The Lightstone Group

Businesses and Affiliates

The Lightstone Group operates through a group of subsidiaries and investment vehicles, and it owns approximately 300 retail, office industrial and residential properties in 20 states. The company's mall holdings are managed by Paragon Outlets in Baltimore, Md. The residential properties are managed in the Lakewood, NJ, office by The Lightstone Group. The company's New York City developments are managed from its New York, N.Y., headquarters.

Lightstone Securities - REITs

In 2006, Lightstone group debuted a $300 million real-estate investment trust (REIT), which allowed Lightstone to raise money from outside investors for the first time. The non-traded Lightstone Value Plus REIT invested in a mix of office, retail and other commercial properties, and by the end of 2009 was fully invested in a total of 30 properties. By the end of 2011, Lightstone Value Plus I was the 18th largest non-traded U.S. REIT and had generated a dividend stream of 7%. According to the fund's 2011 annual report filed with the [U.S. Securities and Exchange Commission], Lightstone Value Plus I reported net asset value (NAV) was $10.65 per share. In the summer of 2010, the company went to market again offering its second, non-traded REIT (Lightstone Value Plus II), which is following a similar investment strategy to its debut fund, committing capital to the hospitality, retail, multi-family and commercial segments, according to documents filed with the SEC. The Lightstone Group is a significant investor in the fund, committing 10% of the capital raised by the REIT and paying 100% of the front-end costs of the offering. By December 2011, LVPII had invested in several properties, including the Crowne Plaza Boston hotel, Saxon Hall Rego Park, TownePlace New Orleans Metairie hotel in New Orleans.

Beacon Management

Beacon Management is a Lightstone subsidiary, which manages the company's residential apartment business. The division was recently reorganized bringing all of Lightstone’s apartment business, which comprises roughly a third of the overall company, under one umbrella.

Paragon Outlets

Baltimore, Md.-based Paragon Outlets is an affiliate of Lightstone, and manages the company's retail acquisitions and development.

Deals, Early-Mid 2000s

During the early years of Lightstone Group, the company primarily focused on the residential housing market, a strategy that it pursued through the 1990s. Yet the rapid increase of home prices from 1997 through the market peak in 2006, led Lightstone Group to begin to seek new deals outside of the U.S. residential housing market. In 2000, Lightstone began acquiring retail properties — first strip centers, then malls.

One of the earliest deals in that market was the 2002 acquisition of a Puerto Rico-based outlet mall from Prime Retail, a Chicago-based real estate investment trust, for $36.5 million. This purchase of Prime Outlets opened the door to what would become Lightstone Group's most talked about acquisition to date.

In 2003, the company inked the deal that would later become one of the company's most acknowledged successes – the purchase of the entire Prime Retail portfolio for about $638 million, adding 37 properties (from places such as Pleasant Prairie, Wis., Odessa, Mo., and Gaffney, S.C.) to the Lightstone portfolio. The acquisition made Lightstone the second-largest owner of outlet malls in the country after Chelsea Premium Outlets, owned by Simon Property Group Inc., the nation's largest mall owner.

Lightstone Group continued to add to this portfolio until 2010, when Prime Retail was acquired by Simon Property Group for a total of $2.3 billion – $700 million in cash and the assumption of $1.6 billion in debt. The price tag reflected a significant increase from what Lightstone paid for Prime in 2003: $115 million in cash and the assumption of $523 million in debt. After paying its 40% partner in Prime, fees and other expenses, Lightstone made about $450 million on the sale.

In 2006, Lightstone Group again began re-evaluating the housing sector, and the company made some high-profile deals in the affordable housing sector. In May 2006, Lightstone contracted to buy 19 Detroit-area multifamily rental complexes from REIT Home Properties for $200 million, and later that year Lightstone acquired a series of Birmingham, Ala., apartments for a total of $303 million.

Deals, Late 2000s

By late 2007, when the United States housing bubble burst and home prices began to collapse, Lightstone Group again broadened its strategy, entering the hospitality sector. Lightstone acquired Extended Stay Hotels for $8.1 billion.

But by late 2007 and early 2008, Lightstone, like many leveraged buyout and real estate companies, began feeling the ill effects of the subprime mortgage crisis and the ensuing Global Financial Crisis of the late-2000s. The hospitality sector saw room occupancy in the extended-stay hotel sector, which is aimed at construction workers and other employees on temporary assignments, showing signs of decline by the end of 2007. On June 15, 2009, Extended Stay Hotels filed for bankruptcy protection.

In October 2008, Lightstone turned over two malls to the lender; Macon, Ga., and Burlington Square, N.C. Shortly after defaulting on these two malls, four additional malls were turned over to the lender Martinsburg Mall in Martinsburg, W. Va.; Mount Berry Square Mall in Rome, Ga.; Shenango Valley Mall in Hermitage, Pa.; and Bradley Square Mall in Cleveland, Tenn.

Throughout 2008, 2009 and 2010, Lightstone Group retrenched and focused its efforts on adding value to existing properties through renovation, and securing long-term leases with strong retailers.

Recent Deals

By the end of 2010, with more than $350 million from Lightstone's non-traded REITs and private funds, and “a big war chest” from the Prime sale, the company geared up for an active 2011:

In February, Lightstone bought Festival Bay Mall in Orlando, Fla., for $25 million, partnering with Paragon Outlet Partners. One month later, in March, it was Crown Plaza Boston North Shore, for $10 million, considered “a big score in a tough market.”

In May, the firm broke ground on a new outlet center in Grand Prairie, Tx. The mall, which is scheduled to open August 2012, is fully leased and includes stores such as Bloomingdale’s The Outlet Store, Saks Fifth Avenue Off 5th, J Crew, Michael Kors and DKNY.

In June, Lightstone purchased close to 24 acres in southwest Las Vegas Valley for $4.4 million – its prior owners had bought it just four years before for more than $30 million. And the following month, in July, the firm purchased a senior position in Holiday Inn Express Hotel & Suites Tower Center, East Brunswick, N.J., for $5.6 million. Next, Lightstone purchased the senior mortgage of Marriott Courtyard in Parsippany, N.J., for $9.2 million, as well as the Plaza at DuPaul retail center in St. Louis, Mo., for $19.8 million.

In August, the company acquired a residential development site in Long Island City, N.Y., for $19.3 million, with intentions to build out more than 200 apartment units, as part of the company's efforts to grow its presence in the New York City market.

In May 2012, Lightstone through its affiliate Paragon Outlets broke ground on an upscale outlet mall in the California Bay Area, which is expected to be completed in November 2012.

Also in May 2012, Lightstone sold the Dakota Square Mall, in Minot, N.D., for $91.475 million to CBL & Associates Properties, Inc. Lightstone originally purchased the Minot shopping center in February 2005 for $55.1 million.