LIGHTSTONE VALUE PLUS REIT I, INC. Item 8.01 Other Events.
The terms "we," "our," "us" and "the Company" refer toLightstone Value Plus REIT I, Inc. , aMaryland corporation, and, as required by context,Lightstone Value Plus REIT, L.P. and its wholly owned subsidiaries, which we collectively refer to as our "Operating Partnership.
Estimated Net Asset Value ("NAV") and NAV per Share of Common Stock ("NAV per Share")
OnDecember 16, 2021 , our board of directors determined and approved our estimated NAV of$313.8 million and resulting estimated NAV per Share of$11.75 , after allocations of value to special general partner interests, or SLP Units, in ourOperating Partnership , held byLightstone SLP, LLC , an affiliate of our Advisor, assuming a liquidation event, both as ofSeptember 30, 2021 . From our inception through the termination of our initial public offering onOctober 10, 2008 ,Lightstone SLP, LLC , an affiliate of our Advisor, contributed cash of$30.0 million in exchange for 300 SLP Units, at a cost of$100,000 per unit. The estimated NAV of our shares was calculated as of a particular point in time. The estimated NAV of our shares will fluctuate over time in response to developments related to individual assets in the portfolio and the management of those assets and in response to the real estate and finance markets. There is no assurance of the extent to which the current estimated valuation should be relied upon for any purpose after its effective date regardless that it may be published on any statement issued by us or otherwise. Process and Methodology Our Advisor, along with any necessary material assistance or confirmation of a third-party valuation expert or service, is responsible for calculating our estimated NAV and resulting NAV per Share, which we currently expect will be done on an annual basis unless our Common Shares are approved for listing on a national securities exchange. Our board of directors will review and approve each estimate of NAV and resulting NAV per Share. Our estimated NAV and resulting NAV per Share as ofSeptember 30, 2021 were calculated with the assistance of both our Advisor andRobert A. Stanger & Co, Inc. ("Stanger"), an independent third-party valuation firm engaged by us to assist with the valuation of our assets, liabilities and any allocations of value to SLP Units. Our Advisor recommended and our board of directors established the estimated NAV per Share as ofSeptember 30, 2021 based upon the analysis and reports provided by our Advisor and Stanger. The process for estimating the value of our assets, liabilities and allocations of value to SLP Units, is performed in accordance with the provisions of the Investment Program Association Practice Guideline 2013-01, "Valuations of Publicly Registered Non-Listed REITs." We believe that our valuations were developed in a manner reasonably designed to ensure their reliability. The engagement of Stanger with respect to our estimated NAV and resulting NAV per Share as ofSeptember 30, 2021 was approved by our board of directors, including all of our independent directors. Stanger has extensive experience in conducting asset valuations, including valuations of commercial real estate, debt, properties and real estate-related investments. With respect to our estimated NAV and resulting NAV per Share as ofSeptember 30, 2021 , Stanger prepared appraisal reports (the "Stanger Appraisal Reports"), summarizing key inputs and assumptions, for three of our properties (the "Stanger Appraised Properties "), all of which we wholly own and consolidate, consisting of (i) theSt. Augustine Outlet Center and (ii) theLower East Side Moxy Hotel and theExterior Street Project (collectively, the "Development
Properties").
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Stanger also prepared a NAV report (the "September 2021 NAV Report") which estimates our NAV per Share as ofSeptember 30, 2021 . TheSeptember 2021 NAV Report relied upon (i) the Stanger Appraisal Reports for theStanger Appraised Properties , (ii) an appraisal report prepared by another independent third-party valuation firm forGantry Park Landing , our 59.2% majority-owned and consolidated multi-family residential property, (iii) Stanger's estimated value of our outstanding indebtedness, (iv) our Advisor's value opinion with respect to our 2.5% non-managing ownership interest in an unconsolidated joint venture (the "Joint Venture"), assuming a liquidation pursuant to the terms of the Joint Venture's operating agreement, and our other investments in related parties, (v) Stanger's estimate of the allocation of value to the SLP Units, and (vi) our Advisor's estimate of the value of our cash and cash equivalents, marketable securities, restricted escrows, other assets, other liabilities and other non-controlling interests, to calculate estimated NAV per Share, all as ofSeptember 30, 2021 . The table below sets forth the calculation of our estimated NAV and resulting NAV per Share as ofSeptember 30, 2021 , as well as the comparable calculation as ofSeptember 30, 2020 . Certain amounts are reflected net of noncontrolling interests, as applicable. Dollar and share amounts are presented in thousands, except per share data. As of As of September September 30, 2021 30, 2020 Value Per Share Value Per Share Net Assets: Real Estate Properties$ 329,755 $ 14.53 $ 287,124 $ 12.60 Non-Real Estate Assets: Cash and cash equivalents 32,245 56,521
Investments in related parties 15,541
15,657
Marketable securities, available for sale 53,071 36,192 Restricted escrows 1,601 2,419 Notes receivable, ent 32,468 51,258 Other assets 1,840 1,337
Total non-real estate assets 136,766 6.02 163,384 7.17 Total Assets 466,521 20.55 450,508 19.77 Liabilities: Mortgage notes payable (131,811 ) (140,441 ) Notes payable - - Other liabilities (20,268 ) (13,282 ) Total liabilities (152,079 ) (6.70 ) (153,723 ) (6.75 ) Other noncontrolling interests (617 ) (0.03 ) (617 ) (0.02 ) Net Asset Value before Allocations to SLP Units 313,825 13.82 296,168 13.00 Allocations to SLP Units (47,040 ) (2.07 ) (41,499 ) (1.82 ) Net Asset Value$ 266,785 $ 11.75
Shares of Common Stock Outstanding(1) 22,702
22,784
Note:
(1) Includes 0.5 million shares of our common stock assuming the conversion of an
equal number of common units of limited partnership interest in our Operating
Partnership ("common units").
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Use of Independent Valuation Firm:
As discussed above, our Advisor is responsible for calculating our NAV. In connection with determining our NAV, our Advisor may rely on the material assistance or confirmation of a third-party valuation expert or service. In this regard, Stanger was selected by our board of directors to assist our Advisor in the calculation of our estimated NAV and resulting NAV per Share as ofSeptember 30, 2021 . Stanger's service included appraising theStanger Appraised Properties and preparing theSeptember 2021 NAV Report. Stanger is engaged in the business of appraising commercial real estate properties and is not affiliated with us or our Advisor. The compensation we paid to Stanger was based on the scope of work and not on the appraised values of our real estate properties. The appraisals were performed in accordance with the Code of Ethics and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created byThe Appraisal Foundation . The Stanger Appraisal Reports were reviewed, approved, and signed by an individual with the professional designation of MAI licensed in the state where each real property is located. The use of the reports is subject to the requirements of theAppraisal Institute relating to review by its duly authorized representatives. In preparing its reports, Stanger did not, and was not requested to; solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of us. Stanger collected reasonably available material information that it deemed relevant in appraising our real estate properties. Stanger relied in part on property-level information provided by our Advisor, including (i) property historical and projected operating revenues and expenses; (ii) property lease agreements and/or lease abstracts; and (iii) information regarding recent or planned capital expenditures. In conducting their investigation and analyses, Stanger took into account customary and accepted financial and commercial procedures and considerations as they deemed relevant. Although Stanger reviewed information supplied or otherwise made available by us or the Advisor for reasonableness, they assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to them by any other party and did not independently verify any such information. Stanger has assumed that any operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Stanger were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of our management, our board of directors, and/or our Advisor. Stanger relied on us to advise them promptly if any information previously provided became inaccurate or was required to be updated during the period of their review. In performing its analyses, Stanger made numerous other assumptions as of various points in time with respect to industry performance, general business, economic, and regulatory conditions, and other matters, many of which are beyond their control and our control. Stanger also made assumptions with respect to certain factual matters. For example, unless specifically informed to the contrary, Stanger assumed that we have clear and marketable title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no significant deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density, or shape are pending or being considered. Furthermore, Stanger's analyses, opinions, and conclusions were necessarily based upon market, economic, financial, and other circumstances and conditions existing as of or prior to the date of the Stanger Appraisal Reports, and any material change in such circumstances and conditions may affect Stanger's analyses and conclusions. The Stanger Appraisal Reports contain other assumptions, qualifications, and limitations that qualify the analyses, opinions, and conclusions set forth therein. Furthermore, the prices at which our real estate properties may actually be sold could differ from
Stanger's analyses.
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Stanger is actively engaged in the business of appraising commercial real estate
properties similar to those owned by us in connection with public security
offerings, private placements, business combinations, and similar transactions.
We do not believe that there are any material conflicts of interest between
Stanger, on the one hand, and us, our Sponsor, our Advisor, and our affiliates,
on the other hand. Our Advisor engaged Stanger on behalf of our board of
directors to deliver their reports to assist in the NAV calculation as of
September 30, 2021 and Stanger received compensation for those efforts. In
addition, we agreed to indemnify Stanger against certain liabilities arising out
of this engagement. In the two years prior to the date of this filing, Stanger
was previously engaged by us for appraisal and valuation services in connection
with our financial reporting requirements. Stanger has received usual and
customary fees in connection with those services. Stanger may from time to time
in the future perform other services for us and our Sponsor or other affiliates
of the Sponsor, so long as such other services do not adversely affect the
independence of Stanger as certified in the applicable Appraisal Reports. During
the past two years Stanger has also been engaged to provide appraisal services
to another non-traded REIT sponsored by our Sponsor for which it was paid usual
and customary fees.
Although Stanger considered any comments received from us and our Advisor
relating to their reports, the final appraised values of the Stanger Appraised
Properties were determined by Stanger. The reports are addressed to our board of
directors to assist our board of directors in calculating our estimated NAV per
Share as of September 30, 2021 . The reports are not addressed to the public, may
not be relied upon by any other person to establish our estimated NAV per Share,
and do not constitute a recommendation to any person to purchase or sell any
shares of our common stock.
Our goal in calculating our estimated NAV is to arrive at values that are
reasonable and supportable using what we deem to be appropriate valuation
methodologies and assumptions. The reports, including the analysis, opinions,
and conclusions set forth in such reports, are qualified by the assumptions,
qualifications, and limitations set forth in the respective reports. The
following is a summary of our valuation methodologies used to value our assets
and liabilities by key component:
Real estate properties:
As of
As described above, we engaged Stanger to provide an appraisal of theStanger Appraised Properties consisting of three of our four consolidated properties in which we held ownership interests as ofSeptember 30, 2021 .The Stanger Appraised Properties consist of theSt. Augustine Outlet Center and theDevelopment Properties . We also engaged another independent third-party valuation firm to provide an appraisal report forGantry Park Landing . In preparing their appraisal reports, the scope of the work performed by Stanger and the other independent third-party valuation firm included the following procedures, as well other factors:
? A review of all property level information provided by our Advisor;
? A review of the historical performance of our real estate investments and
business plans related to operations of the investments;
? A review of the data models prepared by the Advisor supporting the valuation
for each investment; and
? A review of the applicable markets by means of publications and other resources
to measure current market conditions, supply and demand factors, and growth
patterns.
Stanger and the other independent third-party valuation firm employed the income
approach and/or the sales comparison approach to estimate the value of the
appraised properties. The income approach involves an economic analysis of the
property based on its potential to provide future net annual income. As part of
the valuation, a discounted cash flow analysis ("DCF Analysis") and/or direct
capitalization analysis was used in the income approach to determine the value
of our interest in the portfolio. The indicated value by the income approach
represents the amount an investor may pay for the expectation of receiving the
net cash flow from the property.
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The direct capitalization analysis is based upon the net operating income of the property capitalized at an appropriate capitalization rate for the property based upon property characteristics and competitive position and market conditions at the date of the appraisal.
In applying the DCF Analysis, pro forma statements of operations for the property including revenues and expenses are analyzed and projected over a multi-year period. The property is assumed to be sold at the end of the multi-year holding period. The reversion value of the property which can be realized upon sale at the end of the holding period is calculated based on the capitalization of the estimated net operating income of the property in the year of sale, utilizing a capitalization rate deemed appropriate in light of the age, anticipated functional and economic obsolescence and competitive position of the property at the time of sale. Net proceeds to owners are determined by deducting appropriate costs of sale. The discount rate selected for the DCF Analysis is based upon estimated target rates of return for buyers of similar properties. The sales comparison approach utilizes indices of value derived from actual or proposed sales of comparable properties to estimate the value of the subject property. The appraiser analyzed such comparable sale data as was available to develop a market value conclusion for the subject property. Stanger prepared the Stanger Appraisal Reports and the other independent third-party valuation firm prepared an appraisal report forGantry Park Landing , summarizing key inputs and assumptions, for each of the appraised properties using financial information provided by us and our Advisor. From such review, Stanger and the other independent third-party valuation firm selected the appropriate cash flow discount rate, residual discount rate, and terminal capitalization rate in the DCF Analysis, if applicable, the appropriate capitalization rate in the direct capitalization analysis and the appropriate price per unit in the sales comparison analysis. As for those properties consolidated on our financials, and for which we do not own 100% of the ownership interest, the property value was adjusted to reflect our ownership interest in such property after consideration of the distribution priorities associated with such property. The estimated values for our investments in real estate may or may not represent current market values and do not equal the book values of our real estate investments in accordance withU.S. GAAP. Our consolidated investments in real estate are currently carried in our consolidated financial statements at their amortized cost basis, adjusted for any loss impairments and bargain purchase gains recognized to date. Our unconsolidated investments in real estate are currently accounted for under the cost method of accounting in our consolidated financial statements.St. Augustine Outlet Center
As of
Gantry Park Landing As ofSeptember 30, 2021 , our 59.2% ownership interest inGantry Park Landing , a multi-family residential property, was valued at$75.5 million . The following summarizes the key assumptions that were used in the discounted cash flow model to estimate the value ofGantry Park Landing as ofSeptember 30, 2021 : Gantry Park Landing Weighted-average: Exit capitalization rate 4.25 % Discount rate 5.25 % Annual market rent growth rate 2.95 % Annual net operating income growth rate 2.88 % Holding period (in years) 11.0 5 While we believe that the assumptions made by the other independent third-party appraisal firm forGantry Park Landing are reasonable, a change in these assumptions would impact the calculation of the estimated value included in ourReal Estate Properties . The table below represents the estimated increase or decrease to our estimated NAV per Share resulting from a 25-basis point increase and decrease in the capitalization rate and discount rate forGantry Park Landing . The table is presented to provide a hypothetical illustration of the possible results if only one change in assumptions was made, with all other factors remaining constant. Further, each of these assumptions could change by more or less than 25 basis points or not at all. Change in NAV per Share Increase of Decrease of 25 basis points 25 basis points Exit capitalization rate $ (0.19 ) $ 0.22 Discount rate $ (0.07 ) $ 0.07Development Properties
As of
Lower East Side Moxy Hotel
As ofSeptember 30, 2021 , we wholly own and consolidate theLower East Side Moxy Hotel , a development project which when completed will consist of a 296-room Marriott-branded hotel located at 147-151 Bowery,New York, New York As ofSeptember 30, 2021 , because theLower East Side Moxy Hotel was under development, Stanger deemed it appropriate to determine its fair value of$132.7 million as of that date based on the estimated fair value of the underlying land of$58.7 million (using a sales comparison approach) plus other development costs incurred of$74.0 million .Exterior Street Project
As ofSeptember 30, 2021 , we wholly own and consolidate theExterior Street Project , a multi-family development project located at355 and 399 Exterior Street ,New York, New York . As ofSeptember 30, 2021 , because theExterior Street Project was under development, Stanger deemed it appropriate to determine its fair value of$96.6 million as of that date based on the aggregate estimated fair value of the underlying land of$70.1 million (using a sales comparison approach) plus other development costs incurred of$26.5 million .
The aggregate fair value of our
Cash and cash equivalents: The estimated values of our cash and cash equivalents approximate their carrying values due to their short maturities.
Investments in related parties: As of
? As of
Joint Venture, which owns seven hospitality properties. The Joint Venture is
between us and the operating partnership of
("Lightstone REIT II"), a real estate investment trust also sponsored by our
Sponsor, which has a 97.5% managing ownership interest in the Joint Venture. We
do not consolidate our ownership interest in the Joint Venture but rather
account for it under the cost method of accounting. As of
our Advisor estimated the fair value of our ownership interest in the Joint
Venture was
value of the Joint Venture's net assets, which approximated our carrying value.
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? We have entered into agreements with various related party entities pursuant to
which we have made aggregate outstanding contributions of
affiliates of our Sponsor which have either developed or are developing various
residential and hospitality projects located in the
metropolitan areas. These contributions were made pursuant to instruments (the
"Preferred Investments") that entitle us to monthly preferred distributions at
12% per annum and are classified as held-to-maturity securities and are
recorded at cost. As of
our Preferred Investments of
based on market rates for similar instruments. Marketable securities, available for sale: The estimated values of our marketable securities, available for sale, are based on Level 1 and Level 2 inputs. Level 1 inputs are inputs that are observable, either directly or indirectly, such as quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. All of our marketable securities measured using Level 2 inputs were valued based on a market approach using readily available quoted market prices for similar assets.
Restricted escrows: The estimated values of our restricted escrows approximate their carrying values due to their short maturities.
Notes receivable, net: The estimated values of our notes receivable generally
approximate their carrying values as of
Other assets: Our other assets consist of tenant accounts receivable and prepaid expenses and other assets. The estimated values of these items approximate their carrying values due to their short maturities. Certain other items, primarily straight-line rent receivable, intangibles and deferred costs, have been eliminated for the purpose of the valuation because those items are already considered in our valuation of the respective investments in real estate properties or financial instruments. Mortgage notes payable: We have mortgage notes payable that bear interest at both variable and fixed rates. The estimated values of our variable-rate mortgage loans were generally deemed to approximate their carrying values because their interest rates move in conjunction with changes to market interest rates. The estimated values for our fixed-rate mortgage loans were estimated using a discounted cash flow analysis, which used inputs based on the remaining loan terms and estimated current market interest rates for mortgage loans with similar characteristics, including remaining loan term and loan-to-value ratios. The current market interest rates for our fixed-rate mortgage loans were generally determined based on market rates for available comparable debt. The estimated current market interest rates for our fixed-rate mortgage loans ranged from 2.35% to 2.85% as ofSeptember 30, 2021 . Other liabilities: Our other liabilities consist of our accounts payable and accrued expenses, amounts due to our Sponsor, tenant allowances and deposits payable, distributions payable and deferred rental income. The carrying values of these items were considered to equal their fair value due to their short maturities. Certain other items, primarily intangibles, have been eliminated for the purpose of the valuation because those items are already considered in our valuation of the respectiveReal Estate Properties or financial instruments.
Other noncontrolling interests: Our other noncontrolling interests consist of accrued distributions on common units and SLP Units.
Allocations of value to SLP units: The carrying value of the SLP Units held byLightstone SLP, LLC , an affiliate of our Advisor, are classified in noncontrolling interests on our consolidated balance sheet. The IPA's Practice Guideline 2013-01 provides for adjustments to the NAV for preferred securities, special interests and incentive fees based on the aggregate NAV of the company and payable to the sponsor in a hypothetical liquidation of the company as of the valuation date in accordance with the provisions of the partnership or advisory agreements and the terms of the preferred securities. Because certain distributions related to our SLP Units are only payable to their holder in a liquidation event, we believe they should be valued for our NAV in accordance with these provisions. 7 . . .
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