Exhibit            99.1

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            COMBINED FINANCIAL STATEMENTS            YEARS ENDED DECEMBER 31, 2007 AND 2006**

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**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            COMBINED FINANCIAL STATEMENTS            YEARS ENDED DECEMBER 31, 2007 AND 2006**

**TABLE OF            CONTENTS**

|                                                                                   |   |                                |                                |
|----------------------------------------------------------------------------------------|--------|-------------------------------------|-------------------------------------|
|                                                                                   |   | **Page                        No.** |
|                                                                                   |
| Independent                        Auditors’ Report                              |   |                                | 1                                   |
|                                                                                   |
| Combined                        Balance Sheets                                         |   |                                | 2                                   |
|                                                                                   |
| Combined                        Statements of Operations                               |   |                                | 3                                   |
|                                                                                   |
| Combined                        Statements of Changes in Members’ Equity Deficit |   |                                | 4                                   |
|                                                                                   |
| Combined                        Statements of Cash Flows                               |   |                                | 5                                   |
|                                                                                   |
| Notes                        to Combined Financial Statements                          |   |                                | 6 –                        18 |
|                                                                                   |
| Supplementary                        Information                                       |   |                                |                                |
|                                                                                   |
| Combined                        Balance Sheets                                         |   |                                | 20                                  |
|                                                                                   |
| Combined                        Statements of Operations                               |   |                                | 21                                  |

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**INDEPENDENT            AUDITORS’ REPORT**

To the            Members            Lightstone Member LLC, PRC Member LLC,            Lightstone Member II LLC and Lightstone Member III LLC            Lakewood, NJ 08701

We have audited            the accompanying combined balance sheets of Lightstone Member LLC, PRC Member LLC,            Lightstone Member II LLC and Lightstone Member III LLC (the “Companies”) as            of December 31, 2007 and 2006, and the related combined statements of operations,            changes in members’ equity deficit and cash flows for the years then ended. These            financial statements are the responsibility of the Companies’ management. Our            responsibility is to express an opinion on these financial statements based on our            audits.

We conducted our            audits in accordance with auditing standards of the Public Company Accounting Oversight            Board (United States). Those standards require that we plan and perform the audit to            obtain reasonable assurance about whether the financial statements are free from            material misstatement. The Companies are not required to have, nor were we engaged to            perform, an audit of internal control over financial reporting. Our audit included            consideration of internal control over financial reporting as a basis for designing            audit procedures that are appropriate in the circumstances, but not for the purpose of            expressing an opinion on the effectiveness of the Companies’ internal control            over financial reporting. Accordingly, we express no such opinion. An audit includes            examining, on a test basis, evidence supporting the amounts and disclosures in the            financial statements. An audit also includes assessing the accounting principles used            and significant estimates made by management, as well as evaluating the overall            financial statement presentation. We believe that our audits provide a reasonable basis            for our opinion.

In our opinion,            the combined financial statements referred to above present fairly, in all material            respects, the combined financial position of the Companies as of December 31, 2007 and            2006, and the combined results of operations and cash flows for the years then ended,            in conformity with accounting principles generally accepted in the United States of            America.

Our audits were            conducted for the purpose of forming an option on the basic financial statements taken            as a whole. The supplementary information shown on pages 20 and 21 is presented for            purposes of additional analysis and is not a required part of the basic financial            statements. Such information has been subject to the auditing procedures applied in the            audit of the basic financial statements and, in our opinion, is fairly stated in all            material respects in relation to the basic financial statements taken as a            whole.

/s/ The Schonbraun McCann Group,            LLP

Roseland, New Jersey            March 24, 2008

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**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLCCOMBINED BALANCE SHEETS            DECEMBER 31, 2007 AND 2006            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|                                                                                                                                                 |   |     |     |     |   |    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|----------|----------|--------|---------|--------|
|                                                                                                                                                 |   | **2007** |     | **2006** |   |
|                                                                                                                                                 |   |          |     |          |   |
| **ASSETS**                                                                                                                                           |
|                                                                                                                                                 |
| **Investments in Real                        Estate, net of accumulated depreciation of $28,787 (2007) and $18,698                        (2006)**   |   | $        | 235,595  |     | $      | 304,358 |   |
|                                                                                                                                                 |   |     |     |     |   |    |   |
| **Other                        Assets**                                                                                                              |   |     |     |     |   |    |   |
| Cash and cash                        equivalents                                                                                                     |   |     | 3,028    |     |   | 2,695   |   |
| Escrow                        deposits                                                                                                               |   |     | 17,177   |     |   | 13,863  |   |
| Rents and other                        receivables, net of allowance of $2,859 (2007) and $1,043 (2006)                                              |   |     | 7,307    |     |   | 7,255   |   |
| In place lease value,                        net of accumulated amortization of $11,745 (2007) and $9,320                        (2006)              |   |     | 6,409    |     |   | 9,256   |   |
| Acquired lease rights,                        net of accumulated amortization of $5,483 (2007) and $3,816                        (2006)              |   |     | 5,160    |     |   | 6,891   |   |
| Deferred financing and                        lease costs, net of accumulated amortization of $2,014 (2007) and $1,120                        (2006) |   |     | 2,505    |     |   | 1,766   |   |
| Prepaid                        expenses                                                                                                              |   |     | 968      |     |   | 981     |   |
|                                                                                                                                                 |   |          |          |     |        |         |   |
|                                                                                                                                                 |   |     |     |     |   |    |   |
|                                                                                                                                                 |   | $        | 278,149  |     | $      | 347,065 |   |
|                                                                                                                                                 |   |          |          |     |        |         |   |
|                                                                                                                                                 |   |     |     |     |   |    |   |
| **LIABILITIES AND                        MEMBERS’ EQUITY DEFICIT**                                                                             |
|                                                                                                                                                 |   |     |     |     |   |    |   |
| **Liabilities**                                                                                                                                      |   |     |     |     |   |    |   |
| Mortgage and other                        notes payable                                                                                              |   | $        | 306,131  |     | $      | 308,092 |   |
| Notes payable –                        related party                                                                                           |   |     | 49,994   |     |   | 31,670  |   |
| Interest                        payable                                                                                                              |   |     | 1,265    |     |   | 1,288   |   |
| Deferred                        revenue                                                                                                              |   |     | 3,343    |     |   | 1,465   |   |
| Accounts payable,                        accrued expenses and other liabilities                                                                      |   |     | 6,928    |     |   | 6,817   |   |
| Acquired lease                        obligation, net of accumulated amortization of $7,241 (2007) and $6,105                        (2006)          |   |     | 3,768    |     |   | 5,534   |   |
| Due to                        affiliates                                                                                                             |   |     | 13,974   |     |   | 9,506   |   |
|                                                                                                                                                 |   |          |          |     |        |         |   |
|                                                                                                                                                 |   |     | 385,403  |     |   | 364,372 |   |
|                                                                                                                                                 |
| **Commitment and                        Contingencies**                                                                                              |   |     |     |     |   |    |   |
|                                                                                                                                                 |   |     |     |     |   |    |   |
| **Members’                        Deficit**                                                                                                    |   |     | (107,254 | )        |   | (17,307 | )      |
|                                                                                                                                                 |   |          |          |     |        |         |   |
|                                                                                                                                                 |   |     |     |     |   |    |   |
|                                                                                                                                                 |   | $        | 278,149  |     | $      | 347,065 |   |
|                                                                                                                                                 |   |          |          |     |        |         |   |

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

2

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**LIGHTSTONE            MEMBER LLC****PRC MEMBER LLC****LIGHTSTONE MEMBER II LLC****LIGHTSTONE MEMBER III LLC****COMBINED STATEMENTS OF OPERATIONS****YEARS ENDED DECEMBER 31, 2007 and 2006****(Dollar amounts in thousands)**

|   |
|--------|
|        |

|                                                                                                                                                     |   |     |    |     |   |    |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|---------|--------|
|                                                                                                                                                     |   | **2007** |    | **2006** |   |
|                                                                                                                                                     |   |          |    |          |   |
|                                                                                                                                                     |
| **Revenues**                                                                                                                                             |   |     |    |     |   |    |   |
| Rental                                                                                                                                                   |   | $        | 35,660  |     | $      | 40,959  |   |
| Tenant                        reimbursements                                                                                                             |   |     | 19,449  |     |   | 16,587  |   |
| Interest and other                        income                                                                                                         |   |     | 4,704   |     |   | 1,039   |   |
|                                                                                                                                                     |   |          |         |     |        |         |   |
|                                                                                                                                                     |   |     | 59,813  |     |   | 58,585  |   |
|                                                                                                                                                     |   |          |         |     |        |         |   |
|                                                                                                                                                     |   |     |    |     |   |    |   |
| **Expenses**                                                                                                                                             |   |     |    |     |   |    |   |
| Rental property                        operating and maintenance expenses                                                                                |   |     | 24,591  |     |   | 23,311  |   |
| Real estate                        taxes                                                                                                                 |   |     | 5,352   |     |   | 4,974   |   |
| Provision for losses on                        real estate                                                                                               |   |     | 75,994  |     |   | — |   |
| Interest, including                        amortization of $212 in 2007 and $330 in 2006 and prepayment penalty of                        $1,050 in 2006 |   |     | 25,144  |     |   | 25,112  |   |
| Depreciation and                        amortization                                                                                                     |   |     | 14,108  |     |   | 16,102  |   |
| General and                        administrative                                                                                                        |   |     | 4,395   |     |   | 3,017   |   |
|                                                                                                                                                     |   |          |         |     |        |         |   |
|                                                                                                                                                     |   |     | 149,584 |     |   | 72,516  |   |
|                                                                                                                                                     |   |          |         |     |        |         |   |
|                                                                                                                                                     |   |     |    |     |   |    |   |
| **Net                        Loss**                                                                                                                      |   | $        | (89,771 | )        | $      | (13,931 | )      |
|                                                                                                                                                     |   |          |         |     |        |         |   |

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

3

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**LIGHTSTONE            MEMBER LLC****PRC MEMBER LLC****LIGHTSTONE MEMBER II LLC****LIGHTSTONE MEMBER III LLC****COMBINED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY            DEFICIT****YEARS ENDED DECEMBER 31, 2007 AND 2006****(Dollar amounts in thousands)**

|   |
|--------|
|        |

|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
|---------------------------------------------------------|--------|----------------------------------|---------|---------------------------|--------|--------------------------------------------------------------|--------|---------------------|---------|-----------|--------|---------|--------|--------|----------|--------|
|                                                    |   | **Presidential****Realty Corp.** |    | **David****Lichtenstein** |   | **Cedar                        Asset****Management,****LLC** |   | **Harold****Rubin** |    | **Total** |   |
|                                                    |   |                                  |    |                           |   |                                                              |   |                     |    |           |   |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |
| **Balance at                        January 1, 2006**   |   | $                                | (1,598  | )                         | $      | 533                                                          |   | $                   | (55     | )         | $      | 114     |   | $      | (1,006   | )      |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
| Contributions                                           |   |                             | — |                      |   | —                                                      |   |                | — |      |   | — |   |   | —  |   |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
| Distributions                                           |   |                             | (652    | )                         |   | (1,705                                                       | )      |                | (2      | )         |   | (12     | )      |   | (2,370   | )      |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
| Net loss                                                |   |                             | (4,040  | )                         |   | (9,782                                                       | )      |                | (79     | )         |   | (30     | )      |   | (13,931  | )      |
|                                                    |   |                                  |         |                      |        |                                                              |   |                     |         |      |        |         |   |        |          |   |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
| **Balance at                        December 31, 2006** |   |                             | (6,290  | )                         |   | (10,954                                                      | )      |                | (136    | )         |   | 72      |   |   | (17,307  | )      |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
| Distributions                                           |   |                             | (160    | )                         |   | —                                                      |   |                | — |      |   | (16     | )      |   | (176     | )      |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
| Net loss                                                |   |                             | (26,034 | )                         |   | (63,554                                                      | )      |                | (131    | )         |   | (52     | )      |   | (89,771  | )      |
|                                                    |   |                                  |         |                      |        |                                                              |   |                     |         |      |        |         |   |        |          |   |
|                                                    |   |                             |    |                      |   |                                                         |   |                |    |      |   |    |   |   |     |   |
| **Balance at                        December 31, 2007** |   | $                                | (32,484 | )                         | $      | (74,508                                                      | )      | $                   | (267    | )         | $      | 4       |   | $      | (107,254 | )      |
|                                                    |   |                                  |         |                      |        |                                                              |   |                     |         |      |        |         |   |        |          |   |

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

4

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**LIGHTSTONE            MEMBER LLC****PRC MEMBER LLC****LIGHTSTONE MEMBER II LLC****LIGHTSTONE MEMBER III LLC****COMBINED STATEMENTS OF CASH FLOWS****YEARS ENDED DECEMBER 31, 2007 and 2006****Increase (decrease) in cash and cash equivalents****(Dollar amounts in thousands)**

|   |
|--------|
|        |

|                                                                                      |   |     |    |     |   |     |   |
|-------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|----------|--------|
|                                                                                      |   | **2007** |    | **2006** |   |
|                                                                                      |   |          |    |          |   |
| **Cash Flows From                        Operating Activities:**                          |   |     |    |     |   |     |   |
| Net loss                                                                                  |   | $        | (89,771 | )        | $      | (13,931  | )      |
| **Adjustments to                        reconcile net loss to net cash**                  |   |     |    |     |   |     |   |
| **provided by                        operating activities:**                              |   |     |    |     |   |     |   |
| Depreciation and                        amortization                                      |   |     | 14,320  |     |   | 16,432   |   |
| Provision for losses on                        real estate                                |   |     | 75,994  |     |   | —  |   |
| Net change in revenue                        related to acquired lease rights/obligations |   |     | (35     | )        |   | (1,864   | )      |
| Bad debt                        allowance                                                 |   |     | 1,816   |     |   | 725      |   |
| Rents and other                        receivables                                        |   |     | (1,868  | )        |   | (1,536   | )      |
| Prepaid                        expenses                                                   |   |     | 13      |     |   | (86      | )      |
| Accounts payable,                        accrued expenses and other liabilities           |   |     | 111     |     |   | 1,632    |   |
| Interest expense                        payable                                           |   |     | (23     | )        |   | (209     | )      |
| Due to affiliates,                        net                                             |   |     | 4,468   |     |   | 5,191    |   |
| Deferred leasing                        costs                                             |   |     | (2,095  | )        |   | (1,112   | )      |
| Deferred                        revenue                                                   |   |     | 1,878   |     |   | (164     | )      |
|                                                                                      |   |          |         |     |        |          |   |
| **Net cash provided by                        operating activities**                      |   |     | 4,808   |     |   | 5,078    |   |
|                                                                                      |   |          |         |     |        |          |   |
|                                                                                      |   |     |    |     |   |     |   |
| **Cash Flows Used                        In Investing Activities:**                       |   |     |    |     |   |     |   |
| Escrow deposits,                        net                                               |   |     | (3,314  | )        |   | 1,382    |   |
| Additions to                        properties                                            |   |     | (17,320 | )        |   | (12,203  | )      |
|                                                                                      |   |          |         |     |        |          |   |
| **Net cash used in                        investing activities**                          |   |     | (20,634 | )        |   | (10,821  | )      |
|                                                                                      |   |          |         |     |        |          |   |
|                                                                                      |   |     |    |     |   |     |   |
| **Cash Flows From                        Financing Activities:**                          |   |     |    |     |   |     |   |
| Proceeds from mortgage                        notes payable                               |   |     | — |     |   | 110,500  |   |
| Repayment of mortgage                        note payable                                 |   |     | (1,961  | )        |   | (105,758 | )      |
| Proceeds from notes                        payable – related party                  |   |     | 18,324  |     |   | 3,470    |   |
| Deferred financing                        costs                                           |   |     | (28     | )        |   | (892     | )      |
| Capital                        distributions                                              |   |     | (176    | )        |   | (2,370   | )      |
|                                                                                      |   |          |         |     |        |          |   |
| **Net cash provided by                        financing activities**                      |   |     | 16,159  |     |   | 4,950    |   |
|                                                                                      |   |          |         |     |        |          |   |
|                                                                                      |   |     |    |     |   |     |   |
| **Net change in                        cash and cash equivalents**                        |   |     | 333     |     |   | (793     | )      |
|                                                                                      |   |     |    |     |   |     |   |
| **Cash and cash                        equivalents, beginning of year**                   |   |     | 2,695   |     |   | 3,488    |   |
|                                                                                      |   |          |         |     |        |          |   |
|                                                                                      |   |     |    |     |   |     |   |
| **Cash and cash                        equivalents, end of year**                         |   | $        | 3,028   |     | $      | 2,695    |   |
|                                                                                      |   |          |         |     |        |          |   |
|                                                                                      |   |     |    |     |   |     |   |
|                                                                                      |   |     |    |     |   |     |   |
| **Supplemental                        Disclosures of Cash Flow Information:**             |   |     |    |     |   |     |   |
| Cash paid during the                        year ended for:                               |   |     |    |     |   |     |   |
| Interest                                                                                  |   | $        | 24,954  |     | $      | 23,942   |   |
|                                                                                      |   |          |         |     |        |          |   |
| Prepayment                        penalty                                                 |   | $        | — |     | $      | 1,050    |   |
|                                                                                      |   |          |         |     |        |          |   |

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

5

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**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLCNOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|---------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **1.** | **ORGANIZATION AND                        DESCRIPTION OF BUSINESS** |
|   |                                                                |
|   | **a.**                                                              | **Formation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                | Lightstone Member LLC                        (“Lightstone”) and PRC Member LLC (“PRC”) were both                        organized under the laws of the Commonwealth of Delaware on September 10,                        2004. Lightstone Member II LLC (“Lightstone II”) and Lightstone                        Member III LLC (“Lightstone III”) were formed under the laws of                        Commonwealth of Delaware on December 1, 2004, and June 30, 2005,                        respectively. They are collectively the “Entities” or the                        “Companies”. The purpose of the Companies is to acquire, own,                        develop and manage retail malls. The Companies own the following retail                        malls as of December 31, 2007: |

|                                         |   |                                    |   |                                               |   |          |          |                                                  |   |   |
|----------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------------------|--------|---------------|---------------|-------------------------------------------------------|--------|--------|
| **Property                        Name**     |   | **Location**                            |   | **Approximate                        Square Feet** |   | **Ownership** |          | **Occupancy at                        Dec. 31, 2007** |
|                                              |   |                                         |   |                                                    |   |               |          |                                                       |
|                                         |   |                                    |   |                                               |   |          |          |                                                  |
| Martinsburg                        Mall      |   | Martinsburg,                        WV  |   | 552,000                                            |   |          | Fee           |                                                  | 97     | %      |
| Mt. Berry Square                        Mall |   | Rome, GA                                |   | 478,000                                            |   |          | Fee           |                                                  | 91     | %      |
| Bradley Square                        Mall   |   | Cleveland,                        TN    |   | 385,000                                            |   |          | Fee           |                                                  | 92     | %      |
| W. Manchester                        Mall    |   | York, PA                                |   | 733,000                                            |   |          | Fee           |                                                  | 88     | %      |
| Shenango Valley                        Mall  |   | Hermitage,                        PA    |   | 508,000                                            |   |          | Leasehold     |                                                  | 99     | %      |
| Shawnee                        Mall          |   | Shawnee,                        OK      |   | 444,000                                            |   |          | Fee           |                                                  | 64     | %      |
| Brazos Outlet                        Center  |   | Lake Jackson,                        TX |   | 698,000                                            |   |          | Fee           |                                                  | 90     | %      |
| Burlington                        Mall       |   | Burlington,                        NC   |   | 412,000                                            |   |          | Fee           |                                                  | 58     | %      |
| Macon                        Mall            |   | Macon, GA                               |   | 1,446,000                                          |   |          | Fee/Leasehold |                                                  | 81     | %      |
|                                         |   |                                    |   |                                                    |   |          |          |                                                  |   |   |
|                                         |   |                                    |   | 5,656,000                                          |   |          |          |                                                  |   |   |
|                                         |   |                                    |   |                                                    |   |          |          |                                                  |   |   |

|   |                                                                                                                                                     |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | As                        of December 31, 2007, members of the Companies and their respective                        percentage interests are as follow: |

|                                                        |   |                                           |   |   |
|-------------------------------------------------------------|--------|------------------------------------------------|--------|--------|
| **Lightstone and                        PRC**               |   | **Ownership                        Interests** |
|                                                             |   |                                           |        |
|                                                        |   |                                           |   |
| Presidential Realty                        Corp.            |   | 29                                             | %      |
| David Lichtenstein                        (Managing Member) |   | 70                                             | %      |
| Cedar Asset                        Management, LLC          |   | 1                                              | %      |

|                                                        |   |   |                                           |   |
|-------------------------------------------------------------|--------|--------|------------------------------------------------|--------|
| **Lightstone                        II**                    |   |   | **Ownership                        Interests** |
|                                                             |   |   |                                                |
| Presidential Realty                        Corp.            |   | 29     | %                                              |
| David Lichtenstein                        (Managing Member) |   | 70     | %                                              |
| Harold                        Rubin                         |   | 1      | %                                              |

6

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**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                            |                                             |
|--------|---------------------------------------------------------------------------------|--------------------------------------------------|
| **1.** | **ORGANIZATION AND                        DESCRIPTION OF BUSINESS (Continued)** |
|   |                                                                            |                                             |
|   | **a.**                                                                          | **Formation                        (continued)** |

|                                                        |   |                                           |   |
|-------------------------------------------------------------|--------|------------------------------------------------|--------|
| **Lightstone                        III**                   |   | **Ownership                        Interests** |
|                                                             |   |                                                |
|                                                        |   |                                           |
| Presidential Realty                        Corp.            | 29     | %                                              |
| David Lichtenstein                        (Managing Member) | 71     | %                                              |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **b.** | **Cash                        Distribution, Profit and Loss Allocations**                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | The                        Companies shall continue to operate until dissolved per the operating                        agreements. The liability of each of the members is limited to the amount                        of capital contributed.                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | Distributions of                        proceeds shall be distributed to the members at the discretion of the                        Managing Member, subject to the terms and conditions of all indebtedness of                        the Companies; provided that cash flow shall be distributed not less than                        annually and capital proceeds shall be distributed not later than                        forty-five days from the closing of the transaction giving rise to such                        capital proceeds. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | Distributions of                        cash flow shall be made to the members as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|   |   |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (a)                                                                                     | First, to the Managing                        Member and its affiliate, Cedar Asset Management, LLC (or Harold Rubin),                        until the Managing Member and its affiliate (or Harold Rubin) have received                        an aggregate amount equal to an accrued return of 11% per annum                        (“Preferred Return”) on the Managing Member’s and                        affiliate’s unreturned capital contribution. |
|   |   |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (b)                                                                                     | Then, to the members                        in accordance with their respective ownership interests.                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | Capital proceeds                        shall be distributed to the members as follows: |
|   |   |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (a)                                                                                     | First, to the Managing                        Member and its affiliates, until the Managing Member and its affiliates                        have received an aggregate amount equal to an accrued return of 11% per                        annum on the Managing Member’s and its affiliates’ unreturned                        capital contribution.                                                                                                                    |
|   |   |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (b)                                                                                     | Then, to the Managing                        Member and its affiliates, until the Managing Member and its affiliates                        have received an aggregate amount equal the Managing Member’s and its                        affiliates’ capital contribution.                                                                                                                                                                                                |
|   |   |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (c)                                                                                     | Then, to the members in                        accordance with their respective ownership interests.                                                                                                                                                                                                                                                                                                                                                                                  |

7

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|---------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **1.** | **ORGANIZATION AND                        DESCRIPTION OF BUSINESS (Continued)** |
|   |                                                                            |
|   | **c.**                                                                          | **Allocation of                        Profits and Losses**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                            | For                        financial reporting purposes, income is allocated based upon the cash flow                        distribution formula above. Losses are allocated pro-rata based upon                        ownership interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **2.** | **SUMMARY OF                        SIGNIFICANT ACCOUNTING POLICIES**           |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | **a.**                                                                          | **Basis of                        Accounting**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                            | The                        accompanying combined financial statements have been prepared in accordance                        with accounting principles generally accepted in the United States of                        America (“GAAP”).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | **b.**                                                                          | **Principles of                        Combination**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                            | The                        combined financial statements include the accounts of Lightstone and its                        wholly owned subsidiaries; Mount Berry Square Mall LLC, Bradley Square Mall                        LLC, West Manchester Mall LLC and Shenango Valley Mall LLC; PRC and its                        wholly owned subsidiary; Martinsburg Mall LLC; Lightstone II and its wholly                        owned subsidiaries; Shawnee Mall LLC and Brazos Outlet Mall LLC; Lightstone                        III and its wholly owned subsidiaries; Macon Mall LLC and Burlington Mall                        LLC. All material intercompany balances and transactions have been                        eliminated in combination. The financial statements were combined due to                        common ownership and control.                                                                          |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | **c.**                                                                          | **Use of                        Estimates**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                            | The                        preparation of the financial statements in conformity with GAAP requires                        management to make estimates and assumptions. These estimates and                        assumptions affect the reported amounts of certain assets and liabilities                        and disclosure of contingent assets and liabilities at the date of the                        financial statements. They also affect reported amounts of revenues and                        expenses during the reporting period. Significant items subject to such                        estimates and assumptions include the carrying amount of investments in                        real estate, valuation of receivables and the allocation of purchase price                        to acquired lease rights and obligations. Actual results could differ from                        those estimates. |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | **d.**                                                                          | **Cash and Cash                        Equivalents**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                            | For                        purposes of the statement of cash flows, the Companies consider short-term                        investments with maturities of 90 days or less when purchased to be cash                        equivalents. The Companies maintain cash accounts at financial                        institutions, which are insured up to a maximum of $100,000. At various                        times during the year, balances exceeded the federally insured limit. Due                        to the stature and high credit quality of the financial institutions, such                        credit risk is considered to be minimal.                                                                                                                                                                                                                                                                        |

8

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **2.** | **SUMMARY OF                        SIGNIFICANT ACCOUNTING POLICIES (Continued)** |
|   |                                                                              |
|   | **e.**                                                                            | **Marketing**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                              | General marketing and                        advertising costs are expensed as incurred and were approximately $1,718                        and $1,295 for 2007 and 2006, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **f.**                                                                            | **Revenue                        Recognition and Tenant Receivables**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                              | Base                        rental revenues from rental retail properties are recognized on a                        straight-line basis over the noncancelable terms of the related leases,                        which are all accounted for as operating leases. “Percentage                        rent” or rental revenue which is based upon a percentage of the sales                        recorded by the Companies’ tenants, is recognized in the period in                        which the tenants achieve their specified threshold per their lease                        agreements. These amounts are included in rental revenue in the                        accompanying financial statements. |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                              | Rental income is also                        recognized in accordance with Statement of Financial Accounting Standards                        (SFAS) No. 141, Business Combinations, whereby the amortization of acquired                        favorable leases and acquired unfavorable leases is recognized as a                        reduction of or an addition to base rental income, respectively, over the                        terms of the respective leases. The net amount included in base rental                        income for the years ended December 31, 2007 and 2006 are as                        follows:                                                                                               |

|                                           |   |     |   |     |   |   |   |
|------------------------------------------------|--------|----------|--------|----------|--------|--------|--------|
|                                           |   | **2007** |   | **2006** |   |
|                                           |   |          |   |          |   |
|                                           |   |     |   |     |   |   |   |
| Martinsburg                        Mall        |   | $        | (148   | )        | $      | (97    | )      |
| Bradley Square                        Mall     |   |     | 74     |     |   | 107    |   |
| West Manchester                        Mall    |   |     | 200    |     |   | 704    |   |
| Shenango Valley                        Mall    |   |     | 238    |     |   | 274    |   |
| Mount Berry Square                        Mall |   |     | 116    |     |   | 175    |   |
| Shawnee                        Mall            |   |     | (32    | )        |   | 126    |   |
| Brazos Outlets                        Center   |   |     | (69    | )        |   | 574    |   |
| Burlington                        Mall         |   |     | 1      |     |   | 51     |   |
| Macon                        Mall              |   |     | (345   | )        |   | (50    | )      |
|                                           |   |          |        |     |        |        |   |
|                                           |   |     |   |     |   |   |   |
|                                           |   | $        | 35     |     | $      | 1,864  |   |
|                                           |   |          |        |     |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Reimbursements from                        tenants related to real estate taxes, insurance and other shopping center                        operating expenses are recognized as revenue, based on a predetermined                        formula, in the period the applicable costs are incurred. Lease termination                        fees are recognized when the related leases are canceled, the tenant                        surrenders the space, and the Companies have no continuing obligation to                        provide services to such former tenants. |

9

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|-----------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **2.** | **SUMMARY OF                        SIGNIFICANT ACCOUNTING POLICIES (Continued)** |
|   |                                                                              |
|   | **f.**                                                                            | **Revenue                        Recognition and Tenant Receivables (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                              | The                        Companies provide an allowance for doubtful accounts against the portion of                        tenant receivables which is estimated to be uncollectible. Management of                        the Companies reviews its allowance for doubtful accounts monthly. Balances                        that are past due over 90 days and over a specified amount are reviewed                        individually for collectibility. Account balances are charged off against                        the allowance after all means of collection have been exhausted and the                        potential for recovery is considered doubtful. Allowance for doubtful                        accounts as of December 31, 2007 and 2006 was approximately $2,859 and                        $1,043, respectively.                                                                                                                                                                                                                                           |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | **g.**                                                                            | **Deferred                        Charges**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                              | Deferred leasing                        commissions, acquired in-place lease value, and other direct costs                        associated with the acquisition of tenants are capitalized and amortized on                        a straight-line basis over the terms of the related leases. Loan costs are                        capitalized and amortized to interest expense over the term of the related                        loan using a method that approximates the effective-interest                        method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | **h.**                                                                            | **Real Estate and                        Depreciation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                              | Real                        estate is stated at historical cost less accumulated depreciation. The                        building and improvements thereon are depreciated on the straight-line                        basis over an estimated useful life of 40 years. Tenant improvements are                        depreciated on the straight-line basis over the shorter of the lease term                        or their estimated useful life. Equipment is depreciated on the                        straight-line basis over estimated useful lives of 5 to 7 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                              | Improvements and                        replacements are capitalized when they extend the useful life or improve                        the efficiency of the asset. Repairs and maintenance are charged to expense                        as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | **i.**                                                                            | **Impairment of                        Long-Lived Assets**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                              | Management assesses                        whether there has been impairment in the value of its long-lived assets                        whenever events or changes in circumstances indicate the carrying amount of                        an asset may not be recoverable. Recoverability of assets to be held and                        used is measured by a comparison of the carrying amount to the future net                        cash flows, undiscounted and without interest, expected to be generated by                        the asset. If such assets are considered to be impaired, the impairment to                        be recognized is measured by the amount by which the carrying amount of the                        assets exceeds the fair value of the assets. Assets to be disposed of are                        reported at the lower of the carrying amount or fair value, less costs to                        sell. Provision for losses on real estate includes the impairment on assets                        to be held and used. See Note 4. |

10

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**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|-----------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **2.** | **SUMMARY OF                        SIGNIFICANT ACCOUNTING POLICIES (Continued)** |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | **j.**                                                                            | **Purchase                        Accounting for Acquisition of Interests in Real Estate                        Entities**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                              | Management allocated                        the purchase price of properties to tangible and identified intangible                        assets acquired based on its fair value in accordance with the provisions                        of SFAS No. 141, Business Combinations. The fair value of the tangible                        assets of an acquired property (which includes land, building, and                        improvements) was determined by valuing the properties as if vacant, and                        the “as-if-vacant” value was then allocated to land, building                        and improvements based on management’s determination of the relative                        fair values of these assets. Management determined the                        “as-if-vacant” fair value of properties using methods similar                        to those used by independent appraisers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                              | Factors considered by                        management in performing these analyses included an estimate of carrying                        costs to execute similar leases. In estimating carrying costs, management                        included real estate taxes, insurance and other operating expenses and                        estimates of lost rental revenue during the expected lease-up periods based                        on current market demand. Management also estimated costs to execute                        similar leases including leasing commissions, legal and other related                        costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                              | In                        allocating the fair value of the identified intangible assets and                        liabilities of acquired properties, above-market and below-market in-place                        lease values were recorded based on the present value (using an interest                        rate which reflects the risks associated with the leases acquired) of the                        difference between (i) the contractual amounts to be paid pursuant to the                        in-place leases and (ii) management’s estimate of fair market lease                        rates for the corresponding in-place leases, measured over a period equal                        to the remaining non-cancelable term of the lease. The capitalized                        above-market lease values (included in the acquired lease rights in the                        accompanying combined balance sheets) are amortized as a reduction of                        rental income over the remaining non-cancelable terms of the respective                        leases. The capitalized below-market lease values (presented as acquired                        lease obligations in the accompanying combined balance sheets) are                        amortized as an increase to rental income over the initial term and any                        fixed rate renewal periods in the respective leases.          |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                              | The                        aggregate value of other acquired intangible assets, consisting of in-place                        leases and tenant relationships, was measured by the excess of (i) the                        purchase price paid for a property after adjusting existing in-place leases                        to market rental rates over (ii) the estimated fair value of the property                        as if vacant, determined as set forth above. This aggregate value was                        allocated between in-place lease values and tenant relationships based on                        management’s evaluation of the specific characteristics of each                        tenant’s lease; however, the value of tenant relationships has not                        been separated from in-place lease value because such value and its                        consequence to amortization expense is immaterial for these particular                        acquisitions. The value of in-place leases exclusive of the value of                        above-market and below-market in-place leases is amortized to expense over                        the remaining non-cancelable periods of the respective leases. If a lease                        were to be terminated prior to its stated expiration, all unamortized                        amounts relating to that lease would be written off. |

11

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|-----------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **2.** | **SUMMARY OF                        SIGNIFICANT ACCOUNTING POLICIES (Continued)** |
|   |                                                                              |
|   | **j.**                                                                            | **Purchase                        Accounting for Acquisition of Interests in Real Estate Entities                        (Continued)**                                                                                                                                                                                                                                                                                                             |
|   |                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                              | Purchase accounting was                        applied, on a pro-rata basis, to the assets and liabilities related to the                        Properties. The results of operations of the Properties since acquisition                        are included in the accompanying combined statements of operations. The                        purchase price of the Properties, including closing costs, was as                        follows: |

|                                  |   |   |    |   |
|---------------------------------------|--------|--------|---------|--------|
| Lightstone                            |   | $      | 84,089  |   |
| PRC                                   |   |   | 27,247  |   |
| Lightstone                        II  |   |   | 45,500  |   |
| Lightstone                        III |   |   | 167,006 |   |
|                                  |   |        |         |   |
|                                  |
|                                  |   | $      | 323,842 |   |
|                                  |   |        |         |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The                        fair value of the real estate acquired was allocated to the acquired                        tangible assets, consisting of land, building and improvements, and                        identified intangible assets and liabilities, consisting of the value of                        above-market and below-market leases, other value of in-place leases and                        value of tenant relationships, if any, based in each case on their fair                        values. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | The                        following are the amounts that were assigned to each major asset and                        liability caption at the acquisition date:                                                                                                                                                                                                                                                                                                                                                        |

|                                                     |   |           |   |    |   |                                     |   |                                      |   |   |   |    |   |
|----------------------------------------------------------|--------|----------------|--------|---------|--------|------------------------------------------|--------|-------------------------------------------|--------|--------|--------|---------|--------|
|                                                     |   | **Lightstone** |   | **PRC** |   | **Lightstone                        II** |   | **Lightstone                        III** |   |
|                                                     |   |                |   |         |   |                                          |   |                                           |   |
|                                                     |
| Land                                                     |   | $              | 10,641 |    | $      | 6,875                                    |   | $                                         | 7,086  |   | $      | 25,930  |   |
| Buildings and tenant                        improvements |   |           | 70,378 |    |   | 16,546                                   |   |                                      | 35,797 |   |   | 132,946 |   |
| Acquired lease                        rights(1)          |   |           | 2,426  |    |   | 1,843                                    |   |                                      | 1,851  |   |   | 4,588   |   |
| Acquired lease                        obligations (1)    |   |           | (6,069 | )       |   | (781                                     | )      |                                      | (2,052 | )      |   | (2,737  | )      |
| In-place lease                        values(1)          |   |           | 6,713  |    |   | 2,764                                    |   |                                      | 2,818  |   |   | 6,279   |   |
|                                                     |   |                |        |    |        |                                          |   |                                           |        |   |        |         |   |
|                                                     |   |           |   |    |   |                                     |   |                                      |   |   |   |    |   |
|                                                     |   | $              | 84,089 |    | $      | 27,247                                   |   | $                                         | 45,500 |   | $      | 167,006 |   |
|                                                     |   |                |        |    |        |                                          |   |                                           |        |   |        |         |   |

|   |   |                                                                                                                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (1)    | These intangibles are                        being amortized over the remaining lease terms. The weighted average                        remaining lease terms are approximately 4.2 years. |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **k.** | **Income                        Taxes**                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The                        Companies are limited liability companies which elected to be treated as                        partnerships for income tax purposes and are, therefore, not subject to                        income taxes at the entity level. All income and losses pass through to the                        members and are reported by them individually for income tax                        purposes. |

12

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |
|--------|
|        |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **3.** | **ESCROW                        DEPOSITS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | Escrow deposits include                        funds and other restricted deposits required in conjunction with the                        Companies’ loan agreements. Such amounts are to be used for specific                        purposes, such as the payment of real estate taxes, insurance and capital                        improvements.                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
| **4.** | **REAL                        ESTATE**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | The                        investments in real estate consist of nine retail malls as identified in                        Note 1. During 2007 the current downturn in the commercial real estate and                        lack of demand for retail space in the regions covered by certain holdings                        has caused management to reassess the carrying value of each of the                        properties. Based on this assessment, management has determined that four                        of the nine properties have suffered an impairment loss of $75,994 in the                        aggregate. Determined fair values of the impaired properties at December                        31, 2007, are as follows: |

|                                         |   |   |   |   |
|----------------------------------------------|--------|--------|--------|--------|
| Macon                        Mall            |   | $      | 79,680 |   |
| Burlington                        Mall       |   | $      | 7,900  |   |
| Mt. Berry Square                        Mall |   | $      | 19,490 |   |
| W. Manchester                        Mall    |   | $      | 25,450 |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | In                        accordance with the provisions of SFAS No. 144, the above properties were                        written down from their individual carrying values to the determined fair                        values and the Company recognized a loss of $75,994 in the                        aggregate.                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|   | Fair                        value was determined on an income approach where future estimated cash                        flows are capitalized to arrive at an estimate of value. Cash flow was                        determined for each property based on current and anticipated operations.                        The capitalization rates were developed from market data specific to each                        of the malls. The inputs used to assess fair value are considered                        unobservable level 3 inputs. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | At                        December 31, 2007, and 2006 investments in real estate consists of the                        following:                                                                                                                                                                                                                                                                                                                                                                                                              |

|                                                    |   |     |    |     |   |    |   |
|---------------------------------------------------------|--------|----------|---------|----------|--------|---------|--------|
|                                                    |   | **2007** |    | **2006** |   |
|                                                    |   |          |    |          |   |
|                                                    |   |     |    |     |   |    |   |
| Land                                                    |   | $        | 50,466  |     | $      | 50,466  |   |
| Buildings and                        improvements       |   |     | 252,594 |     |   | 237,230 |   |
| Tenant                        improvements              |   |     | 37,316  |     |   | 35,360  |   |
|                                                    |   |          |         |     |        |         |   |
|                                                    |   |     | 340,376 |     |   | 323,056 |   |
| Less accumulated                        depreciation    |   |     | (28,787 | )        |   | (18,698 | )      |
|                                                    |   |          |         |     |        |         |   |
|                                                    |   |     |    |     |   |    |   |
| Carrying value                        before impairment |   |     | 311,589 |     |   | 304,358 |   |
|                                                    |   |     |    |     |   |    |   |
| Impairment                                              |   |     | (75,994 | )        |   | — |   |
|                                                    |   |          |         |     |        |         |   |
|                                                    |   |     |    |     |   |    |   |
|                                                    |   | $        | 235,595 |     | $      | 304,358 |   |
|                                                    |   |          |         |     |        |         |   |

13

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |                                                        |
|--------|-------------------------------------------------------------|
|        |                                                             |
|   |                                                        |
| **5.** | **MORTGAGE AND OTHER                        NOTES PAYABLE** |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | On                        June 8, 2006, Martinsburg Mall, LLC (“Martinsburg”), Shenango                        Valley Mall, LLC (“Shenango”), Mount Berry Square Mall, LLC                        (“Mt. Berry”), and Bradley Mall, LLC (“Bradley”)                        together borrowed $73,900 from CIBC Inc., at an interest rate of 5.93% per                        annum. The loan is payable interest only monthly for twenty three months                        and thereafter in equal monthly installment of $440 and is secured by the                        related real estate, assignment of leases, rent and security deposits. The                        loan matures in July 2016 with no prepayment option. The loan, however, may                        be defeased. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Management allocated                        the loan amount to the Properties as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|                             |   |   |   |   |
|----------------------------------|--------|--------|--------|--------|
| Martinsburg                      |   | $      | 27,285 |   |
| Bradley                          |   |   | 12,615 |   |
| Shenango                         |   |   | 13,470 |   |
| Mt.                        Berry |   |   | 20,530 |   |
|                             |   |        |        |   |
|                             |   |   |   |   |
|                             |   | $      | 73,900 |   |
|                             |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | On                        June 8, 2006, West Manchester, Mall LLC (“West Manchester”)                        borrowed $29,600 from CIBC Inc., at an interest rate of LIBOR plus 232                        basis points (approximately 7.06% per annum at December 31, 2007), subject                        to a minimum rate of 7.89% per annum. The loan is payable interest only                        monthly and is secured by its real estate, assignment of leases, rent and                        security deposits. The loan matures on June 8, 2008 and contains a                        prepayment penalty equal to .75% of the outstanding principal amount if                        repaid prior to maturity. The loan is guaranteed, up to $10,360, by                        Lightstone Holdings, LLC an affiliate of a member. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | On                        June 8, 2006, Martinsburg, Shenango, Mount Berry, and Bradley borrowed                        $7,000 from CIBC Bank, at an interest rate of 12% per annum. Principal and                        interest on this loan is payable in equal monthly installment of $72 and is                        secured by the related real estate, assignment of leases, rent and security                        deposits of each property. The loan matures on July 1, 2016 with no                        prepayment option till three months prior to maturity date; however, the                        loan may be defeased.                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | At                        December 31, 2007 and 2006 loan amount allocated to properties were as                        follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

|                             |   |     |   |     |   |   |   |
|----------------------------------|--------|----------|--------|----------|--------|--------|--------|
|                             |   | **2007** |   | **2006** |   |
|                             |   |          |   |          |   |
|                             |
| Martinsburg                      |   | $        | 2,575  |     | $      | 2,579  |   |
| Bradley                          |   |     | 1,186  |     |   | 1,189  |   |
| Shenango                         |   |     | 1,276  |     |   | 1,279  |   |
| Mt.                        Berry |   |     | 1,947  |     |   | 1,949  |   |
|                             |   |          |        |     |        |        |   |
|                             |   |     |   |     |   |   |   |
|                             |   | $        | 6,984  |     | $      | 6,996  |   |
|                             |   |          |        |     |        |        |   |

14

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |                                                                    |
|--------|-------------------------------------------------------------------------|
|        |                                                                         |
|   |                                                                    |
| **5.** | **MORTGAGE AND OTHER                        NOTES PAYABLE (Continued)** |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | On                        December 16, 2004, Lightstone II borrowed $39,500 from Wachovia at an                        interest rate of the greater of 8.8% per annum or the 30 day LIBOR plus 280                        basis points (approximately 7.54% at December 31, 2007). This loan is                        payable interest only monthly and originally matured on January 9, 2007                        with three one-year options with an extension fee of .125% of the                        outstanding principal. This loan is secured by the real estate, assignment                        of leases, rent and security deposits of Brazos Outlet Center LLC                        (“Brazos”) and Shawnee Mall LLC                        (“Shawnee”). |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | The                        Company extended the loan until January 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Management allocated                        the loan amount to the properties as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

|    |   |   |   |   |
|---------|--------|--------|--------|--------|
| Brazos  |   | $      | 21,725 |   |
| Shawnee |   |   | 17,775 |   |
|    |   |        |        |   |
|    |   |   |   |   |
|    |   | $      | 39,500 |   |
|    |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | On                        June 30, 2005, Lightstone III borrowed $141,200 (“Mortgage”)                        from Wachovia at an interest rate of 5.78% per annum. This loan is payable                        interest only monthly until July 11, 2006 and then installments of $827 as                        principal and interest until maturity on June 11, 2015. This loan is                        secured by the real estate, assignment of leases, rent and security                        deposits of Macon Mall LLC (“Macon”) and Burlington Mall LLC                        (“Burlington”). On June 30, 2005, Wachovia made an additional                        mezzanine loan (“Mezzanine”) in the amount of $17,650 under the                        same terms as the first mortgage. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Management allocate the                        mortgage and Mezzanine loans to the properties at acquisition as                        follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

|       |   |                                      |    |                                      |   |   |   |
|------------|--------|-------------------------------------------|---------|-------------------------------------------|--------|--------|--------|
|       |   | **First                        Mortgage** |    | **Mezzanine                        Loan** |   |
|       |   |                                           |    |                                           |   |
|       |   |                                      |    |                                      |   |   |   |
| Macon      |   | $                                         | 114,203 |                                      | $      | 14,275 |   |
| Burlington |   |                                      | 26,997  |                                      |   | 3,375  |   |
|       |   |                                           |         |                                      |        |        |   |
|       |   |                                      |    |                                      |   |   |   |
|       |   | $                                         | 141,200 |                                      | $      | 17,650 |   |
|       |   |                                           |         |                                      |        |        |   |

|   |                                                                                        |
|--------|---------------------------------------------------------------------------------------------|
|   | Mortgage and Mezzanine                        loans to the properties at December 31, 2007: |

|       |   |                                      |    |                                      |   |   |   |
|------------|--------|-------------------------------------------|---------|-------------------------------------------|--------|--------|--------|
|       |   | **First                        Mortgage** |    | **Mezzanine                        Loan** |   |
|       |   |                                           |    |                                           |   |
|       |   |                                      |    |                                      |   |   |   |
| Macon      |   | $                                         | 112,257 |                                      | $      | 14,032 |   |
| Burlington |   |                                      | 26,541  |                                      |   | 3,317  |   |
|       |   |                                           |         |                                      |        |        |   |
|       |   |                                      |    |                                      |   |   |   |
|       |   | $                                         | 138,798 |                                      | $      | 17,349 |   |
|       |   |                                           |         |                                      |        |        |   |

15

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |                                                                                        |
|--------|---------------------------------------------------------------------------------------------|
|        |                                                                                             |
|   |                                                                                        |
| **5.** | **MORTGAGE AND OTHER                        NOTES PAYABLE (Continued)**                     |
|   |                                                                                        |
|   | Mortgage and Mezzanine                        loans to the properties at December 31, 2006: |

|       |   |                                      |    |                                      |   |   |   |
|------------|--------|-------------------------------------------|---------|-------------------------------------------|--------|--------|--------|
|       |   | **First                        Mortgage** |    | **Mezzanine                        Loan** |   |
|       |   |                                           |    |                                           |   |
|       |   |                                      |    |                                      |   |   |   |
| Macon      |   | $                                         | 113,659 |                                      | $      | 14,208 |   |
| Burlington |   |                                      | 26,870  |                                      |   | 3,359  |   |
|       |   |                                           |         |                                      |        |        |   |
|       |   |                                      |    |                                      |   |   |   |
|       |   | $                                         | 140,529 |                                      | $      | 17,567 |   |
|       |   |                                           |         |                                      |        |        |   |

|   |                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Future minimum annual                        principal payments at December 31, 2007, after exercising of extension                        options, are as follows: |

|       |   |   |    |   |
|------------|--------|--------|---------|--------|
| 2008       |   | $      | 32,006  |   |
| 2009       |   |   | 42,597  |   |
| 2010       |   |   | 3,287   |   |
| 2011       |   |   | 3,489   |   |
| 2012       |   |   | 3,666   |   |
| Thereafter |   |   | 221,086 |   |
|       |   |        |         |   |
|       |   |   |    |   |
|       |   | $      | 306,131 |   |
|       |   |        |         |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **6.** | **NOTES PAYABLE                        – RELATED PARTY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Lightstone borrowed                        $8,600 in 2004 from Presidential Realty Corp., a member of the Companies.                        The loan bears interest of 11% per annum, payable monthly. The entire loan                        payable is due in September 2014. The loan is secured by an assignment of                        the Companies’ ownership interest in its subsidiaries, subject to the                        first mortgage lien to CIBC Inc.

The                        loan has a prepayment penalty of 3% of principal. $959 was recorded as                        interest expense in each of 2007 and 2006.

PRC                        borrowed $2,600 in 2004 from David Lichtenstein and Cedar Asset Management,                        LLC, members of the Companies. The loans bear interest of 11% per annum,                        payable interest only monthly. The entire loan balances are due in                        September 2014. The loans are secured by an assignment of the                        Companies’ ownership interest in PRC’s subsidiary, subject to                        the first mortgage lien to CIBC Inc. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | This                        loan has a prepayment penalty of 3% of principal. $290 was recorded as                        interest expense in each of 2007 and 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Lightstone II borrowed                        $7,500 in 2004 from Presidential Realty Corp., a member of the Companies.                        This loan bears interest only at the rate of 11% per annum payable in                        monthly installments and matures on December 23, 2014. This loan is secured                        by interest in certain subsidiaries subject to the first mortgage lien to                        Wachovia Bank. Presidential Realty Corp. funded an additional $335 in 2006                        under the same terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

16

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **6.** | **NOTES PAYABLE                        – RELATED PARTY (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | This                        loan has a prepayment penalty of 3% of principal. Approximately $873 and                        $856 were recorded as interest expense in 2007 and 2006,                        respectively.                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | On                        June 30, 2005, Lightstone III borrowed $9,500 from Presidential Realty                        Corp., a member of the Companies. This loan bears interest only at a rate                        of 11% per annum payable monthly and matures on June 30, 2015. This loan is                        secured by membership interests in certain subsidiaries, subject to the                        first mortgage lien to Wachovia bank.                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | This                        loan has a prepayment penalty of 3% of principal. $1,060 was recorded as                        interest expense in 2007 and 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | A                        member of the Company advanced $1,947 in 2005 for working capital needs of                        certain properties. This amount was repaid with approximately $125 of                        interest expense in 2006. The member advanced $3,135 in 2006 and an                        additional $18,324 in 2007 for the same purpose.                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | The                        net amount due to affiliates represents advances from affiliated entities                        and is due upon demand at interest rate of 11%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **7.** | **RENTALS UNDER                        OPERATING LEASES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | The                        Companies’ receive rental income from the leasing of retail shopping                        center space under operating leases. The Companies recognize income from                        tenant operating leases on a straight-line basis over the respective lease                        terms and, accordingly, rental income in a given period will vary from                        actual contractual rental amounts due. Rental income recorded in 2007 and                        2006 in excess of amounts contractually due was approximately $365 and                        $856, respectively. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | The                        minimum annual future base rentals due under non-cancelable operating                        leases as of December 31, 2007, are approximately as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

|       |   |   |   |   |
|------------|--------|--------|--------|--------|
| 2008       |   | $      | 25,856 |   |
| 2009       |   |   | 21,623 |   |
| 2010       |   |   | 17,765 |   |
| 2011       |   |   | 12,586 |   |
| 2012       |   |   | 8,890  |   |
| Thereafter |   |   | 6,856  |   |
|       |   |        |        |   |
|       |   |   |   |   |
|       |   | $      | 93,576 |   |
|       |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Minimum annual future                        rentals due do not include amounts which are payable by certain tenants                        based upon certain reimbursable operating expenses. The tenants include                        national and regional chains and local retailers and, consequently, the                        Companies’ credit risk is concentrated in the retail                        industry. |

17

----

**LIGHTSTONE            MEMBER LLC            PRC MEMBER LLC            LIGHTSTONE MEMBER II LLC            LIGHTSTONE MEMBER III LLC            NOTES TO COMBINED FINANCIAL STATEMENTS            DECEMBER 31, 2007            (Dollar amounts in thousands)**

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **8.** | **COMMITMENT AND                        CONTINGENCIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Shenango Valley Mall is                        subject to a ground lease. The Companies exercised the first 17 year ground                        lease option in 2005 which expires on December 31, 2021. The ground lease                        payment is based upon 10% of monthly gross revenues, as defined. The gross                        revenues, upon which the ground rent is computed, cannot be less than 75%                        of gross revenues of the previous year. Approximately $324 and $436 were                        expensed as ground rent for Shenango in 2007 and 2006,                        respectively. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | A                        parcel of Macon Mall is under a ground lease that expires in 2071. The                        ground lease is subject to an annual rent payment of $54 throughout the                        remainder of its term. The Companies are responsible for all other costs                        including real estate taxes and utilities. Future minimum lease payments                        are as follows:                                                                                                                                                                                                             |

|       |   |   |   |   |
|------------|--------|--------|--------|--------|
| 2008       |   | $      | 54     |   |
| 2009       |   |   | 54     |   |
| 2010       |   |   | 54     |   |
| 2011       |   |   | 54     |   |
| 2012       |   |   | 54     |   |
| Thereafter |   |   | 3,186  |   |
|       |   |        |        |   |
|       |   |   |   |   |
|       |   | $      | 3,456  |   |
|       |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **9.** | **FAIR VALUE OF                        FINANCIAL INSTRUMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | As                        of December 31, 2007, the fair values of the Companies’ mortgage and                        other notes and mezzanine notes payable to related parties approximate the                        carrying values as the terms are similar to those currently available to                        the Companies for debt with similar risk and the same remaining maturities.                        The carrying amounts for cash and cash equivalents, restricted cash, rents                        and other receivables, due to affiliates, and accounts payable and other                        liabilities approximate fair value because of the short-term nature of                        these instruments. |