10-Q: Lightstone REIT V Reports Q3 Loss, 9-Month Profit on Asset Sale

Lightstone Value Plus REIT V, Inc. reported a net loss for Q3 2025 but achieved a net income for the nine months ended September 30, 2025, primarily driven by a significant property disposition gain.

Summary

• Net loss for the three months ended September 30, 2025, was $3.3 million, compared to a net loss of $3.3 million for the same period in 2024.
• Net income for the nine months ended September 30, 2025, was $8.4 million, a significant improvement from a net loss of $8.8 million for the same period in 2024, largely due to an $18.1 million gain on the sale of investment property.
• Rental revenues remained flat at $12.5 million for the three months ended September 30, 2025, compared to $12.5 million in 2024, but increased by $1.3 million to $38.7 million for the nine-month period.
• Interest expense, net, increased by $0.5 million to $4.3 million for the three-month period and by $1.7 million to $13.1 million for the nine-month period, reflecting higher market interest rates.
• Cash and cash equivalents increased to $49.9 million as of September 30, 2025, from $21.4 million at December 31, 2024.
• The company disposed of the Autumn Breeze Apartments for $59.5 million in February 2025, generating net proceeds of $30.5 million and an $18.1 million gain.
• The targeted timeline for a liquidity event for stockholders was extended to June 30, 2033.
• A special cash distribution of $0.08 per common share, totaling $1.5 million, was declared on September 29, 2025, significantly lower than the $0.42 per share ($8.0 million) declared in 2024.
• The company repurchased 444,774 common shares at a weighted average price of $13.49 during the nine months ended September 30, 2025, under its Amended Share Redemption Program.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company reported a net income for the nine-month period, this was largely due to a one-time asset sale gain. Operating cash flow declined, interest expenses rose, and the special distribution was significantly reduced. The extension of the liquidity event timeline to 2033 introduces long-term uncertainty for shareholders, despite management's confidence in refinancing upcoming debt maturities.

Positives

• Achieved a net income of $8.4 million for the nine months ended September 30, 2025, a substantial turnaround from an $8.8 million net loss in the prior year, primarily driven by an $18.1 million gain on property sale.
• Cash and cash equivalents significantly increased to $49.9 million as of September 30, 2025, from $21.4 million at December 31, 2024.
• Successfully refinanced the Aster Apartments Mortgage for $21.8 million and the BayVue Apartments Mortgage for $48.2 million, repaying existing indebtedness.
• Extended an interest rate cap contract through October 11, 2026, for a notional amount of $44.0 million, capping SOFR at 3.00%.
• Same Store rental revenues increased by $0.5 million for the nine months ended September 30, 2025, primarily due to higher monthly rent per unit for Axis at Westmont.
• Real estate taxes for Same Store properties decreased by $0.4 million for the nine months ended September 30, 2025, mainly due to lower taxes for Citadel Apartments.

Negatives

• Reported a net loss of $3.3 million for the three months ended September 30, 2025, an increase from the $3.3 million net loss in the prior year's quarter.
• Modified Funds from Operations (MFFO) decreased to $4.1 million for the nine months ended September 30, 2025, from $5.8 million in the prior year, and to $1.4 million for the three-month period from $1.6 million.
• Interest expense, net, increased by $1.7 million for the nine months ended September 30, 2025, and by $0.5 million for the three months, reflecting higher market interest rates.
• Net cash provided by operating activities decreased to $3.2 million for the nine months ended September 30, 2025, from $4.9 million in the prior year.
• The 2025 special cash distribution of $0.08 per common share ($1.5 million total) was significantly lower than the 2024 special distribution of $0.42 per common share ($8.0 million total).
• Total fees incurred and paid to the Advisor increased to $5.2 million for the nine months ended September 30, 2025, from $4.3 million in the prior year, including $0.7 million in debt financing fees.

Risks

• Market and economic challenges, including inflation, tariffs, recession, and higher interest rates, could adversely affect future results.
• Availability or terms of financings and financial markets volatility could impact the company's ability to fund operations and refinance debt.
• Conflicts of interest arising from relationships with the external advisor and its affiliates.
• Ability to retain executive officers and other key individuals providing advisory and property management services.
• High level of debt and limitations imposed by debt agreements.
• Ability to obtain debt financing at favorable terms or satisfy conditions for debt.
• Ability to make accretive investments and diversify the asset portfolio.
• Changes in market factors impacting rental rates and operating costs.
• Ability to sell assets at a favorable price and timeline consistent with investment objectives.
• Potential impairment charges on investment properties.
• Unfavorable changes in laws, regulations, or ordinances impacting the business.
• Factors affecting the ability to continue to qualify as a Real Estate Investment Trust (REIT).

Future Outlook

The company intends to refinance its significant mortgage debt maturities in early 2026, including Arbors Harbor Town Mortgages ($34.4 million), Axis at Westmont Mortgage ($34.6 million), and Valley Ranch Apartments Mortgage ($43.4 million), and Citadel Apartments Mortgages ($44.0 million) due in October 2026. Management does not anticipate issues in extending or refinancing these at favorable terms, but will consider using available cash or asset sales if necessary. The targeted timeline for a liquidity event for stockholders has been extended to June 30, 2033, with no assurances on actual timing or ultimate liquidation, which would require stockholder approval.

Management Comments

• Management believes the risk of loss due to non-performance by the counterparty to interest rate cap contracts is remote.
• Management believes that adjusting for mark-to-market adjustments is appropriate because they are nonrecurring items that may not be reflective of ongoing operations.
• 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.

Industry Context

The company's operating results and financial condition are significantly influenced by the overall health of local, U.S. national, and global economies. Current and future economic conditions, including inflation, higher interest rates, and financial market volatility, are noted as potential adverse factors. The multifamily residential property market, where the company's current investments are concentrated, is subject to these broader economic trends, impacting rental rates, operating costs, and financing terms. The increase in interest expense reflects the broader trend of rising interest rates affecting real estate financing.

Legal Proceedings

• No material pending legal proceedings of which 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's business is externally managed by LSG Development Advisor LLC (the Advisor), an affiliate of Lightstone, which is majority owned by David Lichtenstein, a board member.
• Fees incurred associated with payments to the Advisor totaled $1.5 million for the three months ended September 30, 2025, and $5.2 million for the nine months ended September 30, 2025.
• Debt financing fees paid to the Advisor were $0.7 million for the nine months ended September 30, 2025, compared to none in the prior year.
• The company is dependent on the Advisor and its affiliates for essential services including asset management, property management, acquisition, disposition, financing, and general administrative responsibilities.

Stakeholder Impact

• Shareholders: The extension of the liquidity event timeline to June 30, 2033, defers potential returns. The significantly reduced special distribution may impact income-focused investors. Share redemptions continue under the Amended SRP, offering some liquidity at 85% of NAV.
• Creditors: The company is actively managing its debt maturities and states it does not expect issues in refinancing, which is positive for debt holders. Compliance with all financial debt covenants as of September 30, 2025, provides reassurance.
• Management/Advisor: The Advisor continues to receive substantial fees for management and financing services, indicating continued reliance and compensation for the external management structure.

Next Steps

• Refinance Arbors Harbor Town Mortgages ($34.4 million) on or before January 1, 2026.
• Refinance Axis at Westmont Mortgage ($34.6 million) on or before February 1, 2026.
• Refinance Valley Ranch Apartments Mortgage ($43.4 million) on or before March 1, 2026.
• Refinance Citadel Apartments Mortgages ($44.0 million) on or before October 11, 2026.
• Seek stockholder approval prior to liquidating the entire portfolio, if such a decision is made.

Key Dates

Recommendation

The company's nine-month net income is largely attributable to a one-time asset sale, masking underlying operational challenges such as declining operating cash flow and rising interest expenses. While management expresses confidence in refinancing upcoming debt, the significant volume of maturities in 2026, coupled with the extended liquidity event timeline to 2033, introduces considerable long-term uncertainty for investors. The substantial reduction in the special distribution also signals a more conservative outlook or reduced capacity for shareholder returns from ongoing operations. Given these mixed signals and the long-term illiquidity, a 'hold' recommendation is appropriate, advising investors to monitor the refinancing efforts and core operational performance closely without adding new capital or exiting positions prematurely.

Keywords

REIT, Real Estate Investment Trust, Multifamily Residential, Commercial Real Estate, SEC Filing, 10-Q, Financial Report, Property Disposition, Debt Refinancing, Interest Rates, Share Redemption Program, Distributions, Net Income, Funds From Operations, MFFO, Lightstone Value Plus REIT V