UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20172021

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number 000-55773

LIGHTSTONE REAL ESTATE INCOME TRUST INC.Lightstone Value Plus REIT IV, Inc.

(Exact Name of Registrant as Specified in Its Charter)

(732)367-0129

(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. 

Yesþ ☒   No ¨☐

Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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).

Yesþ ☒   No ¨☐

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. (Check one):

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 ☒

Yes ¨  No þ

As of November 1, 2017,10, 2021, there were 9.08.5 million outstanding shares of common stock of Lightstone Real Estate Income TrustValue Plus REIT IV, Inc.

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION, CONTINUED:INFORMATION:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:STATEMENTS:

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION, CONTINUED:  

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)(unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION:INFORMATION, CONTINUED:  

ITEM 1. FINANCIAL STATEMENTS.STATEMENTS, CONTINUED.

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITYCOMPREHENSIVE INCOME

(Unaudited)(unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:CONTINUED.  

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY

(Unaudited)(unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), which was formerly known as Lightstone Real Estate Income Trust, Inc. (‘‘Lightstone Income Trust’’), incorporatedbefore September 15, 2021, is a Maryland corporation, formed on September 9, 2014 in Maryland,, which elected to qualify to be taxed as a real estate investment trust (‘‘REIT’’(“REIT”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2016.

Lightstone Income Trust sold 20,000 Common SharesREIT IV, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to Lightstone REIT IV or the Company as required by the context in which any such pronoun is used.

The Company has and intends to continue to seek opportunities to invest in real estate and real estate-related investments. The Company’s real estate-related investment may include mezzanine loans, mortgage loans, bridge loans and preferred equity interests, with a focus on development-related investments, including investments intended to finance development or redevelopment opportunities. The Company may also invest in debt and derivative securities related to real estate assets. A portion of the Company’s investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly owned by, The Lightstone Group, LLC (the “Sponsor”), its affiliates or other real estate investment programs it sponsors. Although the Company expects that most of its investments will be of these various types, it may also make other investments. In fact, it may invest in whatever types of investments that it believes are in its best interests.

The Company currently has one operating segment. As of September 30, 2021, it majority owned and consolidated the operating results of one development project, the Williamsburg Moxy Hotel and held an unconsolidated approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”). The Company accounts for its unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

The Company’s advisor is Lightstone Real Estate Income LLC a Delaware limited liability company (the ‘‘Advisor’’“Advisor”), an entitywhich is majority owned by David Lichtenstein, onLichtenstein. On September 12, 2014, the Advisor contributed $200,000for $10.0020,000 shares of common stock (“Common Shares”), or $10.00 per share.share of the Lightstone REIT IV. Mr. Lichtenstein also is a majority owner of the equity interests of The Lightstone Income Trust’s sponsor,Group, LLC. The Lightstone Group, LLC served as the Company’s Sponsor during its initial public offering (the ‘‘Sponsor’’“Offering”). which terminated on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on June 15, 2015 for $2.0 million, or $9.00 per share. Subject to the oversight of the Company’s board of directors (the “Board of Directors”), and pursuant to the terms of an advisory agreement, the Advisor has the primary responsibility for making investment decisions on behalf of the Company and managing the Company’sits day-to-day operations. Mr. Lichtenstein also acts as the Company’s Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone Income Trust.REIT IV.

Lightstone Income Trust, together with its subsidiaries is collectively referred to as the ‘‘Company’’ and the use of ‘‘we,’’ ‘‘our,’’ ‘‘us’’ or similar pronouns refers to Lightstone Income Trust or the Company as required by the context in which any such pronoun is used.

The Company’s registration statement on Form S-11 (the “Offering”), pursuant to which it offered to sell up to 30,000,000 shares of its common stock, par value $0.01 per share (which may be referred to herein as ‘‘shares of common stock’’ or as ‘‘Common Shares’’) for an initial offering price of $10.00 per share, subject to certain volume and other discounts (the “Primary Offering”) (exclusive of 10,000,000 shares available pursuant to its distribution reinvestment program (the ‘‘DRIP’’) which were offered at a discounted price equivalent to 95% of the Primary Offering Price per Common Share) was declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933 on February 26, 2015. On June 30, 2016, the Company adjusted its offering price to $9.14 per Common Share in its Primary Offering, which was equal to the Company’s estimated net asset value (“NAV”) per Common Share as of March 31, 2016, and effective July 25, 2016, the Company’s offering price was adjusted to $10.00 per Common Share in its Primary Offering, which was equal to the estimated NAV per Common Share as of June 30, 2016. Our estimated NAV per Common Share remained unchanged at $10.00 as of both September 30, 2016 and December 31, 2016.

The Offering, which terminated on March 31, 2017, raised aggregate gross proceeds of approximately $85.6 million from the sale of approximately 8.9 million shares of common stock (including $2.0 million in Common Shares at a purchase price of $9.00 per Common Share to an entity 100% owned by David Lichtenstein, who also owns a majority interest in the Company’s Sponsor). After including aggregate advances from our Sponsor of $12.6 million under the Subordinated Agreement (as discussed in Note 6) and allowing for the payment of approximately $7.6 million in selling commissions and dealer manager fees and $3.2 million in organization and offering expenses, the Offering generated aggregate net proceeds of approximately $87.5 million.

On April 21, 2017, the Company’s board of directors approved the termination of the DRIP effective May 15, 2017. Previously, the Company’s stockholders had an option to elect the receipt of shares of the Company’s common stock in lieu of cash distributions under the Company’s DRIP, however, all future distributions will be in the form of cash. In addition, through May 15, 2017 (the termination date of the DRIP), the Company issued approximately 0.1 million shares of common stock under its DRIP, representing approximately $1.2 million of additional proceeds under the Offering.

The Company has and expects to continue to seek to originate, acquire and manage a diverse portfolio of real estate-related investments. The Company may invest in mezzanine loans, first lien mortgage loans, second lien mortgage loans, bridge loans and preferred equity interests, in each case with a focus on investments intended to finance development or redevelopment opportunities. The Company may also invest in debt and derivative securities related to real estate assets. The Company expects that a majority of its investments by value will be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly owned by, the Sponsor, by its affiliates or by real estate investment programs sponsored by it.

The Company has nodoes not have any employees. The Company retains the Advisor to manage its affairs on a day-to-day basis. Orchard Securities, LLC (the ‘‘Dealer Manager’’), a third party not affiliated with the Company, the Sponsor or the Advisor, served as the dealer manager of the Offering until their termination on March 31, 2017 as a result of the termination of the Offering. The Advisor is an affiliate of the Sponsor and will receivereceives compensation and fees for services related to the investment and management of the Company’s assets. The Advisor has certain affiliates which may manage the properties the Company acquires. However, the Company may also contract with other unaffiliated third-party property managers.

The Company’s Common Shares are not currently listed on a 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 would be in the best interest of its stockholders. The Company does not intend to list its Common Shares at this time. The Company does not anticipate that there would be any market for its Common Shares until they are listed for trading. In the event the Company does not begin the process of achieving a liquidity event prior to March 31, 2022, which is the fifth anniversary of the termination of its Offering, its charter requires either (a) an amendment to the Company’s charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of its portfolio.

Noncontrolling Interests in Consolidated Subsidiaries

Noncontrolling interests in consolidated subsidiaries include ownership interests in the Williamsburg Moxy Hotel Joint Venture with Lightstone Value Plus REIT III, Inc (“Lightstone REIT III”), a real estate investment trust also sponsored by the Company’s Sponsor and a related party. See Note 3 for additional information.

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

The accompanying 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 the Lightstone Income TrustREIT IV and Subsidiaries have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (‘‘GAAP’’).GAAP. 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 debt investments and securities, the valuation of the investment in related party and revenue recognition.securities. 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, 2020 included herein has been derived from the consolidated balance sheet included in the Company’s Annual Report on Form 10-K.

The unaudited statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Lightstone Income TrustREIT IV and Subsidiaries (over which the Company exercises financial and operating control). All inter-company accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary.

Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash and other assets, the Williamsburg Mortgage and accounts payable, accrued expenses and other liabilities approximate their fair values because of the short maturity of these instruments. The carrying amount of the Moxy Construction Loan approximates fair value because its interest rate is variable and reflective of market rates.

Reclassifications

New Accounting PronouncementsCertain prior period amounts have been reclassified to conform to the current year presentation.

COVID-19 Pandemic

In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance

The World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that clarifies the definition of a business and assists in the evaluation of whether a transaction will be accounted for as an acquisition of an asset or as a business combination. The guidance provides a test to determine when a set of assets and activities acquired is not a business. When substantially alltime many of the fair valuepreviously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets,U.S. economy for the set isforeseeable future.

To-date, the COVID-19 pandemic has not a business. Under the updated guidance, an acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and associated transaction costs will be capitalized rather than expensed as incurred. Additionally, assets acquired, liabilities assumed, andhad any noncontrolling interest will be measured at their relative fair values. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted. This guidance will not have a materialsignificant impact on the Company’s consolidated financial statements.

In August 2016,Williamsburg Moxy Hotel development project. The Company’s other investment is its 33.3% membership interest in the FASB issued40 East End Ave. Joint Venture, which owns a luxury residential condominium project (the “40 East End Avenue Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project previously received its final temporary certificates of occupancy, or TCO, in March 2020 and through September 30, 2021, ten condominium units have been sold. The 40 East End Ave. Joint Venture has an accounting standards update which provides guidanceoutstanding loan on the classification40 East End Project (the “Condo Loan”) which is currently scheduled to mature on December 19, 2021. Because of certain cash receipts and cash payments in the statementimpact of cash flows, including those related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investees.  This guidance is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years.  The guidance must be adopted on a retrospective basis and must be applied to all periods presented, but may be applied prospectively if retrospective application would be impracticable.  This guidance will not have a material impactCOVID-19 pandemic on the Company’s consolidated financial statements.pace of condominium unit sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extend the maturity date of the Condo Loan. However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors. See Note 4 for additional information.

In June 2016, the FASB issued an accounting standards update which replaces the incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  The Company does not expect that this guidance will have a material impact on its consolidated financial statements.

In January 2016, the FASB issued an accounting standards update that eliminates the requirement for public business entities to disclose the method and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet and is effective for periods beginning after December 15, 2017 and early adoption is not permitted. This guidance will not have a material impact on the Company’s consolidated financial statements.

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

In May 2014,The extent to which the FASB issued an accounting standards update that provides for a single five-step model toCompany’s business may be applied toaffected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understandof which are highly uncertain and cannot be reasonably predicted. If the nature, amount, timing, and uncertainty of revenue and cash flows relating to customer contracts.  Companies have an option to use either a retrospective approachCOVID-19 pandemic or cumulativeits effect adjustment approach to implement the standard.  This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  The adoption of this standard will not have a material impact on the U.S. economy negatively impact the Williamsburg Moxy Hotel development project and/or investment in the 40 East End Ave. Joint Venture for an extended period, the Company’s consolidatedbusiness and financial statements.results could be materially and adversely impacted.

New Accounting Pronouncements

The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its current operations.

The entities listed 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, and is not considered to be the primary beneficiary of these entities. A summary of the Company’s investments in the unconsolidated affiliated real estate entities is as follows:

The Cove Joint Venture

On September 29, 2016,July 17, 2019, the Company, through its then wholly owned subsidiary, REIT CoveBedford Avenue Holdings LLC (“REIT Cove”), LSG Cove LLC (“LSG Cove”), an affiliateacquired four adjacent parcels of the Lightstone Group, LLC, the Company’s sponsor and a related party, and Maximus Cove Investor LLC (“Maximus”), an unrelated third partyland located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Buyer”“Williamsburg Land”), entered intofrom unaffiliated third parties, for an agreement of sale andaggregate purchase with an unrelated third party, RP Cove, L.L.C (the “Seller”), pursuant to which the Buyer would acquire the Seller’s membership interest in RP Maximus Cove, L.L.C. (the “Cove Joint Venture”) for approximately $255.0 million (the “Cove Transaction”). The Cove Joint Venture owns and operates The Cove at Tiburon (“the Cove”), a 281-unit, luxury waterfront multifamily rental property located in Tiburon, California. Prior to entering into the Cove Transaction, Maximus previously owned a separate noncontrolling interest in the Cove Joint Venture.

On January 31, 2017, REIT Cove entered into an Assignment and Assumption Agreement (the “Assignment”) with another of the Company’s wholly owned subsidiaries, REIT IV COVE LLC (“REIT IV Cove”) and REIT III COVE LLC (“REIT III Cove”), a subsidiary of the operating partnership of Lightstone Value Plus Real Estate Investment Trust III, Inc., a real estate investment trust also sponsored by the Company’s sponsor and a related party, and together with REIT IV Cove, collectively, the “Assignees”. Under the terms of the Assignment, the Assignees were assigned the rights and obligations of REIT Cove with respect to the Cove Transaction.

On January 31, 2017, REIT IV Cove, REIT III Cove, LSG Cove, and Maximus (the “Members”) completed the Cove Transaction for aggregate considerationprice of approximately $255.0$30.4 million, excluding closing and other acquisition related costs, on which consisted of $80 million of cashit is developing and $175 million of proceeds fromconstructing a loan from a financial institution to the Cove Joint Venture. The Company paid approximately $20.0 million for a 22.5% membership interest in the Cove Joint Venture.210-room branded hotel (the “Williamsburg Moxy Hotel”). In connection with the acquisition of the Williamsburg Land, the Company paidsimultaneously entered into a $16.0 million nonrecourse mortgage loan (the “Williamsburg Mortgage”) collateralized by the Advisor an acquisition fee of $573,750, equalWilliamsburg Land.

On August 5, 2021, the Company formed a joint venture (the “Williamsburg Moxy Hotel Joint Venture”) with Lightstone REIT III, pursuant to 1.0%which Lightstone REIT III acquired 25% of the Company’s pro-rata share of the contractual purchase price which has been included in investments in unconsolidated affiliated real estate entities on the consolidated balance sheets.

The Company’smembership interest in the CoveBedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to the initial acquisition, Lightstone REIT III made additional capital contributions to the Williamsburg Moxy Hotel Joint Venture of $2.9 million through September 30, 2021.

As a result, the Company and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. Additionally, the Company is a non-managing interest. the managing member of the Williamsburg Moxy Hotel Joint Venture and Lightstone REIT III has consent rights with respect to all major decisions.

The Company has determined that the CoveWilliamsburg Moxy Hotel Joint Venture is a variable interest entity (“VIE”) and because the Company exerts significant influence over but does not controlis the Coveprimary beneficiary.  As the Company is the member most closely associated with the Williamsburg Moxy Hotel Joint Venture it will accountand therefore has the power to direct the activities of the Williamsburg Moxy Hotel Joint Venture that most significantly impact its performance, the Company consolidates the operating results and financial condition of the Williamsburg Moxy Hotel Joint Venture and accounts for itsthe ownership interest in the Cove Joint Ventureof Lightstone REIT III as noncontrolling interests. Contributions are allocated in accordance with the equity method of accounting. All distributions of earnings from the Cove Joint Venture will be made on a pro rata basis in proportion to each Members’ equity interestinvestor’s ownership percentage. Any distributions in excess of earnings from the Cove Joint Venture will be made to the Members pursuant to the terms of the Cove Joint Venture’s operating agreement. An affiliate of Maximus is the asset manager of The Cove and receives certain fees as defined in the Property Management Agreement for the management of The Cove. The Company commenced recording its allocated portion of profit or lossProfit and cash distributions beginning asare allocated in accordance with each investor’s ownership percentage.

As of January 31, 2017 with respectSeptember 30, 2021, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to its membershipconstruction in progress an aggregate of $61.0 million (including capitalized interest of 22.5%$2.3 million) consisting of acquisition and other costs attributable to the development of the Williamsburg Moxy Hotel. During the three and nine months ended September 30, 2021, the Company capitalized interest of approximately $0.6 million and $0.8 million, respectively, and during the three and nine months ended September 30, 2020, the Company capitalized interest of approximately $0.3 million and $0.9 million, respectively, in the Cove Joint Venture.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)

In connection with the closingdevelopment of the Cove Transaction, the CoveWilliamsburg Moxy Hotel.

Moxy Construction Loan

On August 5, 2021, Williamsburg Moxy Hotel Joint Venture simultaneously entered into a $175.0recourse construction loan facility for up to $77.0 million loan (the “Loan”“Moxy Construction Loan”) initially scheduled to mature on January 31, 2020February 5, 2024,  with two, one-yearsix-month extension options, subject to certain conditions. The Loan requires monthly interest payments through its maturity date.  TheMoxy Construction Loan bears interest at LiborLIBOR plus 3.85% through its initial maturity9.00%, subject to a 9.50% floor, with monthly interest-only payments based on a rate of 7.50% with the accrued and Libor plus 4.15% during each of the extension periods.unpaid interest due at maturity. The Moxy Construction Loan is collateralized by the Williamsburg Moxy Hotel. The CoveWilliamsburg Moxy Hotel Joint Venture received initial proceeds of $16.0 million under the Moxy Construction Loan and an affiliaterepaid the Williamsburg Mortgage ($16.0 million) in full. As of the Sponsor (the “Guarantor”) has guaranteed the Cove Joint Venture‘s obligation to paySeptember 30, 2021, the outstanding principal balance of the Moxy Construction Loan was $16.1 million (including $0.1 million of interest capitalized to principal) which is presented, net of deferred financing fees of $4.2 million, on the consolidated balance sheet and is classified as Mortgage Payable, net. As of September 30, 2021, the remaining availability under the Moxy Construction Loan was up to approximately $43.8 million (the “Loan Guarantee”). The Members have agreed to reimburse the Guarantor for any balance that may become due under the Loan Guarantee, of which the Company’s share is up to approximately $10.9$61.0 million.

Starting in 2013, the Cove has been undergoing an extensive refurbishment which is substantially completed. The Members intend to use remaining proceeds from the Loan and to invest additional capital if necessary to complete the remainder of the refurbishment. The Guarantor provided an additional guarantee of up to approximately $13.4 million (the “Refurbishment Guarantee”) to provide the necessary funds to complete the remaining renovations as defined in the Loan. The Members have agreed to reimburse the Guarantor for any balance that may become due under the Refurbishment Guarantee, of which the Company’s share is up to approximately $3.3 million.

The Company has determined that the fair value of both the Loan Guarantee and the Refurbishment Guarantee are immaterial.

The Cove Joint Venture Condensed Financial Information

The Company’s carrying value of its interest in the Cove Joint Venture differs from its share of member’s equity reported in the condensed balance sheet of the Cove Joint Venture due to the Company’s basis of its investment in excess of the historical net book value of the Cove Joint Venture. The Company’s additional basis allocated to depreciable assets is being recognized on a straight-line basis over the lives of the appropriate assets.

The following table represents the unaudited condensed income statement for the Cove Joint Venture:

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

The following table representsIn connection with the unaudited condensedMoxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture has provided certain completion and carry cost guarantees. Furthermore, in connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of loan fees and expenses and accrued $0.8 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheet for the Cove Joint Venture:sheets as of September 30, 2021.

40 East End Ave. Joint Venture

On March 31, 2017, the Company entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Company’s Sponsor, and a related party, (the “Seller”“40 East End Seller”), providing for the Company to acquire 33.3%approximately 33.3% of the 40 East End Seller’s approximate 100% membership interest in 40 East End Ave. Pref Member LLC ((the “40 East End Ave. Joint Venture”) for aggregate consideration of approximately $10.3$10.3 million. During the six months ended September 30, 2017, the Company contributed an additional $2.3 million to the 40 East End Ave. Joint Venture.

In accordance with the Company’s charter, a majority of the Company’s board of directors, including a majority of the Company’s independent directors not otherwise interested in the transaction, approved the 40 East End Ave. Transaction as fair and reasonable to the Company and on terms and conditions not less favorable to the Company than those available from unaffiliated third parties.

The Company’s ownership interest in the 40 East End Ave. Joint Venture is a non-managing interest. Because the Company exerts significant influence over but does not control the 40 East End Ave. Joint Venture, it will accountaccounts for its ownership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting. All contributions to and distributions of earnings from the 40 East End Ave. Joint Venture will beare made on a pro rata basis in proportion to each Member’smember’s equity interest percentage. Any distributions in excess of earnings from the 40 East End Ave. Joint Venture will beare made to the Membersmembers pursuant to the terms of its operating agreement. The Company will commencecommenced recording its allocated portion of earnings and cash distributions, if any, from the 40 East End Ave. Joint Venture beginning as of March 31, 2017 with respect to its membership interest of approximately 33.3%33.3% in the 40 East End Ave. Joint Venture. Additionally, Lightstone Value Plus Real Estate Investment Trust,REIT I, Inc. (“Lightstone I”), a real estate investment trust also sponsored by the Company’s Sponsor, has made $30.0$30.0 million of preferred equity contributions (the “Preferred Contributions”) to a subsidiary of the 40 East End Ave. Joint Venture, pursuant to an instrument that entitles Lightstone I to monthly preferred distributions at a rate of 12%12% per annum. No distributions may be paid to the members until the Preferred Contributions are redeemed in full.

The 40 East End Ave. Joint Venture, through affiliates, owns the 40 East End Avenue Project, a parcel of landluxury residential 29-unit condominium project located at the corner of 81^st81st Street and East End Avenue in the Upper East Side neighborhood of New York City on which it is constructing a luxury residential project consistingCity. The 40 East End Avenue Project received its final TCO in March 2020 and through September 30, 2021, ten of 29the condominium units. As of and for the nine months ended September 30,units have been sold.

On March 21, 2017, the 40 East End Ave. Joint Venture obtained financing from a financial institution of up to $85.3 million (the “40 East End Ave. Mortgage”) for the land acquisition and construction of the 40 East End Ave. Project. On December 19, 2019, the 40 East End Ave. Joint Venture refinanced the 40 East End Ave. Mortgage with a loan (the “Condo Loan”) from another financial institution of $95.2 million, of which $90.2 million was being developedinitially funded at closing and thereforethe remaining $5.0 million was subsequently advanced in April 2020. The Condo Loan is scheduled to mature on December 19, 2021, bears interest at LIBOR plus 2.45%, which is payable monthly, and requires principal payments to be made at certain prescribed amounts from proceeds from the sales of condominium units with any remaining outstanding balance due in full at maturity.

Pursuant to the terms of the Condo Loan, the 40 East End Ave. Joint Venture was required to make a principal paydown on December 19, 2020 if the then outstanding principal balance of the Condo Loan had no resultsnot been paid down to at least $81.0 million as of operations.that date. However, in lieu of a required principal paydown of $11.7 million, the lender agreed to accept an immediate principal paydown of $2.0 million, of which the Company’s proportionate share was approximately $0.7 million, which was paid on December 18, 2020, and allowed for the remaining required principal paydown of $9.7 million to be subsequently paid during the first quarter of 2021. The 40 East End Ave. Joint Venture used proceeds from the sale condominium units which closed during the first quarter of 2021 to make the remaining required principal paydown.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)

The following table represents40 East End Ave. Joint Venture was required to make another principal paydown of $8.0 million on June 19, 2021 since principal paydowns from additional condominium sales proceeds had not reduced the unaudited condensedoutstanding principal balance sheetof the Condo Loan to at least $73.0 million as of that date. However, the lender has agreed to rolling 30-day extensions, commencing on June 19, 2021, to provide further time for the 40 East End Ave. Joint Venture to close on the sale of additional condominiums units and apply the resulting proceeds to the required principal paydown. During the third quarter of 2021, the 40 East End Ave. Joint Venture closed on the sale of two additional condominium unit which generated sufficient proceeds to make the required principal paydown. As of September 30, 2021, the Condo Loan had an outstanding principal balance of $58.9 million.

The Condo Loan is scheduled to mature on December 19, 2021. Because of the impact of the COVID-19 pandemic on the pace of condominium unit sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extend the maturity date of the Condo Loan. However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors.

The Company’s Sponsor and its affiliates (collectively, the “40 East End Guarantors”) have provided certain guarantees with respect to the Condo Loan and the members have agreed to reimburse the 40 East End Guarantors for any balance that may become due under the guarantees (the “40 East End Guarantee”), of which the Company’s share is approximately 33.3%. The Company has determined that the fair value of its share of the 40 East End Guarantee is immaterial.

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

In connection with the closing of the Condo Loan , the 40 East End Ave. Joint Venture used a portion of the initial loan proceeds to (i) fully repay the then outstanding principal balance of $80.3 million plus accrued and unpaid interest of $0.2 million for the 40 East End Ave. Mortgage and (ii) redeem $9.5 million of Lightstone I’s Preferred Contributions.

The 40 East End Ave. Joint Venture subsequently redeemed an additional $3.5 million and $11.0 million of Preferred Contributions on December 26, 2019 and February 13, 2020, respectively, reducing Lightstone I’s Preferred Contributions to $6.0 million, which remains outstanding as of September 30, 2021.

Subsequent to the Company’s acquisition through September 30, 2021, it has made an aggregate of $5.7 million of additional capital contributions to the 40 East End Ave. Joint Venture, of which none were made during the nine months ended September 30, 2021. The Company’s investment in the 40 East Ave. Joint Venture was $10.8 million and $11.0 million as of September 30, 2021 and December 31, 2020, respectively.

The 40 East End Ave. Joint Venture Financial Information

The following table represents the condensed income statements for the 40 East End Ave. Joint Venture:

The following table represents the condensed balance sheets for the 40 East End Ave. Joint Venture:

The Cove Joint Venture

On January 31, 2017, the Company, through its wholly owned subsidiary, REIT IV COVE LLC along with LSG Cove LLC, an affiliate of the Sponsor and a related party, REIT III COVE LLC, a subsidiary of the operating partnership of Lightstone REIT III and Maximus Cove Investor LLC (“Maximus”), an unrelated third party, completed the acquisition of all of RP Cove, L.L.C’s membership interest in RP Maximus Cove, L.L.C. (the “Cove Joint Venture”) for aggregate consideration of approximately $255.0 million (the “Cove Transaction”). Excluding mortgage financing obtained by the Cove Joint Venture in connection with the Cove Transaction, the Company paid $20.0 million for a 22.5% non-managing membership interest in the Cove Joint Venture.

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

The Cove Joint Venture owned and operated The Cove at Tiburon (the “Cove”), a 281-unit, luxury waterfront multifamily residential property located in Tiburon, California from January 31, 2017 through February 12, 2020, As discussed below, the Company disposed of its 22.5% membership interest in the Cove Joint Venture on February 12, 2020.

The Company accounted for its 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting because it exercised significant influence, but did not exercise financial and operating control over this entity. For the period from January 1, 2020 through February 12, 2020, the Company’s share of the Cove Joint Venture’s loss of approximately $0.7 million was $0.2 million which is recorded as a loss from investments in unconsolidated affiliated real estate entities on the consolidated statements of operations.

On February 12, 2020, REIT IV Cove LLC, LSG Cove LLC and REIT III COVE LLC each redeemed their respective membership interests in the Cove Joint Venture for an aggregate redemption price of $87.6 million. In connection, with the redemption of the Company’s 22.5% membership interest in the Cove Joint Venture, it received proceeds of $21.9 million which resulted in the recognition of a gain on the disposition of unconsolidated affiliated real estate entity of $8.2 million during the first quarter of 2020.

As a result of the redemption of the Company’s 22.5% membership interest in the Cove Joint Venture on February 12, 2020, it no longer had an ownership interest in the Cove Joint Venture. During August 2020, the Company received $0.1 million of additional proceeds related to the redemption of its membership interest in the Cove Joint Venture and recognized a gain on the disposition of investment in unconsolidated affiliated real estate entity of $0.1 million during the third quarter of 2020. As a result, the Company recognized an aggregate gain on the disposition of investment in unconsolidated affiliated real estate entity of $8.3 million during the year ended December 31, 2020.

Earnings per ShareDistributions

On March 25, 2020, the Board of Directors determined to suspend regular monthly distributions for months ending after March 2020. 

Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of the Company’s performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, the Company’s ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. The Company had no potentially dilutive securities outstanding during the periods presented. Accordingly, earnings per share is calculated by dividing net income/(loss) by the weighted-average numbercannot assure that any future distributions will be made or that it will maintain any particular level of shares of common stock outstanding during the applicable period.distributions that it has previously established or may establish.

Subscription Receivable2020 Special Distribution

The subscription receivable relates to shares issued to the Company’s shareholders for which the proceeds have not yet been received by the Company as of the balance sheet date solely due to timing of transfers from the escrow agent holding the funds.

Distributions

Distribution Declaration

On November 9, 2017,December 21, 2020, the Board of Directors authorized and the Company declared a special distribution for each month during the three-month period ending March 31, 2018. The distributions will be calculated based on shareholders of record at a rate of $0.002191781$0.37 per day, and will equal a daily amount that, if paid each day for a 365-day period, would equal a 8.0% annualized rate based on acommon share price of $10.00 payable on or about the 15th day following each month end to stockholders of record at the closeas of business on the last dayDecember 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution of $3.2 million, which represented a portion of the prior month.proceeds generated from asset sales, was paid on or about January 15, 2021.

2021 Special Distribution

Distribution Payments

On August 15, 2017, September 15, 20179, 2021, the Board of Directors authorized and October 16, 2017, the Company paid distributions for the months ended July 31, 2017, August 31, 2017 anddeclared a special distribution of $0.215 per common share payable to stockholders of record as of September 30, 2017, respectively, totaling $1,801,111.2021 (the “2021 Special Distribution”). The distributions were paid in cash. The distributions were paid fromtotal 2021 Special Distribution of $1.8 million, which represented a combination of cash flows provided by operations ($853,784 or 47%) and offering proceeds ($947,327 or 53%).

Selling commissions and dealer manager fees were paid to the Dealer Manager, pursuant to various agreements that were terminated on March 31, 2017, in connection with the terminationportion of the Offering,proceeds generated from asset sales and other third-party offering costs such as registration fees, due diligence fees, marketing costs, and professional fees are accounted for as a reduction against additional paid-in capital as costs are incurred. Organizational costs are expensed as general and administrative costs. The following table represents the selling commissions and dealer manager and other offering costs for the periods indicated:was paid on or about October 15, 2021.

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

SinceShare Repurchase Program

The Company’s share repurchase program may provide its stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to the Company’s inception throughCompany, subject to restrictions.

On March 31, 2017 (the termination date25, 2020, the Board of Directors amended the Offering), it incurred approximately $7.6 million in selling commissionsshare repurchase program to remove stockholder notice requirements and dealer manager fees and $3.2 millionalso approved the suspension of other offering costsall redemptions effective immediately. On March 25, 2020, the Board of Directors determined to suspend the share repurchase program effective immediately.

Effective May 10, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s death or hardship and set the public offeringprice for all such purchases to 100% of the NAV per Share ($8.50 as of December 31, 2020).

Deaths that occurred subsequent to January 1, 2020 are eligible for consideration. Beginning January 1, 2022, 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 for consideration.

On an annual basis, the Company will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Redemption requests are expected to be processed on a quarterly basis and may be subject to pro ration if either type of redemption requests exceed the annual limitation.

For the nine months ended September 30, 2021 the Company repurchased 9,284 shares of common stock, pursuant to our share repurchase program at an average price per share of $8.50 per share.

Net Earnings per Common Share

Net earnings per Common Share on a basic and fully diluted basis is earnings divided by the weighted average number of shares of its common stock.stock outstanding. The Company does not have any potentially dilutive securities.

In addition to certain agreements with the Sponsor and Dealer Manager (see Note 5), theThe Company has various agreements, including an advisory agreement, with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated entities. As of September 30, 2021, the Company owed the Advisor and its affiliated entities $6,789, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. Additionally, as of December 31, 2020, the Advisor and its affiliated entities owed the Company $122, which was included in restricted cash and other assets on the consolidated balance sheets.

The following table represents the fees incurred associated with the payments to the Company’s Advisor for the periods indicated:

Investment in Related Party

105-109 W. 28^th Street Preferred Investment

On November 25, 2015,The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the Company entered into an agreement (the “Moxy Transaction”) with various related party entities that provides for the Company to make aggregate preferred equity contributions (the “105-109 W. 28^th Street Preferred Investment”) of up to $20.0 million in various affiliates of its Sponsor (the “Developer”) which owns a parcel of land located at 105-109 W. 28^th Street, New York, NY at which they are constructing a 343-room Marriott Moxy hotel. The 105-109 W. 28^th Street Preferred Investment is made pursuant to an instrument that entitles the Company to monthly preferred distributions at a rate of 12% per annum and was redeemable by the Company at the earlier of (i) the date that is two years from the datemutual consent of the Advisor and the Company’s final contributionindependent directors. Payments to the Advisor or (ii)its affiliates may include asset acquisition fees and the third anniversaryreimbursement of 105-109 W. 28^th Street Preferred Investment.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 have requested redemption or a restructuringreimburse the Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the agreement prior toCompany’s assets, it may pay the acceptance of any construction financing, which was obtained in December 2016. On September 30, 2016, the Company and the Developer amended the Moxy Transaction so that the Company’s contributions would become redeemable on the fifth anniversary of the Moxy Transaction. The 105-109 W. 28^th Street Preferred Investment is classified asAdvisor or its affiliates a held-to-maturity security and recorded at cost.disposition commission.

On August 30, 2016, the Company and the Developer amended the Moxy Transaction so that Company’s total aggregate contributions under the 105-109 W. 28^th Street Preferred Investment would increase by $17.0 million to $37.0 million.

As of both September 30, 2017 and December 31, 2016, the 105-109 W. 28th Street Preferred Investment had an outstanding balance of $37.0 million, which is classified as an investment in related party on the consolidated balance sheets.  During the three and nine months ended September 30, 2017, the Company recorded $1,134,667 and $3,367,000, respectively, and during the three and nine months ended September 30, 2016, the Company recorded $600,366 and $1,103,133, respectively, of investment income related to the 105-109 W. 28^th Street Preferred Investment. The Company’s Advisor elected to waive the acquisition fee associated with this transaction.​

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

Subordinated Advances – Related Party

On March 18, 2016, the Company and its Sponsor entered into the Subordinated Agreement, a subordinated unsecured loan agreement, (the “Subordinated Agreement”) pursuant to which the Sponsor had committed to make a significant investment in the Companymade aggregate principal advances of up to $36.0$12.6 million which is equivalent to 12.0%through March 31, 2017 (the termination date of the $300.0 million maximum offering amount of Common Shares.Offering). The outstanding principal advances under the Subordinated Agreement (the “Subordinated Advances”) will bear interest at a rate of 1.48%1.48%, which was equal to the mid-term applicable U.S. federal rate as of March 2016. Interest will retroactively accrue on the outstanding advances under the Subordinated Agreement back to the date of each quarterly draw, but no interest or outstanding advances will beprincipal is due andor payable to the Sponsor until holders of the Company’s Common Shares have received liquidation distributions equal to their respective net investments (defined as $10.00 per Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments.

Distributions in connection with a liquidation of the Company initially will be made to holders of its Common Shares until holders of its Common Shares have received liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments. Thereafter, only if additional liquidating distributions are available, the Company will be obligated to repay the outstanding principal advances under the Subordinated Agreement and related accrued interest to the Sponsor, as described in the Subordinated Agreement. In the event that additional liquidation distributions are available after the Company repays its holders of common stock their respective net investments plus their 8% return on investment and then the outstanding principal advances under the Subordinated Agreement and accrued interest to its Sponsor, such additional distributions will be paid to holders of its Common Shares and its Sponsor: 85.0% of the aggregate amount will be payable to holders of the Company’s Common Shares and the remaining 15.0% will be payable to the Sponsor.

The Subordinated Advancesprincipal advances and itsthe related interest are subordinate to all of the Company’s obligations as well as to the holders of its Common Shares in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0% and only potentially payable in the event of a liquidation of the Company.

In connection with the termination of the Offering, on March 31, 2017, the Company and the Sponsor simultaneously terminated the Subordinated Agreement. As a result of the termination, the Sponsor is no longer obligated to make any additional principal advances to the Company. Interest will continue to accrue on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will be made according to the terms of the Subordinated Agreement disclosed above.

As of both September 30, 2017,2021 and December 31, 2020, an aggregate of approximately $12.6$12.6 million of Subordinated Advances hadprincipal advances have been funded, which along with the related accrued interest of $211,694,$959,510 and $819,679, respectively, are classified as Subordinated Advances – Related Party, a liability on the consolidated balance sheets. During the three and nine months ended September 30, 2017,2021, the Company accrued $47,122$47,123 and $139,831,$139,831, respectively, of interest on the Subordinated Advances and during the three and nine months ended September 30, 2016,2020, the Company accrued $21,138$46,994 and $32,787,$139,960, respectively, of interest on the Subordinated Advances.

In connection with the termination of the Offering, on March 31, 2017, the Company and the Sponsor terminated the Subordinated Agreement. As a result of the termination, the Sponsor is no longer obligated to make Subordinated Advances to the Company. Interest will continue to accrue on the aggregate Subordinated Advances and repayment, if any, of the Subordinated Advances and accrued interest will be made according to the terms of the Subordinated Agreement disclosed above.principal advances.