10-Q: Lightstone REIT IV Narrows Q3 Loss, Moxy Hotel Improves

Lightstone Value Plus REIT IV, Inc. reported a significantly reduced net loss for the third quarter and first nine months of 2025, driven by improved hotel operations and a casualty gain.

Summary

• Net loss for the three months ended September 30, 2025, significantly improved to $374,000 from $1,369,000 in the same period of 2024.
• Net loss for the nine months ended September 30, 2025, improved to $3,979,000 from $8,165,000 in the prior year period.
• Hotel revenues for the nine months increased to $21.9 million from $21.3 million, driven by higher occupancy and average daily rate (ADR) at the Williamsburg Moxy Hotel.
• The Williamsburg Moxy Hotel's occupancy rose to 91% (9M 2025) from 89% (9M 2024), with RevPAR increasing to $244.77 from $238.22 and ADR to $270.11 from $268.48.
• A net casualty gain of $0.5 million was recognized for the nine months ended September 30, 2025, related to a December 2024 fire at the Williamsburg Moxy Hotel, with the damaged venue reopening in Q3 2025.
• The 40 East End Ave. Joint Venture, in which the company holds a 33.3% interest, shifted from a loss of $293,000 in 9M 2024 to income of $453,000 in 9M 2025, with 27 of 29 luxury condo units now sold.
• Cash and cash equivalents stood at $8.0 million and restricted cash at $4.8 million as of September 30, 2025.
• The Williamsburg Moxy Hotel Joint Venture did not meet its minimum Debt Service Coverage Ratio (DSCR) covenant as of September 30, 2025, but the lender indicated no intent to retain excess cash flow pending finalization of the insurance claim.

Sentiment

Score: 7

Explanation: The company demonstrated significant improvement in reducing its net loss and enhancing hotel operating metrics. The successful sales at the 40 East End Ave. Joint Venture also contributed positively. However, the breach of a debt covenant at the Moxy Hotel, even with lender forbearance, and the ongoing accumulated deficit, indicate underlying financial challenges and risks. The suspension of distributions and lack of a public market for shares also temper enthusiasm.

Positives

• Net loss significantly narrowed for both the three-month and nine-month periods ended September 30, 2025, compared to the prior year.
• Improved performance at the Williamsburg Moxy Hotel, with increases in occupancy (91% vs 89%), RevPAR ($244.77 vs $238.22), and ADR ($270.11 vs $268.48) for the nine months ended September 30, 2025.
• Recognition of a net casualty gain of $0.5 million for the nine months ended September 30, 2025, from the Moxy Hotel fire, with the damaged venue reopening.
• The 40 East End Ave. Joint Venture transitioned from a net loss of $293,000 in 9M 2024 to net income of $453,000 in 9M 2025, with 27 of 29 condominium units sold.
• Net cash used in operating activities significantly decreased to $1.4 million for 9M 2025 from $7.7 million for 9M 2024.
• Net cash provided by investing activities showed a positive swing to $2.3 million for 9M 2025 from a use of $3.1 million in 9M 2024, largely due to distributions from the 40 East End Ave. Joint Venture and insurance proceeds.
• Interest expense decreased for both the three-month and nine-month periods, reflecting changes in market interest rates and the refinancing of the Moxy Hotel's construction loan.

Negatives

• Total hotel revenues for the three months ended September 30, 2025, decreased to $8.2 million from $8.5 million in the same period of 2024, primarily due to a decrease in food, beverage, and other revenues.
• The Williamsburg Moxy Hotel Joint Venture did not meet its prescribed minimum Debt Service Coverage Ratio (DSCR) as of September 30, 2025, indicating potential operational underperformance relative to loan covenants.
• Total Stockholders Equity decreased to $26.3 million as of September 30, 2025, from $30.8 million as of December 31, 2024, primarily due to an increased accumulated deficit.
• The company's accumulated deficit increased to $50.2 million as of September 30, 2025, from $46.9 million as of December 31, 2024.
• Distributions on common shares remain suspended since March 2020.
• The company is dependent on its Advisor and Sponsor affiliates for essential services and has no employees, which could pose a risk if these relationships are disrupted.
• Amounts owed to the Advisor and its affiliated entities increased to $1.5 million as of September 30, 2025, from $0.8 million as of December 31, 2024.

Risks

• Operating results and financial condition are substantially impacted by the overall health of local, U.S. national, and global economies.
• Business and financial performance may be adversely affected by current and future economic conditions, including availability or terms of financings, financial markets volatility, banking failures, political upheaval or uncertainty, natural and man-made disasters, terrorism, acts of war, unfavorable changes in laws/regulations, outbreaks of contagious diseases, cybercrime, technological advances (e.g., AI/ML), loss of key relationships, inflation, tariffs, and recession.
• Worsening economic conditions, increases in costs due to inflation, tariffs, higher interest rates, labor and supply chain challenges could adversely affect future results.
• The ability to make accretive real estate or real estate-related investments, rent space on favorable terms, address debt maturities, and fund liquidity requirements.
• Conflicts of interest arising out of relationships with the advisor and its affiliates.
• The ability to retain executive officers and other key individuals who provide advisory, property management, and property management oversight services.
• The level of debt and the terms and limitations imposed by debt agreements.
• The availability of credit generally, and any failure to obtain debt financing at favorable terms or to satisfy debt conditions.
• The ability to diversify the portfolio of assets.
• The ability to sell assets at a price and on a timeline consistent with investment objectives.
• Potential impairment charges.
• Unfavorable changes in laws, regulations, or ordinances impacting the business, assets, or key relationships.
• Factors that could affect the ability to qualify as a REIT, including the requirement to distribute at least 90% of taxable income.
• No assurance that additional recoveries will be received from the Williamsburg Moxy Hotel insurance claim.
• The Moxy Mortgage Loans require the maintenance of certain financial covenants, including a minimum debt service coverage ratio (DSCR), which was not met as of September 30, 2025. While the lender has indicated no intent to retain excess cash flow, this could change.
• The company cannot assure that any future distributions will be made or that it will maintain any particular level of distributions.
• The share repurchase program (SRP) is limited and can be amended or suspended at any time without notice.
• The company has cash deposited in certain financial institutions in excess of U.S. federally insured levels, exposing it to credit risk if those institutions fail.

Future Outlook

The company expects current cash, future cash flows from the Williamsburg Moxy Hotel (including potential additional insurance recoveries), and distributions from the 40 East End Ave. Joint Venture (from remaining condo sales) to be sufficient to meet cash requirements for at least the next 12 months. It intends to continue seeking opportunities to invest in real estate and real estate-related investments, focusing on development-related opportunities. The company may seek additional capital contributions from Lightstone REIT III for the Williamsburg Moxy Hotel Joint Venture if necessary. There is no intention to list common shares on a national securities exchange at this time, and no active market is anticipated until such a listing occurs.

Management Comments

• "We have and currently expect to continue to seek opportunities to invest in real estate and real estate-related investments."
• "We believe that these items [cash and cash equivalents, restricted cash, future Moxy cash flows, 40 East End distributions] along with our pro rata share of the future cash flows we expect to be generated from the Williamsburg Moxy Hotel (including potential insurance recoveries), plus our pro rata share of any distributions from the 40 East End Ave. Joint Venture resulting from the potential sale of its two remaining unsold condominium units, will be sufficient to satisfy our expected cash requirements for at least 12 months from the date of filing this report."
• "We may also seek additional capital contributions from Lightstone REIT III into the Williamsburg Moxy Hotel Joint Venture, if necessary."
• "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."
• Regarding the Moxy Hotel DSCR covenant breach: "the lender has indicated that they do not intend to retain excess cash flow pending finalization of the open insurance claim."

Industry Context

The company operates within the U.S. real estate and hospitality sectors, specifically with a focus on a Marriott-branded hotel in Brooklyn and luxury residential condominiums in Manhattan. Its performance is influenced by broader economic conditions, interest rates, and consumer behavior, which are noted as potential adverse factors. The luxury condominium market in Manhattan, as evidenced by the sale of 27 out of 29 units, appears to be performing well, contributing positively to the company's equity earnings. The hospitality sector, particularly in urban centers like New York City, is recovering, as indicated by the improved occupancy, RevPAR, and ADR at the Williamsburg Moxy Hotel, despite a slight dip in overall hotel revenues for the quarter. The reliance on related parties for management and financing is a common structure in certain REITs, but also a noted risk factor.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or global benchmarks to assess its results against industry standards. It primarily focuses on the company's own historical performance and internal targets.
• The Williamsburg Moxy Hotel's occupancy of 91% and RevPAR of $244.77 for the nine months ended September 30, 2025, are strong indicators for a New York City hotel, especially considering it only opened in March 2023. However, without specific peer data, a direct comparison is not possible.
• The sale of 27 out of 29 luxury condominium units at the 40 East End Ave. Project suggests a successful development and sales cycle, which is generally positive for the luxury residential market in Manhattan.

Corporate Governance

Legal Proceedings

• Not a party to any material pending legal proceedings where the outcome is probable or reasonably possible to have a material adverse effect on results of operations or financial condition.

Related Party Transactions

• The company is dependent on its Advisor (Lightstone Real Estate Income LLC) and Sponsor (The Lightstone Group, LLC) and their affiliates for essential services, including asset management, property management, acquisition, disposition, and financing activities. Both the Advisor and Sponsor are majority owned by David Lichtenstein, the company's Chairman and CEO.
• Compensation and reimbursement of costs are paid to these related entities based on various agreements, generally tied to property costs, annual revenue, and other fees.
• Asset management fees incurred were $243,000 for Q3 2025 and $727,000 for 9M 2025.
• The company owed the Advisor and its affiliated entities $1.5 million as of September 30, 2025 (up from $0.8 million at December 31, 2024).
• The Advisor temporarily deferred asset management fees during Q2 2024.
• A subordinated unsecured loan agreement with the Sponsor (related party) involves aggregate principal advances of $12.6 million, bearing 1.48% interest. Repayment is subordinate to common shareholders receiving their net investments ($10.00 per share) plus an 8.0% cumulative annual return, and is only potentially payable upon liquidation if additional funds are available.
• Outstanding principal advances and related accrued interest from the Sponsor totaled $14.3 million as of September 30, 2025.
• Lightstone REIT III, also sponsored by the Sponsor and a related party, owns a 25% noncontrolling interest in the Williamsburg Moxy Hotel Joint Venture.
• The 40 East End Ave. Joint Venture's remaining 66.7% membership interest is owned by affiliated entities majority-owned and/or controlled by David Lichtenstein.

Stakeholder Impact

• Shareholders: Experienced a significant reduction in net loss and improved operational performance of key assets. However, distributions remain suspended, and total stockholders' equity decreased. The share repurchase program offers limited liquidity. The DSCR covenant breach, while currently waived by the lender, poses a potential risk to future cash flows or debt terms.
• Lenders: The Williamsburg Moxy Hotel Joint Venture did not meet its DSCR covenant, but the lender has indicated forbearance pending insurance claim finalization. This highlights a potential risk to debt servicing if conditions worsen or forbearance is withdrawn.
• Management/Advisor/Sponsor: Continue to receive fees and reimbursements for services, with some fees temporarily deferred in the past. The subordinated loan from the Sponsor remains outstanding, with repayment contingent on shareholder returns.
• Employees: The company has no employees, relying entirely on the Advisor and its affiliates for services.

Next Steps

• Finalization of the open insurance claim for the Williamsburg Moxy Hotel fire, with expectations of additional recoveries, particularly for business interruption.
• Potential sale of the remaining two unsold condominium units at the 40 East End Ave. Joint Venture.
• Board of Directors to determine future distributions based on performance, capital availability, debt refinancing ability, and REIT distribution requirements.
• Management will continue to evaluate protections against significant increases in interest rates for floating rate debt, such as purchasing interest rate cap instruments.
• The company expects to continue seeking opportunities to invest in real estate and real estate-related investments.

Key Dates

Recommendation

While the company has shown significant operational improvements, particularly in reducing its net loss and enhancing hotel performance, and the 40 East End Ave. Joint Venture is nearing completion with strong sales, several factors warrant caution. The breach of the DSCR covenant at the Williamsburg Moxy Hotel, despite lender forbearance, introduces uncertainty. The continued suspension of distributions and the illiquid nature of the common shares (not listed on an exchange) limit investor returns and exit opportunities. The accumulated deficit also remains substantial. Given the mixed signals and inherent risks associated with related-party transactions and economic sensitivities, a "hold" recommendation is appropriate for existing shareholders, while new investors might find the illiquidity and covenant breach concerning.

Keywords

REIT, Real Estate Investment Trust, Hotel, Williamsburg Moxy Hotel, New York City Real Estate, Condominium Development, 40 East End Avenue, Hospitality, Property Management, Financial Results, SEC Filing, 10-Q, Lightstone Value Plus REIT IV, Debt Service Coverage Ratio, Casualty Gain, Equity Method Investment