UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of | (I.R.S. Employer |
| (Address of Principal Executive Offices) | (Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
As of August 7, 2026, there were approximately
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data and where indicated in millions)
| June 30, 2026 | December 31, 2025 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Investment property: | ||||||||
| Land and improvements | $ | $ | ||||||
| Building and improvements | ||||||||
| Furniture and fixtures | ||||||||
| Construction in progress | ||||||||
| Gross investment property | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Net investment property | ||||||||
| Investments in unconsolidated affiliated real estate entities | ||||||||
| Cash and cash equivalents | ||||||||
| Marketable securities, available for sale | ||||||||
| Accounts receivable and other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity | ||||||||
| Accounts payable and other liabilities | $ | $ | ||||||
| Mortgages payable, net | ||||||||
| Due to related parties | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Equity: | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Noncontrolling interests | ||||||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Expenses: | ||||||||||||||||
| Property operating expenses | ||||||||||||||||
| Real estate taxes | ||||||||||||||||
| General and administrative costs | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Earnings from investments in unconsolidated affiliated real estate entities | ( | ) | ( | ) | ||||||||||||
| Interest expense and other income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income/(loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: net (income)/loss attributable to noncontrolling interests | ||||||||||||||||
| Net income/(loss) applicable to Company’s common shares | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income/(loss) per Company’s common share, basic and diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
| For the Three Months Ended June 30, | For
the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income/(loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Other comprehensive income: | ||||||||||||||||
| Holding gain on marketable securities, available for sale | ||||||||||||||||
| Comprehensive income/(loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: Comprehensive (income)/loss attributable to noncontrolling interests | ||||||||||||||||
| Comprehensive income/(loss) attributable to the Company’s common shares | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Amounts in thousands)
(Unaudited)
| Common | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | Total Noncontrolling | Total | |||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Interests | Equity | ||||||||||||||||||||||
| BALANCE, March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | |||||||||||||||||||||||
| Redemption and cancellation of shares | ( | ) | ( | ) | ( | ) | - | - | - | ( | ) | |||||||||||||||||
| BALANCE, June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Common | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | Total Noncontrolling | Total | |||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Interests | Equity | ||||||||||||||||||||||
| BALANCE, December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | |||||||||||||||||||||||
| Redemption and cancellation of shares | ( | ) | ( | ) | ( | ) | - | - | - | ( | ) | |||||||||||||||||
| BALANCE, June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Common | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | Total Noncontrolling | Total | |||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Interests | Equity | ||||||||||||||||||||||
| BALANCE, March 31, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Net income | - | - | - | - | - | |||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | |||||||||||||||||||||||
| Redemption and cancellation of shares | ( | ) | ( | ) | ( | ) | - | - | - | ( | ) | |||||||||||||||||
| BALANCE, June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Common | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | Total Noncontrolling | Total | |||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Interests | Equity | ||||||||||||||||||||||
| BALANCE, December 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | |||||||||||||||||||||||
| Redemption and cancellation of shares | ( | ) | ( | ) | ( | ) | - | - | - | ( | ) | |||||||||||||||||
| BALANCE, June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Loss from investments in unconsolidated affiliated real estate entities | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of deferred financing costs | ||||||||
| Other non-cash adjustments | ||||||||
| Changes in assets and liabilities: | ||||||||
| Increase in accounts receivable and other assets | ( | ) | ( | ) | ||||
| Increase in accounts payable and other accrued expenses | ||||||||
| Increase in due to related parties | ||||||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of investment property | ( | ) | ( | ) | ||||
| Purchase of marketable securities | ( | ) | ( | ) | ||||
| Distributions from unconsolidated affiliated real estate entities | ||||||||
| Investments in unconsolidated affiliated real estate entities | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments on mortgages payable | ( | ) | ( | ) | ||||
| Redemption and cancellation of common shares | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental cash flow information for the periods indicated is as follows: | ||||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
| 1. | Business and Structure |
Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”) is a Maryland corporation, formed on October 5, 2012, which elected to qualify as a real estate investment trust (“REIT”) for United States (the “U.S.”) federal income tax purposes beginning with the taxable year ended December 31, 2015.
Lightstone REIT III is structured as an umbrella
partnership REIT, or UPREIT, and substantially all of its current and future business will be conducted through Lightstone Value Plus
REIT III LP, a Delaware limited partnership (the “Operating Partnership”). As of June 30, 2026, Lightstone REIT III had a
Lightstone REIT III and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns in these consolidated financial statements refers to Lightstone REIT III, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through the Operating Partnership, the Company
owns, operates and develops commercial properties and makes real estate-related investments. Since its inception, the Company has primarily
acquired, developed and operated commercial hospitality properties, principally consisting of limited-service hotels and one full-service
hotel all located in the U.S. Although the Company has historically acquired hotels, it has and may continue to purchase other types of
real estate. Assets other than hotels may include, without limitation, office buildings, shopping centers, business and industrial parks,
manufacturing facilities, single-tenant properties, multifamily residential properties, student housing properties, warehouses and distribution
facilities and medical/life sciences office buildings. The Company’s real estate investments are held by it alone or jointly with
other parties. In addition, the Company may invest up to
As of June 30, 2026, the Company (i) wholly owned
and consolidated the operating results and financial condition of eight limited-service hotels containing a total of 872 rooms, (ii) held
an unconsolidated
The Hilton Garden Inn Joint Venture owns a 183-room,
limited-service hotel (the “Hilton Garden Inn – Long Island City”) located in the Long Island City neighborhood in the
Queens borough of New York City. The Hilton Garden Inn Joint Venture is between the Company and Lightstone Value Plus REIT II, Inc. (“Lightstone
REIT II”), a related party REIT, which is sponsored by The Lightstone Group LLC (the “Sponsor”). The Company and Lightstone
REIT II each have a
The Company’s advisor is Lightstone Value
Plus REIT III LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 16, 2014, the Advisor contributed
$
8
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
The Company has no employees. The Company is dependent on the Advisor and certain affiliates of the Sponsor for performing a full range of services that are essential to it, including asset management, property management (excluding its hospitality properties, which are managed by unrelated third-party property managers) and acquisition, disposition and financing activities, and other general administrative responsibilities, such as tax, accounting, legal, information technology and investor relations services. If the Advisor and its affiliates are unable to provide these services to the Company, it would be required to provide the services itself or obtain the services from another party or other parties.
The Company’s Common Shares are not currently listed on any national securities exchange. The Company may seek to list its Common Shares for trading on a national securities exchange only if a majority of its independent directors believe listing them would be in the best interest of its stockholders. However, the Company does not intend to list its Common Shares at this time. The Company does not anticipate that there would be any active market for its Common Shares until they are listed for trading.
Noncontrolling Interests – Partners of the Operating Partnership
Limited Partner
On July 16, 2014, the Advisor contributed
$
Special Limited Partner
In connection with the Company’s Offering,
the Special Limited Partner purchased from the Operating Partnership an aggregate of
As the indirect majority owner of the Special
Limited Partner, Mr. Lichtenstein is the beneficial owner of a
These Subordinated Participation Interests may entitle the Special Limited Partner to a portion of any regular distributions that the Company makes to its stockholders, but only after its stockholders have received a stated preferred return. However, since the Company’s inception there have been no distributions declared or paid on the Subordinated Participation Interests. Any future distributions on the Subordinated Participation Interests will always be subordinated until stockholders receive a stated preferred return.
The Subordinated Participation Interests may also entitle the Special Limited Partner to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net proceeds available for distribution upon the Company’s liquidation and, therefore, cannot be determined at the present time. Liquidating distributions to the Special Limited Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.
Related Parties
The Company’s Advisor and certain affiliates of the Sponsor, including the Special Limited Partner, are related parties of the Company as well as the other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, these entities are entitled to compensation and reimbursement for services and costs incurred for services related to the investment, development, management and disposition of the Company’s assets. The compensation is generally based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements as outlined in each of the respective agreements.
9
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
Current Environment
The Company’s operating results and financial condition are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, its business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, new and existing competition, inflation, the impact of tariffs and global trade disruptions, recessionary pressures, supply chain disruptions, wars and acts of war, geopolitical tensions, political upheaval or uncertainty, potential violence, civil unrest, criminal activity or terrorism, the availability and cost of comprehensive insurance coverage, the effects of climate change, environmental liabilities, natural and other disasters, security breaches and cybercrime, any disruptions in the financial markets that may adversely affect the availability or terms of financings, unfavorable changes in laws, ordinances and regulations, technological advances and challenges, such as the use and impact of artificial intelligence and machine learning, and loss of key relationships.
The Company’s overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation or tariffs, higher interest rates, labor and supply chain challenges, and other changes in economic conditions, could adversely affect the Company’s future results of operations and financial condition.
| 2. | Summary of Significant Accounting Policies |
Principles of Consolidation and Basis of Presentation
The consolidated
financial statements include the accounts of Lightstone REIT III and the Operating Partnership and its subsidiaries (over which
Lightstone REIT III exercises financial and operating control). As of June 30,
2026, Lightstone REIT III had a
The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Form 10-K”). The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT III, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and depreciable lives. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
The consolidated balance sheet as of December 31, 2025 included herein has been derived from the consolidated balance sheet included in the Company’s 2025 Form 10-K.
The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.
Income Taxes
The Company elected to be taxed and qualify as
a REIT commencing with the taxable year ended December 31, 2015. As a REIT, the Company generally will not be subject to U.S. federal
income tax on its net taxable income that it distributes currently to its stockholders. To maintain its REIT qualification under the Internal
Revenue Code of 1986, as amended, the Company must meet a number of organizational and operational requirements, including a requirement
that it annually distribute to its stockholders at least
10
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
To maintain its qualification as a REIT, the Company engages in certain activities through a taxable REIT subsidiary (“TRS”), including when it acquires a hotel, it usually establishes a new TRS and enters into an operating lease agreement for the hotel. As such, the Company is subject to U.S. federal and state income taxes and franchise taxes from these activities.
For the three and six months ended June 30, 2026 and 2025, there was no deferred income tax expense and de minimis current income tax expense. These amounts are included in “interest expense and other income, net” on the consolidated statements of operations.
Revenues
The following table represents the total revenues from hotel operations on a disaggregated basis:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| Revenues | 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Room revenue | $ | $ | $ | $ | ||||||||||||
| Food, beverage and other revenue | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
Concentration of Risk
As of June 30, 2026 and December 31, 2025, the Company had cash deposited in certain financial institutions in excess of U.S. federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents.
Reclassifications
Certain prior period amounts may have been reclassified to conform to the current year presentation.
Segment Disclosure
The Company’s operations are reported within one reportable segment and constitutes all of the consolidated entities which are reported in the consolidated financial statements. Through the Company’s Operating Partnership, it owns and operates commercial properties and makes other real estate-related investments, principally in the U.S.
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM assesses entity-wide operating results and performance and decides how to allocate resources based on consolidated net income/(loss) which is reported on the consolidated statements of operations. Additionally, the measure of segment assets is reported on the consolidated balance sheets as total assets.
The accounting policies for the reportable segment are the same as those described above. The CODM uses net income/(loss) to evaluate income generated from assets to assess performance and make decisions about allocating resources. The CODM also uses net income/(loss) to monitor the budget versus actual results, which is used in assessing the Company’s entity-wide operating results and performance.
The revenue, costs and expenses, and net income/(loss) for the reportable segment are the same as those presented on the consolidated statements of operations.
Significant expense categories, including property operating expenses, real estate taxes, general and administrative costs, depreciation and amortization and interest expense and other income, net, are included on the Company’s consolidated statements of operations.
11
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
New Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses.” ASU 2024-03 will require public business entities to provide more detailed information in the notes to their financial statements about the types of expenses included in commonly presented expense captions. ASU 2024-03 does not require any changes to the expense captions a public business entity presents on the face of its income statement. The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact adoption of ASU 2024-03 will have on its consolidated financial statements and related disclosures.
| 3. | Investments in Unconsolidated Affiliated Real Estate Entities |
The entities below are partially owned by the Company. The Company accounts for these investments under the equity method of accounting as the Company exercises significant influence, but does not exercise financial and operating control over these entities. A summary of the Company’s investments in unconsolidated affiliated real estate entities is as follows:
| As of | ||||||||||||||
| Entity | Date of Ownership | Ownership % | June 30, 2026 | December 31, 2025 | ||||||||||
| Hilton Garden Inn Joint Venture | % | $ | $ | |||||||||||
| Williamsburg Moxy Hotel Joint Venture | % | |||||||||||||
| Total investments in unconsolidated affiliated real estate entities | $ | $ | ||||||||||||
Hilton Garden Inn Joint Venture
On March 27, 2018, the Company and Lightstone
REIT II, a related party REIT also sponsored by the Company’s Sponsor, acquired, through the Hilton Garden Inn Joint Venture, the
Hilton Garden Inn – Long Island City from an unrelated third party, for aggregate consideration of $
On May 31, 2023,
The Company and Lightstone REIT II each have a
During the six months ended
June 30, 2026, the Company received distributions of $
As of June 30, 2026, the Hilton Garden Inn Joint Venture was in compliance with all of its financial debt covenants.
12
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
Hilton Garden Inn Joint Venture Financial Information
The following table represents the condensed statements of operations for the Hilton Garden Inn Joint Venture:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Property operating expenses | ||||||||||||||||
| General and administrative costs | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Operating income | ||||||||||||||||
| Interest expense and other, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income/(loss) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Company’s share of earnings (50%) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
The following table represents the condensed balance sheets for the Hilton Garden Inn Joint Venture:
| As of June 30, | As of December 31, | |||||||
| 2026 | 2025 | |||||||
| Investment property, net | $ | $ | ||||||
| Cash and restricted cash | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Mortgage payable, net | $ | $ | ||||||
| Other liabilities | ||||||||
| Members’ capital | ||||||||
| Total liabilities and members’ capital | $ | $ | ||||||
Williamsburg Moxy Hotel Joint Venture
On August 5, 2021, the Company formed a joint
venture with Lightstone REIT IV, a related party REIT also sponsored by the Company’s Sponsor, pursuant to which the Company acquired
As a result, the Company and Lightstone REIT IV
have
Fire Damage, Insurance Claim and Casualty Gain/Loss, Net
On December 11, 2024, the Williamsburg Moxy Hotel suffered substantial damage resulting from a fire to its food and beverage venue located in the outdoor garden area on the grounds of the property. As a result, the Williamsburg Moxy Hotel Joint Venture filed an insurance claim related to the physical damages incurred and the loss of business resulting from the closure of the affected food and beverage venue.
13
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
During the fourth quarter of 2024, the Williamsburg
Moxy Hotel Joint Venture recognized a net casualty loss of $
During the second quarter of 2026, the Williamsburg
Moxy Hotel Joint Venture and its insurance carriers finalized the insurance claim for the physical damages incurred and the loss of business
resulting from the closure of the affected food and beverage venue. In connection with the finalization of the insurance claim, the Williamsburg
Moxy Hotel Joint Venture received a final payment of $
Moxy Mortgage Loans
On April 19, 2024, the Williamsburg Moxy
Joint Venture entered into an $
The Moxy Mortgage Loans bear interest at
As of both June 30, 2026 and December 31, 2025,
the outstanding principal balance of the Moxy Mortgage Loans was $
In connection with the Moxy Mortgage Loans, the
Williamsburg Moxy Hotel Joint Venture paid $
The Moxy Mortgage Loans require the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum debt service coverage ratio (“DSCR”), which if not met, provide the senior lender with an option to retain any excess cash flow from the property until such time as the prescribed minimum DSCR is met for two consecutive calendar quarters. As of June 30, 2026, the Williamsburg Moxy Hotel Joint Venture was in compliance with all of the financial covenants under the Williamsburg Moxy Mortgage Loans.
Although the Moxy Mortgage Loans are scheduled to initially mature on April 19, 2027, the Williamsburg Moxy Hotel Joint Venture currently expects to refinance these loans on or before their initial maturity date. However, if the Williamsburg Moxy Hotel Joint Venture is unable to successfully refinance the Moxy Mortgage Loans at favorable terms on or before their initial maturity date, then the Joint Venture intends to exercise the first of the two available six-month extension options, subject to the satisfaction of certain conditions, which would extend the maturity of the Moxy Mortgage Loans to October 19, 2027.
14
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
Williamsburg Moxy Hotel Joint Venture Financial Information
The following table represents the condensed statements of operations for the Williamsburg Moxy Hotel Joint Venture:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Property operating expenses | ||||||||||||||||
| General and administrative costs | ||||||||||||||||
| Casualty (gain)/loss, net | ( | ) | ( | ) | ||||||||||||
| Business interruption insurance recovery | ( | ) | ( | ) | ||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Operating income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income/(loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Company’s share of net income/(loss) (25%) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Additional deprecation and amortization expense (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Company’s net income/(loss) from investment | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| (1) |
The following table represents the condensed balance sheets for the Williamsburg Moxy Hotel Joint Venture:
| |
|
As of June 30, 2026 |
|
|
As of December 31, 2025 |
|
||
| Investment property, net | $ | $ | ||||||
| Cash and restricted cash | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Mortgages payable, net | $ | $ | ||||||
| Other liabilities | ||||||||
| Members’ capital | ||||||||
| Total liabilities and members’ capital | $ | $ | ||||||
| 4. | Marketable Securities and Fair Value Measurements |
Marketable Securities
The following is a summary of the Company’s available for sale securities:
| As of June 30, 2026 | ||||||||||||||||
| Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Marketable Securities: | ||||||||||||||||
| Equity securities: | ||||||||||||||||
| Preferred Equity Securities | $ | $ | | $ | $ | |||||||||||
| Mutual Funds | ||||||||||||||||
| Debt securities: | ||||||||||||||||
| Corporate Bonds | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
15
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
| As of December 31, 2025 | ||||||||||||||||
| Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Marketable Securities: | ||||||||||||||||
| Equity securities: | ||||||||||||||||
| Preferred Equity Securities | $ | $ | $ | $ | ||||||||||||
| Mutual Funds | ||||||||||||||||
| Debt securities: | ||||||||||||||||
| Corporate Bonds | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
As of June 30, 2026, the Company has not recognized an allowance for expected credit losses related to its available-for-sale debt securities as the Company has not identified any unrealized losses for these investments attributable to credit factors. The Company’s unrealized loss on investments in corporate bonds was primarily caused by higher market interest rates. The Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities. |
| ● |
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● |
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The Company’s mutual funds were classified as Level 1 assets and the Company’s preferred equity securities and corporate bonds were classified as Level 2 assets.
The fair values of the Company’s investments in mutual funds are measured using quoted prices in active markets for identical assets and its preferred equity securities and corporate bonds are measured using readily available quoted prices for these securities; however, the markets for these securities are not active.
The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:
| As of June 30, 2026 | ||||
| Due in 1 year | $ | |||
| Due in 1 year through 5 years | ||||
| Due in 5 year through 10 years | ||||
| Due after 10 years | ||||
| Total | $ | |||
The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.
16
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
| 5. | Mortgages payable, net |
Mortgages payable, net consists of the following:
| Description | Interest Rate | Weighted Average Interest Rate for the Six Months Ended June 30, 2026 | Maturity Date | Amount Due at Maturity | As of June 30, 2026 | As of December 31, 2025 | ||||||||||||||
| Revolving Credit Facility | % | $ | $ | $ | ||||||||||||||||
| Home2 Suites Tukwila Loan | % | |||||||||||||||||||
| Home2 Suites Salt Lake City Loan | % | |||||||||||||||||||
| Total mortgages payable | % | $ | ||||||||||||||||||
| Less: Deferred financing costs | ( | ) | ( | ) | ||||||||||||||||
| Total mortgages payable, net | $ | $ | ||||||||||||||||||
SOFR as of June 30, 2026
and December 31, 2025 was
Credit Facility
On July 31, 2024, the Company entered into a nonrecourse
loan agreement with a financial institution providing for a credit facility (the “Credit Facility”) with a revolving feature
of up to $
As of June 30, 2026, the same six wholly owned and consolidated limited-service hotels remained pledged as collateral and no additional borrowings were available under the Credit Facility.
On July 21, 2026, the Company and the lender entered
into a loan modification agreement (the “Loan Modification Agreement”) to the Credit Facility. The Loan Modification Agreement
removed the revolving feature under the Credit Facility and also revised the required minimum DSCR and DYR levels as measured for the
calendar quarterly periods from June 30, 2026 and thereafter. In connection with the Loan Modification Agreement, the Company deposited
$
As of June 30, 2026, the Company did not meet the financial debt covenants under the Credit Facility but the lender has provided it with a waiver.
The Company currently expects the lender to approve the first of the two one-year extension options available under the Credit Facility which would extend its maturity date from July 31, 2027 to July 31, 2028. If the lender does not approve the first one-year extension option, the Company would seek to refinance the Credit Facility on or before its initial maturity date. However, there can be no assurance that the lender will approve the first one-year extension option or the Company will be able to successfully refinance the Credit Facility on or before its initial maturity date.
17
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
Home2 Suites Mortgage Financings
On December 6, 2021, the Company entered into
two cross-collateralized five-year non-recourse mortgage loan facilities (collectively, the “Home2 Suites Mortgage Financings”),
both with the same financial institution. The Home2 Suites Mortgage Financings consist of (i) a facility providing up to $
At closing, the Company received $
At closing, the Company received $
The Home2 Suites Mortgage Financings require the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum DSCR and DYR, which if not met may also be achieved through principal paydowns on the outstanding balance. As of June 30, 2026, the Company was in compliance with the financial debt covenants with respect to the Home2 Suites Mortgage Financings. The Company currently expects to extend the maturity or refinance the Home2 Suites Mortgage Financings on or before their maturity dates; however, there can be no assurances that it will be successful in such endeavors.
Principal Maturities
The following table, based on the initial terms of the mortgages, sets forth their aggregate estimated contractual principal maturities, including balloon payments due at maturity, as of June 30, 2026:
| 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | ||||||||||||||||||||||
| Principal maturities | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Less: Deferred financing costs | ( | ) | ||||||||||||||||||||||||||
| Total principal maturities, net | $ | |||||||||||||||||||||||||||
Certain of the Company’s debt agreements also contain clauses providing for prepayment penalties.
| 6. | Company’s Stockholders Equity |
SRP
The Company’s share repurchase program (the “SRP”), as amended from time to time by the Board of Directors, may provide eligible stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to the Company, subject to various restrictions.
The Company’s SRP currently provides for redemption requests to be submitted in connection with either a stockholder’s death or certain hardships and the price for all such purchases has been set at our estimated net asset value per Common Share (“NAV per Share”) as of the date of actual redemption. The Company’s estimated NAV per Share is determined by the Board of Directors and reported by it from time to time. 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 to be eligible for consideration.
18
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
Additionally, the Board of Directors has established
that on an annual basis the Company will not redeem in excess of
For the six months ended
June 30, 2026, the Company repurchased
Earnings per Share
Net earnings per Common Share on a basic and fully diluted basis is earnings divided by the weighted average number of Common Shares outstanding. The Company does not have any potentially dilutive securities.
| 7. | Related Party Transactions |
The Company’s Sponsor, Advisor and their
affiliates, including the Special Limited Partner, are related parties of the Company as well as other public REITs also sponsored and/or
advised by these entities. Pursuant to the terms of various agreements, certain of these entities are entitled to compensation and reimbursement
of costs incurred for services related to the investment, development, management and disposition of the Company’s assets. The compensation
is generally based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and
other such fees and expense reimbursements as outlined in each of the respective agreements. During the first quarter of 2024, the Advisor
agreed to allow the Company to temporarily defer the payment of asset management and finance fees. As of June 30, 2026 and December 31,
2025, $
The following table represents the fees incurred associated with the services provided by the Advisor:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Asset management fees (general and administrative costs) | $ | $ | $ | $ | ||||||||||||
The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and the Company’s independent directors. Payments to the Advisor or certain affiliates of the Sponsor may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse the Advisor and certain affiliates of the Sponsor for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the Company’s assets, it may pay the Advisor or certain affiliates of the Sponsor a disposition commission.
| 8. | Financial Instruments |
The carrying amounts of cash and cash equivalents, accounts receivable and other assets, accounts payable and other accrued expenses and due to related parties approximate their fair values because of the short maturity of these instruments.
The estimated fair value of the Company’s mortgages payable as of both June 30, 2026 and December 31, 2025 approximated their carrying values because they bear interest at floating rates.
19
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
(Unaudited)
| 9. | Commitments and Contingencies |
Management Agreements
The Company’s limited-service hotels operate
pursuant to management agreements (the “Management Agreements”) with various third-party management companies. The management
companies perform management functions including, but not limited to, hiring and supervising employees, establishing room prices, establishing
administrative policies and procedures, managing expenditures and arranging and supervising public relations and advertising. The
Management Agreements are for initial terms ranging from
The Management Agreements provide for the payment
of a base management fee equal to
Franchise Agreements
As of June 30,
2026, the Company’s limited-service hotels operated pursuant to various franchise agreements. Under the franchise agreements,
the Company generally pays a fee equal to
The franchise agreements are generally for initial
terms ranging from
As of June 30, 2026, the Company has received default notices for certain of its limited-service hotels with respect to the franchise agreements pursuant to which they operate. Although the Company is currently working on remediation plans to address these defaults, there can be no assurance that it will be able to successfully complete the necessary actions to cure these defaults in a timely basis.
Legal Proceedings
From time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.
As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss.
20
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Lightstone Value Plus REIT III, Inc. and Subsidiaries and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Lightstone Value Plus REIT III, Inc., a Maryland corporation, and, as required by context, Lightstone Value Plus REIT III, L.P., which we collectively refer to as the “Operating Partnership”. Dollar amounts are presented in thousands, except per share data, revenue per available room (“RevPAR”), average daily rate (“ADR”), annualized revenue per square foot and where indicated in millions.
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include discussion and analysis of the financial condition of Lightstone Value Plus REIT III, Inc. and our subsidiaries (which may be referred to herein as the “Company,” “we,” “us” or “our”), including our ability to make accretive real estate or real estate-related investments, to rent space on favorable terms, to address our debt maturities and to fund our liquidity requirements, to sell our assets when we believe advantageous to achieve our investment objectives, to fund our anticipated capital expenditures, to meet the amount and timing of anticipated future cash distributions to our stockholders, to grow the estimated net asset value per share of our common stock (“NAV per Share”), and other matters. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors described below:
| ● | market and economic challenges experienced by the United States (“U.S.”) and global economies or real estate industry as a whole and the local economic conditions in the markets in which our investments are located. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; such as inflation, tariffs, recession, political upheaval or uncertainty, terrorism and acts of war, natural and man-made disasters, cybercrime, and outbreaks of contagious diseases; | |
| ● | the availability of cash flow from operating activities for distributions, if required, to maintain our status as a real estate investment trust (“REIT”); | |
| ● | conflicts of interest arising out of our relationships with our advisor and its affiliates; | |
| ● | our ability to retain our executive officers and other key individuals who provide advisory and property management services to us; | |
| ● | our level of debt and the terms and limitations imposed on us by our debt agreements; | |
| ● | the availability of credit generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions and requirements of that debt; | |
| ● | our ability to make accretive investments; | |
| ● | our ability to diversify our portfolio of assets; | |
| ● | our ability to sell our assets at a price and on a timeline consistent with our investment objectives; | |
| ● | impairment charges; | |
| ● | our ability to maintain and/or upgrade our hotels pursuant to the requirements of their respective franchise agreements; | |
| ● | our ability to extend or replace expiring franchise agreements for our hotels; | |
| ● | unfavorable changes in laws or regulations impacting our business, our assets or our key relationships; and | |
| ● | factors that could affect our ability to qualify as a REIT. |
Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Quarterly Report on Form 10-Q, and may ultimately prove to be incorrect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.
21
Cautionary Note
The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Quarterly Report on Form 10-Q are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties. Moreover, these representations, warranties, or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.
Business and Structure
Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), is a Maryland corporation formed on October 5, 2012, which elected to qualify as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes beginning with the taxable year ending December 31, 2015.
Lightstone REIT III is structured as an umbrella partnership REIT (“UPREIT”), and substantially all of its current and future business is and will be conducted through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the “Operating Partnership”). As of June 30, 2026, Lightstone REIT III had a 99% general partnership interest in the Operating Partnership’s common units.
Lightstone REIT III and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns in this Quarterly Report on Form 10-K (the “Quarterly Report”) refers to Lightstone REIT III, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through the Operating Partnership, we own, operate and develop commercial hospitality properties and make real estate-related investments. Since our inception, we have primarily acquired, developed and operated commercial hospitality properties, principally consisting of limited-service hotels and one full-service hotel all located in the U.S. However, our commercial holdings may also to a lesser extent, consist of retail (primarily multi-tenanted shopping centers), industrial and office properties. Our real estate investments are held by us alone or jointly with other parties. In addition, we may invest up to 20% of our net assets in collateralized debt obligations, commercial mortgage-backed securities and mortgage and mezzanine loans secured, directly or indirectly, by the same types of properties which we may acquire directly. Although most of our investments are these types, we may invest in whatever types of real estate or real estate-related investments that we believe are in our best interests. We evaluate all of our real estate investments as one operating segment. We currently intend to hold our investments until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that the objectives will not be met.
As of June 30, 2026, we (i) wholly owned and consolidated the operating results and financial condition of eight limited-service hotels containing a total of 872 rooms, (ii) held an unconsolidated 50% membership interest in LVP LIC Hotel JV LLC (the “Hilton Garden Inn Joint Venture”), an affiliated real estate entity that owns and operates one limited-service hotel, and (iii) held an unconsolidated 25% membership interest in Bedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), an affiliated real estate entity that owns and operates one full-service hotel. We account for our unconsolidated membership interests in the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture under the equity method of accounting.
The Hilton Garden Inn Joint Venture owns a 183-room, limited-service hotel (the “Hilton Garden Inn – Long Island City”) located in the Long Island City neighborhood in the Queens borough of New York City. The Hilton Garden Inn Joint Venture is between us and Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a related party REIT, which is sponsored by The Lightstone Group LLC (the “Sponsor”). We and Lightstone REIT II each have a 50% membership interest in the Hilton Garden Inn Joint Venture. The Williamsburg Moxy Hotel Joint Venture developed, constructed and owns a 216-room Marriott branded hotel (the “Williamsburg Moxy Hotel”) located in the Williamsburg neighborhood in the Brooklyn borough of New York City, which opened on March 7, 2023. The Williamsburg Moxy Hotel Joint Venture is between us and Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), a related party REIT, which is sponsored by the Sponsor. We and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.
Our advisor is Lightstone Value Plus REIT III LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units (“Common Units”) in the Operating Partnership. Our Advisor also owns 20,000 shares of our common stock (“Common Shares”) which were issued on December 24, 2012 for $200, or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of the Sponsor, which served as our sponsor during our initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on December 11, 2014 for $2.0 million, or $9.00 per share. Pursuant to the terms of an advisory agreement and subject to the oversight of our board of directors (the “Board of Directors”), the Advisor has primary responsibility for making investment decisions on our behalf and managing our day-to-day operations. Through his ownership and control of the Sponsor, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP III LLC, a Delaware limited liability company (the “Special Limited Partner”), which owns 242 subordinated participation interests (“Subordinated Participation Interests”) in the Operating Partnership which were acquired at a cost of $50,000 per unit, or for aggregate consideration of $12.1 million in connection with our Offering. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone REIT III or the Operating Partnership.
22
We have no employees. We are dependent on the Advisor and certain affiliates of the Sponsor for services that are essential to us, including asset management, property management (excluding our hospitality properties, which are managed by unrelated third-party property managers) and acquisition, disposition, development and financing activities, and other general administrative responsibilities; such as tax, accounting, legal, information technology and investor relations services. If the Advisor and certain affiliates of the Sponsor are unable to provide these services to us, we would be required to provide the services ourselves or obtain the services from another party or other parties.
Our Common Shares are not currently listed on a national securities exchange. We may seek to list our Common Shares for trading on a national securities exchange only if a majority of our independent directors believe listing them would be in the best interest of our stockholders. However, we do not intend to list our Common Shares at this time. We do not anticipate that there would be any active market for our Common Shares until they are listed for trading.
Noncontrolling Interests – Partners of the Operating Partnership
Limited Partner
On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units. The Advisor has the right to convert its Common Units into cash or, at our option, an equal number of our Common Shares.
Special Limited Partner
In connection with our Offering, the Special Limited Partner purchased from the Operating Partnership an aggregate of 242 Subordinated Participation Interests for $50,000 per unit, or aggregate consideration of $12.1 million.
As the indirect majority owner of the Special Limited Partner, Mr. Lichtenstein is the beneficial owner of a 99% interest in such Subordinated Participation Interests and thus receives an indirect benefit from any distributions made in respect thereof.
These Subordinated Participation Interests may entitle the Special Limited Partner to a portion of any regular distributions that we make to our stockholders, but only after our stockholders have received a stated preferred return. However, since our inception there have been no distributions declared or paid on the Subordinated Participation Interests. Any future distributions on the Subordinated Participation Interests will always be subordinated until stockholders receive a stated preferred return.
The Subordinated Participation Interests may also entitle the Special Limited Partner to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net proceeds available for distribution upon our liquidation and, therefore, cannot be determined at the present time. Liquidating distributions to the Special Limited Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.
Related Parties
Our Advisor and certain affiliates of the Sponsor, including the Special Limited Partner, are related parties of ours as well as other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, certain of these entities are entitled to compensation and reimbursement of costs incurred for services related to the investment, development, management and disposition of our assets. The compensation is generally based on the cost of acquired properties/investments from such properties/investments and other such fees and expense reimbursements as outlined in each of the respective agreements.
Concentration of Credit Risk
As of June 30, 2026 and December 31, 2025, we had cash deposited in certain financial institutions in excess of U.S. federally insured levels. We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk for our cash and cash equivalents or restricted cash.
Current Environment
Our operating results and financial condition are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, new and existing competition, inflation, the impact of tariffs and global trade disruptions, recessionary pressures, supply chain disruptions, wars and acts of war, geopolitical tensions, political upheaval or uncertainty, potential violence, civil unrest, criminal activity or terrorism, the availability and cost of comprehensive insurance coverage, the effects of climate change, environmental liabilities, natural and other disasters, security breaches and cybercrime, any disruptions in the financial markets that may adversely affect the availability or terms of financings, unfavorable changes in laws, ordinances and regulations, technological advances and challenges, such as the use and impact of artificial intelligence and machine learning, and loss of key relationships.
23
Our overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation or tariffs, higher interest rates, labor and supply chain challenges, and other changes in economic conditions, could adversely affect our future results of operations and financial condition.
We are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred to above or throughout this Form 10-Q. The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”) requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period.
Portfolio Summary –
Wholly-Owned and Consolidated Properties:
| Hospitality
- Limited-Service Hotel |
|
Location |
|
Year Built |
|
|
Date Acquired |
|
Rooms |
|
|
Year to Date June 30, 2026 Available Rooms |
|
|
Percentage Occupied for the Six Months Ended June 30, 2026 |
|
|
RevPAR for the Six Months Ended June 30, 2026 |
|
|
ADR for the Six Months Ended June 30, 2026 |
|
||||||
| Hampton Inn – Des Moines | Des Moines, Iowa | 1987 | February 4, 2015 | 120 | 21,720 | 63 | % | $ | 70.71 | $ | 111.68 | |||||||||||||||||
| Courtyard - Durham | Durham, North Carolina | 1996 | May 15, 2015 | 146 | 26,426 | 65 | % | $ | 73.73 | $ | 113.10 | |||||||||||||||||
| Hampton Inn – Lansing | Lansing, Michigan | 2013 | March 10, 2016 | 86 | 15,566 | 67 | % | $ | 80.27 | $ | 120.65 | |||||||||||||||||
| Courtyard - Warwick | Warwick, Rhode Island | 2003 | March 23, 2016 | 92 | 16,652 | 62 | % | $ | 87.78 | $ | 141.78 | |||||||||||||||||
| Home2 Suites – Salt Lake | Salt Lake City, Utah | 2013 | August 2, 2016 | 125 | 22,625 | 77 | % | $ | 99.19 | $ | 128.94 | |||||||||||||||||
| Home2 Suites – Tukwila | Tukwila, Washington | 2015 | August 2, 2016 | 139 | 25,159 | 82 | % | $ | 126.58 | $ | 154.32 | |||||||||||||||||
| Fairfield Inn – Austin | Austin, Texas | 2014 | September 13, 2016 | 84 | 15,204 | 63 | % | $ | 55.26 | $ | 87.23 | |||||||||||||||||
| Staybridge Suites – Austin | Austin, Texas | 2009 | October 7, 2016 | 80 | 14,480 | 75 | % | $ | 71.37 | $ | 95.19 | |||||||||||||||||
| Total | 872 | 157,832 | 70 | % | $ | 85.52 | $ | 122.51 | ||||||||||||||||||||
Unconsolidated Affiliated Real Estate Entities:
| Hospitality |
|
Location |
|
Year Built |
|
|
Date Acquired |
|
Rooms |
|
|
Year to Date Available Rooms |
|
|
Percentage Occupied for the Six Months Ended June 30, 2026 |
|
|
RevPAR for the Six Months Ended June 30, 2026 |
|
|
ADR for the Six Months Ended June 30, 2026 |
|
||||||
| Limited-Service Hotel | ||||||||||||||||||||||||||||
| Hilton Garden Inn - Long Island City | Long Island City, New York | 2014 | March 27, 2018 | 183 | 33,123 | 87 | % | $ | 173.86 | $ | 199.77 | |||||||||||||||||
| Full-Service Hotel | ||||||||||||||||||||||||||||
| Williamsburg Moxy Hotel | Williamsburg, New York | 2023 | March 7, 2023 | 216 | 39,096 | 91 | % | $ | 238.24 | $ | 262.01 | |||||||||||||||||
The following information generally applies to our investments in our real estate properties:
| ● | we believe our real estate properties are adequately covered by insurance and suitable for their intended purpose; | |
| ● | our real estate properties are located in markets where we are subject to competition; and | |
| ● | depreciation is provided on a straight-line basis over the estimated useful life of the applicable improvements. |
Critical Accounting Policies and Estimates
There were no material changes during the six months ended June 30, 2026 to our critical accounting policies as reported in our Annual Report on Form 10-K, for the year ended December 31, 2025.
24
Results of Operations
Comparison of the three months ended June 30, 2026 vs. June 30, 2025
Consolidated
Our consolidated revenues, property operating expenses, real estate taxes, general and administrative expense and depreciation and amortization for the three months ended June 30, 2026 and 2025 are attributable to our consolidated hospitality properties, all eight of which were owned by us during both of the periods presented.
During the three months ended June 30, 2026 compared to same period in 2025, our consolidated hospitality portfolio experienced increases in the percentage of rooms occupied to 75% from 74% and RevPAR to $97.66 from $97.09 and a decrease in ADR to $130.64 from $131.09.
Revenues
Revenues increased by $0.2 million to $8.1 million during the three months ended June 30, 2026 compared to $7.9 million for the same period in 2025. The increase in revenues during the 2026 period was primarily the result of the increase in occupancy partially offset by the decrease in ADR.
Property operating expenses
Property operating expenses increased by $0.2 million to $5.5 million during the three months ended June 30, 2026 compared to $5.3 million for the same period in 2025.
Real estate taxes
Real estate taxes were relatively unchanged at $0.3 million during both the three months ended June 30, 2026 and 2025.
General and administrative expense
General and administrative expenses increased slightly by $0.1 million to $0.8 million during the three months ended June 30, 2026 compared to $0.7 million for the same period in 2025.
Depreciation and amortization
Depreciation and amortization expense was relatively unchanged at $0.8 million during both the three months ended June 30, 2026 and 2025.
Interest expense and other income, net
Interest expense and other income, net decreased slightly by $0.1 million to $1.1 million during the three months ended June 30, 2026 compared to $1.2 million for the same period in 2025. Interest expense is attributable to the financings associated with our hotels and reflects changes in the weighted average principal outstanding and the market interest rates on our mortgage debt, all of which bear interest at variable rates.
Earnings from investments in unconsolidated affiliated real estate entities
Our earnings from investments in unconsolidated affiliated real estate entities are attributable to our unconsolidated 50% membership interest in the Hilton Garden Inn Joint Venture and our unconsolidated 25% membership interest in the Williamsburg Moxy Hotel Joint Venture. Our income from investments in unconsolidated affiliated entities was $0.5 million and $6 during the three months ended June 30, 2026 and 2025, respectively.
Comparison of the six months ended June 30, 2026 vs. June 30, 2025
Consolidated
Our consolidated revenues, property operating expenses, real estate taxes, general and administrative expense and depreciation and amortization for the six months ended June 30, 2026 and 2025 are attributable to our consolidated hospitality properties, all eight of which were owned by us during both of the periods presented.
25
During the six months ended June 30, 2026 compared to same period in 2025, our consolidated hospitality portfolio experienced decreases in RevPAR to $85.52 from $86.25 and ADR to $122.51 from $122.61while the percentage of rooms occupied was unchanged at 70%.
Revenues
Revenues decreased slightly by $0.1 million to $14.0 million during the six months ended June 30, 2026 compared to $14.1 million for the same period in 2025. The decrease in revenues during the 2026 period was primarily the result of the decrease in ADR.
Property operating expenses
Property operating expenses increased by $0.4 million to $10.6 million during the six months ended June 30, 2026 compared to $10.2 million for the same period in 2025.
Real estate taxes
Real estate taxes decreased slightly by $0.1 million to $0.6 million during the six months ended June 30, 2026 compared to $0.7 million for the same period in 2025.
General and administrative expense
General and administrative expenses increased slightly by $0.1 million to $1.6 million during the six months ended June 30, 2026 compared to $1.5 million for the same period in 2025.
Depreciation and amortization
Depreciation and amortization expense was relatively unchanged at $1.6 million during both the six months ended June 30, 2026 and 2025.
Interest expense and other income, net
Interest expense and other income, net decreased by $0.2 million to $2.1 million during the six months ended June 30, 2026 compared to $2.3 million for the same period in 2025. Interest expense is attributable to the financings associated with our hotels and reflects changes in the weighted average principal outstanding and the market interest rates on our mortgage debt, all of which bear interest at variable rates.
Earnings from investments in unconsolidated affiliated real estate entities
Our earnings from investments in unconsolidated affiliated real estate entities are attributable to our unconsolidated 50% membership interest in the Hilton Garden Inn Joint Venture and our unconsolidated 25% membership interest in the Williamsburg Moxy Hotel Joint Venture. Our loss from investments in unconsolidated affiliated real estate entities was $0.4 million and $1.3 million during the six months ended June 30, 2026 and 2025, respectively.
Financial Condition, Liquidity and Capital Resources
Overview
As of June 30, 2026, we had $3.8 million of cash on hand and $6.2 million of marketable securities. We currently believe that these items along with revenues generated from our properties, interest and dividend income earned on our marketable securities and distributions received from our unconsolidated affiliated real estate entities, if any, will be sufficient to satisfy our expected cash requirements for at least 12 months from the date of filing this Quarterly Report on Form 10-Q, which primarily consist of our anticipated operating expenses (excluding the temporarily deferred payment of asset management fees and financing fees payable to our Advisor), scheduled debt service including our current expectations that we will successfully extend or refinance the Home2 Suites Mortgage Financings on or before their scheduled maturity (see “Home2 Suites Mortgage Financings”) and that the lender will approve the first of the two, one-year extension options available under the Credit Facility which would extend its maturity date from July 31, 2027 to July 31, 2028 or if the lender does not approve the first one-year extension option, we would seek to refinance the Credit Facility on or before its initial maturity date (see “Credit Facility”), capital expenditures (excluding non-recurring capital expenditures), capital contributions to our unconsolidated affiliated real estate entities, if any, redemptions and cancellations of Common Shares, if approved, and distributions to our shareholders, if any, required to maintain our status as a REIT for the foreseeable future. However, we may also obtain additional funds, if necessary, through selective asset dispositions, joint venture arrangements, new borrowings and refinancing of existing borrowings.
26
As of June 30, 2026, we had mortgage indebtedness totaling $56.6 million which represented 59% of our net assets. We have and intend to continue to limit our aggregate long-term permanent borrowings to 75% of the aggregate fair market value of all properties unless any excess borrowing is approved by a majority of the independent directors and is disclosed to our stockholders. Market conditions will dictate our overall leverage limit; as such our aggregate long-term permanent borrowings may be less than 75% of aggregate fair market value of all properties. We may also incur short-term indebtedness, having a maturity of two years or less.
Our charter provides that the aggregate amount of our borrowing, both secured and unsecured, may not exceed 300% of net assets in the absence of a justification showing that a higher level is appropriate, the approval of our Board of Directors and disclosure to stockholders. Net assets mean our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders, along with justification for such excess. Market conditions will dictate our overall leverage limit; as such our aggregate borrowings may be less than 300% of net assets.
Any future properties that we may acquire or develop may be funded through a combination of borrowings and the proceeds received from the disposition of certain of our assets. These borrowing may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not exclusively, we intend to seek to encumber our properties with non-recourse debt. This means that a lender’s rights on default will generally be limited to foreclosing on the property. However, we may, at our discretion, secure recourse financing or provide a guarantee to lenders if we believe this may result in more favorable terms. When we give a guaranty for a property-owning entity, we will be responsible to the lender for the satisfaction of the indebtedness if it is not paid by the property-owning entity.
We may also obtain lines of credit to be used to acquire properties. If obtained, these lines of credit will be at prevailing market terms and will be repaid from proceeds from the sale or refinancing of properties, working capital and/or permanent financing. Our Sponsor and/or its affiliates may guarantee our lines of credit although they are not obligated to do so. We expect that such properties may be purchased by our Sponsor’s affiliates on our behalf, in our name, in order to minimize the imposition of a transfer tax upon a transfer of such properties to us.
We have an advisory agreement with the Advisor and various agreements with certain affiliates of our Sponsor which provide for us to pay certain fees in exchange for services performed by them on our behalf. Additionally, our ability to secure financing and our real estate operations are dependent upon our Advisor and certain affiliates of our Sponsor to perform such services as specified in these agreements.
In addition to meeting working capital needs and making distributions, if any, to maintain our status as a REIT, our capital resources may also be used to make various payments to our Advisor and certain affiliates of the Sponsor, such as payments of fees related to asset acquisition, development and leasing commissions, asset management fees, and property management (excluding our hospitality properties, each of which is managed by an unrelated third party property manager), as well as the reimbursement of acquisition related expenses and actual expenses it incurred for administrative and other services provided to us. Additionally, in the event of a liquidation of our assets, we may pay our Advisor or certain affiliates of our Sponsor, disposition fees. Furthermore, the Operating Partnership may be required to make distributions to the Special Limited Partner provided stockholders receive a distribution equal to their initial investment plus a stated preferred return. During the first quarter of 2024, the Advisor agreed to allow us to temporarily defer the payment of asset management and finance fees. As of June 30, 2026 and December 31, 2025, the Advisor agreed to defer $4.2 million and $3.5 million of asset management and finance fees, respectively, which is included in due to related parties on the consolidated balance sheets.
The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and our independent directors.
The following table represents the fees incurred associated with the services provided by the Advisor:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Asset management fees (general and administrative costs) | $ | 369 | $ | 366 | $ | 737 | $ | 732 | ||||||||
27
Summary of Cash Flows
The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below:
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash provided by operating activities | $ | 41 | $ | 504 | ||||
| Net cash used in investing activities | (57 | ) | (508 | ) | ||||
| Net cash used in financing activities | (907 | ) | (889 | ) | ||||
| Change in cash and cash equivalents | (923 | ) | (893 | ) | ||||
| Cash and cash equivalents, beginning of year | 4,772 | 6,175 | ||||||
| Cash and cash equivalents, end of the period | $ | 3,849 | $ | 5,282 | ||||
Operating activities
The net cash provided by operating activities of $41 during the six months ended June 30, 2026 consisted of our net loss of $2.9 million which was offset by the changes in our operating assets and liabilities of $0.7 million, depreciation and amortization, and our loss from investments in unconsolidated affiliated real estate entities and other non-cash items aggregating $2.2 million.
Investing activities
The net cash used in investing activities of $57 during the six months ended June 30, 2026 consisted of distributions from the Hilton Garden Inn Joint Venture of $0.5 million offset by purchases of investment property $0.3 million, purchases of marketable securities of $0.1 million and contributions to the Hilton Garden Inn Joint Venture of $0.1 million.
Financing activities
The cash used in financing activities of $0.9 million during the six months ended June 30, 2026 consisted of debt principal payments of $0.2 million and redemptions of Common Shares of $0.7 million.
Credit Facility
On July 31, 2024, we entered into a nonrecourse loan agreement with a financial institution providing for a credit facility (the “Credit Facility”) with a revolving feature of up to $40.0 million. At closing, we received an initial advance of $30.8 million under the Credit Facility and designated six of its wholly owned and consolidated limited-service hotels as collateral. The Credit Facility bears interest at SOFR plus 3.30%, subject to a 6.64% floor, with an initial scheduled maturity of July 31, 2027, subject to two, one-year extension options at the sole discretion of the lender, and provides for monthly interest-only payments during its initial term with monthly principal and interest payments pursuant to a 25-year amortization schedule thereafter during any lender approved extended term with the unpaid principal balance due at the initial maturity. The Credit Facility previously provided for borrowings up to 65% of the loan-to-value ratio of properties designated as collateral and also requires the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum DSCR and debt yield ratio (“DYR”), which if not met may also be achieved through principal paydowns on the outstanding balance.
As of June 30, 2026, the same six wholly owned and consolidated limited-service hotels remained pledged as collateral and no additional borrowings were available under the Credit Facility.
On July 21, 2026, we and the lender entered into a loan modification agreement (the “Loan Modification Agreement”) to the Credit Facility. The Loan Modification Agreement removed the revolving feature under the Credit Facility and also revised the required minimum DSCR and DYR levels as measured for the calendar quarterly periods from June 30, 2026 and thereafter. In connection with the Loan Modification Agreement, we deposited $2.5 million into a cash collateral account held by the lender as additional security for the Credit Facility. Additionally, the Loan Modification Agreement requires us to either complete the sale of certain hotel properties pledged as collateral prior to September 30, 2026, or deposit an additional $5.2 million into the cash collateral account or provide a letter of credit to the lender in a like amount.
As of June 30, 2026, we did not meet the financial debt covenants under the Credit Facility but the lender has provided it with a waiver.
We currently expect the lender to approve the first of the two one-year extension options available under the Credit Facility which would extend its maturity date from July 31, 2027 to July 31, 2028. If the lender does not approve the first one-year extension option, we would seek to refinance the Credit Facility on or before its initial maturity date. However, there can be no assurance that the lender will approve the first one-year extension option or we will be able to successfully refinance the Credit Facility on or before its initial maturity date.
Home2 Suites Mortgage Financings
On December 6, 2021 we entered into two cross-collateralized five-year non-recourse mortgage loan facilities (collectively, the “Home2 Suites Mortgage Financings”), both with the same financial institution. The Home2 Suites Mortgage Financings consist of (i) a facility providing up to $19.1 million (the “Home2 Suites – Tukwila Loan”) collateralized by our wholly owned and consolidated 139-room limited-service hotel located in Tukwila, Washington (the “Home2 Suites – Tukwila”) and (ii) a facility providing up to $12.5 million (the “Home2 Suites – Salt Lake City Loan”) collateralized by our wholly owned and consolidated 125-room limited-service hotel located in Salt Lake City, Utah (the “Home2 Suites – Salt Lake City”). The Home2 Suites Mortgage Financings bear interest at a rate of AMERIBOR plus 3.50%, with a floor of 3.75%.
28
At closing, we received $16.2 million under the Home2 Suites – Tukwila Loan and the remaining unfunded amount of $2.9 million may be only be drawn subject to the satisfaction of certain conditions. The Home2 Suites – Tukwila Loan requires monthly payments of principal and interest of $0.1 million with the unpaid principal balance due at maturity on December 6, 2026. As of June 30, 2026, the outstanding principal balance of the Home2 Suites – Tukwila Loan was $15.6 million.
At closing, we received $10.4 million under the Home2 Suites – Salt Lake City Loan and the remaining unfunded amount of $2.0 million may only be drawn subject to satisfaction of certain conditions. The Home2 Suites – Salt Lake City Loan requires monthly payments of principal and interest of $0.1 million with the outstanding unpaid principal balance due at maturity on December 6, 2026. As of June 30, 2026, the outstanding principal balance of the Home2 Suites – Salt Lake City Loan was $10.1 million.
The Home2 Suites Mortgage Financings require the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum DSCR and DYR, which if not met may also be achieved through principal paydowns on the outstanding balance. As of June 30, 2026, we were in compliance with the financial debt covenants with respect to the Home2 Suites Mortgage Financings. We expect to extend the maturity or refinance the Home2 Suites Mortgage Financings on or before their maturity date; however, there can be no assurances that we will be successful in such endeavors.
Contractual Mortgage Obligations
The following is a summary of the estimated contractual obligations related to our mortgage payable over the next five years and thereafter as of June 30, 2026.
| Contractual Mortgage Obligations | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | |||||||||||||||||||||
| Principal maturities | $ | 25,724 | $ | 30,844 | $ | $ | - | $ | - | $ | - | $ | 56,568 | |||||||||||||||
| Interest payments(1) | 2,181 | 1,268 | - | - | - | 3,449 | ||||||||||||||||||||||
| Total Contractual Mortgage Obligations | $ | 27,905 | $ | 32,112 | $ | - | $ | - | $ | - | $ | - | $ | 60,017 | ||||||||||||||
| (1) | These amounts represent future interest payments related to mortgage payable obligations based on the interest rate specified in the associated debt agreement. Our mortgage debt outstanding as of June 30, 2026 bears interest based either on one-month AMERIBOR or one-month SOFR plus a specified spread, subject to a floor. For purposes of calculating future interest amounts on our variable interest rate debt, the one-month SOFR and the one-month AMERIBOR rates as of June 30, 2026 were used. |
Certain of our debt agreements also contain clauses providing for prepayment penalties.
SRP
Our SRP, as amended from time to time by our board of directors, may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to us, subject to various restrictions.
Our SRP currently provides for redemption requests to be submitted in connection with either a stockholder’s death or certain hardships and the price for all such purchases has been set at our estimated NAV per Share as of the date of actual redemption. Our estimated NAV per Share is determined by our Board of Directors and reported by us from time to time. 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 to be eligible for consideration.
Additionally, our Board of Directors has established that on an annual basis we will not redeem in excess of 0.5% of the number of Common Shares outstanding as of the end of the preceding year for both death redemptions and hardship redemptions. Additionally, eligible redemption requests have been and are generally expected to be processed on a quarterly basis and will be subject to proration if either type of redemption requests exceeds the annual limitations (subject to a quarterly factor) as established by our Board of Directors. Furthermore, our Board of Directors may, at their sole discretion, amend or suspend the SRP at any time without any notice to stockholders.
For the six months ended June 30, 2026, we repurchased 63,737 Common Shares at a weighted average price of $10.35. For the six months ended June 30, 2025, we repurchased 64,305 Common Shares at a weighted average price of $10.20.
29
Investments in Unconsolidated Affiliated Entities
Hilton Garden Inn Joint Venture
On March 27, 2018, we and Lightstone REIT II, a related party REIT also sponsored by our Sponsor, acquired, through the Hilton Garden Inn Joint Venture, the Hilton Garden Inn – Long Island City from an unrelated third party, for aggregate consideration of $60.0 million, which consisted of $25.0 million of cash and $35.0 million of proceeds from a five-year term non-recourse mortgage loan from a financial institution (the “Hilton Garden Inn Mortgage”), excluding closing and other related transaction costs. We paid $12.9 million for a 50% membership interest in the Hilton Garden Inn Joint Venture.
On May 31, 2023, the Hilton Garden Inn Mortgage was amended to provide for (i) an extension of the maturity date for an additional five years, (ii) the interest rate to be adjusted to SOFR plus 3.25%, subject to a 6.41% floor, (iii) interest-only payments for the first two years of its extended term with principal and interest payments pursuant to a 300-month amortization schedule thereafter and the remaining unpaid balance due in full at its maturity date of May 31, 2028, (iv) the ability to draw up to an additional $3.0 million of principal, subject to the satisfaction of certain conditions, and (v) certain changes to its financial covenants. Additionally, the Hilton Garden Inn Joint Venture funded $1.3 million, through monthly payments of $37 from May 31, 2023 through June 1, 2026, into a cash collateral reserve account which may be drawn upon for specified capital expenditures.
We and Lightstone REIT II each have a 50% co-managing membership interest in the Hilton Garden Inn Joint Venture. We account for our membership interest in the Hilton Garden Inn Joint Venture in accordance with the equity method of accounting because we exert significant influence over but do not control the Hilton Garden Inn Joint Venture. All capital contributions and distributions of earnings from the Hilton Garden Inn Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage pursuant to the terms of the Hilton Garden Inn Joint Venture’s operating agreement.
As of June 30, 2026, the Hilton Garden Inn Joint Venture was in compliance with all of its financial debt covenants.
During the six months ended June 30, 2026, we received distributions of $0.5 million from the Hilton Garden Joint Venture. During the six months ended June 30, 2026 and 2025, we made contributions of $0.1 million and $0.2 million, respectively, to the Hilton Garden Joint Venture.
Williamsburg Moxy Hotel Joint Venture
On August 5, 2021, we formed a joint venture with Lightstone REIT IV, a related party REIT also sponsored by the Sponsor, pursuant to which we acquired 25% of Lightstone REIT IV’s membership interest in the Bedford Avenue Holdings LLC, which effective on that date became the Williamsburg Moxy Hotel Joint Venture, for aggregate consideration of $7.9 million. In July 2019, Lightstone REIT IV, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC, previously acquired four adjacent parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood in the Brooklyn borough of New York City, from unrelated third parties, for the development of the Williamsburg Moxy Hotel.
As a result, we and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. We have determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and we are not the primary beneficiary, as it was determined that Lightstone REIT IV is the primary beneficiary. Therefore, we account for our membership interest in the Williamsburg Moxy Hotel Joint Venture in accordance with the equity method because we exert significant influence over but do not control the Williamsburg Moxy Hotel Joint Venture. Earnings, capital contributions and distributions are allocated in accordance with each investor’s ownership percentage.
The Williamsburg Moxy Hotel Joint Venture owns the Williamsburg Moxy Hotel which it developed, constructed and opened on March 7, 2023.
Fire Damage, Insurance Claim and Casualty Gain/Loss, Net
On December 11, 2024, the Williamsburg Moxy Hotel suffered substantial damage resulting from a fire to its food and beverage venue located in the outdoor garden area on the grounds of the property. As a result, the Williamsburg Moxy Hotel Joint Venture filed an insurance claim related to the physical damages incurred and the loss of business resulting from the closure of the affected food and beverage venue.
During the fourth quarter of 2024, the Williamsburg Moxy Hotel Joint Venture recognized a net casualty loss of $0.5 million representing the write-off of the carrying value of the physically damaged assets of $0.8 million plus remediation costs of $0.2 million, partially offset by an agreed upon initial advance from its insurance carriers of $0.5 million (which was subsequently received during the first quarter of 2025). Thereafter, the Williamsburg Joint Venture recognized a casualty loss of $0.1 million during the first quarter of 2025 related to additional remediation costs and a casualty gain, net of $0.6 million during the third quarter of 2025 related to an agreement with its insurance carriers to fund an additional advance of $1.0 million (which was subsequently received in the fourth quarter of 2025) partially offset by additional remediation costs of $0.4 million. As a result, during the year ended December 31, 2025, the Williamsburg Moxy Hotel Joint Venture recognized a casualty gain, net of $0.5 million. Furthermore, during the third quarter of 2025 the affected food and beverage venue became fully renovated and reopened for business.
30
During the second quarter of 2026, the Williamsburg Moxy Hotel Joint Venture and its insurance carriers finalized the insurance claim for the physical damages incurred and the loss of business resulting from the closure of the affected food and beverage venue. In connection with the finalization of the insurance claim, the Williamsburg Moxy Hotel Joint Venture received a final payment of $0.6 million for physical damages incurred from its insurance carriers during the second quarter of 2026 and recognized a casualty gain in that amount and the insurance carriers agreed to make a payment of $1.0 million (which was subsequently received in July 2026) for the loss of business, which the Williamsburg Moxy Joint Venture recorded as business interruption insurance recovery during the second quarter of 2026.
Moxy Mortgage Loans
On April 19, 2024, the Williamsburg Moxy Joint Venture entered into an $86.0 million senior mortgage loan facility (the “Moxy Senior Loan”) and a $9.0 million junior mortgage loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Mortgage Loans”) with unrelated third parties.
The Moxy Mortgage Loans bear interest at SOFR plus 5.10%, subject to an 8.75% floor (8.75% and 8.89% as of June 30, 2026 and December 31, 2025, respectively). The Moxy Mortgage Loans initially mature on April 19, 2027, but may be further extended through the exercise of two six-month extension options, subject to the satisfaction of certain conditions. The Moxy Mortgage Loans require monthly interest-only payments with their outstanding principal due in full at maturity and are collateralized by the Williamsburg Moxy Hotel, however, the Moxy Junior Loan is subordinate to the Moxy Senior Loan. The Williamsburg Moxy Hotel Joint Venture used $85.8 million of the proceeds from the Moxy Mortgage Loans in connection with the payoff of all obligations due under a construction loan previously used in connection with the funding of the development of the Williamsburg Moxy Hotel.
As of both June 30, 2026 and December 31, 2025, the outstanding principal balance of the Moxy Mortgage Loans was $95.0 million.
In connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture paid $2.8 million of loan fees and expenses and accrued $0.5 million of loan exit fees.
The Moxy Mortgage Loans require the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum debt service coverage ratio (“DSCR”), which if not met, provide the senior lender with an option to retain any excess cash flow from the property until such time as the prescribed minimum DSCR is met for two consecutive calendar quarters. As of June 30, 2026, the Williamsburg Moxy Hotel Joint Venture was in compliance with all of the financial covenants under the Williamsburg Moxy Mortgage Loans.
Although the Moxy Mortgage Loans are scheduled to initially mature on April 19, 2027, the Williamsburg Moxy Hotel Joint Venture currently expects to refinance these loans on or before their initial maturity date. However, if the Williamsburg Moxy Hotel Joint Venture is unable to successfully refinance the Moxy Mortgage Loans at favorable terms on or before their initial maturity date, then the Joint Venture intends to exercise the first of the two available six-month extension options, subject to the satisfaction of certain conditions, which would extend the maturity of the Moxy Mortgage Loans to October 19, 2027.
Funds from Operations and Modified Funds from Operations
We believe that the historical cost accounting convention used for real estate assets in accordance with GAAP implicitly assumes that the value of a real estate asset diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe the presentation of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be insufficient by themselves.
The National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has published a standardized non-GAAP measure of performance known as funds from operations (“FFO”), which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. However, FFO is not equivalent to our net income or loss as determined under GAAP.
We calculate FFO in accordance with the current NAREIT definition. FFO represents net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, income taxes attributable to gains from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
31
Our computation of FFO may not be comparable to other REITs that do not compute FFO in accordance with the current NAREIT definition. We believe that the use of FFO provides a more complete understanding of our performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
Changes in the accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, the Investment Program Association (the “IPA”), another industry trade group, published a standardized non-GAAP measure of performance known as modified funds from operations (“MFFO”), which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs.
MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as another supplemental measure of operating performance because we believe that it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income or loss. However, MFFO is also not equivalent to our net income or loss as determined under GAAP.
We compute MFFO in accordance with the definition included in Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010 as interpreted by management. The Practice Guideline defines MFFO as FFO further adjusted for acquisition and transaction-related fees and expenses and other items.
We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring properties and once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.
Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income or loss or income or loss from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions, if any, to our stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. FFO and MFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or loss or in its applicability in evaluating our operating performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.
Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate our FFO or MFFO. In the future, NAREIT, the IPA or another industry trade group may publish updates to the current definitions of FFO and MFFO or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry, and we may have to adjust our calculations and characterizations of FFO or MFFO accordingly.
32
Our calculations of FFO and MFFO are presented below. Items are presented net of non-controlling interest portions where applicable.
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income/(loss) | $ | 82 | $ | (324 | ) | $ | (2,886 | ) | $ | (3,362 | ) | |||||
| FFO adjustments: | ||||||||||||||||
| Depreciation and amortization of real estate assets | 790 | 795 | 1,581 | 1,625 | ||||||||||||
| Adjustments to equity earnings from unconsolidated affiliated real estate entities | 335 | 465 | 821 | 1,031 | ||||||||||||
| FFO | 1,207 | 936 | (484 | ) | (706 | ) | ||||||||||
| MFFO adjustments: | ||||||||||||||||
| Mark-to-market adjustments (1) | - | - | - | 2 | ||||||||||||
| Unrealized (gain)/loss on sale of marketable equity securities (1) | 3 | (11 | ) | 11 | (8 | ) | ||||||||||
| MFFO - IPA recommended format | $ | 1,210 | $ | 925 | $ | (473 | ) | $ | (712 | ) | ||||||
| Net income/(loss) | $ | 82 | $ | (324 | ) | $ | (2,886 | ) | $ | (3,362 | ) | |||||
| Less: net (income)/loss attributable to noncontrolling interests | - | - | - | - | ||||||||||||
| Net income/(loss) applicable to Company’s common shares | $ | 82 | $ | (324 | ) | $ | (2,886 | ) | $ | (3,362 | ) | |||||
| Net income/(loss) per common share, basic and diluted | $ | 0.01 | $ | (0.03 | ) | $ | (0.23 | ) | $ | (0.26 | ) | |||||
| FFO | $ | 1,207 | $ | 936 | $ | (484 | ) | $ | (706 | ) | ||||||
| Less: FFO attributable to noncontrolling interests | - | - | - | - | ||||||||||||
| FFO attributable to Company’s common shares | $ | 1,207 | $ | 936 | $ | (484 | ) | $ | (706 | ) | ||||||
| FFO per common share, basic and diluted | $ | 0.09 | $ | 0.07 | $ | (0.04 | ) | $ | (0.06 | ) | ||||||
| MFFO - IPA recommended format | $ | 1,210 | $ | 925 | $ | (473 | ) | $ | (712 | ) | ||||||
| Less: MFFO attributable to noncontrolling interests | - | - | - | - | ||||||||||||
| MFFO attributable to Company’s common shares | $ | 1,210 | $ | 925 | $ | (473 | ) | $ | (712 | ) | ||||||
| Weighted average number of common shares outstanding, basic and diluted | 12,757 | 12,776 | 12,742 | 12,792 | ||||||||||||
| (1) | Management believes that adjusting for gains or losses related to extinguishment/sale of debt, derivatives or securities holdings is appropriate because they are items that may not be reflective of ongoing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods. |
| (2) | Management believes that adjusting for mark-to-market adjustments is appropriate because they are nonrecurring items that may not be reflective of ongoing operations and reflects unrealized impacts on value based only on then current market conditions, although they may be based upon current operational issues related to an individual property or industry or general market conditions. Mark-to-market adjustments are made for items such as ineffective derivative instruments, certain marketable securities and any other items that GAAP requires we make a mark-to-market adjustment for. The need to reflect mark-to-market adjustments is a continuous process and is analyzed on a quarterly and/or annual basis in accordance with GAAP. |
The table below presents our cumulative distributions paid and FFO attributable to our common shares:
| For the period October 5, 2012 | ||||
| (date of inception) through | ||||
| June 30, 2026 | ||||
| FFO attributable to Company’s common shares | $ | 20,494 | ||
| Distributions paid | $ | 29,764 | ||
ITEM 4. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, management, including our chief executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of the evaluation, our chief executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no significant deficiencies or material weaknesses identified in the evaluation, and therefore, no corrective actions were taken.
33
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS.
From time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.
As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
During the period covered by this Form 10-Q, the Company did not sell any unregistered securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
| * | Filed herewith |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIGHTSTONE VALUE PLUS REIT III, INC. | ||
| Date: August 14, 2026 | By: | /s/ David Lichtenstein |
| David Lichtenstein | ||
| Chairman and Chief Executive Officer (Principal Executive Officer) | ||
| Date: August 14, 2026 | By: | /s/ Seth Molod |
| Seth Molod | ||
| Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) |
35