**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D. C. 20549**









**FORM
      10-Q**




(Mark
      One)


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




For
      the
      quarterly period ended September 30, 2006




OR




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




For
      the
      transition period from  to




Commission
      file number 333-117367







**LIGHTSTONE
      VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC.**


**(Exact
      Name of Registrant as Specified in Its Charter)**




**Maryland**
            
            **20-1237795****(State
                or Other Jurisdiction of**
              **Incorporation
                or Organization)**
            
            **(I.R.S.
                Employer**
              **Identification
                No.)**




**326
                Third Street****Lakewood,
                New Jersey**
            
            **08701****(Address
                of Principal Executive Offices)**
            
            **(Zip
                Code)**




**(732)
      367-0129**


**(Registrant’s
      Telephone Number, Including Area Code)**









Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.    Yes þ No  ̈




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated
      filer þ





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes   ̈ **** No  þ





As
      of
      November 8, 2006, there were 3,167,470 outstanding shares of common stock of
      Lightstone Value Plus Real Estate Investment Trust, Inc.












**LIGHTSTONE
      VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC.**


**INDEX**




**Page****PART I**
              
              **FINANCIAL
                  INFORMATION**Item 1.
              
              Financial
                  StatementsConsolidated
                  Balance Sheets as of September 30, 2006 (unaudited) and December
                  31,
                  2005
              
              3Consolidated
                  Statements of Operations (unaudited) for the Three and Nine Months
                  Ended
                  September 30, 2006 and 2005
              
              4Consolidated
                  Statement of Stockholders’ Equity (unaudited) for the Nine Months Ended
                  September 30, 2006
              
              5Consolidated
                  Statements of Cash Flows (unaudited) for the Nine Months ended
                  September
                  30, 2006 and 2005
              
              6Notes
                  to Consolidated Financial Statements
              
              7Item 2.
              
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              18Item 3.
              
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              23Item 4.
              
              Controls
                  and Procedures
              
              23**PART II**
              
              **OTHER
                  INFORMATION**Item
                  1.
              
              Legal
                  Proceedings
              
              24Item
                  2.
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              
              24Item
                  3.
              
              Defaults
                  Upon Senior Securities
              
              25Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              25Item
                  5.
              
              Other
                  Information
              
              25Item
                  6.
              
              Exhibits
              
              26







2


**PART
      I. FINANCIAL INFORMATION:**


**ITEM
      1. FINANCIAL STATEMENTS:**







**LIGHTSTONE
      VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC.**


**CONSOLIDATED
      BALANCE SHEETS**




**Sept
                    30, 2006**
                
                **December
                    31, 2005*****Assets***
                
                (UNAUDITED)Investment
                    property:Land
                
                $
                13,435,415
                
                $
                -Building
                
                
                56,230,989
                
                
                -69,666,404
                
                
                -Less
                    accumulated depreciation
                
                
                (510,090
                )
                
                -Net
                    investment property
                
                
                69,156,314
                
                
                -Cash
                
                
                14,603,277
                
                
                205,030Restricted
                    escrows
                
                
                7,092,867
                
                
                -Due
                    from escrow agent
                
                
                1,051,202
                
                
                -Tenant
                    accounts receivable
                
                
                198,225
                
                
                -Acquired
                    in-place lease intangibles (net of accumulated amortization of
                    $704,604
                    and $0, respectively)
                
                
                734,544
                
                
                -Deferred
                    financing costs (net of accumulated amortization of $15,425 and
                    $0,
                    respectively)
                
                
                409,877
                
                
                -Deferred
                    offering costs
                
                
                -
                
                
                225,966Prepaid
                    expenses and other assets
                
                
                715,333
                
                
                -**Total
                    Assets**
                
                $
                93,961,639
                
                $
                430,996***Liabilities
                    and Stockholders' Equity***Mortgages
                    payable
                
                $
                67,975,000
                
                $
                -Accounts
                    payable and accrued expenses
                
                
                1,368,595
                
                
                37,511Tenant
                    allowances and deposits payable
                
                
                319,856
                
                
                -Distributions
                    payable
                
                
                309,282
                
                
                -Prepaid
                    rental revenues
                
                
                161,270
                
                
                -Acquired
                    below market lease intangibles (net of accumulated amortization
                    of
                    $229,309 and $0, respectively)
                
                
                359,499
                
                
                -Due
                    to affiliate
                
                
                268,369
                
                
                309,05670,761,871
                
                
                346,567Minority
                    interest in partnership
                
                
                2,454,250
                
                
                836Commitments
                    and contingenciesStockholders'
                    equity:Preferred
                    shares, 10,000,000 shares authorized, none outstanding
                
                
                -
                
                
                -Common
                    stock, $.01 par value; 60,000,000 shares authorized, 2,463,924
                    and 20,000
                    shares issued and outstanding, respectively
                
                
                24,639
                
                
                200Additional
                    paid-in-capital
                
                
                22,134,554
                
                
                199,800Accumulated
                    distributions in addition to net loss
                
                
                (1,413,675
                )
                
                (116,407
                )Total
                    stockholder’s equity
                
                
                20,745,518
                
                
                83,593**Total
                    Liabilities and Stockholders' Equity**
                
                $
                93,961,639
                
                $
                430,996


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


3


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**








**LIGHTSTONE
      VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**





**Three
                    Months Ended Sept 30, 2006**
                
                **Three
                    Months Ended Sept 30, 2005**
                
                **Nine
                    Months Ended Sept 30, 2006**
                
                **Nine
                    Months Ended Sept 30, 2005**Revenues:Rental
                    income
                
                $
                2,830,537
                
                $
                -
                
                $
                3,819,234
                
                $
                -Tenant
                    recovery income
                
                
                241,234
                
                
                -
                
                
                744,657
                
                
                -3,071,771
                
                
                -
                
                
                4,563,891
                
                
                -Expenses:Property
                    operating expenses
                
                
                1,444,232
                
                
                -
                
                
                1,939,753
                
                
                -Real
                    estate taxes
                
                
                341,211
                
                
                -
                
                
                502,350
                
                
                -General
                    and administrative costs
                
                
                322,374
                
                
                -
                
                
                578,062
                
                
                -Depreciation
                    and amortization
                
                
                1,030,337
                
                
                -
                
                
                1,216,341
                
                
                -3,138,154
                
                
                -
                
                
                4,236,506
                
                
                -Operating
                    (loss) income
                
                
                (66,383
                )
                
                -
                
                
                327,385
                
                
                -Other
                    income, primarily interest
                
                
                303,502
                
                
                -
                
                
                371,532
                
                
                -Interest
                    expense
                
                
                (1,059,802
                )
                
                -
                
                
                (1,495,697
                )
                
                -Minority
                    interest
                
                
                77
                
                
                -
                
                
                73
                
                
                -Net
                    (loss) applicable to common shares
                
                $
                (822,606
                )
                $
                -
                
                $
                (796,707
                )
                $
                -Net
                    (loss) per common share, basic and diluted
                
                $
                (0.46
                )
                $
                -
                
                $
                (0.82
                )
                $
                -Weighted
                    average number of common shares outstanding, basic and
                    diluted
                
                
                1,772,331
                
                
                20,000
                
                
                975,986
                
                
                20,000











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


4


**PART
      I. FINANCIAL INFORMATION:**


**ITEM
      1. FINANCIAL STATEMENTS:**







**LIGHTSTONE
      VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC.**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY**


**(UNAUDITED)**





**Preferred
                  Shares**
              
              
              **Common
                  Shares**Preferred
                  Shares
              
              
              Amount
              
              
              **Common Shares**
              
              
              **Amount**
              
              
              **Additional
                  Paid-In**
                **Capital**
              
              
              **Accumulated
                  Distributions in Addition to Net Loss**
              
              
              Total
                  Stockholders' Equity**BALANCE,
                  December 31, 2005**
              
              
              -
              
              $
              -
              
              
              20,000
              
              $
              200
              
              $
              199,800
              
              $
              (116,407
              )
              $
              83,593Net
                  (loss)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (796,707
              )
              
              (796,707
              )Distributions
                  declared
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (500,561
              )
              
              (500,561
              )Proceeds
                  from offering
              
              
              -
              
              
              -
              
              
              2,435,734
              
              
              24,357
              
              
              24,310,522
              
              
              -
              
              
              24,334,879Selling
                  commissions and dealer manager fees
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,925,590
              )
              
              -
              
              
              (1,925,590
              )Other
                  offering costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (527,897
              )
              
              -
              
              
              (527,897
              )Proceeds
                  from distribution reinvestment program
              
              
              -
              
              
              -
              
              
              8,190
              
              
              82
              
              
              77,719
              
              
              -
              
              
              77,801**BALANCE,
                  September 30, 2006**
              
              
              -
              
              $
              -
              
              
              2,463,924
              
              $
              24,639
              
              $
              22,134,554
              
              $
              (1,413,675
              )
              $
              20,745,518











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


5


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**








**LIGHTSTONE
      VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**Nine
                  Months Ended Sept 30, 2006**
              
              **Nine
                  Months Ended Sept 30, 2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (796,707
              )
              $
              -Loss
                  allocated to minority interests
              
              
              (73
              )
              
              -Adjustments
                  to reconcile net loss to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              510,587
              
              
              -Amortization
                  of deferred financing costs
              
              
              15,425
              
              
              -Amortization
                  of above and below-market lease intangibles
              
              
              475,365
              
              
              -Changes
                  in assets and liabilities:Increase
                  in prepaid expenses and other assets
              
              
              (715,830
              )
              
              -Increase
                  in tenant accounts receivable
              
              
              (198,225
              )Increase
                  in tenant allowance and security deposits payable
              
              
              319,856
              
              
              -Increase
                  in accounts payable and accrued expenses
              
              
              1,331,084
              
              
              -Increase
                  in prepaid rents
              
              
              161,270Net
                  cash provided by operating activities
              
              
              1,102,752
              
              
              -**CASH
                  FLOWS USED IN INVESTING ACTIVITIES:**Purchase
                  of investment property, net
              
              
              (70,516,814
              )
              
              -Restricted
                  escrows
              
              
              (7,092,867
              )
              
              -Net
                  cash used in investing activities
              
              
              (77,609,681
              )
              
              -**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  form mortgage financing
              
              
              67,975,000
              
              
              -Payment
                  of loan fees and expenses
              
              
              (425,302
              )
              
              -Proceeds
                  from issuance of common stock
              
              
              24,334,879
              
              
              -Proceeds
                  from issuance of special general partnership units
              
              
              2,453,487
              
              
              -Payment
                  of offering costs
              
              
              (2,227,521
              )
              
              -Increase
                  in amounts due from escrow agent
              
              
              (1,051,202
              )Increase
                  (decrease) in amounts due to affiliates, net
              
              
              (40,687
              )
              
              (3,489
              )Distributions
                  paid
              
              
              (113,478
              )
              
              -Net
                  cash provided by financing activities
              
              
              90,905,176
              
              
              (3,489
              )**Net
                  change in cash**
              
              
              14,398,247
              
              
              (3,489
              )**Cash,
                  beginning of period**
              
              
              205,030
              
              
              205,489**Cash,
                  end of period**
              
              $
              14,603,277
              
              $
              202,000**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for interest
              
              $
              1,254,025
              
              $
              -








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


6





**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements







**1.** ***Organization*** ****




Lightstone
      Value Plus Real Estate Investment Trust, Inc., a Maryland corporation (“Lightstone
      REIT” and, together with the Operating Partnership (as defined below), the
“Company”) was
      formed on June 8, 2004 and intends
      to qualify as a real estate investment trust (“REIT”) for the year ending
      December 31, 2006. The Company was formed primarily
      for the purpose of engaging in the business of investing in and owning
      commercial and residential real estate properties located throughout the United
      States and Puerto Rico.





The Lightstone
      REIT is
      structured as an umbrella partnership real estate investment trust, or UPREIT,
      and substantially all of the Lightstone
      REIT ’s
      current and future business is and will be conducted through Lightstone
      Value Plus REIT, L.P., a Delaware limited partnership formed on July
      12,
      2004  (the
      “Operating Partnership”). The
      Lightstone REIT is managed by Lightstone
      Value Plus REIT, LLC (the “Advisor”) ,
      an
      affiliate of the Lightstone Group (the “Sponsor”), under the terms and
      conditions of an advisory agreement. The Sponsor and Advisor are owned and
      controlled by David
      Lichtenstein ,
      the
      Chairman of the Company’s board of directors.





The
      Company intends to sell a maximum of 30 million common shares, at a price of
      $10
      per share (exclusive of 4 million shares available pursuant to the Company’s
      dividend reinvestment plan, 600,000 shares that could be obtained through the
      exercise of selling dealer warrants when and if issued and 75,000 shares that
      are reserved for issuance under the Company’s stock option plan). The Company’s
      Registration Statement on Form S-11 (the “Registration Statement”) was declared
      effective under the Securities Act of 1933 on April 22, 2005, and on May
      24,
      2005 ,
      the
      Lightstone REIT began offering its common shares for sale to the public. Lightstone
      Securities, LLC (the “Dealer Manager”), an affiliate of the Sponsor, is serving
      as the dealer manager of the Company’s public offering (the “Offering”).





The
      Company sold 20,000 shares to the Advisor on July 6, 2004, for $10 per share.
      The Company invested the proceeds from this sale in the Operating Partnership,
      and as a result, held a 99.01% general partnership interest at December 31,
      2004
      and 2005, respectively. The Advisor also contributed $2,000 to the Operating
      Partnership in exchange for 200 limited partner units in the Operating
      Partnership. The limited partner has the right to convert operating partnership
      units into cash or, at the option of the Company, an equal number of common
      shares of the Company, as allowed by the limited partnership agreement.





A
      Post-Effective Amendment to the Lightstone REIT’s Registration Statement was
      declared effective on October 17, 2005. The Post-Effective Amendment reduced
      the
      minimum offering from 1 million shares of common stock to 200,000 shares of
      common stock. As of December 31,
      2005, the Company had
      reached its minimum offering by receiving subscriptions for approximately 226,000 of
      its
      common shares, representing gross offering proceeds of approximately
      $ 2.3
      million .
      On
      February 1, 2006, cumulative gross offering proceeds of approximately $2.7
      million were released to the Company from escrow and invested in the Operating
      Partnership.





As
      of
      September 30, 2006, cumulative gross offering proceeds of approximately $24.5
      million have been released to the Lightstone REIT and used for the purchase
      of a
      99.99% general partnership interest in the Operating Partnership. The Company
      expects that its ownership percentage in the Operating Partnership will remain
      significant as it plans to continue to invest all net proceeds from the Offering
      in the Operating Partnership.





Lightstone
      SLP, LLC, an affiliate of the Advisor, intends to periodically purchase special
      general partner units in the Operating Partnership at a cost of $100,000 per
      unit for each $1.0 million in offering subscriptions. Proceeds from the sale
      of
      the special general partnership interests will be used to repay advances from
      the Advisor that were used to fund organizational and offering costs incurred
      by
      the Company. Through September 30, 2006, the Lightstone REIT offset proceeds
      of
      approximately $2.5 million from the sale of special general partnership units
      against approximately $3.8 million of Advisor cash advances used for offering
      costs.





The
      Advisor is responsible for offering and organizational costs exceeding 10%
      of
      the gross offering proceeds without recourse to the Company. Since its
      inception, and through September 30, 2006, the Advisor has not allocated any
      organizational costs to the Company. Advances for offering costs in excess
      of
      the 10% threshold (approximately $1.3 million at September 30, 2006) will only
      be reimbursed to the Advisor as additional offering proceeds are received by
      the
      Company.


7


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements








***1.
      Organization (continued):***




Through
      its Operating Partnership, the Company will seek to acquire and operate
      commercial and residential properties, principally in the United States. All
      such properties may be acquired and operated by the Company alone or jointly
      with another party. The Company has completed two acquisitions to date. The
      first was completed on March 31, 2006 (the Belz Factory Outlet World in St.
      Augustine, Florida), and the second was completed on June 29, 2006 (four
      multi-family communities in Southeast Michigan). Each of the acquired properties
      is managed by an affiliate of Lightstone Value Plus REIT Management LLC, (the
      “Property Manager”).





On
      November 6, 2006, the Company announced its commitment to purchase Oakview
      Plaza
      from an unaffiliated third party. Oakview Plaza is a retail shopping mall
      located in Omaha, Nebraska consisting of three single-story retail buildings
      located on approximately 19.6 acres of land and containing approximately 177,303
      rentable square feet. The contract price for the Property is $32,600,000,
      excluding closing costs. Subject to the development and leasing of an additional
      2.1 acre parcel of land (the “Option Land”) located immediately adjacent to
      Oakview Plaza, the Company will be required to purchase the Option Land on
      the
      commencement of rent under the lease for the Option Land. The contract price
      for
      the fully improved and leased Option Land will be determined by dividing the
      first full year of base rent payments by 9.5%. In the event that it receives
      notice that the improvement and leasing of the Option Land has not been
      successful, the Company will have 30 days to purchase the unimproved Option
      Land
      for a fixed contract price of $650,000. Although the Company believes that
      the
      acquisition of Oakview Plaza is probable, there can be no assurance that this
      acquisition will be consummated. No other acquisitions have been completed
      or
      identified by the Company as of November 6, 2006.




The
      Company’s Advisor, Property Manager and Dealer Manager are each related parties.
      Each of these entities will receive compensation and fees for services related
      to the offering and for the investment and management of the Company’s assets.
      These entities will receive fees during the offering, acquisition, operational
      and liquidation stages. The compensation levels during the offering, acquisition
      and operational stages are based on percentages of the offering proceeds sold,
      the cost of acquired properties and the annual revenue earned from such
      properties, and other such fees outlined in each of the respective agreements.
      (See Note 6, Related Party Transactions).





**2.** ***Summary
      of Significant Accounting Policies*** ****




Basis
      of Presentation




The
      consolidated financial statements include the accounts of the Lightstone REIT
      and the Operating Partnership. As of September 30, 2006, the Lightstone REIT
      had
      a 99.99% general partnership interest in the Operating Partnership. All
      inter-company balances and transactions have been eliminated in
      consolidation.





The
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States of America for
      interim financial information and in accordance with the instructions to Form
      10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
      of
      the information and footnotes required by accounting principles generally
      accepted in the United States of America for complete financial statements.
      The
      information furnished in the accompanying consolidated balance sheets,
      statements of operations, statements of stockholders’ equity and statements of
      cash flows reflect all adjustments which are, in the opinion of management,
      recurring and necessary for a fair statement of the aforementioned financial
      statements for the interim period. Operating results for the three and nine
      months ended September 30, 2006 are not necessarily indicative of the results
      that may be expected for the year ending December 31, 2006.





The
      December 31, 2005 balance sheet data was derived from audited financial
      statements. The consolidated financial statements should be read in conjunction
      with the notes to the consolidated financial statements and Management's
      Discussion and Analysis of Financial Condition and Results of Operations
      included in the Company’s Form 10-K/A for the year ended December 31,
      2005.





8


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements






**2.** ***Summary
      of Significant Accounting Policies*** **(continued)**





Revenue
      Recognition




Minimum
      rents are recognized on an accrual basis over the terms of the related leases
      on
      a straight-line basis. The capitalized above-market lease values and the
      capitalized below-market lease values are amortized as an adjustment to rental
      income over the initial lease term. Percentage rents, which are based on
      commercial tenants’ sales, are recognized once the sales reported by such
      tenants exceed any applicable breakpoints as specified in the tenants’ leases.
      Recoveries from commercial tenants for real estate taxes, insurance and other
      operating expenses, and from residential tenants for utility costs, are
      recognized as revenues in the period that the applicable costs are incurred.
      The
      Company recognizes differences between estimated recoveries and the final billed
      amounts in the subsequent year.





Investment
      in Real Estate




*Accounting
      for Acquisitions*




The
      Company accounts for acquisitions of Properties in accordance with SFAS No.
      141,
“Business Combinations.” The fair value of the real estate acquired is allocated
      to acquired tangible assets, consisting of land, building and tenant
      improvements, and identified intangible assets and liabilities, consisting
      of
      the value of above-market and below-market leases for acquired in-place leases
      and the value of tenant relationships, based in each case on their fair values.
      Purchase accounting is applied to assets and liabilities related to real estate
      entities acquired based upon the percentage of interest acquired.





The
      fair
      value of the tangible assets of an acquired property (which includes land,
      building and tenant improvements) is determined by valuing the property as
      if it
      were vacant, based on management’s determination of the relative fair values of
      these assets. Management determines the as-if-vacant fair value of a property
      using methods to determine the replacement cost of the tangible assets.





In
      determining the fair value of the identified intangible assets and liabilities
      of an acquired property, above-market and below-market in-place lease values
      are
      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 and the capitalized
      below-market lease values are amortized as an adjustment to rental income over
      the initial lease term.





The
      aggregate value of in-place leases is determined by evaluating various factors,
      including an estimate of carrying costs during the expected lease-up periods,
      current market conditions and similar leases. In estimating carrying costs,
      management includes 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 estimates costs to execute similar
      leases including leasing commissions, legal and other related costs. The value
      assigned to this intangible asset is amortized over the remaining lease terms
      ranging from one month to approximately 9 years. Optional renewal periods were
      not considered.





The
      aggregate value of other acquired intangible assets include tenant
      relationships. Factors considered by management in assigning a value to these
      relationships include: assumptions of probability of lease renewals, investment
      in tenant improvements, leasing commissions and an approximate time lapse in
      rental income while a new tenant is located. The value assigned to this
      intangible asset will be amortized over the average life of the
      relationship.





*Carrying
      Value of Assets*




The
      amounts to be capitalized as a result of periodic improvements and additions
      to
      real estate property, and the periods over which the assets are depreciated
      or
      amortized are determined based on the application of accounting standards that
      may require estimates as to fair value and the allocation of various costs
      to
      the individual assets. Differences in the amount attributed to the assets can
      be
      significant based upon the assumptions made in calculating these estimates.








9




**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements






**2.** ***Summary
      of Significant Accounting Policies*** **(continued)**





Investment
      in Real Estate (continued)




*Impairment
      Evaluation*




Management
      evaluates the recoverability of its investment in real estate assets in
      accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement
      requires that long-lived assets be reviewed for impairment whenever events
      or
      changes in circumstances indicate that recoverability of the asset is not
      assured.





The
      Company evaluates the recoverability of its investments in real estate assets
      to
      be held and used each quarter and will record an impairment charge when there
      is
      an indicator of impairment and the undiscounted projected cash flows are less
      than the carrying amount for a particular property. Management concluded no
      impairment adjustment was required at September 30, 2006. The estimated cash
      flows used for the impairment analysis and the determination of estimated fair
      value are based on the Company’s plans for the respective assets and the
      Company’s views of market and economic conditions. The estimates consider
      matters such as current and historical rental rates, occupancies for the
      respective Properties and comparable properties and recent sales data for
      comparable properties. Changes in estimated future cash flows due to changes
      in
      the Company’s plans or views of market and economic conditions could result in
      recognition of impairment losses, which, under the applicable accounting
      guidance, could be substantial.





*Depreciation
      and Amortization*




Depreciation
      expense for real estate assets is computed using a straight-line method and
      estimated useful lives for buildings and improvements using a weighted average
      composite life of forty years and equipment and fixtures of five to ten years.
      Expenditures for leasehold improvements and construction allowances paid to
      commercial tenants are capitalized and amortized over the initial term of each
      lease. Maintenance and repairs are charged to expense as incurred.





Deferred
      Costs




The
      Company capitalizes initial direct costs in accordance with SFAS No. 91,
“Accounting for Nonrefundable Fees and Costs Associated with Originating or
      Acquiring Loans and Initial Direct Costs of Leases.” The costs are capitalized
      upon the execution of the loan or lease and amortized over the initial term
      of
      the corresponding loan or lease. Amortization of deferred loan costs begins
      in
      the period during which the loan was originated. Deferred leasing costs are
      not
      amortized to expense until the earlier of the store opening date or the date
      the
      tenant’s lease obligation begins.





Income
      Taxes




For
      the
      year ending December 31, 2006, the Company intends to make an election to be
      taxed as a real estate investment trust (a “REIT”), under Sections 856 through
      860 of the Internal Revenue Code of 1986, as amended (the “Code”) and intends to
      be taxed as such beginning with its taxable year ending December 31, 2006.
      Accordingly, no provision for income tax has been recorded.





To
      qualify as a REIT, the Company must meet certain organizational and operational
      requirements, including a requirement to distribute at least 90% of its ordinary
      taxable income to stockholders. As a REIT, the Company generally will not be
      subject to federal income tax on taxable income that it distributes to its
      stockholders. If the Company fails to qualify as a REIT in any taxable year,
      it
      will then be subject to federal income taxes on its taxable income at regular
      corporate rates and will not be permitted to qualify for treatment as a REIT
      for
      federal income tax purposes for four years following the year during which
      qualification is lost unless the Internal Revenue Service grants the Company
      relief under certain statutory provisions. Such an event could materially
      adversely affect the Company’s net income and net cash available for
      distribution to stockholders. However, the Company believes that it will be
      organized and operate in such a manner as to qualify for treatment as a REIT
      and
      intends to operate in such a manner so that the Company will remain qualified
      as
      a REIT for federal income tax purposes.





10


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements







**2.** ***Summary
      of Significant Accounting Policies*** **(continued)**





Organization
      and Offering Costs




The
      Company estimates offering costs of approximately $300,000 if the minimum
      offering of 200,000 shares is sold, and approximately $30,000,000 if the maximum
      offering of 30,000,000 shares is sold. Subject to limitations in terms of the
      maximum percentage of costs to offering proceeds that may be incurred by the
      Company, third-party offering expenses such as registration fees, due diligence
      fees, marketing costs, and professional fees, along with selling commissions
      and
      dealer manager fees paid to the Dealer Manager, are accounted for as a reduction
      against additional paid-in capital (“APIC”) as offering proceeds are released to
      the Company.




As
      of
      September 30, 2006, the Advisor has advanced approximately $3.8 million to
      the
      Company for offering costs, including commission and dealer manager fees. Based
      on gross proceeds of approximately $24.5 million  from
      its
      public offering as of September 30, 2006, the Company’s responsibility for the
      reimbursement of advances for commissions and dealer manager fees was **** limited
      to approximately $2.0 million (or 8% of the gross offering proceeds), and its
      obligation for advances for organization and third-party offering costs was
      limited to approximately $0.5 million (or 2% of the gross offering proceeds).





Use
      of
      Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting periods. Actual results could differ from those
      estimates.





Reclassifications




Certain
      reclassifications have been made to the prior year financial statements to
      conform to the current year presentation.





New
      Accounting Pronouncements




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* .
      This
      Statement applies under other accounting pronouncements that require or permit
      fair value measurements. Accordingly, this Statement does not require any new
      fair value measurements. However, for some entities, the application of this
      Statement will change current practice. This Statement clarifies that market
      participant assumptions include assumptions about risk, for example, the risk
      inherent in a particular valuation technique used to measure fair value (such
      as
      a pricing model) and/or risk inherent in the inputs to the valuation technique.
      This Statement clarifies that market participant assumptions also include
      assumptions about the effect of a restriction on the sale or use of an asset.
      This Statement also clarifies that a fair value measurement for a liability
      reflects its nonperformance risk. This Statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. The Company is currently evaluating
      the impact that the adoption of SFAS No. 157 will have on the Company’s
      consolidated financial statements.





In
      June
      2006, the FASB issued FIN No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* .
      This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, *Accounting
      for Income Taxes* .
      This
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This Interpretation also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This Interpretation is effective for fiscal
      years beginning after December 15, 2006. The Company is currently evaluating
      the
      impact that the adoption of FIN No. 48 will have on the Company’s consolidated
      financial statements.





In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108 to address
      diversity in practice in quantifying financial statement misstatements and
      the
      potential under current practice for the build up of improper amounts on the
      balance sheet. SAB 108 provides guidance on the consideration of the effects
      of
      prior year misstatements in quantifying current year misstatements for the
      purpose of a materiality assessment. The Company does not believe that the
      adoption of SAB 108 will have any effect on the Company’s consolidated financial
      statements.


11


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements







**2.** ***Summary
      of Significant Accounting Policies*** **(continued)**




New
      Accounting Pronouncements (continued)




In
      September 2005, the Emerging Issues Task Force (“EITF”) issued Issue 04-05,
“Determining Whether a General Partner, or the General Partners As a Group,
      Controls a Limited Partnership or Similar Entity When the Limited Partners
      Have
      Certain Rights.” The EITF addresses whether rights held by the limited
      partner(s) preclude consolidation in circumstances in which the sole general
      partner would consolidate the limited partnership in accordance with U.S.
      generally accepted accounting principals. The assessment of limited partners’
rights and their impact on the presumption of control of the limited partnership
      by the sole general partner should be made when an investor becomes the sole
      general partner and should be reassessed if (i) there is a change to the terms
      or in the exercisability of the rights of the limited partners, (ii) the sole
      general partner increases or decreases its ownership of limited partnership
      interests, or (iii) there is an increase or decrease in the number of
      outstanding limited partnership interests. This issue is effective no later
      than
      for fiscal years beginning after December 15, 2005, and as of June 29, 2005
      for
      new or modified arrangements. The Company adopted this statement in the first
      quarter of 2006. Adoption of EITF 04-05 had no material impact on the Company’s
      financial position or results of operations.





**3.** ***Acquisitions***




*St
      Augustine Retail Outlet Mall*




On
      November 30, 2005, Prime Outlets Acquisition Company LLC (“Prime”), an affiliate
      of the Advisor, entered into a Purchase and Sale Agreement with St. Augustine
      Outlet World, Ltd, an unaffiliated third party, to purchase Belz Outlets at
      St.
      Augustine, Florida. On March 31, 2006, Prime assigned its interest in the
      Purchase and Sale Agreement to LVP St. Augustine Outlets, LLC (“LVP St.
      Augustine”), a single purpose, wholly owned subsidiary of the Operating
      Partnership, and LVP St. Augustine simultaneously completed the acquisition
      of
      the property. The total acquisition price, including acquisition-related
      transaction costs, was $26,921,450. In connection with the transaction, the
      Advisor received an acquisition fee equal to 2.75% of the purchase price, or
      $715,000.





Approximately
      $22.4 million of the total acquisition cost was funded by a mortgage loan from
      Wachovia Bank, National Association (“Wachovia”) and approximately $4.5 million
      was funded with offering proceeds from the sale of the Company’s common stock.
      Loan proceeds from Wachovia were also used to fund approximately $4.8 million
      of
      escrows for future leasing-related expenditures, real estate taxes, insurance
      and debt service. LVP St. Augustine currently holds a fee simple interest in
      the
      property, subject to the encumbrances described in Note 4 below.





As
      of
      September 30, 2006, the approximate fixed future minimum rentals from tenants
      of
      the property are as follows:





2006
            
            2007
            
            2008
            
            2009
            
            2010
            
            Thereafter
            
            TotalFixed
                Future Minimum Rentals
            
            $
            526,849
            
            $
            1,866,132
            
            $
            1,429,512
            
            $
            983,783
            
            $
            333,951
            
            $
            129,920
            
            $
            5,270,147







*Southeastern
      Michigan Multi-Family Properties*




On
      April
      26, 2006, the Sponsor entered into a Purchase and Sale Agreement with Home
      Properties, L.P. and Home Properties WMF I, LLC, affiliates of Home Properties,
      Inc., a New York Stock Exchange listed real estate investment trust
      (collectively, “Sellers”), each an unaffiliated third party, to purchase 19
      multifamily apartment communities. On June 29, 2006, the Sponsor assigned the
      purchaser’s interest in the Purchase and Sale Agreement with respect to four of
      the apartment communities to each of four single purpose, wholly owned
      subsidiaries of LVP Michigan Multifamily Portfolio LLC (“LVP MMP”), and the LVP
      MMP subsidiaries simultaneously completed the acquisition of the four
      properties. The Operating Partnership holds a 99% membership interest in LVP
      MMP, while the Lightstone REIT holds a 1% membership interest in
LVP
      MMP. The properties are located in Southeast Michigan and were valued by an
      independent third-party appraiser retained by Citigroup Global Markets Realty
      Corp. (“Citigroup”) at an aggregate value equal to $54.3
      million.


12


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements






**3.** ***Acquisitions
      (continued)***




The
      total
      acquisition price, excluding acquisition-related transaction costs, was
      approximately $42.2 million. In connection with the transaction, the Advisor
      received an acquisition fee equal to 2.75% of the purchase price, or
      approximately $1.1 million. Other closing and financing related costs totaled
      approximately $400,000, and net pro ration adjustments for assumed liabilities,
      prepaid rents, real estate taxes and interest totaled $500,000.





Approximately
      $40.7 million of the total acquisition cost was funded by a mortgage loan from
      Citigroup, and approximately $4.6 million was funded with offering proceeds
      from
      the sale of the Company’s common stock. Loan proceeds from Citigroup were also
      used to fund approximately $1.1 million of escrows for capital improvements,
      real estate taxes, and insurance. Each of the four subsidiaries of LVP MMP
      currently holds a fee simple interest in one of the four properties, subject
      to
      the encumbrances described in Note 4 below.





In-place
      rents, net of rent concessions, and average occupancy for the four properties
      at
      September 30, 2006 was as follows:




In-Place
                Rents, Net
            $729,211Occupancy
                Percentage
            92.5%




The
      following unaudited pro forma combined condensed statements of operations set
      forth the consolidated results of operations for the nine months ended September
      30, 2006 and September 30, 2005, respectively, as if the above described
      acquisitions had occurred at the beginning of the period of acquisition and
      the
      same period in the year prior to the acquisition. The unaudited pro forma
      information does not purport to be indicative of the results that actually
      would
      have occurred if the acquisitions had been in effect for the nine months ended
      September 30, 2006 and September 30, 2005, respectively.





Nine
                  Months EndedSeptember
                  30,2006
              
              2005Real
                  estate revenues
              
              $
              9,960,169
              
              $
              10,515,051Net
                  loss
              
              $
              (116,809
              )
              $
              (271,605
              )Basic
                  and diluted loss per share
              
              $
              (0.09
              )
              $
              (0.29
              )





**4.** ***Mortgages
      Payable*** ****




Mortgages
      payable, totaling approximately $68.0 million at September 30, 2006, consists
      of
      two secured loans maturing in 2016. The loans bear interest at a fixed annual
      rate of 6.09% and 5.96%, respectively. Monthly installments of interest only
      are
      required through the first 12 and 60 months, respectively, and monthly
      installments of principal and interest are required throughout the remainder
      of
      their stated terms. At their maturity, approximately $23.4 million and $37.9
      million, respectively, will be due, assuming no prior principal prepayment.
      Each
      of the loans is secured by acquired real estate and is non-recourse to the
      Company.





13


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements






**4.** ***Mortgages
      Payable*** **(continued)**




The
      following table shows the mortgage debt maturing during the next five
      years:




2006
              
              2007
              
              2008
              
              2009
              
              2010
              
              Thereafter
              
              TotalFixed
                  rate mortgages
              
              $
              -
              
              $
              244,904
              
              $
              344,388
              
              $
              365,957
              
              $
              388,876
              
              $
              66,630,875
              
              $
              67,975,000





Lightstone
      Holdings, LLC (“Guarantor”), a company wholly owned by the Advisor, has
      guaranteed payment of losses that Wachovia may sustain as a result of fraud,
      misappropriation, misuse of loan proceeds or other acts of misconduct by the
      Company and/or its principals or affiliates.  Such losses are recourse
      to Guarantor under the guaranty regardless of whether Wachovia has
      attempted to procure payment from the Company or any other party.  Further,
      in the event of the Company's bankruptcy, reorganization or insolvency, or
      the
      interference by the Company or its affiliates in any foreclosure proceedings
      or
      other remedy exercised by Wachovia, Guarantor has guaranteed the payment of
      any unpaid loan amounts.  The Company has agreed, to the maximum extent
      permitted by its Charter, to indemnify Guarantor for any liability
      that it incurs under this guaranty.





**5** ***.
      Distributions Payable***




On
      September 5, 2006, the Company’s Board of Directors declared a dividend for the
      three-month period ending September 30, 2006. The dividend of $309,282 at
      September 30, 2006, was calculated based on shareholders of record each day
      during this period at a rate of $0.0019178 per day. If paid each day for a
      365-day period, the dividend represented a 7.0 percent annualized rate based
      on
      a share price of $10.00. The dividend was paid in full on October 13, 2006
      using
      a combination of cash ($189,252), and pursuant to the Company’s Distribution
      Reinvestment Program, shares of the Company’s stock at a discounted price of
      $9.50 per share ($120,030). The amount of dividends to be distributed to
      stockholders in the future will be determined by the Board of Directors and
      are
      dependent on a number of factors, including funds available for payment of
      dividends, our financial condition, capital expenditure requirements and annual
      distribution requirements needed to maintain our status as a REIT under the
      Internal Revenue Code.





**6.** ***Related
      Party Transactions*** ****




The
      Company has agreements with the Dealer Manager, Advisor and Property Manager
      to
      pay certain fees, as follows, in exchange for services performed by these
      entities and other affiliated entities. The Company’s ability to secure
      financing and subsequent real estate operations are dependent upon its Advisor,
      Property Manager, Dealer Manager and their affiliates to perform such services
      as provided in these agreements.





**Fees
                /****Compensation**
            
            **Amount**Selling
                Commission
            
            The
                Dealer Manager will be paid up to 7% of the gross offering proceeds
                before
                reallowance of commissions earned by participating broker-dealers.
                Selling
                commissions are expected to be approximately $21,000,000 if the maximum
                offering of 30 million shares is sold.Soliciting
                Dealer Warrants
            
            The
                Dealer Manager may buy up to 600,000 warrants at a purchase price
                of
                $.0008 per warrant. Each warrant will be exercisable for one share
                of the
                Company’s common stock at an exercise price of $12.00 per
                share.





14


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements






**6.** ***Related
      Party Transactions*** **(continued)**





**Fees
                /****Compensation**
            
            **Amount**Dealer
                Management Fee
            
            The
                Dealer Manager will be paid up to 1% of gross offering proceeds before
                reallowance to participating broker-dealers. The estimated dealer
                management fee is expected to be approximately $3,000,000 if the
                maximum
                offering of 30 million shares is sold.Reimbursement
                of Offering Expenses
            
            All
                offering costs, including the commissions and dealer management fees
                indicated above, are estimated at approximately $30 million if the
                maximum
                offering of 30 million shares is sold. The Company will sell a special
                general partnership interest in the Operating Partnership to Lightstone
                SLP, LLC (an affiliate of the Sponsor) and apply all the sales proceeds
                to
                reimburse offering costs.Reimbursement
                of Other Expenses
            
            The
                Advisor or its affiliates will be reimbursed for expenses that may
                include
                costs of goods and services, administrative services and non-supervisory
                services performed directly for the Company by independent
                parties.Acquisition
                Fee
            
            The
                Advisor will be paid an acquisition fee equal to 2.75% of the gross
                contract purchase price (including any mortgage assumed) of each
                property
                purchased. The Advisor will also be reimbursed for expenses that
                it incurs
                in connection with the purchase of a property. The Company anticipates
                that acquisition expenses will be between 1% and 1.5% of a property’s
                purchase price, and acquisition fees and expenses are capped at 5%
                of the
                gross contract purchase price of a property. The actual amounts of
                these
                fees and reimbursements depend upon results of operations and, therefore,
                cannot be determined at the present time. However, $33,000,000 may
                be paid
                as an acquisition fee and for the reimbursement of acquisition expenses
                if
                the maximum offering is sold, assuming aggregate long-term permanent
                leverage of approximately 75%.Property
                Management-
              *Residential
                / Retail*
            
            The
                Property Manager will be paid a monthly management fee of up to 5%
                of the
                gross revenues from residential and retail properties. In addition,
                the
                Company may pay the Property Manager a separate fee for the one-time
                initial rent-up or leasing-up of newly constructed properties in
                an amount
                not to exceed the fee customarily charged in arm’s length transactions by
                others rendering similar services in the same geographic area for
                similar
                properties as determined by a survey of brokers and agents in such
                area.Property
                Management-*Office/Industrial*
            
            The
                Property Manager will be paid monthly property management and leasing
                fees
                of up to 4.5% of gross revenues from office and industrial properties.
                In
                addition, the Company may pay the Property Manager a separate fee
                for the
                one-time initial rent-up or leasing-up of newly constructed properties
                in
                an amount not to exceed the fee customarily charged in arm’s length
                transactions by others rendering similar services in the same geographic
                area for similar properties as determined by a survey of brokers
                and
                agents in such area.Asset
                Management Fee
            
            The
                Advisor or its affiliates will be paid an asset management fee of
                0.55% of
                the Company’s average invested assets, as defined, payable quarterly in an
                amount equal to 0.1375 of 1% of average invested assets as of the
                last day
                of the immediately preceding quarter.








15


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements







**6.** ***Related
      Party Transactions*** **(continued)**




For
      any
      year in which the Company qualifies as a REIT, the Advisor must reimburse the
      Company for the amounts, if any, by which the total operating expenses, the
      sum
      of the advisor asset management fee plus other operating expenses paid during
      the previous fiscal year exceed the greater of 2% of average invested assets,
      as
      defined, for that fiscal year, or, 25% of net income for that fiscal year.
      Items
      such as interest payments, taxes, non-cash expenditures, the special liquidation
      distribution, the special termination distribution, organization and offering
      expenses, and acquisition fees and expenses are excluded from the definition
      of
      total operating expenses, which otherwise includes the aggregate expense of
      any
      kind paid or incurred by the Company.





Lightstone **** SLP,
      LLC **** intends
      to purchase special general partner units in the Operating Partnership. These
      special general partner units, the purchase price of which will be repaid only
      after stockholders receive a stated preferred return and their net investment,
      will entitle Lightstone **** SLP,
      LLC **** to
      a
      portion of any regular distributions made by the Operating Partnership. Such
      distributions will always be subordinated until stockholders receive a stated
      preferred return, as described below:







**Operating
                  Stage**
                **Distributions**
              
              **Amount
                  of Distribution**7%
                  Stockholder Return Threshold
              
              Once
                  a cumulative non-compounded return of 7% per year is realized by
                  stockholders on their net investment, Lightstone SLP, LLC will
                  receive
                  available distributions from the Operating Partnership until it
                  has
                  received an amount equal to a cumulative non-compounded return
                  of 7% per
                  year on the purchase price of the special general partner interests.
“Net
                  investment” refers to $10 per share, less a pro rata share of any proceeds
                  received from the sale or refinancing of the Company’s
                  assets.12%
                  Stockholder Return Threshold
              
              Once
                  a cumulative non-compounded return of 12% per year is realized
                  by
                  stockholders on their net investment (including amounts equaling
                  a 7%
                  return on their net investment as described above), 70% of the
                  aggregate
                  amount of any additional distributions from the Operating Partnership
                  will
                  be payable to the stockholders, and 30% of such amount will be
                  payable to
                  Lightstone SLP, LLC.





**Operating
                Stage****Distributions**
            
            **Amount
                of Distribution**Returns
                in Excess of 12%
            
            After
                the 12% return threshold is realized by stockholders and Lightstone
                SLP,
                LLC, 60% of any remaining distributions from the Operating Partnership
                will be distributable to stockholders, and 40% of such amount will
                be
                payable to Lightstone SLP, LLC.





The
      special general partner units will also entitle Lightstone **** SLP,
      LLC **** to
      a
      portion of any liquidating distributions made by the Operating Partnership.
      The
      value of such distributions will depend upon the net sale proceeds upon the
      liquidation of the Company and, therefore, cannot be determined at the present
      time. Liquidating distributions to Lightstone **** SLP,
      LLC
      will always be subordinated until stockholders receive a distribution equal
      to
      their initial investment plus a stated preferred return, as described
      below:









16


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      1. FINANCIAL STATEMENTS, CONTINUED:**





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements







**6.** ***Related
      Party Transactions*** **(continued)**




**Liquidating
                Stage**
              **Distributions**
            
            **Amount
                of Distribution**7%
                Stockholder Return Threshold
            
            Once
                stockholders have received liquidation distributions, and a cumulative
                non-compounded 7% return on their initial net investment, Lightstone
                SLP,
                LLC will receive available distributions until it has received an
                amount
                equal to its initial purchase price of the special general partner
                interests plus a cumulative non-compounded return of 7% per
                year.12%
                Stockholder Return Threshold
            
            Once
                stockholders have received liquidation distributions, and a cumulative
                non-compounded return of 12% per year on their initial net investment
                (including amounts equaling a 7% return on their net investment as
                described above), 70% of the aggregate amount of any additional
                distributions from the Operating Partnership will be payable to the
                stockholders, and 30% of such amount will be payable to Lightstone
                SLP,
                LLC.Returns
                in Excess of 12%
            
            After
                stockholders and Lightstone LP, LLC have received liquidation
                distributions, and a cumulative non-compounded return of 12% per
                year on
                their initial net investment, 60% of any remaining distributions
                from the
                Operating Partnership will be distributable to stockholders, and
                40% of
                such amount will be payable to Lightstone SLP,
                LLC.













17


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**





**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS:**




The
      following discussion and analysis should be read in conjunction with the
      accompanying financial statements of Lightstone Value Plus Real Estate
      Investment Trust, Inc. and the notes thereto. As used herein, the terms “we,”
“our” and “us” refer to Lightstone Value Plus Real Estate Investment Trust,
      Inc., a Maryland corporation, and, as required by context, Lightstone Value
      Plus
      REIT, L.P. and its wholly owned subsidiaries, which we collectively refer to
      as
“the Operating Partnership.”




**Forward-Looking
      Statements**




Certain
      information included in this Quarterly Report on Form 10-Q contains, and other
      materials filed or to be filed by us with the Securities and Exchange
      Commission, or the SEC, contain or will contain, forward-looking statements.
      All
      statements, other than statements of historical facts, including, among others,
      statements regarding our possible or assumed future results of our business,
      financial condition, liquidity, results of operations, plans and objectives,
      are
      forward-looking statements. Those statements include statements regarding the
      intent, belief or current expectations of Lightstone Value Plus Real Estate
      Investment Trust, Inc. and members of our management team, as well as the
      assumptions on which such statements are based, and generally are identified
      by
      the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,”
“estimates,” “expects,” “plans,” “intends,” “should” or similar expressions.
      Forward-looking statements are not guarantees of future performance and involve
      risks and uncertainties that actual results may differ materially from those
      contemplated by such forward-looking statements.





Such
      statements are based on assumptions and expectations which may not be realized
      and are inherently subject to risks and uncertainties, many of which cannot
      be
      predicted with accuracy and some of which might not even be anticipated. Future
      events and actual results, financial and otherwise, may differ from the results
      discussed in the forward-looking statements.





Risks
      and
      other factors that might cause differences, some of which could be material,
      include, but are not limited to, economic and market conditions, competition,
      tenant or joint venture partner(s) bankruptcies, failure to increase tenant
      occupancy and operating income, rejection of leases by tenants in bankruptcy,
      financing and development risks, construction and lease-up delays, cost
      overruns, the level and volatility of interest rates, the rate of revenue
      increases versus expense increases, the financial stability of various tenants
      and industries, the failure of the Company (defined herein) to make additional
      investments in real estate properties, the failure to upgrade our tenant mix,
      restrictions in current financing arrangements, the failure to fully recover
      tenant obligations for common area maintenance (“CAM”), insurance, taxes and
      other property expenses, the failure of the Lightstone REIT to qualify as a
      real
      estate investment trust (“REIT”), the failure to refinance debt at favorable
      terms and conditions, an increase in impairment charges, loss of key personnel,
      failure to achieve earnings/funds from operations targets or estimates,
      conflicts of interest with the Advisor and its affiliates, failure of joint
      venture relationships, significant costs related to environmental issues as
      well
      as other risks listed from time to time in this Form 10-Q, our Form 10-K/A,
      our
      Registration Statement on Form S-11 (File No. 333-117367), as the same may
      be
      amended and supplemented from time to time, and in the Company’s other reports
      filed with the Securities and Exchange Commission (“SEC”).




We
      believe these forward-looking statements are reasonable; however, undue reliance
      should not be placed on any forward-looking statements, which are based on
      current expectations. All written and oral forward-looking statements
      attributable to us, or persons acting on our behalf, are qualified in their
      entirety by these cautionary statements. Further, forward-looking statements
      speak only as of the date they are made, and we undertake no obligation to
      update or revise forward-looking statements to reflect changed assumptions,
      the
      occurrence of unanticipated events or changes to future operating results over
      time unless required by law.




**Overview**




Lightstone
      Value Plus Real Estate Investment Trust, Inc. (the “Company”) intends to acquire
      and operate commercial and residential properties, principally in the United
      States. We intend to acquire fee interests in multi-tenanted, community, power
      and lifestyle shopping centers, and in malls located in highly trafficked retail
      corridors, high-barrier to entry markets, and sub- markets with constraints
      on
      the amount of additional property supply. Additionally, we seek to acquire
      multi-tenanted industrial properties located near major transportation arteries
      and distribution corridors; multi-tenanted office properties located near major
      transportation arteries; and market-rate, middle market multifamily properties
      at a discount to replacement cost. We do not intend to invest in single family
      residential properties; hotels or motels; leisure home sites; farms; ranches;
      timberlands; unimproved properties not intended to be developed; or mining
      properties.





18


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS, CONTINUED:**








**Overview
      (continued)**




Investments
      in real estate will be made through the purchase of all or part of a fee simple
      ownership, or all or part of a leasehold interest. We may also purchase limited
      partnership interests, limited liability company interests and other equity
      securities. We may also enter into joint ventures with affiliated entities
      for
      the acquisition, development or improvement of properties as well as general
      partnerships, co-tenancies and other participations with real estate developers,
      owners and others for the purpose of developing, owning and operating real
      properties. We will not enter into a joint venture to make an investment that
      we
      would not be permitted to make on our own. Not more than 10% of our total assets
      will be invested in unimproved real property. For purposes of this paragraph,
      “unimproved real properties” does not include properties acquired for the
      purpose of producing rental or other operating income, properties under
      construction and properties for which development or construction is planned
      within one year. Additionally, we will not invest in contracts for the sale
      of
      real estate unless in recordable form and appropriately recorded. To date the
      Company has completed two acquisitions, the Belz Outlets in St. Augustine,
      Florida which closed on March 31, 2006 and the southeastern Michigan
      multi-family properties which closed on June 29, 2006.





On
      November 6, 2006, the Company announced its commitment to purchase Oakview
      Plaza
      from an unaffiliated third party. Oakview Plaza is a retail shopping mall
      located in Omaha, Nebraska consisting of three single-story retail buildings
      located on approximately 19.6 acres of land and containing approximately 177,303
      rentable square feet. The contract price for the Property is $32,600,000,
      excluding closing costs. Subject to the development and leasing of an additional
      2.1 acre parcel of land (the “Option Land”) located immediately adjacent to
      Oakview Plaza, the Company will be required to purchase the Option Land on
      the
      commencement of rent under the lease for the Option Land. The contract price
      for
      the fully improved and leased Option Land will be determined by dividing the
      first full year of base rent payments by 9.5%. In the event that it receives
      notice that the improvement and leasing of the Option Land has not been
      successful, the Company will have 30 days to purchase the unimproved Option
      Land
      for a fixed contract price of $650,000. Although the Company believes that
      the
      acquisition of Oakview Plaza is probable, there can be no assurance that this
      acquisition will be consummated. No other acquisitions have been completed
      or
      identified by the Company as of November 6, 2006.





Although
      we are not limited as to the geographic area where we may conduct our
      operations, we intend to invest in properties located near the existing
      operations of our sponsor, The Lightstone Group, in order to achieve economies
      of scale where possible. The Lightstone Group currently maintains operations
      in
      Alabama, California, Connecticut, District of Columbia, Florida, Georgia,
      Illinois, Indiana, Maryland, Massachusetts, Michigan, Mississippi, New Jersey,
      New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South
      Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin
      and
      Puerto Rico.




We
      have
      and will continue to utilize leverage in acquiring our properties. The number
      of
      different properties we will acquire will be affected by numerous factors,
      including, the amount of funds available to us. When interest rates on mortgage
      loans are high or financing is otherwise unavailable on terms that are
      satisfactory to us, we may purchase certain properties for cash with the
      intention of obtaining a mortgage loan for a portion of the purchase price
      at a
      later time. We intend to limit our aggregate long-term permanent borrowings
      to
      75% of the aggregate fair market value of all properties unless any excess
      borrowing is approved by a majority of the independent directors and is
      disclosed to our stockholders.





We
      may
      finance our property acquisitions through a variety of means, including but
      not
      limited to individual non-recourse mortgages and through the exchange of an
      interest in the property for limited partnership units of the Operating
      Partnership. We intend to qualify as a REIT and to elect to be taxed as a REIT
      for the taxable year ending December 31, 2006, but as of the date of this
      Quarterly Report on Form 10-Q, we are not qualified as a REIT. We plan to own
      substantially all of our assets and conduct our operations through the Operating
      Partnership.





We
      do not
      have employees. We entered into an advisory agreement dated April 22, 2005
      with
      Lightstone Value Plus REIT LLC, a Delaware limited liability company, which
      we
      refer to as the “Advisor,” pursuant to which the Advisor supervises and manages
      our day-to-day operations and selects our real estate and real estate related
      investments, subject to oversight by our board of directors. We pay the Advisor
      fees for services related to the investment and management of our assets, and
      we
      will reimburse the Advisor for certain expenses incurred on our behalf. Through
      September 30, 2006, the Advisor has advanced in excess of $3.8 million to the
      Company for its organization and other offering costs, which consist of actual
      legal, accounting, printing and other accountable expenses (including sales
      literature and the prospectus), as well as selling commissions and dealer
      manager fees.


19


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS, CONTINUED:**








**Overview
      (continued)**




The
      Company intends to sell a maximum of 30 million common shares, at a price of
      $10
      per share (exclusive of 4 million shares available pursuant to the Company’s
      dividend reinvestment plan, 600,000 shares that could be obtained through the
      exercise of selling dealer warrants when and if issued and 75,000 shares that
      are reserved for issuance under the Company’s stock option plan). The Company’s
      Registration Statement on Form S-11 (the “Registration Statement”) was declared
      effective under the Securities Act of 1933 on April 22, 2005, and on May
      24,
      2005 ,
      the
      Lightstone REIT began offering its common shares for sale to the public. Lightstone
      Securities, LLC (the “Dealer Manager”), an affiliate of the Sponsor, is serving
      as the dealer manager of the Company’s public offering (the “Offering”). As of December 31,
      2005, the Company had
      reached its minimum offering of $2.0 million by receiving subscriptions for
      approximately 226,000 of
      its
      common shares, representing gross offering proceeds of approximately
      $ 2.3
      million .
      On
      February 1, 2006, cumulative gross offering proceeds of approximately $2.7
      million were released to the Company from escrow and invested in the Operating
      Partnership. As of September 30, 2006, cumulative gross offering proceeds of
      approximately $24.5 million have been released to the Lightstone REIT and used
      for the purchase of a 99.99% general partnership interest in the Operating
      Partnership. The Company expects that its ownership percentage in the Operating
      Partnership will remain significant as it plans to continue to invest all net
      proceeds from the Offering in the Operating Partnership.





We
      are
      not aware of any material trends or uncertainties, favorable or unfavorable,
      other than national economic conditions affecting real estate generally, that
      may be reasonably anticipated to have a material impact on either capital
      resources or the revenues or income to be derived from the acquisition and
      operation of real estate and real estate related investments, other than those
      referred to in this Form 10-Q.





For
      the
      year ending December 31, 2006, the Company intends to make an election to be
      taxed as a real estate investment trust (a “REIT”), under Sections 856 through
      860 of the Internal Revenue Code of 1986, as amended (the “Code”) and intends to
      be taxed as such beginning with its taxable year ending December 31, 2006.
      Accordingly, no provision for income tax has been recorded. To qualify as a
      REIT, the Company must meet certain organizational and operational requirements,
      including a requirement to distribute at least 90% of its ordinary taxable
      income to stockholders. As a REIT, the Company generally will not be subject
      to
      federal income tax on taxable income that it distributes to its stockholders.
      If
      the Company fails to qualify as a REIT in any taxable year, it will then be
      subject to federal income taxes on its taxable income at regular corporate
      rates
      and will not be permitted to qualify for treatment as a REIT for federal income
      tax purposes for four years following the year during which qualification is
      lost unless the Internal Revenue Service grants the Company relief under certain
      statutory provisions. Such an event could materially adversely affect the
      Company’s net income and net cash available for distribution to stockholders.
      However, the Company believes that it will be organized and operate in such
      a
      manner as to qualify for treatment as a REIT and intends to operate in such
      a
      manner so that the Company will remain qualified as a REIT for federal income
      tax purposes.





**Liquidity
      and Capital Resources**




Our
      short-term (less than one year) liquidity requirements include continuing
      offering costs, recurring operating costs, capital expenditures, debt service
      requirements, and the payment of dividends to our stockholders, limited partners
      and Lightstone SLP, LLC as may be required to maintain our proposed status
      as a
      REIT under the Internal Revenue Code. We anticipate these needs will be met
      with
      cash flows from operations, advances from the Advisor, and proceeds from the
      continuing sale of special general partnership units.





As
      of
      September 30, 2006, we have received proceeds of approximately $24.5 million
      from our public offering of common stock, net advances of approximately $1.4
      million from our Advisor, and approximately $2.5 million from the sale of
      special general partnership units to an affiliate of our Advisor.





20


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS, CONTINUED:**










**Liquidity
      and Capital Resources (continued)**




Our
      long-term (greater than one year) liquidity requirements include scheduled
      debt
      maturities, capital expenditures to maintain, renovate and expand existing
      assets, property acquisitions and development projects. We anticipate that
      net
      cash provided by the Offering, operating activities, and long-term mortgage
      debt
      will provide sufficient capital resources to carry out our business strategy
      relative to the acquisitions, renovations, and expansions of real estate
      properties. The
      following table shows the mortgage debt maturing during the next five
      years:




2006
              
              2007
              
              2008
              
              2009
              
              2010
              
              Thereafter
              
              TotalFixed
                  rate mortgages
              
              $
              -
              
              $
              244,904
              
              $
              344,388
              
              $
              365,957
              
              $
              388,876
              
              $
              66,630,875
              
              $
              67,975,000




Our
      charter does not permit borrowings that would cause our aggregate borrowings
      to
      exceed seventy-five percent (75%) of the aggregate fair market value of our
      assets as of the date of any borrowing, provided, that borrowings on any
      individual asset may exceed such limit. Any excess in borrowing over such 75%
      level shall be approved by a majority of the independent directors of our board
      of directors, and disclosed to our stockholders in our next quarterly report.





**Critical
      Accounting Policies**




General





Management’s
      Discussion and Analysis of Financial Condition and Results of Operations is
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America (“GAAP”). The preparation of these financial statements requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets, liabilities, revenues and expenses, and related disclosure of contingent
      assets and liabilities. Management bases its estimates on historical experience
      and on various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.




An
      accounting policy is deemed to be critical if it requires an accounting estimate
      to be made based on assumptions about matters that are highly uncertain at
      the
      time the estimate is made, and if different estimates that are reasonably likely
      to occur could materially impact the financial statements. No material changes
      to our critical accounting policies have occurred since the fiscal year ended
      December 31, 2005.




**Results
      of Operations**




We
      commenced operations on February 1, 2006 upon the release of our offering
      proceeds from escrow. Additionally, we acquired our initial real estate
      properties on March 31, 2006 and June 29, 2006, respectively. Our management
      is
      not aware of any material trends or uncertainties, other than national economic
      conditions affecting real estate generally that may reasonably be expected
      to
      have a material impact, favorable or unfavorable, on revenues or income from
      the
      acquisition, management and operation of real estate and real estate related
      investments.





*Comparison
      of the three months ended September 30, 2006 versus the three months ended
      September 30, 2005*





Revenues




Total
      revenues increased 100%, or $3.1 million for the three months ended September
      30, 2006 compared to $0 for the same period last year. Rental income increased
      by approximately $2.8 million primarily as a result of our acquiring the Belz
      Outlets in St. Augustine, Florida on March 31, 2006 and the southeastern
      Michigan multi-family properties on June 29, 2006. Tenant recovery income
      increased by approximately $241,000 primarily as a result of our acquiring
      the
      Belz Outlets in St. Augustine, Florida.





21


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS, CONTINUED:**










**Results
      of Operations (continued):**




Expenses




Total
      expenses increased 100%, or approximately $3.1 million, for the three months
      ended September 30, 2006, compared to $0 for the same period last year.
      Increases in property operating expenses ($1.4 million), real estate taxes
      ($341,000), and depreciation and amortization ($1.0 million) were a result
      of
      the acquisition of two new properties on March 31, 2006 and June 29, 2006,
      respectively. General and administrative costs increased 100% as well, to
      $322,000, primarily as a result of the payment of asset management fees,
      director’s and officer’s liability insurance and fees to our board of directors,
      auditors and attorneys.  We
      had
      not incurred any general and administrative costs during the same period last
      year, as our Company had not yet begun operations.





Other
      Income




Other
      income increased by approximately $304,000 due principally to interest earned
      on
      the investment of cumulative Offering proceeds in a money market account during
      the three-month period ending September 30, 2006.




Interest
      expense




Interest
      expense increased 100%, or approximately $1.1million for the three months ended
      September 30, 2006, as a result of the acquisition and financing of two new
      properties on March 31, 2006 and June 29, 2006, respectively.




*Comparison
      of the nine months ended September 30, 2006 versus the nine months ended
      September 30, 2005*





Due
      to
      the timing of our first acquisitions on March 31, 2006 and June 29, 2006,
      respectively, our results of operations for the nine months ended September
      30,
      2006 are substantially consistent with our results for the quarter ended
      September 30, 2006:





Revenues




Total
      revenues increased 100%, or $4.6 million for the nine months ended September
      30,
      2006 compared to $0 for the same period last year. Rental income increased
      by
      approximately $3.8 million primarily as a result of our acquiring the Belz
      Outlets in St. Augustine, Florida on March 31, 2006 and the southeastern
      Michigan multi-family properties on June 29, 2006. Tenant recovery income
      increased by approximately $745,000 primarily as a result of our acquiring
      the
      Belz Outlets in St. Augustine, Florida.





Expenses




Total
      expenses increased 100%, or approximately $4.2 million, for the nine months
      ended September 30, 2006, compared to $0 for the same period last year.
      Increases in property operating expenses ($1.9 million), real estate taxes
      ($502,000), and depreciation and amortization ($1.2 million) were a result
      of
      the acquisition of two new properties on March 31, 2006 and June 29, 2006,
      respectively. General and administrative costs increased 100% as well, to
      $578,000, primarily as a result of the payment of asset management fees,
      director’s and officer’s liability insurance and fees to our board of directors,
      auditors and attorneys.  We
      had
      not incurred any general and administrative costs during the same period last
      year, as our Company had not yet begun operations.





Other
      Income




Other
      income increased by approximately $372,000 due principally to interest earned
      on
      the investment of cumulative Offering proceeds in a money market account during
      the nine-month period ending September 30, 2006.





Interest
      expense




Interest
      expense increased 100%, or approximately $1.5 million for the nine months ended
      September 30, 2006, as a result of the acquisition and financing of two new
      properties on March 31, 2006 and June 29, 2006, respectively.


22


**PART
      I. FINANCIAL INFORMATION, CONTINUED:**





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK:**




Market
      risk includes risks that arise from changes in interest rates, foreign currency
      exchange rates, commodity prices, equity prices and other market changes that
      affect market sensitive instruments. In pursuing our business plan, we expect
      that the primary market risk to which we will be exposed is interest rate risk.




We
      may be
      exposed to the effects of interest rate changes primarily as a result of
      borrowings used to maintain liquidity and fund the expansion and refinancing
      of
      our real estate investment portfolio and operations. Our interest rate risk
      management objectives will be to limit the impact of interest rate changes
      on
      earnings, prepayment penalties and cash flows and to lower overall borrowing
      costs while taking into account variable interest rate risk. To achieve our
      objectives, we may borrow at fixed rates or variable rates. We may also enter
      into derivative financial instruments such as interest rate swaps and caps
      in
      order to mitigate our interest rate risk on a related financial instrument.
      We
      will not enter into derivative or interest rate transactions for speculative
      purposes.





At
      September 30, 2006, we had mortgage debt totaling approximately $68.0 million.
      There are two secured loans, each maturing in 2016. The loans bear interest
      at a
      fixed annual rate of 6.09% and 5.96%, respectively. Monthly installments of
      interest only are required through the first 12 and 60 months, respectively,
      and
      monthly installments of principal and interest are required throughout the
      remainder of their stated terms. At their maturity, approximately $23.4 million
      and $37.9 million, respectively, will be due, assuming no prior principal
      prepayment. Each of the loans is secured by acquired real estate and is
      non-recourse to the Company.





The
      following table shows the mortgage debt maturing during the next five
      years:




2006
              
              2007
              
              2008
              
              2009
              
              2010
              
              Thereafter
              
              TotalFixed
                  rate mortgages
              
              $
              -
              
              $
              244,904
              
              $
              344,388
              
              $
              365,957
              
              $
              388,876
              
              $
              66,630,875
              
              $
              67,975,000




Our
      combined future earnings, cash flows and fair values relating to financial
      instruments are currently not dependent upon prevalent market rates of interest
      as a result of our having only fixed rate debt and limited cash balances
      available for investment.





The
      fair
      value of our debt approximates its carrying amount at September 30,
      2006.




In
      addition to changes in interest rates, the value of our real estate and real
      estate related investments is subject to fluctuations based on changes in local
      and regional economic conditions and changes in the creditworthiness of lessees,
      which may affect our ability to refinance our debt if necessary. As of September
      30, 2006, the Company has no off-balance sheet arrangements nor has it entered
      into any derivative instruments.







**ITEM
      4. CONTROLS AND PROCEDURES:**




As
      of the
      end of the period covered by this report, management, including our chief
      executive officer and chief financial officer, evaluated the effectiveness
      of
      the design and operation of our disclosure controls and procedures. Based upon,
      and as of the date of, the evaluation, our chief executive officer and chief
      financial officer concluded that the disclosure controls and procedures were
      effective to ensure that information required to be disclosed in the reports
      we
      file and submit under the Exchange Act is recorded, processed, summarized and
      reported as and when required. Since the Company is considered a non-accelerated
      filer, we will not have to file Section 404 reports under the Sarbanes-Oxley
      Act
      of 2002 until its Form 10-K filing for 2007.




There
      have been no changes in our internal control over financial reporting that
      occurred during our last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting. There were no significant deficiencies or material weaknesses
      identified in the evaluation, and therefore, no corrective actions were
      taken.






23


**PART
      II. OTHER INFORMATION:**




**ITEM
      1. LEGAL PROCEEDINGS:**




On
      March
      29, 2006, Jonathan Gould, a former member of our Board of Directors and Senior
      Vice-President-Acquisitions, filed a lawsuit against us in the District Court
      for the Southern District of New York. The suit alleges, among other things,
      that Mr. Gould was insufficiently compensated for his services to us as director
      and officer. Mr. Gould sought damages of (i) up to $11,500,000 or (ii) a 2.5%
      ownership interest in all properties that we acquire and an option to acquire
      up
      to 5% of the membership interests of Lightstone SLP, LLC. We filed a motion
      to
      dismiss the lawsuit. After review of the motion to dismiss, counsel for Mr.
      Gould represented that Mr. Gould was dropping his claim for ownership interest
      in the properties we acquire and his claim for membership interests. Mr. Gould’s
      counsel represented that he would be suing only under theories of quantum merit
      and unjust enrichment seeking the value of work he performed.  Management
      believes that this suit is frivolous and entirely without merit and intends
      to
      defend against these charges vigorously.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS:**




On
      April
      22, 2005, our Registration Statement on Form S-11 (File No. 333-117367),
      covering a public offering, which we refer to as the “Offering,” of up to
      30,000,000 common shares for $10 per share (exclusive of 4,000,000 shares
      available pursuant to the Company’s dividend reinvestment plan, 600,000 shares
      that could be obtained through the exercise of selling dealer warrants when
      and
      if issued, and 75,000 shares that are reserved for issuance under the Company’s
      stock option plan) was declared effective under the Securities Act of 1933.
      On
      October 17, 2005, the Company’s filing of a Post-Effective Amendment to its
      Registration Statement was declared effective. The Post-Effective Amendment
      reduced the minimum offering from 1,000,000 shares of common stock to 200,000
      shares of common stock.





During
      the period covered by this Form 10-Q, we did not sell any equity securities
      that
      were not registered under the Securities Act of 1933, and we did not repurchase
      any of our securities. During the period from May 1, 2006 through June 8, 2006
      (the “Period”), we continued to offer our common stock while our post-effective
      amendments containing the December 31, 2005 financial statements were on file
      with the SEC but had not been declared effective. The offer and sale of our
      common stock during the Period may have been in violation of the rules and
      regulations under the Securities Act of 1933 (“Securities Act”), and the
      interpretations of the SEC. If a violation of the Section 5 of the Securities
      Act did in fact occur, shareholders who purchased during the Period would have
      a
      right to rescind the purchase of the common stock. The Securities Act generally
      requires that any claim brought for a violation of Section 5 be brought within
      one year of the violation. If all of the shareholders who purchased during
      the
      Period demanded rescission within that one-year period, we would be obligated
      to
      repay approximately $3,525,000, which we would repay using offering proceeds
      that we have received.





Through
      September 30, 2006, we had sold 2,463,924 shares for gross offering proceeds
      of
      approximately $24.5 million. This amount includes approximately 8,190 shares
      sold pursuant to our Dividend Reinvestment Plan for gross proceeds of
      approximately $77,801. From the effective date of our public offering through
      September 30, 2006, we have incurred the following expenses in connection with
      the issuance and distribution of the registered securities:




**Type
                  of Expense Amount 
                  Estimated/Actual**Underwriting
                  discounts and commissions
              
              $
              1,925,590
              
              
              ActualFinders’
                  fees
              
              
              -Expenses
                  paid to or for underwriters
              
              
              -Other
                  expenses to affiliates
              
              
              -Other
                  expenses paid to non-affiliates
              
              
              527,897
              
              
              Actual**Total
                  expenses**
              
              $
              2,453,487





The
      net
      offering proceeds to us, after deducting the total expenses paid as described
      above, and after accounting for approximately $2.5 million in contributions
      by
      Lightstone SLP, LLC to the Operating Partnership pursuant to the arrangement
      described in the “Compensation Table” and “Capital Resources” sections of our
      Prospectus, are approximately $24.5 million. The underwriting discounts and
      commissions were paid to our dealer manager, which reallowed all or a portion
      of
      the commissions to soliciting dealers.




24


**PART
      II. OTHER INFORMATION, CONTINUED:**


**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS,
      CONTINUED:**








With
      net
      offering proceeds of $24.5 million, and new mortgage debt in the amount of
      $68.0
      million, as reflected under “Cash Flows from Financing Activities” in our
      consolidated statements of cash flows, we acquired approximately $70.5 million
      in real estate investments (including $1.9 million in acquisition fees) and
      related assets. Cumulatively, we have used the net offering proceeds as
      follows:




**Type
                  of Expense Amount**
              
              **Amount**
              
              **Estimated
                  / Actual**Construction
                  of plant, building and facilities
              
              $
              -Purchase
                  of real estate interests
              
              
              9,106,429
              
              
              ActualAcquisition
                  of other businesses
              
              
              -Repayment
                  of indebtedness
              
              
              -Purchase
                  and installation of machinery and equipment
              
              
              -Working
                  capital (as of September 30, 2006)
              
              
              1,051,202
              
              
              ActualTemporary
                  investments (as of September 30, 2006)
              
              
              14,377,248
              
              
              ActualOther
                  uses
              
              
              -**Total
                  uses**
              
              $
              24,534,879




As
      of November 8, 2006, we have sold approximately 3.1 million shares at an
      aggregate offering price of $31.4 million.







**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES:**




None.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:**




None.




**ITEM
      5. OTHER INFORMATION:**




None.




25


**PART
      II. OTHER INFORMATION, CONTINUED:**


**ITEM
      6. EXHIBITS:**




**Exhibit**
              **Number**
            
            
            **Description**


3.2
            *
            
            Bylaws
                of Lightstone Value Plus Real Estate Investment Trust,
                Inc.4.1
            *
            
            Amended
                and Restated Agreement of Limited Partnership of Lightstone Value
                Plus
                REIT LP.10.1
            *
            
            Escrow
                Agreement by and among Lightstone Value Plus Real Estate Investment
                Trust,
                Inc., Trust Company of America and Lightstone
                Securities.10.2
            *
            
            Advisory
                Agreement by and among Lightstone Value Plus Real Estate Investment
                Trust,
                Inc., Lightstone Value Plus REIT LLC.10.3
            *
            
            Management
                Agreement, by and among Lightstone Value Plus Real Estate Investment
                Trust, Inc., Lightstone Value Plus REIT LP and Lightstone Value Plus
                REIT
                Management LLC.10.4
            *
            
            Form
                of the Company’s Stock Option Plan.10.5
            *
            
            Form
                of Indemnification Agreement by and between The Lightstone Group
                and the
                directors and executive officers of Lightstone Value Plus Real Estate
                Investment Trust, Inc.10.6
            *
            
            Agreement
              by and
              among Lightstone Value Plus REIT LP, Lightstone SLP, LLC, and David
              Lichtenstein.10.7
            *
            
            Purchase
              and Sale
              Agreement between St. Augustine Outlet World, Ltd. and Prime Outlets
              Acquisition Company LLC.10.8
            *
            
            Assignment
              and
              Assumption of Purchase and Sale Agreement by and between Prime Outlets
              Acquisition Company LLC and LVP St. Augustine Outlets LLC.10.9
            *
            
            Note and
              Mortgage
              Modification Agreement Evidencing Renewal Promissory Note Including
              Future
              Advance and Amended and Restated Mortgage, Security Agreement and Fixture
              Filing by LVP St. Augustine Outlets LLC in favor of Wachovia Bank,
              National Association.10.10
            *
            
            Renewal
                Promissory Note Including Future Advance by LVP St. Augustine Outlets
                LLC
                to the order of Wachovia Bank, National Association.10.11
            *
            
            Guaranty
                by Lightstone Holdings, LLC for the benefit of Wachovia Bank, National
                Association.10.12
            *
            
            Indemnification
                Agreement between Lightstone Value Plus Real Estate Investment Trust,
                Inc.
                and Lightstone Holdings, LLC.10.13
            *
            
            Purchase
                and Sale Agreement among Home Properties, L.P., Home Properties WMF
                I, LLC
                and The Lightstone Group, LLC10.14
            *
            
            First
                Amendment to Purchase and Sale Agreement among Home Properties, L.P.,
                Home
                Properties WMF I, LLC and The Lightstone Group, LLC10.15
            *
            
            Second
                Amendment to Purchase and Sale Agreement among Home Properties, L.P.,
                Home
                Properties WMF I, LLC and The Lightstone Group, LLC10.16
            *
            
            Assignment
                and Assumption of Agreement for Purchase and Sale of Interests between
                The
                Lightstone Group, LLC and LVP Michigan Multifamily Portfolio
                LLC10.17
            *
            
            Loan
                and Security Agreement among Scotsdale MI LLC, Carriage Park MI LLC,
                Macomb Manor MI LLC, Carriage Hill MI LLC and Citigroup Global Markets
                Realty Corp.10.18
            *
            
            Promissory
                Note by Scotsdale MI LLC, Carriage Park MI LLC, Macomb Manor MI LLC
                and
                Carriage Hill MI LLC in favor of Citigroup Global Markets Realty
                Corp.10.19
            *
            
            Mortgage
                by Scotsdale MI LLC in favor of Citigroup Global Markets Realty
                Corp.10.20
            *
            
            Mortgage
                by Carriage Park MI LLC in favor of Citigroup Global Markets Realty
                Corp.10.21
            *
            
            Mortgage
                by Macomb Manor MI LLC in favor of Citigroup Global Markets Realty
                Corp.10.22
            *
            
            Mortgage
                by Carriage Hill MI LLC in favor of Citigroup Global Markets Realty
                Corp.10.23
            *
            
            Environmental
                Indemnity Agreement among Scotsdale MI LLC, Carriage Park MI LLC,
                Macomb
                Manor MI LLC, Carriage Hill MI LLC and Citigroup Global Markets Realty
                Corp.10.24
            *
            
            Exceptions
                to Non-Recourse Guaranty by Lightstone Value Plus Real Estate Investment
                Trust, Inc. and Lightstone Value Plus REIT LP for the benefit of
                Citigroup
                Global Markets Realty Corp.10.25
            *
            
            Conditional
                Assignment of Management Agreement among Scotsdale MI LLC, Carriage
                Park
                MI LLC, Macomb Manor MI LLC, Carriage Hill MI LLC and Citigroup Global
                Markets Realty Corp.10.26
            **
            
            Purchase
                and Sale Agreement among Oakview Plaza North, LLC, Frank R. Krejci,
                Vera
                Jane Krejci, George W. Venteicher, Susan Venteicher and Lightstone
                Value
                Plus REIT LP10.27
            **
            
            First
                Amendment to Purchase and Sale Agreement among Oakview Plaza North,
                LLC,
                Frank R. Krejci, Vera Jane Krejci, George W. Venteicher, Susan Venteicher
                and Lightstone Value Plus REIT LP10.28
            **
            
            Second
                Amendment to Purchase and Sale Agreement among Oakview Plaza North,
                LLC,
                Frank R. Krejci, Vera Jane Krejci, George W. Venteicher, Susan Venteicher
                and Lightstone Value Plus REIT LP






26
  **PART
        II. OTHER INFORMATION, CONTINUED:**
 **ITEM
        6. EXHIBITS, CONTINUED:**




**Exhibit**
                **Number**
              
              
              **Description**


10.29
            **
            
            Third
                Amendment to Purchase and Sale Agreement among Oakview Plaza North,
                LLC,
                Frank R. Krejci, Vera Jane Krejci, George W. Venteicher, Susan Venteicher
                and Lightstone Value Plus REIT LP31.1
            
            
            Certification
                Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of
                the
                Sarbanes-Oxley Act of 200231.2
            
            
            Certification
                Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of
                the
                Sarbanes-Oxley Act of 200232.1
            
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 200232.2
            
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002







*
            Incorporated
                by reference from Lightstone Value Plus Real Estate Investment Trust,
                Inc.’s Registration Statement on Form S-11 (File No. 333-117367).**
            Incorporated
                by reference from Lightstone Value Plus Real Estate Investment Trust,
                Inc.’s Current Report on Form 8-K, filed on November 6, 2006 (File No.
                333-117367).





27








**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.






**LIGHTSTONE
                VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC.**Date: November
                13, 2006
            
            By:
            
            /s/    David
                LichtensteinDavid
                Lichtenstein
              President,
                Chief Executive Officer and Director
              (Principal
                Executive Officer)Date: November
                13, 2006
            
            By:
            
            /s/    Michael
                M. SchurerMichael
                M. Schurer
              Chief
                Financial Officer and Treasurer
              (Duly
                Authorized Officer and Principal Financial and Accounting
                Officer)










28