Exhibit 99.1

 

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

On January 19, 2015, the board of directors (the “Board of Directors”) of Lightstone Value Plus Real Estate Investment Trust, Inc. (the “Company”) provided approval for the Company to form a joint venture (the “Joint Venture”) with Lightstone Value Plus Real Estate Investment Trust II, Inc. (“Lightstone II”), a real estate investment trust also sponsored by the Company’s sponsor, The Lightstone Group, and for the Joint Venture to acquire the Company’s membership interests in 11 limited service hotels for approximately $122.4 million, plus closing and other third party transaction costs, contingent upon lender approval.  As of December 31, 2014, the 11 limited service hotels were encumbered by approximately $67.2 million in debt. The amount of consideration that the Company will receive for its contribution was determined based on independent third-party appraisals.

 

On January 29, 2015 the Company, through its operating partnership, entered into an agreement to form the Joint Venture with Lightstone II whereby the Company and Lightstone II have 2.5% and 97.5% membership interests in the Joint Venture, respectively. Lightstone II is the managing member. Each member may receive distributions and make future capital contributions based upon its respective ownership percentage, as required.

 

On January 29, 2015 and February 11, 2015, the Company, through a wholly owned subsidiary of its operating partnership, completed the disposition of its memberships interests in a portfolio of seven limited service hotels (the “Hotel Portfolio”) for approximately $88.0 million, excluding transaction costs, or approximately $42.7 million, net of $45.3 million of debt which was repaid as part of the transaction, pursuant to seven separate contribution agreements entered into with Lightstone II through the Joint Venture. The Hotel Portfolio represents seven of the eleven limited service hotels to be acquired by the Joint Venture previously approved by the Board of Directors. The limited service hotels included in the Hotel Portfolio are as follows:

 

·

a 90-room limited service hotel which operates as a Courtyard by Marriott located in Willoughby, Ohio

 

·

a 102-room limited service hotel which operates as a Fairfield Inn & Suites by Marriott located in West Des Moines, Iowa

 

·

a 97-suite limited service hotel which operates as a SpringHill Suites by Marriott located in West Des Moines, Iowa

 

·

a 126-room limited service hotel which operates as a Hampton Inn located in Miami, Florida

 

	·	a 104-room limited service hotel which operates as a Hampton Inn & Suites located in Fort Lauderdale, Florida
	·	a 121-room limited service hotel which operates as a Courtyard by Marriott located in Baton Rouge, Louisiana
	·	a 121-room limited service hotel which operates as a Courtyard by Marriott  located in Parsippany, New Jersey

 

The Hotel Portfolio was secured by (i) a $34.1 million revolving credit facility that was paid off upon completion of the disposition of the Hotel Portfolio and by (ii) $11.2 million of debt which was assumed by the subsidiaries of the Joint Venture as part of the transaction.

 

Pro Forma Financial Statements

 

The following unaudited pro forma condensed consolidated financial statements have been prepared based on the historical financial statements of the Company after giving effect to the sale of the Hotel Portfolio, and the assumptions and adjustments described in the accompanying notes to these unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated statements of operations give effect to the disposal of the Hotel Portfolio by the Company as if it had occurred on January 1, 2012 and the unaudited pro forma condensed consolidated balance sheet gives effect to the disposal of the Hotel Portfolio by the Company as if it had occurred on September 30, 2014. The unaudited pro forma condensed consolidated financial statements were derived by adjusting the historical financial statements of the Company for the removal of assets, liabilities, revenues and expenses associated with the Hotel Portfolio and the pro forma adjustments described in the notes.

 

 

The unaudited pro forma condensed consolidated financial statements do not give effect to the sale to the Joint Venture of the Company’s membership interests in four limited service hotels whose sale to the Joint Venture the Board of Directors also approved, a transaction that has not yet occurred but that the Company believes is probable.

 

The unaudited pro forma condensed consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the audited historical consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 31, 2014 and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed on November 14, 2014.

 

The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the consolidated financial position or consolidated results of operations that would have actually been reported had the disposition occurred on January 1, 2012 for consolidated statements of operations purposes and as of September 30, 2014 for consolidated balance sheet purposes, nor are they necessarily indicative of the Company’s future consolidated financial position or consolidated results of operations. The unaudited pro forma condensed consolidated financial statements are based upon estimates and assumptions. These estimates and assumptions are preliminary and have been made solely for the purposes of developing this pro forma information.

 

 

 

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2014

(Amounts in thousands, except per share data) 

		Historical				Hotel Portfolio				Pro Forma Adjustments					Pro Forma
Assets
Net investment property			384,886				(76,621	)			-					308,265
Investment in unconsolidated affiliated real estate entity			9,148													9,148
Investment in affiliate			21,837				-				1,311		(e)			23,148
Cash and cash equivalents			59,049				-				42,752		(a)
											(297	)	(b)
											(1,311	)	(e)			100,193
Marketable securities, available for sale			145,237				-				-					145,237
Restricted escrows			12,962				-				-					12,962
Tenant accounts receivable			3,419				(870	)			-					2,549
Mortgage receivable			5,212				-				-					5,212
Intangible assets, net			1,843				(64	)			-					1,779
Prepaid expenses and other assets			12,177				(779	)			-					11,398
																-
Total Assets		$	655,770			$	(78,334	)		$	42,455					619,891
Liabilities and Stockholders' Equity
Mortgages payable		$	264,987			$	(45,717	)		$	-					219,270
Notes payable			39,113				-				-					39,113
Accounts payable, accrued expenses and other liabilities			16,502				(2,295	)			-					14,207
Due to sponsor			675				(30	)			-					645
Tenant allowances and deposits payable			2,108				(99	)			-					2,009
Distributions payable			4,553				-				-					4,553
Deferred rental income			1,546				-				-					1,546
Acquired below market lease intangibles, net			842				-				-					842
Total liabilities			330,326				(48,141	)			-					282,185
Commitments and contingencies
Stockholders' Equity:
Company's stockholders' equity:
Preferred shares, $0.01 par value, 10,000 shares authorized,  none issued and outstanding			-				-				-					-
Common stock, $0.01 par value; 60,000 shares authorized, 25,777 shares issued and outstanding			258				-				-					258
Additional paid-in-capital			203,134				(57,323	)			57,323		(c)			203,134
Accumulated other comprehensive loss			41,282				-				-					41,282
Accumulated surplus			33,990				27,617				(27,617	)	(c)
											12,749		(d)			46,739
Total Company stockholder’s equity			278,664				(29,706	)			42,455					291,413
Noncontrolling interests			46,780				(487	)			-					46,293
Total Stockholders' Equity			325,444				(30,193	)			42,455					337,706
Total Liabilities and Stockholders' Equity		$	655,770			$	(78,334	)		$	42,455					619,891

 

  

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements

 

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Amounts in thousands, except per share data)

 

		For the Nine Months Ended September 30, 2014
		Historical				Hotel Portfolio				Pro Forma Adjustments				Pro Forma
Revenues:
Rental income		$	59,030			$	(17,908	)			-			$	41,122
Tenant recovery income			3,507				-				-				3,507
Other service income			8,764				(634	)			-				8,130
Total revenues			71,301				(18,542	)			-				52,759
Expenses:
Property operating expenses			38,773				(11,497	)			-				27,276
Real estate taxes			3,968				(1,023	)			-				2,945
General and administrative costs			4,887				(243	)			(301	)	(f)		4,343
Depreciation and amortization			12,195				(2,058	)							10,137
Total operating expenses			59,823				(14,821	)			(301	)			44,701
Operating income			11,478				(3,721	)			301				8,058
Mark to market adjustment on derivative financial instruments			(100	)			(11	)			-				(111	)
Interest and dividend income			11,522				(2	)			-				11,520
Interest expense			(14,711	)			2,031				-				(12,680	)
Gain on disposition of unconsolidated affiliated real estate entities			4,418				-				-				4,418
Gain on disposition of real estate, net			9,129				-				-				9,129
Gain on sale of marketable securities			1,367				-				-				1,367
Income from investments in unconsolidated affiliated real estate entities			316				-				-				316
Other income, net			1,165				(94	)			-				1,071
Net income from continuing operations			24,584				(1,797	)			301				23,088
Net income from discontinued operations			1,620				-				-				1,620
Net income			26,204				(1,797	)			301				24,708
Less: net income attributable to noncontrolling interests			(1,718	)			(5	)			-				(1,723	)
Net income attributable to common shares		$	24,486			$	(1,802	)			301			$	22,985
Basic and diluted earnings per common share:
Continuing operations		$	0.89			$	(0.07	)			0.01			$	0.83
Discontinued operations			0.06				-				-				0.06
Net earnings per common share		$	0.95			$	(0.07	)			0.01			$	0.89
Weighted average number of common shares outstanding, basic and diluted			25,772				25,772				25,772				25,772

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

  

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Amounts in thousands, except per share data)

 

		For the Twelve Months Ended December 31, 2013
		Historical				Hotel Portfolio				Pro Forma Adjustments				Pro Forma
Revenues:
Rental income		$	59,021			$	(16,317	)			-			$	42,704
Tenant recovery income			5,123				-				-				5,123
Other service income			9,418				(591	)			-				8,827
Total revenues			73,562				(16,908	)			-				56,654
Expenses:
Property operating expenses			42,947				(10,737	)			-				32,210
Real estate taxes			4,749				(1,045	)			-				3,704
General and administrative costs			10,544				(2,275	)			(244	)	(f)		8,025
Depreciation and amortization			11,810				(1,704	)			-				10,106
Total operating expenses			70,050				(15,761	)			(244	)			54,045
Operating income			3,512				(1,147	)			244				2,609
Mark to market adjustment on derivative financial instruments			444				43				-				487
Interest and dividend income			10,248				(3	)			-				10,245
Interest expense			(16,857	)			1,314				-				(15,543	)
Gain on disposition of unconsolidated affiliated real estate entities			1,200				-				-				1,200
Gain on sale of marketable securities			14,124				-				-				14,124
Loss from investments in unconsolidated affiliated real estate entities			(1,524	)			-				-				(1,524	)
Other income, net			1,890				7				-				1,897
Net income from continuing operations			13,037				214				244				13,495
Net income from discontinued operations			3,265				-				-				3,265
Net income			16,302				214				244				16,760
Less: net income attributable to noncontrolling interests			(1,388	)			(12	)			-				(1,400	)
Net income attributable to common shares		$	14,914			$	202				244			$	15,360
Basic and diluted earnings per common share:
Continuing operations		$	0.41			$	0.01				0.01			$	0.43
Discontinued operations			0.12				-				-				0.11
Net earnings per common share		$	0.53			$	0.01				0.01			$	0.54
Weighted average number of common shares outstanding, basic and diluted			28,310				28,310				28,310				28,310

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Amounts in thousands, except per share data)

 

		For the Twelve Months Ended December 31, 2012
		Historical				Hotel Portfolio				Pro Forma Adjustments				Pro Forma
Revenues:
Rental income		$	34,176			$	(2,450	)			-			$	31,726
Tenant recovery income			5,150				-				-				5,150
Other service income			7,864				(143	)			-				7,721
Total revenues			47,190				(2,593	)			-				44,597
Expenses:
Property operating expenses			25,367				(1,664	)			-				23,703
Real estate taxes			3,766				(199	)			-				3,567
General and administrative costs			7,882				(1,019	)			(55	)	(f)		6,808
Depreciation and amortization			8,465				(216	)			-				8,249
Total operating expenses			45,480				(3,098	)			(55	)			42,327
Operating income			1,710				505				55				2,270
Mark to market adjustment on derivative financial instruments			(13,485	)			-				-				(13,485	)
Interest and dividend income			14,509				(661	)			-				13,848
Interest expense			(12,677	)			-				-				(12,677	)
Gain on disposition of unconsolidated affiliated real estate entities			120,607				-				-				120,607
Bargain purchase gain			4,800				(4,800	)			-				-
Loss on sale of marketable securities			(339	)			-				-				(339	)
Income from investments in unconsolidated affiliated real estate entities			728				-				-				728
Other income, net			1,642				5				-				1,647
Net income from continuing operations			117,495				(4,951	)			55				112,599
Net income from discontinued operations			2,451				-				-				2,451
Net income			119,946				(4,951	)			55				115,050
Less: net income attributable to noncontrolling interests			(11,625	)			-				-				(11,625	)
Net income attributable to common shares		$	108,321			$	(4,951	)			55			$	103,425
Basic and diluted earnings per common share:
Continuing operations		$	3.54			$	(0.17	)			-			$	3.37
Discontinued operations			0.08				-				-				0.08
Net earnings per common share		$	3.62			$	(0.17	)			-			$	3.45
Weighted average number of common shares outstanding, basic and diluted			29,941				29,941				29,941				29,941

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

Note 1. Basis of Pro Forma Presentation

 

The pro forma condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission.

 

The unaudited pro forma condensed consolidated financial statements of the Company have been prepared based on the historical balance sheet of the Company as of September 30, 2014 and the historical statement of operations for the Company for the nine months ended September 30, 2014 and for each of the years in the two-year period ended December 31, 2013 after giving effect to the adjustments described below. The Company did not have any ownership interest in the Hotel Portfolio prior to January 1, 2012.

 

The Company employs accounting policies that are in accordance with accounting principles generally accepted in the United States of America. In management's opinion, all material adjustments necessary to reflect fairly the pro forma financial position and pro forma results of operations of the Company have been made.

 

The ongoing activity presented in these unaudited pro forma condensed consolidated financial statements represents the Company’s assets, liabilities, revenues and expenses that reflect the disposition of the Hotel Portfolio. This pro forma financial information is presented for illustrative purposes only, and is not necessarily indicative of the consolidated operating results and consolidated financial position that might have been achieved had the transaction described above occurred on the dates indicated, nor is it necessarily indicative of the operating results and financial position that may occur in the future.

 

Note 2. Pro Forma Assumptions

 

Pro forma adjustments:

 

The accompanying unaudited pro forma financial statements have been prepared as if (i) the disposition was completed on September 30, 2014 for the balance sheet and (ii) the disposition was completed as of January 1, 2012 for statement of operations purposes and reflect the following pro forma adjustments:

 

a)

To reflect the sale consideration of $42.7 million cash received in connection with the disposition of the Hotel Portfolio.

b)

To reflect the $0.3 million in estimated direct expenses paid in connection with the disposition of the Hotel Portfolio including legal, accounting and other professional fees.

c)

To eliminate the Hotel Portfolio’s equity from consolidated equity as a result of the disposition.

d)

To record the net gain of $12.7 million on the disposition of the Hotel Portfolio.

e)

To reflect the Company’s investment of $1.3 million in the Joint Venture with respect to the seven contribution agreements for the Hotel Portfolio.

f)

To add back the asset management fees paid to the advisor by the Company with respect to the Hotel Portfolio.

 

Note 3. Unaudited Pro Forma Earnings Per Share Data

 

Basic and diluted pro forma earnings per share were calculated using the weighted average shares outstanding of the Company for the nine months ended September 30, 2014 and for each of the years in the two-year period ended December 31, 2013.