10-Q: Lightstone REIT IV Swings to Profit, Boosted by Hotel

Lightstone Value Plus REIT IV, Inc. reported a net income for Q2 2025, a significant improvement driven by strong hotel performance and positive contributions from its condominium joint venture.

Summary

• Reported a net income attributable to common shares of $117 thousand for the three months ended June 30, 2025, compared to a net loss of $1,552 thousand for the same period in 2024.
• Reduced net loss attributable to common shares for the six months ended June 30, 2025, to $2,823 thousand, down from $5,380 thousand in the prior year period.
• Total hotel revenues increased to $8,616 thousand for Q2 2025 from $8,302 thousand in Q2 2024, and to $13,702 thousand for the six months ended June 30, 2025, from $12,861 thousand in the prior year period.
• Hotel operating expenses decreased to $5,064 thousand for Q2 2025 from $5,749 thousand in Q2 2024, primarily due to better expense control measures.
• Interest expense decreased to $2,587 thousand for Q2 2025 from $2,942 thousand in Q2 2024, reflecting the refinancing of the Moxy Hotel Joint Venture's construction loan.
• Earnings from the unconsolidated 40 East End Ave. Joint Venture shifted to an income of $591 thousand in Q2 2025, compared to a loss of $88 thousand in Q2 2024.
• Net cash used in operating activities significantly improved to $2,196 thousand for the six months ended June 30, 2025, from $9,271 thousand used in the prior year period.
• Net cash provided by investing activities was $2,842 thousand for the six months ended June 30, 2025, compared to $3,017 thousand used in the prior year period, primarily due to distributions from the 40 East End Joint Venture and insurance proceeds.
• The Williamsburg Moxy Hotel saw increased occupancy to 89% (from 86%), RevPAR to $223.71 (from $216.79), and ADR to $252.91 (from $251.80) for the six months ended June 30, 2025.
• 27 of the 29 luxury residential units in the 40 East End Ave. Project have been sold as of June 30, 2025, with two units remaining unsold.

Sentiment

Score: 7

Explanation: The company demonstrated a strong operational turnaround, moving to quarterly net income and significantly reducing year-to-date losses, driven by improved hotel performance and positive contributions from its joint venture. Cash flow from operations also improved substantially. However, the company still faces challenges including an accumulated deficit, decreasing equity, and ongoing risks related to market conditions and debt covenants, with distributions remaining suspended.

Positives

• Achieved net income of $117 thousand in Q2 2025, a positive swing from a $1,552 thousand net loss in Q2 2024.
• Substantially reduced year-to-date net loss by 47.5% to $2,823 thousand for the six months ended June 30, 2025, compared to $5,380 thousand in the same period last year.
• Hotel revenues increased by $314 thousand in Q2 2025 and $841 thousand year-to-date, indicating stronger operational performance.
• Improved hotel operating efficiency, with hotel operating expenses decreasing by $685 thousand in Q2 2025 and $708 thousand year-to-date due to better expense control.
• Interest expense decreased by $355 thousand in Q2 2025 and $1,146 thousand year-to-date, benefiting from the Moxy Hotel construction loan refinancing.
• The unconsolidated 40 East End Ave. Joint Venture generated $591 thousand in income in Q2 2025, a significant turnaround from an $88 thousand loss in Q2 2024.
• Cash flow from operating activities improved significantly, with net cash used decreasing from $9,271 thousand in YTD Q2 2024 to $2,196 thousand in YTD Q2 2025.
• Investing activities generated $2,842 thousand in cash in YTD Q2 2025, a positive shift from $3,017 thousand used in YTD Q2 2024, supported by distributions from the 40 East End Joint Venture and insurance proceeds.
• The Williamsburg Moxy Hotel demonstrated stronger performance with increased occupancy (89%), RevPAR ($223.71), and ADR ($252.91) for the six months ended June 30, 2025.
• Successful sales of 27 out of 29 luxury condominium units at the 40 East End Ave. Project, indicating strong demand for the asset.

Negatives

• Maintains a significant accumulated deficit of $49,766 thousand as of June 30, 2025.
• Total Stockholders Equity decreased from $30,821 thousand as of December 31, 2024, to $26,825 thousand as of June 30, 2025.
• Net investment property decreased from $122,370 thousand to $121,630 thousand, and total assets decreased from $144,997 thousand to $141,698 thousand.
• Distributions on common shares remain suspended since March 2020, impacting shareholder returns.
• Incurred additional remediation costs of $0.1 million in Q1 2025 related to the December 2024 fire at the Williamsburg Moxy Hotel, with no assurance of full insurance recovery for damaged assets or business interruption.
• The Moxy Mortgage Loans require maintenance of a minimum Debt Service Coverage Ratio (DSCR) starting October 1, 2025, which, if not met, may necessitate principal paydowns.
• Common Shares are not currently listed on a national securities exchange, resulting in no active market and limited liquidity for stockholders.
• Dependent on the Advisor and certain affiliates of the Sponsor for essential services, posing a concentration risk.

Risks

• Market and economic challenges, including inflation, tariffs, recession, political upheaval, terrorism, natural disasters, cybercrime, and technological advances, could adversely affect business and financial performance.
• Uncertainty regarding the availability of sufficient cash flow from operating activities to maintain REIT status and make required distributions.
• Potential conflicts of interest arising from relationships with the Advisor and its affiliates.
• Risk of inability to retain executive officers and other key individuals providing advisory, property management, and oversight services.
• Exposure to the level of debt and the terms and limitations imposed by debt agreements.
• Challenges in obtaining debt financing at favorable terms or satisfying conditions and requirements of debt.
• Ability to make accretive investments may be constrained.
• Inability to diversify the portfolio of assets effectively.
• Challenges in selling assets at a price and on a timeline consistent with investment objectives.
• Potential for impairment charges on assets.
• Adverse effects from 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.
• Uncertainty regarding the receipt of additional insurance recoveries for fire damage and business interruption at the Williamsburg Moxy Hotel.
• Failure to meet the prescribed minimum debt service coverage ratio (DSCR) for the Moxy Mortgage Loans could lead to required principal paydowns starting October 1, 2025.

Future Outlook

The company expects to continue seeking opportunities to invest in real estate and real estate-related investments, including operating properties and development projects. Management believes that available cash on hand, future cash flows from the Williamsburg Moxy Hotel, and distributions from the sale of the remaining two condominium units will be sufficient to meet cash requirements for at least the next 12 months. The company may seek additional capital contributions from Lightstone REIT III for the Williamsburg Moxy Hotel Joint Venture if needed and may incur short-term indebtedness or obtain lines of credit for future acquisitions. It also anticipates receiving additional insurance recoveries for fire damage and intends to file another claim for business interruption, though no assurance of recovery is provided. The Moxy Mortgage Loans have an initial maturity of April 19, 2027, with two six-month extension options.

Management Comments

• "We believe that our available cash on hand along with the future cash flows generated from the Williamsburg Moxy Hotel, plus any distributions we receive from the resulting from the sale of the 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 intend to limit our aggregate long-term permanent borrowings to 75% of the aggregate fair market value of all properties unless any excess borrowing is approved by a majority of the independent directors and is disclosed to our stockholders."
• "Market conditions will dictate our overall leverage limit; as such our aggregate long-term permanent borrowings may be less than 75% of aggregate fair market value of all properties."
• "We may 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."

Industry Context

The company operates in the U.S. real estate sector, with a focus on hospitality (hotel) and luxury residential condominiums in New York City. The improved performance of the Williamsburg Moxy Hotel, evidenced by increased occupancy, RevPAR, and ADR, suggests a positive trend in the New York City hospitality market. The successful sale of 27 out of 29 luxury condominium units at the 40 East End Ave. Project indicates continued strong demand in the high-end Manhattan residential market. The company acknowledges the broader economic challenges such as inflation, higher interest rates, and supply chain issues, which are prevalent concerns across the real estate industry.

Comparison to Industry Standards

• No specific comparable companies, projects, or industry benchmarks are provided within the filing to allow for a direct assessment against global or industry standards.

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

• Lightstone REIT III, a related party, holds a 25% noncontrolling membership interest in the Williamsburg Moxy Hotel Joint Venture.
• The 40 East End Ave. Joint Venture, in which the company holds a 33.3% interest, has its remaining 66.7% interest owned by entities majority-owned and/or controlled by David Lichtenstein, who also majority owns and controls the Sponsor.
• The company is dependent on its Advisor (Lightstone Real Estate Income LLC) and certain affiliates of its Sponsor (The Lightstone Group, LLC), both majority-owned by David Lichtenstein, for essential services including asset management, property management, acquisition, disposition, financing, and general administrative responsibilities.
• Fees incurred to the Advisor for asset management were $242 thousand for Q2 2025 and $484 thousand for YTD Q2 2025.
• The company owed the Advisor and its affiliated entities $1.3 million as of June 30, 2025, an increase from $0.8 million as of December 31, 2024.
• Subordinated advances from the Sponsor totaled $14.3 million as of June 30, 2025, bearing 1.48% interest, which are subordinate to all company obligations and common shareholders' liquidation distributions (up to $10.00 per share plus an 8.0% annual return).

Stakeholder Impact

• Shareholders: Distributions remain suspended, limiting direct cash returns. The share repurchase program offers limited liquidity for specific hardship or death cases. The subordination of related-party advances provides a measure of protection for common shareholders in a liquidation scenario.
• Employees: The company has no direct employees, relying on services provided by the Advisor and Sponsor affiliates.
• Customers (Hotel Guests/Condo Buyers): The continued operation and improved performance of the Williamsburg Moxy Hotel and the successful sales of condominium units indicate ongoing service and product delivery.
• Creditors: The Moxy Mortgage Loans include financial covenants (DSCR) that, if not met, could require principal paydowns, impacting the company's cash flow and debt structure. Subordinated advances from the Sponsor are junior to other obligations, providing a buffer for senior creditors.

Next Steps

• Continue to seek opportunities to invest in real estate and real estate-related investments.
• Settle the outstanding insurance claim for fire damage at the Williamsburg Moxy Hotel and pursue additional recoveries.
• File another insurance claim related to business interruption from the fire at the Williamsburg Moxy Hotel.
• Maintain compliance with financial covenants, particularly the minimum debt service coverage ratio (DSCR) for the Moxy Mortgage Loans, starting October 1, 2025, which may require principal paydowns if not met.
• The Board of Directors will continue to evaluate and determine future distributions based on company performance and REIT distribution requirements.
• Continue the share repurchase program (SRP) for death or hardship cases, subject to annual limitations.
• Potentially seek additional capital contributions from Lightstone REIT III for the Williamsburg Moxy Hotel Joint Venture.
• Potentially obtain lines of credit for future real estate and real estate-related investments.

Key Dates

Recommendation

While the company has shown significant operational improvements, including a swing to quarterly net income and reduced year-to-date losses, and strong performance from its key assets, several factors warrant a 'hold' recommendation. Distributions remain suspended, limiting immediate shareholder returns. The shares are not publicly traded, severely restricting liquidity. The company still carries a substantial accumulated deficit and has decreasing equity. Furthermore, ongoing risks related to potential debt covenant breaches (DSCR) and the uncertainty of full insurance recovery for the fire damage present headwinds. The positive operational momentum is encouraging, but the lack of liquidity and existing financial vulnerabilities suggest a cautious approach for investors.

Keywords

REIT, Real Estate Investment Trust, Hotel, Hospitality, Condominium, New York City Real Estate, Williamsburg Moxy Hotel, 40 East End Avenue, Financial Performance, SEC Filing, 10-Q, Real Estate Development, Debt Management, REIT Qualification