REIT II LLC, its advisor. From September 2014 to the present, Mr. Lichtenstein has served as
Chairman of the Board of Directors and Chief Executive Officer of Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”),
and as Chief Executive Officer of Lightstone Value Plus REIT II ILLC, its advisor. From October 2014 to the present, Mr. Lichtenstein
has served as Chairman of the Board of Directors and Chief Executive Officer of Lightstone Enterprises Limited (“Lightstone Enterprises”).
On August 31, 2021, Mr. Lichtenstein was appointed Chairman Emeritus of the Board of Directors of Lightstone Value Plus REIT V, Inc.
(“Lightstone REIT V”) and previously served as the Chairman of the Board of Directors of Lightstone REIT V from September
2017 through August 31, 2021. Additionally, Mr. Lichtenstein is Chairman and Chief Executive Officer of Lightstone REIT V’s advisor.
From July 2015 to the present, Mr. Lichtenstein has served as a member of the Board of Directors of the New York City Economic Development
Corporation. Mr. Lichtenstein is also a member of the International Council of Shopping Centers and the National Association of Real
Estate Investment Trusts, Inc., an industry trade group, as well as a member of the Board of Directors of Touro College and New York
Medical College. Mr. Lichtenstein has been selected to serve as a director due to his experience and networking relationships in the
real estate industry, along with his experience in acquiring and financing real estate properties.
Stephen
Spinola is one of our independent directors and is a member of our audit committee. Since September 2017, Mr. Spinola has served
as a member of the Board of Directors of Lightstone REIT V. Since 1986, Mr. Spinola has been the President of the Real Estate Board of
New York (“REBNY”), and as of July 1, 2015 serves as President Emeritus. Prior to becoming REBNY’s President, Mr. Spinola
served as President of the New York City Public Development Corporation (now known as the New York City Economic Development Corporation).
Mr. Spinola holds a Bachelor of Arts degree from the City College of New York with a concentration in political science and government.
Mr. Spinola has been selected to serve as an independent director due to his extensive experience in the real estate industry.
Michael J.
DeMarco is one of our independent directors and the Chairman of our Audit Committee. From April 2017 to July 2020, Mr. DeMarco
served as chief executive officer of Mack-Cali Realty Corporation (“Mack-Cali”). From June 2015 to April 2017,
Mr. DeMarco served as president and chief operating officer of Mack-Cali. From 2013 to June 2015, Mr. DeMarco served as
the chief investment officer of CCRE, a non-bank finance company and one of the largest originators of CMBS. Mr. DeMarco previously
served as an executive vice president at Vornado Realty Trust from 2020 to 2013, as a managing director at Fortress Investment Group
from 2007 to 2020, and as a senior managing director at Lehman Brothers from 1993 to 2007. Mr. DeMarco also held senior positions
at Credit Suisse First Boston and Arthur Andersen LLP. Mr. DeMarco also is a member of the board of trustees of Saint Peter’s
Preparatory School, as well as a member of the Urban Land Institute and the International Council of Shopping Centers. Since June 2015,
Mr. DeMarco has served as a member of the board of trustees of Pennsylvania Real Estate Investment Trust, a publicly traded REIT
(NYSE: PEI). He received a Bachelor of Business Administration in accounting with a minor in history from Pace University, as well as
a Master of Business Administration in finance from the University of Chicago. He is a certified public accountant. Mr. DeMarco
has been selected to serve as an independent director due to his extensive experience in the real estate industry and finance.
Executive
Officers:
The
following table presents certain information as of March 15, 2022 concerning each of our executive officers serving in such capacities:
Name
Age
Principal Occupation and Positions Held
David Lichtenstein
Chief Executive Officer and Chairman of the Board of Directors
Mitchell Hochberg
President and Chief Operating Officer
Joseph Teichman
General Counsel and Secretary
Seth Molod
Chief Financial Officer and Treasurer
David
Lichtenstein for biographical information about Mr. Lichtenstein, see “Management - Directors.”
Mitchell
Hochberg is our President and Chief Operating Officer and also serves as President and Chief Operating Officer of Lightstone
REIT I, Lightstone REIT II and Lightstone REIT III and their respective advisors. Mr. Hochberg also serves as the President and Chief
Operating Officer of our sponsor and our advisor. From October 2014 to the present, Mr. Hochberg has served as President of Lightstone
Enterprises. Mr. Hochberg was appointed Chief Executive Officer of Behringer Harvard Opportunity REIT I, Inc. and Lightstone REIT V effective
as of September 28, 2017, and on August 31, 2021, was appointed Chairman of the Board of Directors of Lightstone REIT V. Prior to joining
The Lightstone Group in August 2012, Mr. Hochberg served as principal of Madden Real Estate Ventures from 2007 to August 2012 when it
combined with our sponsor. Mr. Hochberg held the position of President and Chief Operating Officer of Ian Schrager Company, a developer
and manager of innovative luxury hotels and residential projects in the United States from early 2006 to early 2007 and prior to that
Mr. Hochberg founded Spectrum Communities, a developer of luxury neighborhoods in the northeast of the United States, in 1985 where for
20 years he served as its President and Chief Executive Officer. Mr. Hochberg served on the board of directors of Belmond Ltd from
2009 to April 2019. Additionally, through October 2014, Mr. Hochberg served on the board of directors and as Chairman of the board
of directors of Orleans Homebuilders, Inc. Mr. Hochberg received his law degree as a Harlan Fiske Stone Scholar from Columbia University
School of Law and graduated magna cum laude from New York University College of Business and Public Administration with a Bachelor of
Science degree in accounting and finance.
Joseph
E. Teichman is our General Counsel and Secretary and also serves as General Counsel of Lightstone REIT I, Lightstone REIT II
and Lightstone REIT III and their respective advisors. Mr. Teichman also serves as Executive Vice President and General Counsel of our
sponsor and as General Counsel of our advisor. From October 2014 to the present, Mr. Teichman has served as Secretary and a Director
of Lightstone Enterprises. Prior to joining The Lightstone Group in January 2007, Mr. Teichman practiced law at the law firm of Paul,
Weiss, Rifkind, Wharton & Garrison LLP in New York, NY from September 2001 to January 2007. Mr. Teichman earned a J.D. from the University
of Pennsylvania Law School and a B.A. from Beth Medrash Govoha, Lakewood, New Jersey. Mr. Teichman is licensed to practice law in New
York and New Jersey. Mr. Teichman is also a member of the Board of Directors of Yeshiva Orchos Chaim, Lakewood, New Jersey and was appointed
to the Ocean County College Board of Trustees in February 2016.
Seth
Molod is our Chief Financial Officer and Treasurer and also serves as the Chief Financial Officer and Treasurer of Lightstone
REIT I, Lightstone REIT II, Lightstone REIT III and Lightstone REIT V. Mr. Molod also serves as the Executive Vice President and
Chief Financial Officer of our Sponsor and as the Chief Financial Officer and Treasurer of our Advisor and the advisors of Lightstone
REIT I, Lightstone REIT II, Lightstone REIT III and Lightstone REIT V. Prior to joining the Company in August 2018, Mr. Molod
served as an Audit Partner, Chair of Real Estate Services and on the Executive Committee of Berdon LLP, a full service accounting, tax,
financial and management advisory firm (“Berdon”). Mr. Molod joined Berdon in 1989. He has extensive experience advising
some of the nation’s most prominent real estate owners, developers, managers, and investors in both commercial and residential
projects. Mr. Molod has worked with many privately held real estate companies as well as institutional investors, REITs, and other
public companies. Mr. Molod is a licensed certified public accountant in New Jersey and New York and a member of the American Institute
of Certified Public Accountants. Mr. Molod holds a Bachelor of Business Administration degree in Accounting from Muhlenberg College.
Section
16 (a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires each director, officer and individual beneficially owning more than 10%
of our common stock to file initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership
(Forms 4 and 5) of our common stock with the Securities Exchange Commission (“SEC”). Officers, directors and greater
than 10% beneficial owners are required by Securities and Exchange Commission rules to furnish us with copies of all such forms they
file. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December
31, 2021, or written representations that no additional forms were required, we believe that all of our officers and directors and persons
that beneficially own more than 10% of the outstanding shares of our common stock complied with these filing requirements in 2020.
Information
Regarding Audit Committee
Our Board established an audit committee in September 2014. The charter of audit committee is available at www.lightstonecapitalmarkets.com/sec-filings or in print to any stockholder who requests it c/o Lightstone Value Plus REIT IV, Inc., 1985 Cedar Bridge Avenue, Lakewood, NJ 08701. Our audit committee consists of Steven Spinola and Michael J. DeMarco each of whom is “independent” within the meaning of the NYSE listing standards. The Board determined that Mr. DeMarco is qualified as an audit committee financial expert as defined in Item 401 (h) of Regulation S-K. For more information regarding the relevant professional experience of Messrs. Spinola and DeMarco see “Directors.”
Code
of Conduct and Ethics
We
have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited
to, our principal executive officer and principal financial officer. Our Code of Conduct and Ethics can be found at www.lightstonecapitalmarkets.com/sec-filings

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM
11. EXECUTIVE COMPENSATION
Compensation
of Executive Officers
Our
officers will not receive any cash compensation from us for their services as our officers. Additionally, our officers are officers of
one or more of our related parties and are compensated by those entities (including our sponsor), in part, for their services rendered
to us. From our inception through December 31, 2021, the Company has not compensated the officers.
Compensation
of Board of Directors
We
pay our independent directors an aggregate annual fee of $40,000 (payable in quarterly installments) and are responsible for reimbursement
of their out-of-pocket expenses, as incurred. We also pay our audit committee chair an additional aggregate annual fee of $10,000 (payable
in quarterly installments).

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Executive
Officers:
The
following table presents certain information as of March 15, 2022 concerning each of our directors and executive officers serving in
such capacities:
Name and Address of Beneficial Owner Number of
Shares of Common Stock of
the Lightstone Income Trust Beneficially Owned Percent of All Common Shares of
the Lightstone Income Trust
David Lichtenstein (1) 242,222 2.89 %
Steven Spinola - -
Michael J. DeMarco - -
Mitchell Hochberg - -
Seth Molod - -
Joseph Teichman - -
Our directors and executive officers as a group (6 persons) 242,222 2.89 %
(1) Includes
20,000 shares owned by our Advisor and 222,222 shares owned by an entity 100% owned by David
Lichtenstein. Our Advisor is majority owned and controlled by David Lichtenstein. The beneficial
owner’s business address is 1985 Cedar Bridge Avenue, Lakewood, New Jersey 08701.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
David
Lichtenstein serves as the Chairman of our Board of Directors and our Chief Executive Officer. Our Advisor is majority owned and controlled
by Mr. Lichtenstein. We have entered into agreements with our Advisor and Property Managers to pay certain fees, as described below,
in exchange for services performed by these and other affiliated entities. As a majority owner of those entities, Mr. Lichtenstein benefits
from fees and other compensation that they receive pursuant to these agreements.
Advisor
We
pay our Advisor an acquisition fee equal to 1.0% of the gross contractual purchase price (including any mortgage assumed) of each property
purchased and reimburse our Advisor for expenses that it incurs in connection with the purchase of a property. Acquisition fees and expenses
are capped at 5% of the gross contract purchase price of a property.
Our
Advisor is paid an advisor asset management fee of one-twelfth (1/12) of 0.75% of our average invested assets and we reimburse some expenses
of the Advisor relating to asset management.
For
substantial services in connection with the sale of a property, we will pay to our Advisor a commission in an amount equal to the lesser
of (a) one-half of a real estate commission that is reasonable, customary and competitive in light of the size, type and location of
the property and (b) 2.0% of the contract sales price of the property. The commission will not exceed the lesser of 6.0% of the gross
contractual sales price or commission that is reasonable, customary and competitive in light of the size, type and location of the property.
We
will pay our Advisor an annual subordinated performance fee calculated on the basis of our annual return to holders of our Common Shares,
payable annually in arrears, such that for any year in which holders of our Common Shares receive payment of a 8.0% annual cumulative,
pre-tax, non-compounded return on their respective net investments, our Advisor will be entitled to 15.0% of the amount in excess of
such 8.0% per annum return, provided, that the amount paid to the Advisor will not exceed 10.0% of the aggregate return for such
year, and provided, further, that the annual subordinated performance fee will not be paid unless holders of our Common Shares
receive a return of their respective net investments.
The
following table represents the fees incurred associated with the payments to the Advisor for the period indicated:
For the
Years Ended
December 31,
Development fee and cost reimbursement (1) $ 1,722,882 $ 304,366
Asset management fees (general and administrative costs) - 77,313
Total $ 1,722,882 $ 381,679
(1) Development
fees and the reimbursement of development-related costs that the Williamsburg Moxy Joint
Venture pays to the Advisor and its affiliates are capitalized and included in the carrying
value of the investment in the Williamsburg Moxy Hotel, which is classified as construction
in progress on the consolidated balance sheets.
Sponsor
On
March 18, 2016, we entered into a subordinated unsecured loan agreement (the “Subordinated Agreement”) with the Sponsor,
pursuant to which the Sponsor made aggregate principal advances of $12.6 million through March 31, 2017 (the termination date of the
Offering). The outstanding principal advances bear interest at a rate of 1.48%, but no interest or principal is due or payable to the
Sponsor until holders of our Common Shares have received liquidation distributions equal to their respective net investments (defined
as $10.00 per Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments.
Distributions
in connection with our liquidation will initially be made to holders of our Common Shares until holders of our Common Shares have received
liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return of 8.0%
on their respective net investments. Thereafter, only if additional liquidating distributions are available, we will be obligated to
repay the outstanding principal advances and related accrued interest to the Sponsor, as described in the Subordinated Agreement. In
the event that additional liquidating distributions are available after we repay the holders of our Common Shares their respective net
investments plus their 8% return on investment and then the outstanding principal advances under the Subordinated Agreement and accrued
interest to the Sponsor, such additional distributions will be paid to holders of our Common Shares and the Sponsor: 85.0% of the aggregate
amount will be payable to holders of our Common Shares and the remaining 15.0% will be payable to the Sponsor.
The
principal advances and the related interest are subordinate to all of our obligations as well as to the holders of our Common Shares
in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0% and only
potentially payable in the event of our liquidation.
In
connection with the termination of the Offering, on March 31, 2017, we and the Sponsor simultaneously terminated the Subordinated Agreement.
As a result of the termination, the Sponsor is no longer obligated to make any additional principal advances to us. Interest will continue
to accrue on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will be
made according to the terms of the Subordinated Agreement disclosed above.
As
of both December 31, 2021 and 2020, an aggregate of approximately $12.6 million of principal advances have been funded, which along with
the related accrued interest of $1,006,633 and $819,679, respectively, are classified as Subordinated Advances - Related Party,
a liability on the consolidated balance sheets. During both of the years ended December 31, 2021 and 2020, the Company accrued $186,954
of interest expense, on the principal advances.
Williamsburg
Moxy Hotel
On
July 17, 2019, we, through our then wholly owned subsidiary, Bedford Avenue Holdings LLC acquired four adjacent parcels of land
located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Williamsburg Land”), from unaffiliated third
parties, for an aggregate purchase price of approximately $30.4 million, excluding closing and other acquisition related costs, on which
we are developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). In connection with the acquisition
of the Williamsburg Land, we simultaneously entered into a $16.0 million nonrecourse mortgage loan (the “Williamsburg Mortgage”)
collateralized by the Williamsburg Land.
On
August 5, 2021, we formed the Williamsburg Moxy Hotel Joint Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired
25% of our membership interest in the Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to the initial
acquisition, Lightstone REIT III made additional capital contributions to the Williamsburg Moxy Hotel Joint Venture of $4.3 million through
December 31, 2021.
As
a result, we and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.
Additionally, we are the managing member of the Williamsburg Moxy Hotel Joint Venture and Lightstone REIT III has consent rights with
respect to all major decisions.
We
determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and we are the primary beneficiary. As we are the member most
closely associated with the Williamsburg Moxy Hotel Joint Venture and therefore have the power to direct the activities of the Williamsburg
Moxy Hotel Joint Venture that most significantly impact its performance, we consolidate the operating results and financial condition
of the Williamsburg Moxy Hotel Joint Venture and account for the ownership interest of Lightstone REIT III as noncontrolling interests.
Contributions are allocated in accordance with each investor’s ownership percentage. Profit and cash distributions are allocated
in accordance with each investor’s ownership percentage.
On
August 4, 2021, the Williamsburg Joint Venture entered into a development agreement (the “Development Agreement”) with
an affiliate of the Advisor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg Moxy Developer will
be 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 (see Note 6). Additionally, on August 5, 2021, the Williamsburg Moxy
Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. The Williamsburg Moxy Hotel is
currently under construction and expected to open during the fourth quarter of 2022.
As
of December 31, 2021, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to construction in progress an aggregate of
$73.0 million (including capitalized interest of $3.2 million) consisting of acquisition and other costs attributable to the development
of the Williamsburg Moxy Hotel. During the years ended December 31, 2021 and 2020, we capitalized interest of approximately $1.7 million
and $1.0 million, respectively, in connection with the development of the Williamsburg Moxy Hotel.
Moxy
Construction Loan
On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility for up to $77.0 million
(the “Moxy Construction Loan”) scheduled to mature on February 5, 2024, with two, six-month extension options, subject
to the satisfaction of certain conditions. The Moxy Construction Loan bears interest at LIBOR plus 9.00%, subject to a 9.50% floor,
with monthly interest-only payments based on a rate of 7.50% with the accrued and unpaid interest added to the outstanding loan balance
and due at maturity. The Moxy Construction Loan is collateralized by the Williamsburg Moxy Hotel. The Williamsburg Moxy Hotel Joint Venture
received initial proceeds of $16.0 million under the Moxy Construction Loan and repaid the Williamsburg Mortgage ($16.0 million) in full.
As of December 31, 2021, the outstanding principal balance of the Moxy Construction Loan was $18.6 million (including $0.1 million of
interest capitalized to principal) which is presented, net of deferred financing fees of $3.7 million, on the consolidated balance
sheet and is classified as Mortgage Payable, net and the remaining availability under the facility was up to $58.6 million.
In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture has 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 are due at the initial maturity date and are included in accounts
payable, accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2021.
East End Ave. Joint Venture
On
March 31, 2017, we entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco LLC,
an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls our Sponsor, and a related party,
(the “40 East End Seller”), providing for us to acquire approximately 33.3% of the 40 East End Seller’s approximate
100% membership interest in the 40 East End Ave. Joint Venture for aggregate consideration of $10.3 million.
Our
ownership interest in the 40 East End Ave. Joint Venture is a non-managing interest. Because we exert significant influence over but
do not control the 40 East End Ave. Joint Venture, we account for our ownership interest in the 40 East End Ave. Joint Venture in accordance
with the equity method of accounting. All contributions to and distributions of earnings from the 40 East End Ave. 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 40 East End Ave. Joint Venture are made to the members pursuant to the terms of its operating agreement. We commenced recording our
allocated portion of earnings and cash distributions, if any, from the 40 East End Ave. Joint Venture beginning as of March 31, 2017
with respect to our membership interest of approximately 33.3% in the 40 East End Ave. Joint Venture. Additionally, Lightstone Value
Plus REIT I, Inc.(“Lightstone REIT I”), a real estate investment trust also sponsored by our Sponsor, made $30.0 million
of preferred equity contributions (the “Preferred Contributions”) to a subsidiary of the 40 East End Ave. Joint Venture,
pursuant to an instrument that entitles Lightstone REIT I to monthly preferred distributions at a rate of 12% per annum. No distributions
may be paid to the members until the Preferred Contributions are redeemed in full.
The
40 East End Ave. Joint Venture, through affiliates, owns the 40 East End Avenue Project, a luxury residential 29-unit condominium project
located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue
Project received its final TCO in March 2020 and through December 31, 2021, 15 condominium
units have been sold.
On
December 19, 2019, the 40 East End Ave. Joint Venture obtained financing (the “Condo Loan”) from a financial institution
of $95.2 million, of which $90.2 million was initially funded at closing and the remaining $5.0 million was subsequently advanced in
April 2020. The Condo Loan, which was previously scheduled to mature on December 19, 2021, bears interest at LIBOR plus 2.45%, which
is payable monthly, and requires principal payments to be made at certain prescribed amounts from proceeds from the sales of condominium
units with any remaining outstanding balance due in full at maturity.
On
December 30, 2021, the 40 East End Ave. Joint Venture and the financial institution amended the Condo Loan providing for an extension
of the maturity date to December 20, 2022 and revisions to the timing and amounts of required principal payments to be made from proceeds
from the sale of condominium units. Pursuant to the amended terms of the Condo Loan, the 40 East End Ave. Joint Venture will be required
to make a principal paydown on May 20, 2022, if the then outstanding principal balance of the Condo Loan has not been paid down to at
least $26.5 million as of that date, with any remaining outstanding balance due in full at maturity. As of December 31, 2021, the Condo
Loan had an outstanding principal balance of $36.5 million. Based on the outstanding balance of the Condo Loan as of December 31, 2021
and assuming no additional condominium units are sold through May 20, 2022, our share of the required principal paydown would be $3.3
million.
As
discussed above, the Condo Loan is currently scheduled to mature on December 20, 2022. If the Condo Loan has not been repaid in full
before its maturity date, the 40 East End Ave. Joint Venture intends to seek a further extension to the maturity date.
However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors.
Our
Sponsor and its affiliates (collectively, the “40 East End Guarantors”) have provided certain guarantees with respect to
the Condo Loan and the members have agreed to reimburse the 40 East End Guarantors for any balance that may become due under the guarantees
(the “40 East End Guarantee”), of which our share is approximately 33.3%. We have determined that the fair value of our share
of the 40 East End Guarantee is immaterial.
In
connection with the closing of the Condo Loan, the 40 East End Ave. Joint Venture used a portion of the initial loan proceeds to (i)
fully repay an aggregate of $80.5 million of principal and interest under a construction loan and (ii) redeem $9.5 million of Lightstone
REIT I’s Preferred Contributions. The 40 East End Ave. Joint Venture subsequently redeemed an additional $3.5 million and $11.0
million of Preferred Contributions on December 26, 2019 and February 13, 2020, respectively, reducing Lightstone REIT I’s Preferred
Contributions to $6.0 million, which remains outstanding as of December 31, 2021.
Subsequent
to our acquisition through December 31, 2021, we have made an aggregate of $5.9 million of additional capital contributions to the 40
East End Ave. Joint Venture, of which $0.2 million were made during the year ended December 31, 2021.
Because
proceeds from sales of condominium units must first be used to fully pay-down the Condo Loan and thereafter to redeem Lightstone REIT
I’s remaining Preferred Contributions, we do not expect to receive any distributions from the 40 East End Ave. Joint Venture over
the next 12 months.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Independent
Registered Public Accounting Firm
Our
independent public accounting firm is EisnerAmper, LLP, Iselin, New Jersey, Auditor Firm ID 274.
Audit
and Non-Audit Fees
The
following table presents the aggregate fees billed to us for the years presented by our principal accounting firm:
Year ended
December 31,
Year ended
December 31,
Audit Fees (a) $ 118,000 $ 128,725
Tax Fees (b) 62,400 28,365
Total Fees $ 180,400 $ 157,090
(a) Fees for audit
services consisted of the audit of the Company’s annual financial statements and interim reviews, including services normally
provided in connection with statutory and regulatory filings and including registration statements and consents.
(b) Fees for tax services.
In
considering the nature of the services provided by the independent auditor, the audit committee determined that such services are compatible
with the provision of independent audit services. The audit committee discussed these services with the independent auditor and our management
to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the Securities and
Exchange Commission to implement the related requirements of the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified
Public Accountants.
AUDIT
COMMITTEE REPORT
To the Directors of Lightstone Value Plus REIT IV, Inc.:
We have reviewed and discussed with management Lightstone Value Plus REIT IV, Inc.’s audited financial statements as of and for the year ended December 31, 2021.
We have discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 16, “Communication with Audit Committees,” as amended, as adopted by the Public Company Accounting Oversight Board.
We have received and reviewed the written disclosures and the letter from the independent auditors required by Public Company Accounting Oversight Board Rule 3526, Communication with Audit Committees Concerning Independence and have discussed with the auditors the auditors’ independence.
Based on the reviews and discussions referred to above, we recommend to the board of directors that the financial statements referred to above be included in Lightstone Value Plus REIT IV, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021.
Audit Committee
Steven Spinola
Michael J. DeMarco
INDEPENDENT
DIRECTORS’ REPORT
To
the Stockholders of Lightstone Value Plus REIT IV, Inc.:
We
have reviewed the Company’s policies and determined that they are in the best interest of the Company’s stockholders. Set
forth below is a discussion of the basis for that determination.
General
The
Company’s strategy is to originate, acquire and manage a diverse portfolio of real estate or real estate-related investments located
primarily in the United States. A substantial portion of its investments currently are related-party investments located in relatively
large metropolitan areas. The Company generally has sought to create a portfolio of investments that either generate or are expected
to generate attractive cash flow for distributions. However, the Company has and still may target capital appreciation from its investments.
The
Company has not established any limits on the percentage of its portfolio that may be comprised of various categories of assets which
present differing levels of risk. The allocation of the Company’s assets under management is dependent, in part, upon the then-current
commercial real estate market, the investment opportunities it presents and available financing, if any, as well as other micro and macro
market conditions.
The
Company has and intends to continue to seek opportunities to invest in real estate and real estate-related investments. The Company’s
real estate investments may include operating properties and development projects and its real estate-related investments may include
mezzanine loans, mortgage loans, bridge loans and preferred equity interests, with a focus on development-related investments, including
those intended to finance development or redevelopment opportunities. The Company may also invest in debt and derivative securities related
to real estate assets. A portion of the Company’s investments by value may be secured by or related to properties or entities advised
by, or wholly or partially, directly or indirectly, owned by, the Company’s sponsor, its affiliates or other real estate investment
programs sponsored by it. Although the Company expects that most of its investments will be of these various types, it may make other
investments. In fact, it may invest in whatever types of investments that it believes are in its best interests.
The
Company has and expects to continue to focus its acquisition and origination activity on real estate properties and real estate-related
investments located in the United States, including certain related-party investments generally conducted through joint venture arrangements.
The Company sometimes refers to the foregoing types of investments as its targeted investments. The Company expects to target investments
that generally will offer predictable current cash flow and/or attractive risk-adjusted returns based on the underwriting criteria established
and employed by its advisor, which may include the anticipated leverage point, market and economic conditions, the location and quality
of the underlying collateral and the borrower’s exit or refinancing plan. The Company’s ability to continue to execute its
investment strategy may be enhanced through access to the sponsor’s extensive experience in both financing and developing real
estate projects as well as in buying assets in the open market from third-parties. The Company has and will continue to seek to build
a portfolio that may include some of or all the following investment characteristics: (a) provides current income; (b) is secured by
high-quality commercial real estate; (c) includes subordinate capital investments by strong sponsors that support its investments and
provide downside protection; and (d) possesses strong structural features that maximize repayment potential, such as a clear exit or
refinancing plan by the borrower.
The
Company has and intends to also continue to seek to invest in real estate-related loans and debt securities both by directly originating
them and by purchasing them from third-party sellers. Although the Company generally prefers the benefits of direct origination, situations
may arise to purchase real estate-related loans and debt securities, possibly at discounts to par, which compensate for the lack of control
or structural enhancements typically associated with directly structured investments.
Financing
Policies
There
is no limitation on the amount the Company may invest or borrow for the purchase or origination of any single property or investment.
The Company’s charter allows it to incur leverage up to 300% of its total “net assets” (as defined in its charter)
as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of its investments. The Company may
only exceed this 300% limit if a majority of its independent directors approves each borrowing in excess of this limit and the Company
discloses such borrowing to its stockholders in its next quarterly report along with a justification for the excess borrowing. In all
events, the Company expects that its secured and unsecured borrowings will be reasonable in relation to the net value of its assets and
will be reviewed by the Company’s board of directors at least quarterly.
The
Company does not currently intend to exceed the leverage limit in its charter. The Company believes that careful use of debt helps the
Company to achieve its diversification goals because the Company may have more funds available for investment. However, high levels of
debt could cause the Company to incur higher interest charges and higher debt service payments, which would decrease the amount of cash
available for distributions, if any, to the Company’s investors.
Policy
on Sale or Disposition of Properties
The
Company’s board of directors will determine whether a particular property should be sold or otherwise disposed of after considering
the relevant factors, including performance or projected performance of the property and market conditions, with a view toward achieving
its principal investment objectives.
The
Company currently intends to hold each investment it acquires, develops or originates until its investment objectives are met or it is
likely they will not be met. The determination of whether an investment will be sold or otherwise disposed of will be made after consideration
of relevant factors, including prevailing economic conditions, specific real estate market conditions, tax implications for the Company’s
stockholders and other factors. The requirements for qualification as a REIT also will put some limits on the Company’s ability
to sell investments after short holding periods. However, in accordance with the Company’s investment objective of realizing growth
in the value of its investments, the Company may sell a particular investment when, in the judgment of its advisor and its board of directors,
selling the investment is in the Company’s best interest. The determination of when a particular investment should be sold or otherwise
disposed of will be made after consideration of relevant factors, including prevailing and projected economic conditions, whether the
value of the investment is anticipated to decline substantially, whether the Company could apply the proceeds from the sale of the investment
to make other investments consistent with its investment objectives, whether disposition of the investment would allow the Company to
increase cash flow, and whether the sale of the investment would constitute a prohibited transaction under the Code or otherwise impact
the Company’s status as a REIT. The Company’s ability to dispose of an investment during the first few years following its
acquisition is restricted to a substantial extent as a result of its REIT status. Under applicable provisions of the Code regarding prohibited
transactions by REITs, a REIT that sells an asset other than foreclosure property that is deemed to be inventory or property held primarily
for sale in the ordinary course of business is deemed a “dealer” and subject to a 100% penalty tax on the net income from
any such transaction. As a result, the Company’s board of directors will attempt to structure any disposition of the Company’s
investments to avoid this penalty tax through reliance on safe harbors available under the Code for assets held at least two years or
through the use of a TRS.
When
the Company determines to sell a particular investment, it will seek to achieve a selling price that maximizes the capital appreciation
for investors based on then-current market conditions. The Company cannot assure its investors that this objective will be realized.
Independent
Directors
Steven
Spinola
Michael J.
DeMarco
PART
IV.

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
LIGHTSTONE
VALUE PLUS REIT IV, INC.
Annual
Report on Form 10-K
For
the fiscal year ended December 31, 2021
EXHIBIT
INDEX
The
following exhibits are included, or incorporated by reference, as part of this Annual Report on Form 10-K (and are numbered in accordance
with Item 601 of Regulation S-K):
EXHIBIT NO.
DESCRIPTION
1.1(2)
Amended and Restated Dealer Manager Agreement by and between Lightstone Value Plus REIT IV, Inc. and Orchard Securities, LLC
1.2(4)
Form of Soliciting Dealer Agreement
3.1(5)
Amended and Restated Bylaws of Lightstone Value Plus REIT IV, Inc.
3.2(5)
Articles of Amendment and Restatement of Lightstone Value Plus REIT IV, Inc.
4.1(1)
Distribution Reinvestment Program, included as Appendix C to prospectus
4.2(6)
Description of Registrant’s Securities
5.1(1)
Opinion of Venable LLP re legality
10.1(3)
Advisory Agreement, dated as of March 4, 2015, by and between Lightstone Value Plus REIT IV, Inc. and Lightstone Real Estate Income LLC
21*
Subsidiaries of the Registrant.
31.1*
Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification Pursuant to Rule 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification Pursuant to Rule 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*
XBRL (eXtensible Business Reporting Language).The following financial information from Lightstone Value Plus REIT IV, Inc. on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 23, 2022, formatted in XBRL includes: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Operations, (3) Consolidated Statements of Stockholders’ Equity, (4) Consolidated Statements of Cash Flows, and (5) the Notes to the Consolidated Financial Statements.
* As filed herewith
(1) Previously filed as an exhibit to Amendment No. 2 to the Registrant’s Registration Statement on Form S-11 (Reg. No. 333-200464) filed with the SEC on February 12, 2015.
(2) Previously filed as an exhibit to the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on January 12, 2017.
(3) Previously filed as an exhibit to the Annual Report on Form 10-K that we filed with the Securities and Exchange Commission on March 15, 2016.
(4) Previously filed as an exhibit to the Annual Report on Form 10-K that we filed with the Securities and Exchange Commission on March 28, 2017.
(5) Previously filed as an exhibit to the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on December 21, 2021.
(6) Previously filed as an exhibit to the Annual Report on Form 10-K that we filed with the Securities and Exchange Commission on March 19, 2021.