**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 June 30, 2008





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
                filerþ




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
      August 5, 2008, there were 24.4. million outstanding shares of common stock
      of
      Lightstone Value Plus Real Estate Investment Trust, Inc.










Page
          1 of
          47


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





**INDEX**




**Page****PART I**
            
            **FINANCIAL
                INFORMATION**Item 1.
            
            Financial
                StatementsConsolidated
                Balance Sheets as of June 30, 2008 (unaudited) and December 31,
                2007
            
            3Consolidated
                Statements of Operations (unaudited) for the Three and Six Months
                Ended
                June 30, 2008 and 2007
            
            4Consolidated
                Statement of Stockholders’ Equity and Other Comprehensive Loss (unaudited)
                for the Six Months Ended June 30, 2008
            
            5Consolidated
                Statements of Cash Flows (unaudited) for the Six Months Ended June
                30,
                2008 and 2007
            
            6Notes
                to Consolidated Financial Statements
            
            7Item 2.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            26Item 3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            38Item 4.
            
            Controls
                and Procedures
            
            39**PART II**
            
            **OTHER
                INFORMATION**Item
                1.
            
            Legal
                Proceedings
            
            40Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            41Item
                3.
            
            Defaults
                Upon Senior Securities
            
            42Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            42Item
                5.
            
            Other
                Information
            
            42Item
                6.
            
            Exhibits
            
            42








Page
          2 of
          47







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


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





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


**CONSOLIDATED
      BALANCE SHEETS**


**June
                    30, 2008**
                
                **December
                    31, 2007*****Assets***
                
                (unaudited)Investment
                    property:Land
                
                $
                62,047,067
                
                $
                62,032,138Building
                
                
                246,926,739
                
                
                240,221,044Construction
                    in progress
                
                
                7,375,533
                
                
                7,499,319316,349,339
                
                
                309,752,501Less
                    accumulated depreciation
                
                
                (8,664,497
                )
                
                (5,455,550
                )Net
                    investment property
                
                
                307,684,842
                
                
                304,296,951Investments
                    in unconsolidated affiliated real estate entities
                
                
                24,324,357
                
                
                6,284,675Investment
                    in affiliate, at cost
                
                
                11,000,000
                
                
                -Cash
                
                
                26,125,480
                
                
                29,589,815Marketable
                    securities
                
                
                7,773,862
                
                
                10,752,910Restricted
                    escrows
                
                
                9,843,521
                
                
                9,595,453Tenant
                    and other accounts receivable
                
                
                1,691,670
                
                
                1,531,180Note
                    receivable
                
                
                49,500,000
                
                
                -Acquired
                    in-place lease intangibles (net of accumulated amortization of
                    $1,605,033
                    and $2,646,629, respectively)
                
                
                1,520,656
                
                
                1,982,292Acquired
                    above market lease intangibles (net of accumulated amortization
                    of
                    $568,736 and $373,175, respectively)
                
                
                628,484
                
                
                830,727Deferred
                    intangible leasing costs (net of accumulated amortization of
                    $685,720 and
                    $605,093, respectively)
                
                
                889,671
                
                
                1,153,712Deferred
                    leasing costs (net of accumulated amortization of $80,001 and
                    $50,606,
                    respectively)
                
                
                500,033
                
                
                154,879Deferred
                    financing costs (net of accumulated amortization of $412,022
                    and $172,939,
                    respectively)
                
                
                1,923,975
                
                
                2,154,560Prepaid
                    expenses and other assets
                
                
                1,652,056
                
                
                1,374,200**Total
                    Assets**
                
                $
                445,058,607
                
                $
                369,701,354***Liabilities
                    and Stockholders' Equity***Mortgages
                    payable
                
                $
                238,933,968
                
                $
                237,610,371Note
                    payable
                
                
                7,001,459
                
                
                5,825,286Accounts
                    payable and accrued expenses
                
                
                5,851,976
                
                
                5,811,535Due
                    to sponsor
                
                
                1,566,111
                
                
                521,427Tenant
                    allowances and deposits payable
                
                
                962,535
                
                
                943,854Distributions
                    payable
                
                
                3,836,979
                
                
                2,463,361Prepaid
                    rental revenues
                
                
                1,281,316
                
                
                1,066,724Acquired
                    below market lease intangibles (net of accumulated amortization
                    of
                    $1,787,402 and $1,874,843, respectively)
                
                
                1,728,050
                
                
                2,391,883261,162,394
                
                
                256,634,441Minority
                    interest in partnership
                
                
                21,936,895
                
                
                12,954,715Commitments
                    and contingenciesStockholders'
                    equity:Preferred
                    shares $1 par value, 10,000,000 shares authorized, 18,620 and
                    0 shares
                    issued and outstanding, respectively, Series ALiquidation
                    Preference of $1,000, per share
                
                
                18,620
                
                
                -Common
                    stock, $.01 par value; 60,000,000 shares authorized, 22,739,189
                    and
                    13,606,608 shares issued andoutstanding,
                    respectively
                
                
                227,392
                
                
                136,066Additional
                    paid-in-capital
                
                
                221,749,442
                
                
                120,297,590Note
                    receivable from stockholders
                
                
                (17,640,000
                )
                
                -Accumulated
                    other comprehensive loss
                
                
                (8,234,120
                )
                
                (1,199,278
                )Accumulated
                    distributions in addition to net loss
                
                
                (34,162,016
                )
                
                (19,122,180
                )Total
                    stockholder’s equity
                
                
                161,959,318
                
                
                100,112,198**Total
                    Liabilities and Stockholders' Equity**
                
                $
                445,058,607
                
                $
                369,701,354


The
      Company’s notes are an integral part of these consolidated financial
      statements.


Page
          3 of
          47


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


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




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


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**Three
                  Months ended June 30, 2008**
              
              **Three
                  Months ended June 30, 2007**
              
              **Six
                  Months ended June 30, 2008**
              
              **Six
                  Months ended June 30, 2007**Revenues:Rental
                  income
              
              $
              8,945,993
              
              $
              4,974,347
              
              $
              17,650,275
              
              $
              9,473,972Tenant
                  recovery income
              
              
              991,426
              
              
              1,031,827
              
              
              2,060,953
              
              
              1,748,1069,937,419
              
              
              6,006,174
              
              
              19,711,228
              
              
              11,222,078Expenses:Property
                  operating expenses
              
              
              4,123,152
              
              
              1,922,301
              
              
              8,239,461
              
              
              3,907,515Real
                  estate taxes
              
              
              1,048,434
              
              
              622,678
              
              
              2,086,627
              
              
              1,207,320General
                  and administrative costs
              
              
              5,927,984
              
              
              464,463
              
              
              6,964,200
              
              
              2,465,083Depreciation
                  and amortization
              
              
              2,242,145
              
              
              1,562,400
              
              
              4,402,715
              
              
              2,994,69913,341,715
              
              
              4,571,842
              
              
              21,693,003
              
              
              10,574,617Operating
                  (loss) income
              
              
              (3,404,296
              )
              
              1,434,332
              
              
              (1,981,775
              )
              
              647,461Other
                  income
              
              
              118,548
              
              
              178,613
              
              
              264,638
              
              
              389,895Interest
                  income
              
              
              1,093,125
              
              
              353,267
              
              
              1,977,723
              
              
              492,682Interest
                  expense
              
              
              (3,408,242
              )
              
              (2,248,937
              )
              
              (6,980,220
              )
              
              (4,155,814
              )Loss
                  from investments in unconsolidated affiliated real estate
                  entities
              
              
              (617,829
              )
              
              (2,169,104
              )
              
              (1,560,317
              )
              
              (4,189,000
              )Minority
                  interest
              
              
              94
              
              
              1
              
              
              149
              
              
              192Net
                  loss applicable to common shares
              
              $
              (6,218,600
              )
              $
              (2,451,828
              )
              $
              (8,279,802
              )
              $
              (6,814,584
              )Net
                  loss per common share, basic and diluted
              
              $
              (0.31
              )
              $
              (0.32
              )
              $
              (0.48
              )
              $
              (1.06
              )Weighted
                  average number of common shares outstanding, basic and
                  diluted
              
              
              19,797,471
              
              
              7,765,475
              
              
              17,302,874
              
              
              6,434,892




The
      Company’s notes are an integral part of these consolidated financial
      statements.







Page
          4 of
          47





**PART
      I. FINANCIAL INFORMATION:**


**ITEM
      1. FINANCIAL STATEMENTS.**





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


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE
      LOSS**


**(UNAUDITED)**




**Preferred
                  Shares**
              
              **Common
                  Shares****Preferred**
                **Shares**
              
              **Amount**
              
              **Common**
                **Shares**
              
              **Amount**
              
              **Additional**
                **Paid-In**
                **Capital**
              
              **Note
                  Receivable from Stockholders**
              
              **Accumulated
                  Other Comprehensive Loss**
              
              **Accumulated
                  Distributions in Addition to Net Loss**
              
              **Total**
                **Stockholders'**
                **Equity****BALANCE,
                  December 31, 2007**
              
              
              -
              
              $
              -
              
              
              13,606,608
              
              $
              136,066
              
              $
              120,297,590
              
              $
              -
              
              $
              (1,199,278
              )
              $
              (19,122,180
              )
              $
              100,112,198**Comprehensive
                  loss:**Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (8,279,802
              )
              
              (8,279,802
              )Unrealized
                  loss on available for sale securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,034,842
              )
              
              -
              
              
              (7,034,842
              )Total
                  comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (15,314,644
              )Distributions
                  declared
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              (6,760,034
              )
              
              (6,760,034
              )Proceeds
                  from offering
              
              
              18,620,000
              
              
              18,620
              
              
              8,927,026
              
              
              89,270
              
              
              107,695,943
              
              
              (17,640,000
              )
              
              -
              
              
              -
              
              
              90,163,833Selling
                  commissions and dealer manager fees
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,548,684
              )
              
              -
              
              
              -
              
              
              -
              
              
              (6,548,684
              )Other
                  offering costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,646,124
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,646,124
              )Proceeds
                  from distribution reinvestment program
              
              
              
              
              
              
              
              
              205,555
              
              
              2,056
              
              
              1,950,717
              
              
              -
              
              
              -
              
              
              -
              
              
              1,952,773**BALANCE,
                  June 30, 2008**
              
              
              18,620,000
              
              $
              18,620
              
              
              22,739,189
              
              $
              227,392
              
              $
              221,749,442
              
              $
              (17,640,000
              )
              $
              (8,234,120
              )
              $
              (34,162,016
              )
              $
              161,959,318


The
      Company’s notes are an integral part of these consolidated financial
      statements.







Page
          5 of
          47







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


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




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


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (unaudited)**




**Six
                  months ended June 30, 2008**
              
              **Six
                  months ended June 30, 2007****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (8,279,802
              )
              $
              (6,814,584
              )Loss
                  allocated to minority interests
              
              
              (149
              )
              
              (192
              )Adjustments
                  to reconcile net loss to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              4,087,487
              
              
              2,732,749Amortization
                  of deferred financing costs
              
              
              242,495
              
              
              50,291Amortization
                  of deferred leasing costs
              
              
              315,228
              
              
              261,952Amortization
                  of above and below-market lease intangibles
              
              
              (461,590
              )
              
              (276,177
              )Equity
                  in loss from investments in unconsolidated affiliated real estate
                  entities
              
              
              1,560,317
              
              
              4,189,000Changes
                  in assets and liabilities:Increase
                  in prepaid expenses and other assets
              
              
              (140,281
              )
              
              (89,741
              )Increase
                  in tenant and other accounts receivable
              
              
              (160,491
              )
              
              (836,518
              )Increase
                  in tenant allowance and security deposits payable
              
              
              18,682
              
              
              385,038Increase
                  in accounts payable and accrued expenses
              
              
              788,195
              
              
              974,742Increase
                  in prepaid rents
              
              
              214,593
              
              
              601,358Net
                  cash (used in) provided by operating activities
              
              
              (1,815,316
              )
              
              1,177,918**CASH
                  FLOWS USED IN INVESTING ACTIVITIES:**Purchase
                  of investment property, net
              
              
              (7,547,656
              )
              
              (60,163,491
              )Purchase
                  of marketable securities
              
              
              (4,055,794
              )
              
              -Note
                  receivable
              
              
              (49,500,000
              )
              
              -Note
                  receivable from stockholders
              
              
              (17,640,000
              )
              
              -Purchase
                  of investment in affiliate
              
              
              (11,000,000
              )
              
              -Investment
                  in unconsolidated joint venture
              
              
              -
              
              
              (13,476,185
              )Funding
                  of restricted escrows
              
              
              (248,068
              )
              
              (2,092,030
              )Refundable
                  deposit for investment in real estate
              
              
              -
              
              
              (3,685,000
              )Net
                  cash used in investing activities
              
              
              (89,991,518
              )
              
              (79,416,706
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from mortgage financing
              
              
              2,654,030
              
              
              53,025,000Mortgage
                  payments
              
              
              (154,261
              )
              
              (48,858
              )Payment
                  of loan fees and expenses
              
              
              (11,911
              )
              
              (343,813
              )Proceeds
                  from issuance of common stock
              
              
              88,203,834
              
              
              55,776,131Proceeds
                  from issuance of special general partnership units
              
              
              9,279,259
              
              
              4,289,568Payment
                  of offering costs
              
              
              (8,194,809
              )
              
              (5,577,418
              )Due
                  from escrow agent
              
              
              -
              
              
              163,949Distributions
                  paid
              
              
              (3,433,643
              )
              
              (1,145,446
              )Net
                  cash provided by financing activities
              
              
              88,342,499
              
              
              106,139,113**Net
                  change in cash**
              
              
              (3,464,335
              )
              
              27,900,325**Cash,
                  beginning of period**
              
              
              29,589,815
              
              
              19,280,710**Cash,
                  end of period**
              
              $
              26,125,480
              
              $
              47,181,035**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for interest
              
              $
              7,101,558
              
              $
              3,902,556Dividends
                  declared
              
              $
              6,760,034
              
              $
              2,546,932Unrealized
                  loss on available for sale securities
              
              $
              7,034,842
              
              $
              -Proceeds
                  from shares issued in distribution reinvestment program
              
              $
              1,952,772
              
              $
              652,037Proceeds
                  from shares issued in investments in unconsolidated affiliated
                  real estate
                  entities
              
              $
              19,600,000
              
              $
              -





The
      Company’s notes are an integral part of these consolidated financial
      statements.







Page
          6 of
          47


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


**Notes
      to the 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 subsequently qualified as
      a real estate investment trust (“REIT”) during 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 and its Chief Executive Officer.




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 99.9% limited partnership interest in the Operating
      Partnership. 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
      June 30, 2008, cumulative gross offering proceeds of approximately $223.5
      million, which includes $4.1 million of proceeds from shares issued in the
      distribution reinvestment program, 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 interests (“SLP 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 SLP Units will be used to fund organizational and offering
      costs incurred by the Company. As of June 30, 2008, offering costs of $21.4
      million have been more than offset by $22.2 million of proceeds from the sale
      of
      SLP Units.





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 June 30, 2008, the Advisor has not allocated any
      organizational costs to the Company. Advances for offering costs in excess
      of
      the 10% will only be reimbursed to the Advisor as additional offering proceeds
      are received by the Company. As of June 30, 2008, offering costs incurred were
      slightly less than 10%.


Page
          7 of
          47


**LIGHTSTONE
        VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND
        SUBSIDIARIES**
 **Notes
        to the Consolidated Financial Statements**
 **(continued)**


Through
      its Operating Partnership, the Company will seek to acquire and operate
      commercial, residential, and hospitality properties, principally in the
      United States. Primarily all such properties may be acquired and operated by
      the
      Company alone or jointly with another party. As of June 30, 2008, the Company
      has completed ten acquisitions: the St. Augustine Outlet Center, a retail outlet
      shopping mall in St. Augustine, Florida, on March 31, 2006; the Southeast
      Michigan Apartments, four multi-family communities in Southeast Michigan on
      June
      29, 2006; the Oakview Power Center, a retail shopping mall located in Omaha,
      Nebraska, on December 21, 2006; 1407 Broadway, a 49% equity interest in a joint
      venture, formed to purchase a sub-leasehold interest in a ground lease to
      an office building in New York, New York, on January 4, 2007; the Gulf States
      Industrial portfolio, a portfolio of 12 industrial and 2 office buildings
      in Louisiana and Texas, on February 1, 2007; and has developed the Brazos
      Crossing Power Center after acquiring a land parcel in Lake Jackson, Texas,
      on
      June 29, 2007, the Sugarland and Katy Highway Extended Stay Hotels in Houston,
      Texas on October 17, 2007, the Southeast Apartments, which included, five multi
      family apartment communities, one in Tampa, Florida, two in Greensboro, North
      Carolina and two in Charlotte, North Carolina on November 16, 2007, and the
      Sarasota Industrial Property, an industrial building in Sarasota, Florida on
      November 13, 2007. On June 26, 2008, the Company acquired an interest in an
      entity with an interest in two outlet malls in Orlando, Florida. All of the
      acquired properties and development activities are managed by affiliates of
      Lightstone Value Plus REIT Management LLC (the “Property Manager”).





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 are outlined in each of the respective
      agreements. (See Note 13, Related Party Transactions).




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




Basis
      of Presentation




The
      consolidated financial statements include the accounts of the Company and the
      Operating Partnership and its subsidiaries (over which Lightstone REIT exercises
      financial and operating control). As of June 30, 2008, the Company 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 (GAAP).
      GAAP requires the Company’s management to make estimates and assumptions that
      affect the reported amounts of assets and liabilities, the disclosure of
      contingent assets and liabilities and the reported amounts of revenues and
      expenses during a reporting period. The most significant assumptions and
      estimates relate to the valuation of real estate, depreciable lives, revenue
      recognition, the collectability of trade accounts receivable and the
      realizability of deferred tax assets. Application of these assumptions requires
      the exercise of judgment as to future uncertainties and, as a result, actual
      results could differ from these estimates.





The
      unaudited consolidated statements of operations for interim periods are not
      necessarily indicative of results for the full year. For further information,
      refer to consolidated financial statements and notes thereto included in the
      Company’s annual report on Form 10-K filed with the Securities and Exchange
      Commission for the year ended December 31, 2007.





Investments
      in real estate entities where the Company has the ability to exercise
      significant influence, but does not exercise financial and operating control,
      are accounted for using the equity method.







Cash
      and Cash Equivalents




The
      Company considers all highly liquid investments with an original maturity of
      three months or less when purchased to be cash equivalents. All cash and cash
      equivalents are held in commercial paper and money market funds. To date, the
      Company has not experienced any losses on its cash and cash
      equivalents.







Marketable
      Securities





Marketable
      securities consists of equity securities that are designated as
      available-for-sale and are recorded at fair value, in accordance with Statement
      of Financial Accounting Standards (FAS) No. 115, *Accounting
      for Certain Investments in Debt and Equity Securities* .
      Unrealized holding gains or losses are reported as a component of accumulated
      other comprehensive income (loss). Realized gains or losses resulting from
      the
      sale of these securities are determined based on the specific identification
      of
      the securities sold. Marketable securities with original maturities greater
      than
      three months and less than one year are classified as short-term; otherwise
      they
      are classified as long-term. An impairment charge is recognized when the decline
      in the fair value of a security below the amortized cost basis is determined
      to
      be other-than-temporary. We consider various factors in determining whether
      to
      recognize an impairment charge, including the duration and severity of any
      decline in fair value below our amortized cost basis, any adverse changes in
      the
      financial condition of the issuers and our intent and ability to hold the
      investment for a period of time sufficient to allow for any anticipated recovery
      in market value. The Board has authorized the Company from time to time to
      invest the Company’s available cash in marketable securities of real estate
      related companies. The Board has approved investments up to 30% of the Company’s
      total assets to be made at the Company’s discretion, subject to compliance with
      any REIT or other restrictions. At June 30, 2008 and December 31, 2007, the
      Company has included $8.2 million and $1.2 million of unrealized losses in
      accumulated other comprehensive loss. The following is a summary of the
      Company’s available for sale securities at June 30, 2008 and December 31,
      2007:


Page
          8 of
          47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





At June
                  30,  2008
              
              At December 31, 2007Cost
              
              $
              16,007,982
              
              $
              11,952,188Unrealized
                  loss
              
              
              (8,234,120
              )
              
              (1,199,278
              )Fair
                  Value at period end
              
              $
              7,773,862
              
              $
              10,752,910





Revenue
      Recognition




Minimum
      rents are recognized on a straight-line 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.





Room
      revenue for the hotel properties are recognized as stays occur, using the
      accrual method of accounting. Amounts paid in advance are deferred until earned.





Accounts
      Receivable




The
      Company makes estimates of the uncollectability of its accounts receivable
      related to base rents, expense reimbursements and other revenues. The Company
      analyzes accounts receivable and historical bad debt levels, customer credit
      worthiness and current economic trends when evaluating the adequacy of the
      allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed
      and estimates are made in connection with the expected recovery of pre-petition
      and post-petition claims. The Company’s reported net income is directly affected
      by management’s estimate of the collectability of accounts receivable. The total
      allowance for doubtful accounts was approximately $0.3 million and $0.2 million
      at June 30, 2008 and December 31, 2007, respectively.





Investment
      in Real Estate




*Accounting
      for Acquisitions*




The
      Company accounts for acquisitions of Properties in accordance with SFAS No.
      141,
“ *Business
      Combinations” (“SFAS No. 141”* ).
      The
      fair value of the real estate acquired is allocated to the 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. Fees incurred related to acquisitions
      are generally capitalized. Fees incurred in the acquisition of joint venture
      interest are expensed as incurred.




Page
          9 of
          47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





Upon
      the
      acquisition of real estate operating properties, the Company estimates the
      fair
      value of acquired tangible assets and identified intangible assets and
      liabilities and assumed debt in accordance with SFAS No. 141, at the date
      of acquisition, based on evaluation of information and estimates available
      at
      that date. Based on these estimates, the Company allocates the initial purchase
      price to the applicable assets and liabilities. As final information regarding
      fair value of the assets acquired and liabilities assumed is received and
      estimates are refined, appropriate adjustments are made to the purchase price
      allocation. The allocations are finalized within twelve months of the
      acquisition date.





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 non-cancelable 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 11 years. Optional renewal periods
      are
      not considered.




The
      aggregate value of other acquired intangible assets includes 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 is amortized over the remaining lease terms ranging from one
      month to approximately 11 years.




*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.





*Impairment
      Evaluation*




Management
      evaluates the recoverability of its investment in real estate assets in
      accordance with Statement of Financial Accounting Standard No. 144, “Accounting
      for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). 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 long-lived assets, in accordance with SFAS No. 144 on
      a
      quarterly basis 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 through June 30, 2008. 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 based on the straight-line method
      using a weighted average composite life of thirty-nine years for buildings
      and
      improvements and five to ten years for equipment and fixtures. Expenditures
      for
      tenant improvements and construction allowances paid to commercial tenants
      are
      capitalized and amortized over the initial term of each lease, currently one
      month to 11 years. Maintenance and repairs are charged to expense as
      incurred.




Page
          10
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





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
      or Losses from Investments in Unconsolidated Real Estate Entities





The
      Company invests in real estate entities and joint ventures that are formed
      to
      acquire, develop, and/or sell real estate assets. These entities are not
      majority owned or controlled by the Company, and are not consolidated in its
      financial statements. These investments are recorded under either the equity
      or
      cost method of accounting as appropriate. Under the equity method, the Company
      records its share of the net income and losses from the underlying entities
      on a
      single line item in the consolidated statements of operations as income or
      loss
      from investments in unconsolidated affiliated real estate
      entities. The
      Company determines whether or not consolidation of these entities is recorded
      through the appropriate evaluation of FIN No. 46, *Consolidation
      of Variable Interests.*





Income
      Taxes





The
      Company made an election in 2006 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”), beginning with its first taxable year, which ended
      December 31, 2005. Accordingly, no provision for income tax has been
      recorded.




We
      elected and qualified to be taxed as a REIT under Sections 856 through 860
      of the Internal Revenue Code in conjunction with the filing of our 2006 federal
      tax return. To maintain its status 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 maintain 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. Through June 30,
      2008, the Company has complied with the requirements for maintaining its REIT
      status.





The
      Company has net operating loss carry-forwards for Federal income tax purposes
      as
      of June 30, 2008. The availability of such loss carry-forwards will begin to
      expire in 2026. As the Company does not consider it likely that it will realize
      any future benefit from its loss carry-forward, any deferred asset resulting
      from the final determination of its tax losses will be fully offset by a
      valuation allowance of the same amount.




Effective
      January 1, 2007, the Company adopted FIN No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* .
      The
      adoption of FIN 48 did not have a material impact on the Company’s financial
      position, results of operation, or cash flows. As of December 31, 2007, the
      Company had no material uncertain income tax positions. The tax years 2004
      through 2007 remain open to examination by the major taxing jurisdictions to
      which the Company is subject.




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.





Through
      June 30, 2008, the Advisor has advanced approximately $22.2 million to the
      Company for offering costs, including commission and dealer manager fees. Based
      on gross proceeds of approximately $223.5 million from its public offering
      as of June 30, 2008, the Company’s responsibility for the reimbursement of
      advances for commissions and dealer manager fees was limited to 10% of gross
      offering proceeds, which generally approximate $17.9 million (or 8% of the
      gross
      offering proceeds), and its obligation for advances for organization and
      third-party offering costs was limited to approximately $4.4 million (or 2%
      of
      the gross offering proceeds).


Page
          11
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**


Financial
      Instruments




The
      carrying amounts of cash and cash equivalents, accounts receivable and accounts
      payable approximate their fair values because of the short maturity of these
      instruments. The fair value of the mortgage-debt and note payable as of June
      30,
      2008 approximated the book value of approximately $245.9 million. The fair
      value
      of the mortgage debt and notes payable was determined by discounting the future
      contractual interest and principal payments by a market rate.




Net
      Loss per Share




Net
      loss
      per share is computed in accordance with SFAS No. 128, *Earnings
      per Share* by
      dividing the net loss by the weighted average number of shares of common stock
      outstanding. The Company has 9,000 options issued and outstanding, and does
      not
      have any warrants outstanding. As such, the numerator and the denominator used
      in computing both basic and diluted net loss per share allocable to common
      stockholders for each year presented are equal due to the net operating loss.
      The 9,000 options are not included in the dilutive calculation as they are
      anti
      dilutive as a result of the net operating loss applicable to
      stockholders.




New
      Accounting Pronouncements




In
      May
      2008, the FASB issued SFAS No. 162, *The
      Hierarchy of Generally Accepted Accounting Principles* (“SFAS
      No. 162”). SFAS No. 162 identifies the sources of accounting principles and the
      framework for selecting the principles to be used in the preparation of
      financial statements of nongovernmental entities that are presented in
      conformity with generally accepted accounting principles in the United States.
      SFAS 162 is effective 60 days following the Securities and Exchange Commission’s
      (“SEC”) approval of the Public Company Accounting Oversight Board amendments to
      AU Section 411, The Meaning of Present Fairly in Conformity with Generally
      Accepted Accounting Principles. The Company is currently evaluating the
      potential impact, if any, of the adoption of SFAS No. 162 on its financial
      statements.





In
      December 2007, the FASB issued FASB No. 141(R), *Business
      Combinations*  *(Revised)* which
      establishes principles and requirements for how the acquirer shall recognize
      and
      measure in its financial statements the identifiable assets acquired,
      liabilities assumed, any noncontrolling interest in the acquiree and goodwill
      acquired in a business combination. This statement is effective for business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15,
      2008.





In
      December 2007, the FASB issued No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements,* which
      establishes and expands accounting and reporting standards for minority
      interests, which will be recharacterized as noncontrolling interests, in a
      subsidiary and the deconsolidation of a subsidiary. FASB 160 is effective for
      business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after
      December 15, 2008. This statement is effective for fiscal years beginning
      on or after December 15, 2008.  The Company is currently assessing the
      potential impact that the adoption of FASB No. 160 will have on its financial
      position and results of operations.







**3.**
            ***Investments
                in Unconsolidated Affiliated Real Estate
                Entities***





*Mill
      Run Interest*





On
      June
      26, 2008, the Company, through the Operating Partnership, entered into
      Contribution and Conveyance Agreements between the Operating Partnership and
      (i)
      Arbor Mill Run JRM LLC, a Delaware limited liability company (“Arbor JRM”) and
      (ii) Arbor National CJ, LLC, a New York limited liability company (“Arbor CJ”),
      pursuant to which Arbor JRM and Arbor CJ contributed to the Operating
      Partnership an aggregate 22.54% membership interest (the “Mill Run Interest”) in
      Mill Run. The Mill Run Interest is a non-managing interest, with consent rights
      with respect to certain major decisions. The Company’s sponsor is the managing
      member and owns 55% of Mill Run. The acquisition price for the Mill Run Interest
      was approximately $85 million, $19.6 million of which was in the form of equity
      and $65.4 million in the form of indebtedness secured by the Mill Run
      Properties. As the Company has recorded this investment in accordance with
      the
      equity method of accounting, the indebtedness is not included in the Company’s
      investment. In connection with this transaction, Lightstone Value Plus REIT
      LLC,
      our advisor, received an acquisition fee equal to 2.75% of the acquisition
      price, or approximately $2.4 million. Closing costs totaled approximately $1.1
      million. These costs are included in general and administrative expenses. In
      exchange for the Mill Run Interest, the Operating Partnership issued (i) 96,000
      units of common limited partnership interest in the Operating Partnership
      (“Common Units”) and 18,240 Series A preferred limited partnership units in the
      Operating Partnership (the “Preferred Units”) with an aggregate liquidation
      preference of $18,240,000 to Arbor JRM and (ii) 2,000 Common Units and 380
      Preferred Units with an aggregate liquidation preference of $380,000 to Arbor
      CJ. The total aggregate value of the Common Units and Preferred Units issued
      by
      the Operating Partnership in exchange for the Mill Run Interest was
      $19,600,000.


Page
          12
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





In
      connection with the contribution of the Mill Run Interest, the Company made
      loans to Arbor JRM and Arbor CJ in the aggregate principal amount of $17.6
      million (the “Mill Loans”), which is classified as contra-equity. The Mill Loans
      are payable semi-annually and shall accrue interest at an annual rate of 4%.
      The
      Mill Loans mature on July 1, 2016 and contain customary events of default and
      default remedies. The Mill Loans require Arbor JRM and Arbor CJ to prepay their
      respective loans in full upon the redemption of the Preferred Units by the
      Operating Partnership. The Mill Loans are secured by the Preferred Units and
      Common Units issued in connection with the acquisition of the Mill Interest.
      Accrued interest related to this loan totaled $9,800 at June 30, 2008, and
      is
      included in tenant and other accounts receivables.





The
      Company accounted for the investment in this unconsolidated affiliated real
      estate entity under the equity method of accounting as the Company exercises
      significant influence, but does not control this entity. In accordance with
      APB
      18, *The
      Equity Method of Accounting for Investments in Common Stock* ,
      paragraph 19b., the difference between the cost of the Mill Run Interest and
      the
      amount of underlying equity in net assets of the Company has been accounted
      for
      as if the investee were a consolidated subsidiary, and additional depreciation
      and amortization will be recorded over the lives of the appropriate assets,
      in
      accordance with the allocation of the difference between land, building and
      intangible assets of Mill Run. For the six months ended June 30, 2008 and 2007,
      the Company’s results included a $7,005 and $0 loss from investment in this
      unconsolidated affiliated real estate entity, respectively resulting in a net
      investment balance of approximately $19.6 million as of June 30,
      2008.





In-place
      rents, net of rent concessions was $24.0 million, annualized at June 30, 2008
      and average occupancy for the properties at June 30, 2008 was
      76.1%.





The
      following table represents the condensed income statement for the unconsolidated
      affiliated real estate entity for the period from June 26, 2008 through June
      30,
      2008:


For
                  the period June 26, 2008 through June 30, 2008Total
                  revenue
              
              $
              404,347Total
                  property operating expenses
              
              
              177,990Depreciation
                  and amortization
              
              
              126,996Operating
                  income
              
              
              99,361Other
                  income(expense)
              
              
              2,932Interest
                  income
              
              
              658Interest
                  expense
              
              
              (134,031
              )Net
                  operating loss
              
              $
              (31,080
              )Company's share
                  of net operating loss (22.54%)
              
              $
              (7,005
              )


Page
          13
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





The
      following table represents the condensed balance sheet for this unconsolidated
      affiliated real estate entity as of June 30, 2008:




`
              
              **As
                  of June 30, 2008**Real
                  estate, at cost (net):
              
              $
              258,151,368Intangible
                  assets
              
              
              1,194,821Cash
                  and restricted cash
              
              
              3,223,405Other
                  assets
              
              
              23,000,224Total
                  Assets
              
              $
              285,569,818Mortgage
                  note payable
              
              $
              268,489,614Other
                  liabilities
              
              
              21,202,267Member
                  capital
              
              
              (4,122,063
              )Total
                  liabilities and members' capital
              
              $
              285,569,818





*1407
      Broadway*




On
      January 4, 2007, the Company, through LVP 1407 Broadway LLC, a wholly owned
      subsidiary of the Operating Partnership, entered into a joint venture with
      an
      affiliate of the Sponsor (the “Joint Venture”). On the same date, an indirect,
      wholly owned subsidiary acquired a sub-leasehold interest in a ground lease
      to
      an office building located at 1407 Broadway, New York, New York (the “Sublease
      Interest”).





The
      Company accounted for the investment in this unconsolidated joint venture under
      the equity method of accounting as the Company exercises significant influence,
      but does not control these entities. Initial equity from the Sponsor, our
      co-venturer totaled $13.5 million (representing a 51% ownership interest).
      Our
      initial capital investment, funded with proceeds from our common stock offering,
      was $13.0 million (representing a 49% ownership interest). This $13.0 million
      investment was recorded initially at cost and will be subsequently adjusted
      for
      cash contributions and distributions, and the Company’s share of earnings and
      losses. The Company and the co-Venturer contributed an additional $0.6 million
      in 2007. Earnings for each investment are recognized in accordance with this
      investment agreement and where applicable, based upon an allocation of the
      investment’s net assets at book value as if the investment was hypothetically
      liquidated at the end of each reporting period. For
      the
      six months ended June 30, 2008 and 2007, the Company’s results included a $1.6
      million and $4.2 million loss from investment in this unconsolidated affiliated
      real estate entity, respectively resulting in a net investment balance of
      approximately $4.7 million as of June 30, 2008. The
      Joint
      Venture plans to continue an ongoing renovation project at the property
      that consists of lobby, elevator and window redevelopment projects. Additional
      loan proceeds of up to $14.0 million are available to fund these improvements.




In-place
      rents, net of rent concessions was $37.2 million, annualized at June 30, 2008
      and average occupancy for the property at June 30, 2008 was 84.7%.





Page
          14
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**


The
      following table represents the condensed income statement for this
      unconsolidated affiliated real estate entity for the three month period ended
      June 30, 2008 and June 30, 2007:


For
                  the three months ended June 30, 2008
              
              For
                  the three months ended June 30, 2007Total
                  revenue
              
              $
              9,543,420
              
              $
              9,033,791Total
                  property operating expenses
              
              
              6,543,897
              
              
              6,828,599Depreciation
                  and amortization
              
              
              3,246,703
              
              
              4,398,346Operating
                  loss
              
              
              (247,180
              )
              
              (2,193,154
              )Other
                  income (expense)
              
              
              738,999
              
              
              6,691Interest
                  income
              
              
              18,961
              
              
              17,161Interest
                  expense
              
              
              (1,757,359
              )
              
              (2,257,441
              )Net
                  operating loss
              
              $
              (1,246,579
              )
              $
              (4,426,743
              )Company's share
                  of net operating loss (49%)
              
              $
              (610,824
              )
              $
              (2,169,104
              )


The
      following table represents the condensed income statement for the unconsolidated
      affiliated real estate entity for the six month period ended June 30, 2008
      and
      for the period from January 4, 2007 through June 30, 2007:




For
                  the six months ended June 30, 2008
              
              For
                  the six months ended June 30, 2007Total
                  Revenue
              
              $
              19,275,931
              
              $
              17,894,585Total
                  property operating expenses
              
              
              12,873,496
              
              
              13,120,684Depreciation
                  & Amortization
              
              
              6,494,165
              
              
              8,971,494Operating
                  loss
              
              
              (91,730
              )
              
              (4,197,593
              )Other
                  Income / (Expense)
              
              
              764,130
              
              
              13,378Interest
                  Income
              
              
              76,452
              
              
              38,073Interest
                  Expense
              
              
              (3,918,875
              )
              
              (4,402,837
              )Net
                  loss
              
              $
              (3,170,023
              )
              $
              (8,548,979
              )Company's share
                  of net operating loss (49%)
              
              $
              (1,553,311
              )
              $
              (4,189,000
              )




Page
            15
            of 47
  **LIGHTSTONE
        VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND
        SUBSIDIARIES**
 **Notes
        to the Consolidated Financial Statements**
 **(continued)**


The
      following table represents the condensed balance sheet for the unconsolidated
      affiliated real estate entity as of June 30, 2008 and December 31,
      2007:




June
                  30, 2008
              
              December
                  31, 2007Real
                  estate, at cost (net):
              
              $
              111,145,685
              
              $
              111,361,237Intangible
                  assets
              
              
              5,988,183
              
              
              9,009,677Cash
                  and restricted cash
              
              
              11,749,438
              
              
              11,458,096Other
                  assets
              
              
              8,163,609
              
              
              9,475,857Total
                  Assets
              
              $
              137,046,915
              
              $
              141,304,867Mortgage
                  note payable
              
              $
              113,269,799
              
              $
              110,847,201Other
                  liabilities
              
              
              14,129,836
              
              
              17,640,362Member
                  capital
              
              
              9,647,280
              
              
              12,817,304Total
                  liabilities and members' capital
              
              $
              137,046,915
              
              $
              141,304,867






***4.***
            ***Investment
                in Affiliate***




***Park
      Avenue Funding***





On
      April
      16, 2008, the Company made a preferred equity contribution of $11,000,000 (the
“
Contribution ”) to PAF-SUB LLC (“ PAF ”), a wholly-owned subsidiary of Park
      Avenue Funding LLC (“ Park Avenue ”), in exchange for membership interests of
      PAF with certain rights and preferences described below (the “ Preferred Units
”). Park Avenue is a real estate lending company making loans, including first
      or second mortgages, mezzanine loans and collateral pledges of mortgages, to
      finance real estate transactions. Property types considered include
      multi-family, office, industrial, retail, self-storage, parking and land. Both
      PAF and Park Avenue are affiliates of our Sponsor.




PAF’s
      limited liability company agreement was amended on April 16, 2008 to create
      the
      Preferred Units and admit the Company as a member. The Preferred Units are
      entitled to a cumulative preferred distribution at the rate of 10% per annum,
      payable quarterly. In the event that PAF fails to pay such distribution when
      due, the preferred distribution rate increases to 17% per annum. The Preferred
      Units are redeemable, in whole or in part, at any time at the option of the
      Company upon at least 180 days’ prior written notice (the “ Redemption ”). In
      addition, the Preferred Units are entitled to a liquidation preference senior
      to
      any distribution upon dissolution with respect to other equity interests of
      PAF
      in an amount equal to (x) the Contribution plus any accrued but unpaid
      distributions less (y) any Redemption payments.





In
      connection with the Contribution, the Company and Park Avenue entered into
      a
      guarantee agreement on April 16, 2008, whereby Park Avenue unconditionally
      and
      irrevocably guarantees payment of the Redemption amounts when due (the “
Guarantee ”). Also, Park Avenue agrees to pay all costs and expenses incurred by
      the Company in connection with the enforcement of the Guarantee.





The
      Company does not have any voting rights for this investment, and does not have
      significant influence over this investment. The Company accounted for this
      investment under the cost method. Total accrued distributions related to this
      investment totaled $0.2 million at June 30, 2008, and are included in tenant
      and
      other accounts receivables.





***5.***
            ***Note
                Receivable***





The
      Company, through the Operating Partnership, entered into a Contribution and
      Conveyance Agreement with AR Prime Holdings LLC, a Delaware limited liability
      company (“AR Prime”), pursuant to which AR Prime will contribute to the
      Operating Partnership a 25% membership interest (the “Prime Interest”) in Prime
      Outlets Acquisitions Company (“Prime”). Prime Interest is a non-managing
      interest, with certain consent rights with respect to major decisions. An
      affiliate of The Lightstone Group, the Company’s sponsor, is the majority owner
      and manager of Prime. The acquisition price for the Prime Interest is
      approximately $373 million, $55 million of which will be in the form of equity
      and $318 million of which will be in the form of indebtedness secured by the
      Prime Properties (18 retail outlet malls, and four development projects). As
      the
      Company would account for this investment in accordance with the equity method
      of accounting, the indebtedness would not be included in the Company’s
      investment. In connection with the transaction, upon closing our advisor will
      receive an acquisition fee equal to 2.75% of the acquisition price, or
      approximately $9.7 million.


Page
          16
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





The
      closing of the acquisition of the Prime Interest is subject to customary closing
      conditions, and is scheduled for the earlier of December 15, 2008 or a maximum
      30 days after the Operating Partnership obtains audited financial statements
      of
      Prime for the last three fiscal years (the “Financial Statements”), but in no
      event later than June 26, 2009. If the Operating Partnership does not obtain
      the
      Financial Statements by June 26, 2009 and does not close the transaction, it
      would be required to pay liquidated damages in the amount of $6.08 million.
      However, AR Prime cannot specifically enforce the Contribution and Conveyance
      Agreement if the Operating Partnership does not obtain the Financial Statements.
      Subject to the fulfillment of the closing conditions, the Operating Partnership
      will issue to AR Prime (i) 275,000 Common Units and 52,250 Preferred Units
      with
      an aggregate liquidation preference of $52,250,000 (this amount will be reduced
      by the amount of any distributions by Prime to AR Prime prior to closing) and
      (ii) Common Units with a value equal to 5% of the Adjustment Amount and
      additional Preferred Units with a liquidation preference equal to 95% of the
      Adjustment Amount. The “Adjustment Amount” is the amount of interest that would
      have accrued on a loan in the principal amount of $52,250,000, at an interest
      rate of 4.6316%, from June 26, 2008 until the closing.





In
      connection with the contribution of the Prime Interest, the Company made a
      loan
      to AR Prime in the principal amount of $49.5 million (the “Prime Loan”). The
      Prime Loan is payable semi-annually and accrues interest at an annual rate
      of
      4%. The Prime Loan matures on July 1, 2016 and contains customary events of
      default and default remedies. The Prime Loan contains provisions requiring
      AR
      Prime to prepay the Prime Loan (i) in full upon the redemption by the Operating
      Partnership of the Preferred Units to be issued to AR Prime in connection with
      the closing of the acquisition of the Prime Interest and (ii) in part, with
      the
      proceeds of any distribution received by AR Prime from Prime prior to such
      closing. The Prime Loan is secured by AR Prime’s interest in the Prime Interest.
      Upon the closing, the Common Units and Preferred Units issued to AR Prime will
      replace the Prime Interest as the security for the Prime Loan. Also, upon the
      closing, the Company will make an additional loan to AR Prime, on the same
      terms
      and conditions as the Prime Loan, in the principal amount equal to 90% of the
      Adjustment Amount. Accrued interest related to this loan totaled $27,500 at
      June
      30, 2008, and is included in tenant and other accounts receivables.





***6.***
            ***Future
                Minimum Rentals***


As
      of
      June 30, 2008, the approximate fixed future minimum rentals from the Company’s
      commercial real estate properties are as follows for the remainder of 2008
      and
      thereafter:




**2008**
                  
                  **2009**
                  
                  **2010**
                  
                  **2011**
                  
                  **2012**
                  
                  **Thereafter**
                  
                  **Total
                      Fixed Future**
                    **Minimum
                      Rentals**$
                  5,702,283
                  
                  $
                  9,931,198
                  
                  $
                  6,957,817
                  
                  $
                  5,018,017
                  
                  $
                  3,644,683
                  
                  $
                  2,764,077
                  
                  $
                  34,018,075


***7.***
            ***Pro
                Forma Combined Condensed Statements of
                Operations***





The
      following unaudited pro forma combined condensed statements of operations set
      forth the consolidated results of operations for the six months ended June
      30,
      2008 and June 30, 2007, respectively, as if the acquisitions and equity
      investments listed in Note 1 had occurred at January 1, 2007. There was only
      one
      acquisition during the six months ended June 30, 2008, that took place on June
      26, 2008. 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 six months ended June 30, 2008 and June 30, 2007, respectively,
      or for any future period.




Six
                  Months EndedJune
                  30,2008
              
              2007Real
                  estate revenues
              
              $
              19,711,228
              
              $
              20,002,365Equity
                  in loss from investments in unconsolidated affiliated real estate
                  entities
              
              
              (1,943,368
              )
              
              (5,109,069
              )Net
                  loss
              
              
              (8,662,853
              )
              
              (7,862,718
              )Basic
                  and diluted loss per share
              
              $
              (0.45
              )
              $
              (0.64
              )




**8.**
            ***Mortgages
                Payable*******





At
      June
      30, 2008, the Company had mortgage debt totaling approximately $238.9 million
      as
      follows:




Property
              
              Loan
                  Amount
              
              Interest
                  Rate
              
              Maturity
                  Date
              
              Amount
                  Due at maturitySt.
                  Augustine
              
              $
              26,897,310
              
              
              6.09
              %
              
              April
                  2016
              
              $
              23,747,523Southeastern
                  Michigan Multi Family Properties
              
              
              40,725,000
              
              
              5.96
              %
              
              July
                  2016
              
              
              38,138,605Oakview
                  Plaza
              
              
              27,500,000
              
              
              5.49
              %
              
              January
                  2017
              
              
              25,583,137Gulf
                  Coast Industrial Portfolio
              
              
              53,025,000
              
              
              5.83
              %
              
              February
                  2017
              
              
              49,556,985Houston
                  Extended Stay Hotels (Two Individual Loans)
              
              
              11,517,858
              
              
              LIBOR
                  + 1.75
              %
              
              October
                  2008
              
              
              10,040,000Camden
                  Multi Family Properties - (Five Individual Loans)
              
              
              79,268,800
              
              
              5.44
              %
              
              December
                  2014
              
              
              74,955,771Total
                  of eleven outstanding mortgage loans at June 30, 2008
              
              $
              238,933,968
              
              
              
              
              
              
              
              $
              222,022,021




Page
          17
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





LIBOR
      at
      June 30, 2008 was 2.4625%. Monthly installments of interest only were required
      through the first 12 months for the St. Augustine loan, and monthly installments
      of principal and interest are required throughout the remainder of its stated
      term. Monthly installments of interest only are required through the first
      60
      months for the Southeastern Michigan multi-family properties, and through the
      first 48 months for the Camden Multi-Family properties’ loans, and monthly
      installments of principal and interest are required throughout the remainder
      of
      its stated term. The remaining loans are interest only until their maturity,
      at
      which time the amounts listed in the table above are 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:




**Remainder
                  of 2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **2012**
              
              **Thereafter**
              
              **Total**Mortgage
                  Payable
              
              $
              11,676,957
              
              $
              338,052
              
              $
              359,526
              
              $
              1,586,956
              
              $
              2,781,012
              
              $
              222,191,465
              
              $
              238,933,968




Lightstone
      Holdings, LLC (“the Guarantor”), a company wholly owned by the Advisor, has
      guaranteed to the extent of a $27.2 million mortgage loan on the St. Augustine
      Outlet Mall, in St. Augustine, Florida, the payment of losses that the lender
      (“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 the 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
      voluntary bankruptcy, reorganization or insolvency, or the interference by
      the
      Company or its affiliates in any foreclosure proceedings or other remedy
      exercised by Wachovia, the Guarantor has guaranteed the payment of any
      unpaid loan amounts.  The Company has agreed, to the maximum extent
      permitted by its Charter, to indemnify the Guarantor for any liability
      that it incurs under this guaranty.




Pursuant
      to the Company’s loan agreements, escrows in the amount of $9.8 million were
      held in restricted escrow accounts at June 30, 2008. These escrows will be
      released in accordance with the loan agreements as payments of real estate
      taxes, insurance and capital improvement transactions, as required. Our mortgage
      debt also contains clauses providing for prepayment penalties.





In
      connection with the acquisition of the Sugarland and Katy Highway Extended
      Stay
      Hotels, the Houston Partnership along with ESD #5051 - Houston - Sugar Land,
      LLC
      and ESD #5050 - Houston - Katy Freeway, LLC, its wholly owned subsidiaries
      (the
“Houston Borrowers”) secured a mortgage loan from Bank of America, N.A. in the
      principal amount of $12.85 million, which included up to an additional $2.8
      million of renovation proceeds which will be borrowed as the renovation
      proceeds. At June 30, 2008 available renovation proceeds totaled $1.3
      million.





The
      mortgage loan has a term of one year with the option of a 6-month term
      extension, bears interest on a daily basis expressed as a floating rate equal
      to
      the lesser of (i) the maximum non-usurious rate of interest allowed by
      applicable law or (ii) the British Bankers Association Libor Daily Floating
      Rate
      plus one hundred seventy-five basis points (1.75%) per annum rate and requires
      monthly installments of interest only through the first 12 months. The mortgage
      loan will mature on October 16, 2008, subject to the 6-month extension option
      described above, at which time payment of the entire principal balance, together
      with all accrued and unpaid interest and all other amounts payable thereunder
      will be due. The mortgage loan is secured by the hotels and will be non-recourse
      to the Company. The Company intends to extend, repay or refinance this loan
      upon
      its maturity in October of 2008.





On
      November 16, 2007, in connection with the acquisition of the Camden Properties,
      the Company through its wholly owned subsidiaries obtained from Fannie Mae
      five
      substantially similar fixed rate mortgages aggregating $79.3 million (the
“Loans”). The loans have a 30 year amortization period, mature in 7 years, and
      bear interest at a fixed rate of 5.44% per annum. The loans require monthly
      installments of interest only through the first three years and monthly
      installments of principal and interest throughout the remainder of their stated
      terms. The Loans will mature on December 1, 2014, at which time a balance of
      approximately $75.0 million will be due. Although the loans were allocated
      among
      the Camden Properties, the aggregate loan amount is secured by all of the
      properties.


Page
          18
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





The
      Company is required to maintain minimum debt service coverage ratios as defined
      in the loan documents for the St. Augustine, Houston extended stay hotels and
      Southeastern Michigan multi family properties. The Company was in compliance
      with its financial covenants at June 30, 2008.





**9.**
            ***Note
                Payable*******




On
      December 5, 2007, the Company entered into a construction loan to fund the
      development of the Brazos Crossing Power Center, in Lake Jackson, Texas. The
      loan allows the Company to draw up to $8.2 million, and then will require
      monthly installments of interest only through the first 12 months and bears
      interest at 150 basis points (1.5%) in excess of LIBOR. For the second twelve
      months, principal payments shall be made in monthly installments in amounts
      equal to one-twelfth of the principal component of an annual amortization of
      the
      principal of the loan on the basis of an assumed interest rate of 6.82% and
      a
      thirty year term. The loan is secured by acquired real estate and is guaranteed
      by the Company. The balance at June 30, 2008 and December 31, 2007 was $7.0
      million and $5.8 million, respectively. The construction phase of the loan
      matures on December 4, 2008, the term phase of the loan matures on December
      5,
      2009, we believe we are in compliance with the terms required to enter the
      term
      phase of the loan.




Page
          19
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





**10.**
            ***Intangible
                Assets***




At
      June
      30, 2008, the Company had intangible assets relating to above-market leases
      from
      property acquisitions, intangible assets related to leases in place at the
      time
      of acquisition, intangible assets related to leasing costs, and intangible
      liabilities relating to below-market leases from property
      acquisitions.




The
      following table sets forth the Company’s intangible assets as of June 30, 2008
      and December 31, 2007:




At
                  June 30, 2008
              
              At
                  December 31, 2007Cost
              
              Accumulated
                  Amortization
              
              Net
              
              Cost
              
              Accumulated
                  Amortization
              
              NetAcquired
                  in-place lease intangibles
              
              **$**
              3,125,689
              
              **$**
              (1,605,033
              )
              **$**
              1,520,656
              
              $
              4,628,921
              
              $
              (2,646,629
              )
              $
              1,982,292Acquired
                  above market lease intangibles
              
              
              1,197,219
              
              
              (568,736
              )
              
              628,483
              
              
              1,203,902
              
              
              (373,175
              )
              
              830,727Acquired
                  leasing costs
              
              
              1,575,391
              
              
              (685,720
              )
              
              889,671
              
              
              1,758,805
              
              
              (605,093
              )
              
              1,153,712Acquired
                  below market lease intangibles
              
              $
              3,515,452
              
              $
              (1,787,402
              )
              $
              1,728,050
              
              $
              4,266,726
              
              $
              (1,874,843
              )
              $
              2,391,883




The
      following table presents the amortization of the acquired in-place lease
      intangibles, acquired above market lease costs and the below market lease costs
      for properties owned at June 30, 2008:




Amortization
                  of:
              
              Balance
                  of 2008
              
              2009
              
              2010
              
              2011
              
              2012
              
              Thereafter
              
              TotalAcquired
                  above market lease value
              
              $
              184,515
              
              $
              206,755
              
              $
              97,974
              
              $
              53,943
              
              $
              23,379
              
              $
              61,918
              
              $
              628,484Acquired
                  below market lease value
              
              
              (503,388
              )
              
              (563,439
              )
              
              (272,971
              )
              
              (129,256
              )
              
              (87,922
              )
              
              (171,074
              )
              
              (1,728,050
              )Projected
                  future net rental income decrease
              
              $
              (318,873
              )
              $
              (356,684
              )
              $
              (174,997
              )
              $
              (75,313
              )
              $
              (64,543
              )
              $
              (109,156
              )
              $
              (1,099,566
              )Acquired
                  in-place lease value
              
              $
              360,622
              
              $
              512,230
              
              $
              227,574
              
              $
              113,783
              
              $
              72,871
              
              $
              233,575
              
              $
              1,520,656





Actual
      total amortization expense included in depreciation and amortization expense
      in
      our statements of operations was $0.4 million and $0.5 million for the three
      months ended June 30, 2008 and 2007, respectively. Actual total amortization
      expense included in depreciation and amortization expense in our statements
      of
      operations was $0.8 million and $0.1 million for the six months ended June
      30,
      2008 and 2007, respectively. Amortization of acquired above and below market
      lease values is included in total revenues on our statements of operations
      was
      $0.2 million and $0.2 million for the three months ended June 30, 2008 and
      2007,
      respectively. Amortization of acquired above and below market lease values
      is
      included in total revenues on our statements of operations was $0.4 million
      and
      $0.3 million for the six months ended June 30, 2008 and 2007,
      respectively.











Page
          20
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





11.
            ***Distributions
                Payable***




On
      May
      13, 2008, the Company declared a dividend for the three-month period ending
      June
      30, 2008. The dividend was calculated based on shareholders of record each
      day
      during this three-month period at a rate of $0.0019178 per day, and equaled
      a
      daily amount that, if paid each day for a 365-day period, would equal a 7.0%
      annualized rate based on a share price of $10.00. The June 30, 2008 dividend
      was
      paid in full in July 2008 using a combination of cash ($1.9 million) and shares
      ($1.5 million) which represents 157,347 shares of the Company’s common stock
      issued pursuant to the Company’s Distribution Reinvestment Program, at a
      discounted price of $9.50 per share.   The amount of dividends distributed
      to our stockholders in the future will be determined by our Board of Directors
      and is 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.





In
      addition, Lightstone SLP, LLC, an affiliate of our Sponsor, has and continues
      to
      purchase special general partner interests in the Operating Partnership. These
      special general partner interests, 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. The distribution for the second
      quarter 2008 in the amount of $0.4 million was paid in July 2008. Such
      distributions, paid current at a 7% annualized rate of return to Lightstone
      SLP,
      LLC through June 30, 2008 and will always be subordinated until
      stockholders receive a stated preferred return.








***12.***
            ***Stockholders’
                Equity***




***Preferred
      Shares***




Shares
      of
      preferred stock may be issued in the future in one or more series as authorized
      by the Lightstone REIT’s board of directors. Prior to the issuance of shares of
      any series, the board of directors is required by the Lightstone REIT’s charter
      to fix the number of shares to be included in each series and the terms,
      preferences, conversion or other rights, voting powers, restrictions,
      limitations as to dividends or other distributions, qualifications and terms
      or
      conditions of redemption for each series. Because the Lightstone REIT’s board of
      directors has the power to establish the preferences, powers and rights of
      each
      series of preferred stock, it may provide the holders of any series of preferred
      stock with preferences, powers and rights, voting or otherwise, senior to the
      rights of holders of our common stock. The issuance of preferred stock could
      have the effect of delaying, deferring or preventing a change in control of
      the
      Lightstone REIT, including an extraordinary transaction (such as a merger,
      tender offer or sale of all or substantially all of our assets) that might
      provide a premium price for holders of the Lightstone REIT’s common stock. As of
      June 30, 2008 and December 31, 2007, the Lightstone REIT had 18,620 and
      zero outstanding preferred shares, respectively.





As
      described in Note 3, in exchange for the Mill Run Interest, the Operating
      Partnership issued (i) 96,000 units of common limited partnership interest
      in
      the Operating Partnership (“Common Units”) and 18,240 Series A preferred limited
      partnership units in the Operating Partnership (the “Preferred Units”) with an
      aggregate liquidation preference of $18,240,000 to Arbor JRM and (ii) 2,000
      Common Units and 380 Preferred Units with an aggregate liquidation preference
      of
      $380,000 to Arbor CJ. The total aggregate value of the Common Units and
      Preferred Units issued by the Operating Partnership in exchange for the Mill
      Run
      Interest was $19,600,000.





The
      Series A Preferred Units shall have no mandatory redemption or maturity date.
      The Series A Preferred Units shall not be redeemable by the Partnership prior
      to
      the Lockout Date of June
      26, 2013. On or after the Lockout Date, the Series A Preferred Units may be
      redeemed at the option of the Partnership (which notice may be delivered prior
      to the Lockout Date as long as the redemption does not occur prior to the
      Lockout Date), in whole but not in part, on thirty (30) days’ prior written
      notice at the option of the Partnership, at a redemption price per Series A
      Preferred Unit equal to the sum of the Series A Liquidation Preference plus
      an
      amount equal to all distributions (whether or not earned or declared) accrued
      and unpaid thereon to the date of redemption, and the redemption price shall
      be
      payable in cash. During any redemption notice period, the holders of the Series
      A Preferred Units shall retain any conversion rights with respect to the Series
      A Preferred Units. The Series A Preferred Units shall not be subject to any
      sinking fund or other obligation of the Partnership to redeem or retire the
      Series A Preferred Units.




***Common
      Shares***




All
      of
      the common stock being offered by the Lightstone REIT is duly authorized and
      will be fully paid and nonassessable. Subject to the preferential rights of
      any
      other class or series of stock and to the provisions of its charter regarding
      the restriction on the ownership and transfer of shares of our stock, holders
      of
      the Lightstone REIT’s common stock will be entitled to receive distributions if
      authorized by the board of directors and to share ratably in the Lightstone
      REIT’s assets available for distribution to the stockholders in the event of a
      liquidation, dissolution or winding-up.




Page
          21
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





Each
      outstanding share of the Lightstone REIT’s common stock entitles the holder to
      one vote on all matters submitted to a vote of stockholders, including the
      election of directors. There is no cumulative voting in the election of
      directors, which means that the holders of a majority of the outstanding common
      stock can elect all of the directors then standing for election, and the holders
      of the remaining common stock will not be able to elect any
      directors.




Holders
      of the Lightstone REIT’s common stock have no conversion, sinking fund,
      redemption or exchange rights, and have no preemptive rights to subscribe for
      any of its securities. Maryland law provides that a stockholder has appraisal
      rights in connection with some transactions. However, the Lightstone REIT’s
      charter provides that the holders of its stock do not have appraisal rights
      unless a majority of the board of directors determines that such rights shall
      apply. Shares of the Lightstone REIT’s common stock have equal dividend,
      distribution, liquidation and other rights.





Under
      its
      charter, the Lightstone REIT cannot make some material changes to its business
      form or operations without the approval of stockholders holding at least a
      majority of the shares of our stock entitled to vote on the matter. These
      include (1) amendment of its charter, (2) its liquidation or dissolution, (3)
      its reorganization, and (4) its merger, consolidation or the sale or other
      disposition of its assets. Share exchanges in which the Lightstone REIT is
      the
      acquirer, however, do not require stockholder approval. The Lightstone REIT
      had
      approximately 22.7 million and 13.6 million shares of common stock outstanding
      as of June 30, 2008 and December 31, 2007, respectively.




***Dividends***





The
      Board of Directors of the Lightstone REIT declared a dividend for each quarter
      in 2006, 2007, and 2008. The dividends have been calculated based on
      stockholders of record each day during this three-month period at a rate of
      $0.0019178 per day, which, if paid each day for a 365-day period, would equal
      a
      7.0% annualized rate based on a share price of $10.00. The June 30, 2008
      dividend was paid in full in July 2008 using a combination of cash ($1.9
      million), and ($1.5 million) which represent 157,347 shares of the Company’s
      common stock issued pursuant to the Company’s Distribution Reinvestment Program,
      shares of the Company’s stock at a discounted price of $9.50 per share. In
      addition, the Company declared a dividend on the special general partner
      interests held by our sponsor in the amount of $0.4 million, which was paid
      in
      July 2008.





**13.**
            ***Related
                Party Transactions*******




The
      Lightstone REIT 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 Lightstone REIT’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.





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.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.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
                Lightstone REIT’s common stock at an exercise price of $12.00 per
                share.Reimbursement
                of Offering Expenses
            
            Reimbursement
                of 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 Lightstone REIT
                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 offset such
                costs.


Page
          22
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





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 Lightstone REIT
                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 the 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%.




**Fees**
            
            **Amount**Property
                Management -*Residential/Retail/*
              *Hospitality*
            
            The
                Property Manager will be paid a monthly management fee of up to 5%
                of the
                gross revenues from residential, hospitality and retail properties.
                Lightstone REIT 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 Lightstone REIT 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 Lightstone REIT’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 preceeding
                quarter.




**Fees**
            
            **Amount**Reimbursement
                of Other expenses
            
            For
                any year in which the Lightstone REIT qualifies as a REIT, the Advisor
                must reimburse the Lightstone REIT 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 property
                operating expenses, depreciation and amortization expenses, 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 Lightstone
                REIT.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 Lightstone REIT by independent
                parties.




Page
          23
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**


Lightstone
      SLP, LLC, an affiliate of our Sponsor, has and continues to purchase special
      general partner interests in the Operating Partnership. These special general
      partner interests, 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. Distributions
      of $0.4 million were declared and $0.3 million were paid during the three months
      ended June 30, 2008. Distributions for the first quarter of 2007 were not
      declared until the third quarter of 2007. The distribution for the second
      quarter 2008 in the amount of $0.4 million was paid in July 2008. Such
      distributions, paid current at a 7% annualized rate of return to Lightstone
      SLP,
      LLC through June 30, 2008 and will always be subordinated until
      stockholders receive a stated preferred return, as described below:




The
      special general partner interests 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 Lightstone REIT 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:




**Operating Stage****Distributions**
            
            **Amount of Distribution**7%
                stockholder Return Threshold
            
            Once
                a cumulative non-compounded return of 7% return on their net investment
                is
                realized by stockholders, Lightstone SLP, LLC is eligible to 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 Lightstone REIT’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.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.




**Liquidating Stage**
              **Distributions**
            
            **Amount of Distribution**7%
                Stockholder Return Threshold
            
            Once
                stockholders have received liquidation distributions, and a cumulative
                non-compounded 7% return per year 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.





The
      Lightstone REIT pursuant to the arrangements described above has recorded the
      following amounts for the six months ended June 30, 2008 and 2007:




**June
                  30, 2008**
              
              **June
                  30, 2007**Acquisition
                  fees
              
              $
              2,336,565
              
              $
              1,643,950Asset
                  management fees
              
              
              1,021,839
              
              
              330,879Property
                  management fees
              
              
              832,065
              
              
              469,871Acquisition
                  expenses reimbursed to advisor
              
              
              1,265,528
              
              
              -Total
              
              **$**
              **5,455,997**
              
              **$**
              **2,444,700**


Page
          24
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**





Acquisition
      fees, asset management fees, and acquisition expenses reimbursed to the advisor
      are included in general and administrative expenses for the six months ended
      June 30, 2008 and 2007, and property management fees are included in operating
      expenses for the six months ended June 30, 2008 and 2007.


Page
          25
          of 47


**LIGHTSTONE
        VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND
        SUBSIDIARIES**
 **Notes
        to the Consolidated Financial Statements**
 **(continued)**





**14.**
            ***Segment
                Information***




The
      Company currently operates in five business segments as of June 30, 2008:
      (i) retail real estate, (ii) residential real estate, (iii) industrial real
      estate (iv) office real estate and (v) hospitality. The Company’s advisor and
      its affiliates provide leasing, property and facilities management, acquisition,
      development, construction and tenant-related services for its portfolio. The
      Company’s revenues for the three and six months ended June 30, 2008 and 2007
      were exclusively derived from activities in the United States. No revenues
      from
      foreign countries were received or reported. The Company had no long-lived
      assets in foreign locations as of June 30, 2008 and 2007. The accounting
      policies of the segments are the same as those described in Note 2: Summary
      of
      Significant Accounting Policies, excluding depreciation and amortization.
      Unallocated assets, liabilities, revenues and expense relate to corporate
      related accounts.





The
      Company evaluates performance based upon net operating income from the combined
      properties in each real estate segment.





Selected
      results of operations for the three months ended June 30, 2008 regarding the
      Company’s operating segments are as follows:




**Retail**
                
                **Multi
                    Family**
                
                **Industrial**
                
                **Hospitality**
                
                **Office**
                
                **Corporate**
                
                **Three
                    Months Ended June 30, 2008**Revenues:Rental
                    income
                
                $
                1,552,092
                
                $
                4,839,098
                
                $
                1,631,060
                
                $
                923,743
                
                $
                -
                
                $
                -
                
                $
                8,945,993Tenant
                    recovery income
                
                
                439,033
                
                
                253,466
                
                
                294,135
                
                
                4,792
                
                
                -
                
                
                -
                
                
                991,4261,991,125
                
                
                5,092,564
                
                
                1,925,195
                
                
                928,535
                
                
                -
                
                
                -
                
                
                9,937,419Expenses:Property
                    operating expenses
                
                
                614,582
                
                
                2,565,684
                
                
                471,677
                
                
                471,209
                
                
                -
                
                
                -
                
                
                4,123,152Real
                    estate taxes
                
                
                238,511
                
                
                514,809
                
                
                252,055
                
                
                43,059
                
                
                -
                
                
                -
                
                
                1,048,434General
                    and adminsitrative costs
                
                
                26,644
                
                
                130,769
                
                
                34,842
                
                
                (3,268
                )
                
                -
                
                
                5,738,997
                
                
                5,927,984Depreciation
                    and amortization
                
                
                646,151
                
                
                742,244
                
                
                743,210
                
                
                110,540
                
                
                -
                
                
                -
                
                
                2,242,145Operating
                    expenses
                
                
                1,525,888
                
                
                3,953,506
                
                
                1,501,784
                
                
                621,540
                
                
                -
                
                
                5,738,997
                
                
                13,341,715Net
                    property operations
                
                
                465,237
                
                
                1,139,058
                
                
                423,411
                
                
                306,995
                
                
                -
                
                
                (5,738,997
                )
                
                (3,404,296
                )Other
                    income/(expense)
                
                
                6,981
                
                
                106,972
                
                
                7,327
                
                
                (2,732
                )
                
                -
                
                
                -
                
                
                118,548Interest
                    income
                
                
                5,958
                
                
                199
                
                
                195
                
                
                -
                
                
                -
                
                
                1,086,773
                
                
                1,093,125Interest
                    expense
                
                
                (720,383
                )
                
                (1,740,590
                )
                
                (790,023
                )
                
                (157,246
                )
                
                -
                
                
                -
                
                
                (3,408,242
                )Loss
                    from investments in unconsolidated affiliated real estate
                    entities
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (617,829
                )
                
                -
                
                
                (617,829
                )Minority
                    interest
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                94
                
                
                94Net
                    loss applicable to common shares
                
                $
                (242,207
                )
                $
                (494,361
                )
                $
                (359,090
                )
                $
                147,017
                
                $
                (617,829
                )
                $
                (4,652,130
                )
                $
                (6,218,600
                )





Selected
      results of operations for the three months ended June 30, 2007 regarding the
      Company’s operating segments are as follows:









Page
          26
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**


Selected
      results of operations for the six months ended June 30, 2008, and selected
      asset
      information regarding the Company’s operating segments are as
      follows:




**Retail**
                
                **Multi
                    Family**
                
                **Industrial**
                
                **Hospitality**
                
                **Office**
                
                **Corporate**
                
                **Three
                    Months Ended June 30, 2007**Revenues:Rental
                    income
                
                $
                1,408,870
                
                $
                1,929,669
                
                $
                1,635,808
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                4,974,347Tenant
                    recovery income
                
                
                596,733
                
                
                44,279
                
                
                390,815
                
                
                -
                
                
                -
                
                
                -
                
                
                1,031,8272,005,603
                
                
                1,973,948
                
                
                2,026,623
                
                
                -
                
                
                -
                
                
                -
                
                
                6,006,174Expenses:Property
                    operating expenses
                
                
                581,230
                
                
                899,795
                
                
                441,276
                
                
                -
                
                
                -
                
                
                -
                
                
                1,922,301Real
                    estate taxes
                
                
                212,809
                
                
                225,931
                
                
                183,938
                
                
                -
                
                
                -
                
                
                -
                
                
                622,678General
                    and adminsitrative costs
                
                
                -
                
                
                102,303
                
                
                -
                
                
                -
                
                
                -
                
                
                362,160
                
                
                464,463Depreciation
                    and amortization
                
                
                570,201
                
                
                293,880
                
                
                698,319
                
                
                -
                
                
                -
                
                
                -
                
                
                1,562,400Operating
                    expenses
                
                
                1,364,240
                
                
                1,521,909
                
                
                1,323,533
                
                
                -
                
                
                -
                
                
                362,160
                
                
                4,571,842Net
                    property operations
                
                
                641,363
                
                
                452,039
                
                
                703,090
                
                
                -
                
                
                -
                
                
                (362,160
                )
                
                1,434,332Other
                    income/(expense)
                
                
                (2,649
                )
                
                181,333
                
                
                (100
                )
                
                -
                
                
                -
                
                
                29
                
                
                178,613Interest
                    income
                
                
                24,721
                
                
                -
                
                
                90
                
                
                -
                
                
                -
                
                
                328,456
                
                
                353,267Interest
                    expense
                
                
                (839,654
                )
                
                (619,262
                )
                
                (790,021
                )
                
                -
                
                
                -
                
                
                -
                
                
                (2,248,937
                )Loss
                    from investments in unconsolidated affiliated real estate
                    entities
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (2,169,104
                )
                
                -
                
                
                (2,169,104
                )Minority
                    interest
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1
                
                
                1Net
                    loss applicable to common shares
                
                $
                (176,219
                )
                $
                14,110
                
                $
                (86,941
                )
                $
                -
                
                $
                (2,169,104
                )
                $
                (33,674
                )
                $
                (2,451,828
                )




Page
          27
          of 47


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


**Notes
      to the Consolidated Financial Statements**


**(continued)**


Selected
      results of operations for the six months ended June 30, 2007, and selected
      asset
      information regarding the Company’s operating segments are as
      follows:




**Retail**
              
              **Multi
                  Family**
              
              **Industrial**
              
              **Hospitality**
              
              **Office**
              
              **Corporate**
              
              **Year
                  to Date Ended June 30, 2008**Revenues:Rental
                  income
              
              $
              3,073,324
              
              $
              9,639,870
              
              $
              3,277,855
              
              $
              1,659,226
              
              $
              -
              
              $
              -
              
              $
              17,650,275Tenant
                  recovery income
              
              
              935,387
              
              
              441,632
              
              
              674,203
              
              
              9,731
              
              
              -
              
              
              -
              
              
              2,060,9534,008,711
              
              
              10,081,502
              
              
              3,952,058
              
              
              1,668,957
              
              
              -
              
              
              -
              
              
              19,711,228Expenses:Property
                  operating expenses
              
              
              1,283,682
              
              
              5,009,781
              
              
              1,068,821
              
              
              877,177
              
              
              -
              
              
              -
              
              
              8,239,461Real
                  estate taxes
              
              
              451,018
              
              
              1,044,974
              
              
              494,981
              
              
              95,654
              
              
              -
              
              
              -
              
              
              2,086,627General
                  and adminsitrative costs
              
              
              41,973
              
              
              261,585
              
              
              58,794
              
              
              8,034
              
              
              -
              
              
              6,593,814
              
              
              6,964,200Depreciation
                  and amortization
              
              
              1,197,282
              
              
              1,479,000
              
              
              1,511,370
              
              
              215,063
              
              
              -
              
              
              -
              
              
              4,402,715Operating
                  expenses
              
              
              2,973,955
              
              
              7,795,340
              
              
              3,133,966
              
              
              1,195,928
              
              
              -
              
              
              6,593,814
              
              
              21,693,003Net
                  operating income (loss)
              
              
              1,034,756
              
              
              2,286,162
              
              
              818,092
              
              
              473,029
              
              
              -
              
              
              (6,593,814
              )
              
              (1,981,775
              )Other
                  income/(expense)
              
              
              11,955
              
              
              236,991
              
              
              22,671
              
              
              (6,979
              )
              
              -
              
              
              -
              
              
              264,638Interest
                  income
              
              
              18,807
              
              
              374
              
              
              3,035
              
              
              -
              
              
              -
              
              
              1,955,507
              
              
              1,977,723Interest
                  expense
              
              
              (1,598,808
              )
              
              (3,481,180
              )
              
              (1,580,045
              )
              
              (320,187
              )
              
              -
              
              
              -
              
              
              (6,980,220
              )Loss
                  from investments in unconsolidated affiliated real estate
                  entities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,560,317
              )
              
              -
              
              
              (1,560,317
              )Minority
                  interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              149
              
              
              149Net
                  loss applicable to common shares
              
              $
              (533,290
              )
              $
              (957,653
              )
              $
              (736,247
              )
              $
              145,863
              
              $
              (1,560,317
              )
              $
              (4,638,158
              )
              $
              (8,279,802
              )**Balance
                  sheet financial data at June 30, 2008:**Real
                  estate assets, net
              
              $
              73,949,945
              
              $
              139,749,192
              
              $
              76,328,470
              
              $
              17,657,235
              
              $
              -
              
              $
              -
              
              $
              307,684,842Restricted
                  escrows
              
              
              6,373,816
              
              
              2,577,218
              
              
              892,487
              
              
              -
              
              
              -
              
              
              -
              
              
              9,843,521Investments
                  in unconsolidated affiliated real estate entities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              24,324,357
              
              
              -
              
              
              24,324,357Investment
                  in affiliate, at cost
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              11,000,000
              
              
              -
              
              
              11,000,000Tenant
                  and other accounts receivable
              
              
              631,492
              
              
              567,047
              
              
              97,046
              
              
              76,835
              
              
              -
              
              
              319,250
              
              
              1,691,670Note
                  receivable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              49,500,000
              
              
              49,500,000Acquired
                  in-place lease intangibles, net
              
              
              910,698
              
              
              -
              
              
              609,958
              
              
              -
              
              
              -
              
              
              -
              
              
              1,520,656Acquired
                  above market lease intangibles, net
              
              
              363,008
              
              
              52,762
              
              
              212,714
              
              
              -
              
              
              -
              
              
              -
              
              
              628,484Deferred
                  leasing costs, net
              
              
              839,522
              
              
              -
              
              
              550,182
              
              
              -
              
              
              -
              
              
              -
              
              
              1,389,704Deferred
                  financing costs, net
              
              
              593,347
              
              
              986,152
              
              
              295,107
              
              
              49,369
              
              
              -
              
              
              -
              
              
              1,923,975Other
                  assets
              
              
              99,097
              
              
              439,224
              
              
              201,399
              
              
              424,453
              
              
              -
              
              
              487,883
              
              
              1,652,056Non-segmented
                  assets
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              33,899,342
              
              
              33,899,342Total
                  Assets
              
              $
              83,760,925
              
              $
              144,371,595
              
              $
              79,187,363
              
              $
              18,207,892
              
              $
              35,324,357
              
              $
              84,206,475
              
              $
              445,058,607Mortgage
                  payable
              
              $
              54,397,310
              
              $
              119,993,800
              
              $
              53,025,000
              
              $
              11,517,858
              
              $
              -
              
              $
              -
              
              $
              238,933,968Note
                  payable
              
              
              7,001,459
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              7,001,459





Page
          28
          of 47


**LIGHTSTONE
        VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND
        SUBSIDIARIES**
 **Notes
        to the Consolidated Financial Statements**
 **(continued)**






**14.**
            ***Legal
                Proceedings***





From
      time to time in the ordinary course of business, the Company may become subject
      to legal proceedings, claims or disputes.





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.  Counsel for
      the Lightstone REIT made motion to dismiss Mr. Gould’s complaint, which was
      granted by Judge Sweeney.  Mr. Gould has filed an appeal of the decision
      dismissing his case, which is pending.   Management believes that this suit
      is frivolous and entirely without merit and intends to defend against these
      charges vigorously.





On
      January 4, 2007, 1407 Broadway Real Estate LLC ("Office Owner"), an indirect,
      wholly owned subsidiary of 1407 Broadway Mezz II LLC ("Mezz II"), consummated
      the acquisition of a sub-leasehold interest (the "Sublease Interest") in an
      office building located at 1407 Broadway, New York, New York (the "Office
      Property"). Mezz II is a joint venture between LVP 1407 Broadway LLC ("LVP
      LLC"), a wholly owned subsidiary of our operating partnership, and Lightstone
      1407 Manager LLC ("Manager"), which is wholly owned by David Lichtenstein,
      the
      Chairman of our Board of Directors and our Chief Executive Officer, and Shifra
      Lichtenstein, his wife.





The
      Sublease Interest was acquired pursuant to a Sale and Purchase of Leasehold
      Agreement with Gettinger Associates, L.P. ("Gettinger"). In July 2006, Abraham
      Kamber Company, as sublessor under the sublease ("Sublessor"), served two
      notices of default on Gettinger (the "Default Notices"). The first alleged
      that
      Gettinger had failed to satisfy its obligations in performing certain
      renovations and the second asserted numerous defaults relating to Gettinger's
      purported failure to maintain the Office Property in compliance with its
      contractual obligations.





In
      response to the Default Notices, Gettinger commenced legal action and obtained
      an injunction that extends its time to cure any default, prohibits interference
      with its leasehold interest and prohibits Sublessor from terminating its
      sublease pending resolution of the litigation. A motion by Sublessor for partial
      summary judgment, alleging that certain work on the Office Property required
      its
      prior approval, was denied by the Supreme Court, New York County. Subsequently,
      by agreement of the parties, a stay was entered precluding the termination
      of
      the Sublease Interest pending a final decision on Sublessor's claim of defaults
      under the Sublease Interest. In addition, the parties stipulated to the
      intervention of Office Owner as a party to the proceedings. The parties have
      been directed to engage in and complete discovery. We consider the litigation
      to
      be without merit.




Prior
      to
      consummating the acquisition of the Sublease Interest, Office Owner received
      a
      letter from Sublessor indicating that Sublessor would consider such acquisition
      a default under the original sublease, which prohibits assignments of the
      Sublease Interest when there is an outstanding default there under. On February
      16, 2007, Office Owner received a Notice to Cure from Sublessor stating the
      transfer of the Sublease Interest occurred in violation of the Sublease given
      Sublessor's position that Office Seller is in default. Office Owner will
      commence and vigorously pursue litigation in order to challenge the default,
      receive an injunction and toll the termination period provided for in the
      Sublease.





On
      September 4, 2007, Office Owner commenced a new action against Sublessor
      alleging a number of claims, including the claims that Sublessor has breached
      the sublease and committed intentional torts against Office Owner by (among
      other things) issuing multiple groundless default notices, with the aim of
      prematurely terminating the sublease and depriving Office Owner of its valuable
      interest in the sublease.  The complaint seeks a declaratory judgment that
      Office Owner has not defaulted under the sublease, damages for the losses Office
      Owner has incurred as a result of Sublessor’s wrongful conduct, and an
      injunction to prevent Sublessor from issuing further default notices without
      valid grounds or in bad faith.





As
      of the
      date hereof, we are not a party to any other material pending legal
      proceedings.


Page
            29
            of 47


**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 continue 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, 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.







Page
          30
          of 47







**Overview**





Lightstone
      Value Plus Real Estate Investment Trust, Inc. (the “Lightstone REIT” or
“Company”) intends to acquire and operate commercial, residential and
      hospitality properties, principally in the United States. Principally through
      the Lightstone Value Plus REIT, LP, (the “Operating Partnership”), our
      acquisitions may include both portfolios and individual properties. We expect
      that our commercial holdings will consist of retail (primarily multi-tenanted
      shopping centers), lodging (primarily extended stay hotels), industrial and
      office properties and that our residential properties will be principally
      comprised of ‘‘Class B’’ multi-family complexes. 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 mid-scale, extended stay
      lodging properties and 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; leisure home sites;
      farms; ranches; timberlands; unimproved properties not intended to be developed;
      or mining properties.





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. As of June
      30,
      2008, Lightstone REIT has completed ten acquisitions: the St. Augustine Outlet
      Center, a retail outlet shopping mall in St. Augustine, Florida, on March 31,
      2006; the Southeast Michigan Apartments, four multi-family communities in
      Southeast Michigan on June 29, 2006; the Oakview Power Center, a retail shopping
      mall located in Omaha, Nebraska, on December 21, 2006; 1407 Broadway, a 49%
      equity interest in a joint venture, formed to purchase a sub-leasehold interest
      in a ground lease to an office building in New York, New York, on January
      4, 2007; the Gulf States Industrial portfolio, a portfolio of 12 industrial
      and 2 office buildings in Louisiana and Texas, on February 1, 2007; and has
      developed the Brazos Crossing Power Center after acquiring a land parcel in
      Lake
      Jackson, Texas, on June 29, 2007, the Sugarland and Katy Highway Extended Stay
      Hotels in Houston, Texas on October 17, 2007, the Southeast Apartments, which
      included, five multi family apartment communities, one in Tampa, Florida, two
      in
      Greensboro, North Carolina and two in Charlotte, North Carolina on November
      16,
      2007, and the Sarasota Industrial Property, an industrial building in Sarasota,
      Florida on November 13, 2007. On June 26, 2008, the Company acquired an interest
      in an entity with an interest in two outlet malls in Orlando, Florida.




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, in order to achieve economies of scale where
      possible. Our Sponsor currently maintains operations throughout the United
      States (Hawaii, South Dakota, Vermont and Wyoming excluded), the District of
      Columbia, Puerto Rico and Canada.





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. At December 31, 2006, we qualified as a REIT and have elected
      to be
      taxed as a REIT for the taxable year ending December 31, 2008, 2007 and 2006.
      We
      plan to own substantially all of our assets and conduct our operations through
      the Operating Partnership. The Company has assessed it qualified as a REIT
      for
      the year ended December 31, 2007 and the period ended June 30,
      2008.




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.





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 June 30, 2008, cumulative gross offering
      proceeds of approximately $223.5 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.


Page
          31
          of 47





Lightstone
      SLP, LLC, an affiliate of the Advisor, intends to periodically purchase special
      general partner interests (“SLP 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 SLP Units will be used to fund organizational and offering
      costs incurred by the Company. As of June 30, 2008, offering costs of $21.4
      million have been more than offset by $22.2 million of proceeds from the sale
      of
      SLP Units.





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 June 30, 2008, the Advisor has not allocated any
      organizational costs to the Company. Advances for offering costs in excess
      of
      the 10% will only be reimbursed to the Advisor as additional offering proceeds
      are received by the Company. As of June 30, 2008, offering costs incurred were
      slightly less than 10%.





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.







Beginning
      with the year ended December 31, 2006, the Company qualified 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”). Accordingly, no
      provision for income tax was recorded to date. 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. As of December 31, 2007, and June 30, 2008 the Company has
      complied with the requirements for maintaining its REIT status.


Page
          32
          of 47


**Portfolio
      Summary**




**Location**
                
                **Year
                    Built (Range of years built)**
                
                **Leasable
                    Square Feet**
                
                **Percentage
                    Occupied as of 6/30/08**
                
                **Annualized
                    Revenues based on rents at June 30, 2008****Wholly-Owned
                    Real Estate Properties:**St.
                    Augustine Outlet Mall**(2)**
                
                
                St.
                    Augstine, FL
                
                
                1998
                
                
                251,186
                
                
                57.0
                %
                $
                2.4
                    millionOakview
                    Power Center
                
                
                Omaha,
                    NE
                
                
                1999
                    - 2005
                
                
                177,331
                
                
                99.2
                %
                $
                2.5
                    million7
                    Flex/Office/Industrial Buildings from the Gulf States Industrial
                    portfolio
                
                
                New
                    Orleans, LA
                
                
                1980-2000
                
                
                339,700
                
                
                93.3
                %
                $
                3.1
                    million4
                    Flex/Industrial Buildings from the Gulf States Industrial
                    portfolio
                
                
                San
                    Antonio, TX
                
                
                1982-1986
                
                
                484,260
                
                
                82.3
                %
                $
                1.8
                    million3
                    Flex/Industrial Buildings from the Gulf States Industrial
                    portfolio
                
                
                Baton
                    Rouge, LA
                
                
                1985-1987
                
                
                182,792
                
                
                100.0
                %
                $
                1.2
                    millionBrazos
                    Crossing Power Center**(1)**
                
                
                Lake
                    Jackson, TX
                
                
                2007-2008
                
                
                61,213
                
                
                100.0
                %
                $
                0.5
                    millionSarasota
                    Industrial Property
                
                
                Sarasota,
                    FL
                
                
                1992
                
                
                281,276
                
                
                0.0
                %
                $
                -**Portfolio
                    total**
                
                
                
                
                **1,777,758**
                
                
                **72.6**
                **%**
 
 **(1)**Opened March 2008**(2)**Currently
                  undergoing expansion/renovation, 75.91% occupied including temporary
                  tenants
 
 **Location**
              
              **Year
                  Built (Range of years built)**
              
              **Leasable
                  Units**
              
              **Percentage
                  Occupied as of 6/30/08**
              
              **Annualized
                  Revenues based on rents at June 30, 2008**Michigan
                  Apartments (Four Multi Family Apartment Buildings)
              
              
              Southeast
                  MI
              
              
              1965-1972
              
              
              1,017
              
              
              91.5
              %
              $
              7.9
                  millionSoutheast
                  Apartments (Five Multi Family Apartment Buildings)
              
              
              Greensboro
                  and Charlotte, NC/Tampa, FL
              
              
              1980-1987
              
              
              1,576
              
              
              84.0
              %
              $
              9.8
                  million**Portfolio
                  total**
              
              
              
              
              **2,593**
              
              
              **87.5**
              **%**
 
 **Location**
              
              **Year
                  Built**
              
              **Available
                  Rooms**
              
              **Occupancy
                  Percentage for the three months ended 6/30/08**
              
              **Revenue
                  per Available Room for the three months ended
                  6/30/08****Wholly-Owned
                  Operating Properties:**Sugarland
                  and Katy Highway Extended Stay Hotels (3)
              
              
              Houston,
                  TX
              
              
              1998
              
              
              26,390
              
              
              68.8
              %
              $
              34.71
 
 **(3)**Currently
                  undergoing renovations.
 
 **Location**
              
              **Year
                  Built**
              
              **Leasable
                  Square Feet**
              
              **Percentage
                  Occupied as of 6/30/08**
              
              **Annualized
                  Revenues based on rents at June 30, 2008****Unconsolidated
                  Joint Venture****Properties:**1407
                  Broadway
              
              
              New
                  York, NY
              
              
              1952
              
              
              930,140
              
              
              84.7
              %
              $
              37.2
                  millionOrlando
                  Outlet & Design Center
              
              
              Orlando,
                  FL
              
              
              (4
              )
              
              975,260
              
              
              76.1
              %
              $
              24.0
                  million**Portfolio
                  total**
              
              
              
              
              **1,905,400**
              
              
              **80.4**
              **%**
 
 (4)
                  Orlando Outlet Grand Opening in April 2008
 Page
              33
              of 47


**2008
      Acquisitions and Investments**





There
      were no acquisitions during the first quarter of 2008.





*Park
      Avenue Funding*





On
      April
      16, 2008, we made a preferred equity contribution of $11,000,000 (the “
Contribution ”) to PAF-SUB LLC (“ PAF ”), a wholly-owned subsidiary of Park
      Avenue Funding LLC (“ Park Avenue ”), in exchange for membership interests of
      PAF with certain rights and preferences described below (the “ Preferred Units
”). Park Avenue is a real estate lending company making loans, including first
      or second mortgages, mezzanine loans and collateral pledges of mortgages, to
      finance real estate transactions. Property types considered include
      multi-family, office, industrial, retail, self-storage, parking and land. Both
      PAF and Park Avenue are affiliates of our Sponsor.




PAF’s
      limited liability company agreement was amended on April 16, 2008 to create
      the
      Preferred Units and admit us as a member. The Preferred Units are entitled
      to a
      cumulative preferred distribution at the rate of 10% per annum, payable
      quarterly. In the event that PAF fails to pay such distribution when due, the
      preferred distribution rate increases to 17% per annum. The Preferred Units
      are
      redeemable, in whole or in part, at any time at the option of the Company upon
      at least 180 days’ prior written notice (the “ Redemption ”). In addition, the
      Preferred Units are entitled to a liquidation preference senior to any
      distribution upon dissolution with respect to other equity interests of PAF
      in
      an amount equal to (x) the Contribution plus any accrued but unpaid
      distributions less (y) any Redemption payments.




In
      connection with the Contribution, we entered into a guarantee agreement with
      Park Avenue on April 16, 2008, whereby Park Avenue unconditionally and
      irrevocably guarantees payment of the Redemption amounts when due (the “
Guarantee ”). Also, Park Avenue agrees to pay all costs and expenses incurred by
      the Company in connection with the enforcement of the Guarantee.





*Mill
      Run Interest*





On
      June
      26, 2008, we through our Operating Partnership, entered into Contribution and
      Conveyance Agreements between the Operating Partnership and (i) Arbor Mill
      Run
      JRM LLC, a Delaware limited liability company (“Arbor JRM”) and (ii) Arbor
      National CJ, LLC, a New York limited liability company (“Arbor CJ”), pursuant to
      which Arbor JRM and Arbor CJ contributed to the Operating Partnership an
      aggregate 22.54% membership interest (the “Mill Run Interest”) in Mill Run. The
      Mill Run Interest is a non-managing interest, with consent rights with respect
      to certain major decisions. An affiliate of The Lightstone Group, the Company’s
      sponsor, is the managing member and majority owner of Mill Run. The acquisition
      price for the Mill Run Interest was approximately $85 million, $19.6 million
      of
      which was in the form of equity and $65.4 million in the form of indebtedness
      secured by the Mill Run Properties. In connection with this transaction,
      Lightstone Value Plus REIT LLC, our advisor, received an acquisition fee equal
      to 2.75% of the acquisition price, or approximately $2.4 million. Closing costs
      totaled approximately $1.1 million. In exchange for the Mill Run Interest,
      the
      Operating Partnership issued (i) 96,000 units of common limited partnership
      interest in the Operating Partnership (“Common Units”) and 18,240 Series A
      preferred limited partnership units in the Operating Partnership (the “Preferred
      Units”) with an aggregate liquidation preference of $18,240,000 to Arbor JRM and
      (ii) 2,000 Common Units and 380 Preferred Units with an aggregate liquidation
      preference of $380,000 to Arbor CJ. The total aggregate value of the Common
      Units and Preferred Units issued by the Operating Partnership in exchange for
      the Mill Run Interest was $19,600,000.





In
      connection with the contribution of the Mill Run Interest, we made loans to
      Arbor JRM and Arbor CJ in the aggregate principal amount of $17.6 million (the
      “Mill Loans”). The Mill Loans are payable semi-annually and shall accrue
      interest at an annual rate of 4%. The Mill Loans mature on June 26, 2016 and
      contain customary events of default and default remedies. The Mill Loans require
      Arbor JRM and Arbor CJ to prepay their respective loans in full upon the
      redemption of the Preferred Units by the Operating Partnership. The Mill Loans
      are secured by the Preferred Units and Common Units issued in connection with
      the acquisition of the Mill Interest.





*Material
      Agreement to Acquire Prime Interest*





Through
      our Operating Partnership, we entered into a Contribution and Conveyance
      Agreement with AR Prime Holdings LLC, a Delaware limited liability company
      (“AR
      Prime”), pursuant to which AR Prime will contribute to the Operating Partnership
      a 25% membership interest (the “Prime Interest”) in Prime. Prime Interest is a
      non-managing interest, with certain consent rights with respect to major
      decisions. An affiliate of The Lightstone Group, the Company’s sponsor, is the
      majority owner and manager of Prime. The acquisition price for the Prime
      Interest is approximately $373 million, $55 million of which will be in the
      form
      of equity and $318 million of which will be in the form of indebtedness secured
      by the Prime Properties (18 retail outlet malls, and four development projects).
      In connection with the transaction, upon closing Lightstone Value Plus REIT
      LLC,
      our advisor, will receive an acquisition fee equal to 2.75% of the acquisition
      price, or approximately $9.7 million at closing.


Page
          34
          of 47





The
      closing of the acquisition of the Prime Interest is subject to customary closing
      conditions. The closing of the acquisition of the Prime Interest is scheduled
      for the earlier of December 15, 2008 or a maximum 30 days after the Operating
      Partnership obtains audited financial statements of Prime for the last three
      fiscal years (the “Financial Statements”), but in no event later than June 26,
      2009. If the Operating Partnership does not obtain the Financial Statements
      by
      June 26, 2009 and does not close the transaction, it would be required to pay
      liquidated damages in the amount of $6.08 million. However, AR Prime cannot
      specifically enforce the Contribution and Convenyance Agreement if the Operating
      Partnership does not obtain the Financial Statements. Subject to the fulfillment
      of the closing conditions, the Operating Partnership will issue to AR Prime
      (i)
      275,000 Common Units and 52,250 Preferred Units with an aggregate liquidation
      preference of $52,250,000 (this amount will be reduced by the amount of any
      distributions by Prime to AR Prime prior to closing) and (ii) Common Units
      with
      a value equal to 5% of the Adjustment Amount and additional Preferred Units
      with
      a liquidation preference equal to 95% of the Adjustment Amount. The “Adjustment
      Amount” is the amount of interest that would have accrued on a loan in the
      principal amount of $52,250,000, at an interest rate of 4.6316%, from June
      26,
      2008 until the closing.





In
      connection with the contribution of the Prime Interest, we made a loan to AR
      Prime in the principal amount of $49.5 million (the “Prime Loan”). The Prime
      Loan is payable semi-annually and accrues interest at an annual rate of 4%.
      The
      Prime Loan matures on June 26, 2016 and contains customary events of default
      and
      default remedies. The Prime Loan contains provisions requiring AR Prime to
      prepay the Prime Loan (i) in full upon the redemption by the Operating
      Partnership of the Preferred Units to be issued to AR Prime in connection with
      the closing of the acquisition of the Prime Interest and (ii) in part, with
      the
      proceeds of any distribution received by AR Prime from Prime prior to such
      closing. The Prime Loan is secured by AR Prime’s interest in the Prime Interest.
      Upon the closing, the Common Units and Preferred Units issued to AR Prime will
      replace the Prime Interest as the security for the Prime Loan. Also, upon the
      closing, the Company will make an additional loan to AR Prime, on the same
      terms
      and conditions as the Prime Loan, in the principal amount equal to 90% of the
      Adjustment Amount. Total accrued interest related to this loan totaled $27,500
      at June 30, 2008, and is included in tenant and other receivables.





**2008
      Renovation and Expansion**





On
      October 2, 2007, we closed on the acquisition of an 8.5-acre parcel of
      undeveloped land for $2.75 million, for further development of the adjacent
      St.
      Augustine Outlet mall. Development rights to the land parcel were purchased
      at
      an additional cost of $1.3 million. We have started the construction of the
      expansion which will add approximately 90,000 square feet to the existing
      center. Upon completion of the expansion and renovation to the existing
      property, the center’s gross leaseable area will approximate 335,000 square
      feet. The cost for the renovation and expansion of the outlet mall is expected
      to approximate $35.2 million. Numerous established retail brands have executed
      lease agreements and will occupy the expanded and renovated outlet mall,
      including Saks 5 th Avenue,
      Ann Taylor, Juicy Couture, Kate Spade, Lucky Brand Jeans, Papaya Clothing and
      BCBG Max Azaria. These tenants will occupy approximately 53,000 square feet.
      Costs to date include the purchase of the land and the development rights total
      $5.5 million. We estimate the total remaining cash needs of the project to
      total
      $28.6 million. The Company plans to fund the renovation and expansion from
      offering proceeds.





The
      Company entered into a construction loan to fund the development of
      approximately 60,000 square feet of the power retail center at its Lake Jackson,
      Texas Location. The loan is secured by acquired real estate and is non-recourse
      to the Company. The total cost of the project, inclusive of project
      construction, tenant incentives, leasing costs, and land is estimated at $10.2
      million. Because the debt financing for the acquisition may exceed certain
      leverage limitations of the REIT, the Board, including all of its independent
      directors has approved any leverage exceptions as required by the Company’s
      Articles of Incorporation.  The
      center opened in April 2008, and three tenants occupy 100% of the property’s
      rentable square footage. The tenants, Petsmart, Office Depot and Best Buy all
      have 10 year leases.




**Critical
      Accounting Policies**




There
      were no changes during the three months ended June 30, 2008 to our critical
      accounting policies as reported in our Annual Report on Form 10-K, for the
      year
      ended December 31, 2007.




**Inflation**




Our
      long-term leases are expected to contain provisions to mitigate the adverse
      impact of inflation on our operating results. Such provisions will include
      clauses entitling us to receive scheduled base rent increases and base rent
      increases based upon the consumer price index.  In addition, our leases are
      expected to require tenants to pay a negotiated share of operating expenses,
      including maintenance, real estate taxes, insurance and utilities, thereby
      reducing our exposure to increases in cost and operating expenses resulting
      from
      inflation.


Page
          35
          of 47





**Treatment
      of Management Compensation, Expense Reimbursements and Operating Partnership
      Participation Interest**




Management
      of our operations is outsourced to our Advisor and certain other affiliates
      of
      our Sponsor. Fees related to each of these services are accounted for based
      on
      the nature of such service and the relevant accounting literature. Fees for
      services performed that represent period costs of the Lightstone REIT are
      expensed as incurred. Such fees include acquisition fees associated with the
      purchase of a joint venture interest; asset management fees paid to our Advisor
      and property management fees paid to our Property Manager.




Our
      Property Manager may also perform fee-based construction management services
      for
      both our re-development activities and tenant construction projects. These
      fees
      are considered incremental to the construction effort and will be capitalized
      to
      the associated real estate project as incurred in accordance with SFAS 67, *Accounting
      for Costs and Initial Rental Operations of Real Estate
      Projects.* Costs
      incurred for tenant construction will be depreciated over the shorter of their
      useful life or the term of the related lease. Costs related to redevelopment
      activities will be depreciated over the estimated useful life of the associated
      project.




Leasing
      activity at our properties has also been outsourced to our Property Manager.
      Any
      corresponding leasing fees we pay will be capitalized and amortized over the
      life of the related lease in accordance with the provisions of SFAS 91, *Accounting
      for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
      and Initial Direct Costs of Leases.*




Expense
      reimbursements made to both our Advisor and Property Manager will be expensed
      or
      capitalized to the basis of acquired assets, as appropriate. After the Company
      adopts SFAS 141R, all expense reimbursements will be expensed.




Lightstone
      SLP, LLC, an affiliate of our Sponsor, has and advises us that it intends to
      continue to purchase special general partner interests (“SLP Units”) in the
      Operating Partnership. These SLP 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. Lightstone
      SLP, LLC has received its proportional share of distributions to date;
      representing a 7% annualized return on the value of its SLP Units, through
      June
      30, 2008.




Proceeds
      from the sale of the SLP Units will be used to fund organizational and offering
      costs incurred by the Company. As of June 30, 2008, offering costs of $21.4
      million have been offset by $22.2 million of proceeds from the sale of SLP
      Units.







**Income
      Taxes**




We
      elected to be taxed as a REIT under Sections 856 through 860 of the
      Internal Revenue Code in conjunction with the filing of our 2006 federal tax
      return. In order to qualify as a REIT, an entity must meet certain
      organizational and operational requirements, including a requirement to
      distribute at least 90% of its annual ordinary taxable income to stockholders.
      REITs are generally not subject to federal income tax on taxable income that
      they distribute to their stockholders. It is our intention to adhere to these
      requirements and maintain our REIT status.





As
      such,
      no provision for federal income taxes has been included in the Lightstone REIT
      consolidated financial statements. As a REIT, we still may be subject to certain
      state, local and foreign taxes on our income and property and to federal income
      and excise taxes on our undistributed taxable income.





The
      Company has net operating loss carryforwards for Federal income tax purposes
      for
      the years ended December 31, 2007 and 2006. The availability of such loss
      carryforwards will begin to expire in 2026. As the Company does not consider
      it
      likely that it will realize any future benefit from its loss carry-forward,
      any
      deferred asset resulting from the final determination of its tax losses will
      be
      fully offset by a valuation allowance of the same amount.





Effective
      January 1, 2007, the Company adopted FIN No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* .
      The
      adoption of FIN 48 did not have a material impact on the Company’s financial
      position, results of operation, or cash flows. As of December 31, 2007, the
      Company had no material uncertain income tax positions. The tax years 2004
      through 2007 remain open to examination by the major taxing jurisdictions to
      which the Company is subject.







**Results
      of Operations**




We
      commenced operations on February 1, 2006 upon the release of our offering
      proceeds from escrow. Additionally, we acquired our first property, the Belz
      Outlets at St. Augustine, Florida, on March 31, 2006. 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.


Page
          36
          of 47





**For
      the Three Months Ended June 30, 2008 vs June 30, 2007**





***Revenues***




Total
      revenues increased by approximately $3.9 million to approximately $9.9 million
      for the three months ended June 30, 2008 compared to $6.0 million **** for the
      comparable period last year. Base rents increased $4.0 million primarily due
      to
      our acquisition of a portfolio of 12 industrial and 2 office buildings in
      Louisiana and Texas on February 1, 2007; and a land parcel in Lake Jackson,
      Texas, intended for immediate development as a power retail center, on June
      29,
      2007, which subsequently opened in April of 2008; two hotels in Houston, Texas
      on October 17, 2007; and five multi family apartment communities, one in Tampa,
      Florida, two in Greensboro, North Carolina and two in Charlotte, North Carolina
      on November 16, 2007. Tenant recovery income remained consistent with the prior
      year.





***Total
      Property Expenses***




Total
      property expenses increased by $2.2 million, to approximately $4.1 million
      for
      the three months ended June 30, 2008, compared to approximately $1.9 million
      for
      the comparable period last year. Increases in property operating expenses were
      primarily the result of the acquisition of new properties in February of 2007,
      and during the fourth quarter of 2007.





***Real
      Estate Taxes***




Total
      real estate taxes increased by $0.4 million, to approximately $1.0 million
      for
      the three months ended June 30, 2008, compared to approximately $0.6 million
      for
      the comparable period last year. Increases in real estate taxes were primarily
      the result of the acquisition of new properties in February of 2007, and during
      the fourth quarter of 2007.





***General
      and administrative expenses***




General
      and administrative costs increased by approximately $5.4 million to
      approximately $5.9 million, primarily as a result of the payment of acquisition
      fees, acquisition expenses and legal fees, and costs related to due diligence
      on
      investments which were not pursued in the amounts of $2.3 million, $2.0 million,
      and $0.7 million respectively. The acquisition fee and related expenses were
      related to our acquisition of the 22.54% interest in Mill Run, which owns two
      retail outlet malls in Orlando, Florida. Asset management fees also increased
      approximately $0.2 million related to our acquisitions in the fourth quarter
      of
      2007.




***Depreciation
      and Amortization***




Depreciation
      and amortization expense increased by approximately $0.7 million for the three
      months ended June 30, 2008 to $2.2 million, as compared to $1.5 million at
      June
      30, 2007 primarily due to the acquisition and financing of new properties in
      February of 2007, and during the fourth quarter of 2007.




***Other
      Income***




Other
      income decreased by approximately $0.1 million due principally to slight
      decrease related to vending and other ancillary revenue sources at our
      properties.




***Interest
      Income***




Interest
      income increased by approximately $0.7 million, due primarily to the increase
      in
      interest and dividend income recorded on the short-term investments and
      marketable securities. The average balance of cash and cash equivalents,
      including marketable securities was $57.4 million and $27.5 million at June
      30,
      2008 and June 30 2007, respectively.





***Interest
      expense***




Interest
      expense increased approximately $1.2 million to approximately $3.4 million
      for
      the three months ended June 30, 2008, primarily as a result of the acquisition
      and financing of new properties in February of 2007, and during the fourth
      quarter of 2007.





***Loss
      from Investments in Unconsolidated Affiliated Real Estate
      Entities***




A
      $0.6
      million loss from investment in unconsolidated joint venture for the three
      months ended June 30, 2008, compared to $2.2 million loss in the same period
      last year relates to our investment in the sub lease interest to a ground lease
      of a Manhattan office building on January 4, 2007. The improvement resulted
      primarily from increased revenues of approximately $0.3 at the joint venture
      level, as a result of increases in rents per square foot for new and renewal
      leases, a decrease in depreciation and amortization of $0.6 million as a result
      of tenant roll over, and a $0.2 million decline in interest expense, due to
      the
      decline in the LIBOR rate.


Page
          37
          of 47


**For
      the Six Months Ended June 30, 2008 vs June 30, 2007**





***Revenues***




Total
      revenues increased by approximately $8.5 million to approximately $19.7 million
      for the six months ended June 30, 2008 compared to $11.2 million for the
      comparable period last year. Base rents increased $8.2 million primarily due
      to
      our acquisition of a portfolio of 12 industrial and 2 office buildings in
      Louisiana and Texas, on February 1, 2007; and a land parcel in Lake Jackson,
      Texas, on June 29, 2007, which subsequently opened in April of 2008; two hotels
      in Houston, Texas on October 17, 2007; and five multi family apartment
      communities, one in Tampa, Florida, two in Greensboro, North Carolina and two
      in
      Charlotte, North Carolina on November 16, 2007. Tenant recovery income increased
      approximately $0.3 million primarily as a result of our acquisition of a
      portfolio of 12 industrial and 2 office buildings in Louisiana and Texas,
      on February 1, 2007.





***Total
      Property Expenses***




Total
      property expenses increased by $4.3 million, to approximately $8.2 million
      for
      the six months ended June 30, 2008, compared to approximately $3.9 million
      for
      the comparable period last year. Increases in property operating expenses were
      primarily the result of the acquisition of new properties in February of 2007,
      and during the fourth quarter of 2007.





***Real
      Estate Taxes***




Total
      real estate taxes increased by $0.9 million, to approximately $2.1 million
      for
      the six months ended June 30, 2008, compared to approximately $1.2 million
      for
      the comparable period last year. Increases in real estate taxes were primarily
      the result of the acquisition of new properties in February of 2007, and during
      the fourth quarter of 2007.





***General
      and administrative expenses***




General
      and administrative costs increased by approximately $4.5 million to
      approximately $7.0 million, primarily as a result of the payment of acquisition
      fees, acquisition expenses and legal fees, and costs related to due diligence
      on
      investments which were not pursued in the amounts of $2.3 million, $2.0 million,
      and $0.7 million respectively. The acquisition fee and related expenses were
      related to our acquisition of the 22.54% interest in Mill Run, which owns two
      retail outlet malls in Orlando, Florida. This increase was offset by increased
      fees for the six months ended June 30, 2007 as a result of the payment of
      acquisition and legal fees in the amount of $1.6 million and $0.1 million,
      respectively, related to the our investment in the sub lease interest to a
      ground lease of a Manhattan office building payment in the first quarter of
      2007. In addition asset management fees increased $0.7 million year to date
      s
      compared to prior year as a result of the acquisitions in Feb 2007, June 2007
      and the fourth quarter of 2007.





***Depreciation
      and Amortization***




Depreciation
      and amortization expense increased by approximately $1.4 million for the six
      months ended June 30, 2008 to $4.4 million, as compared to $3.0 million at
      June
      30, 2007 primarily due to the acquisition and financing of new properties during
      the fourth quarter of 2007.




***Other
      Income***




Other
      income decreased by approximately $0.1 million due principally to slight
      decrease related to vending and other ancillary revenue sources at our
      properties.




***Interest
      Income***




Interest
      income increased by approximately $1.5 million, due primarily to the increase
      in
      interest and dividend income recorded on the short-term investments and
      marketable securities. The average balance of cash and cash equivalents was
      $48.3 million and $21.7 million, securities for the six months ended June 30,
      2008 and June 30, 2007, respectively.


Page
          38
          of 47





***Interest
      expense***




Interest
      expense increased approximately $2.8 million to approximately $7.0 million
      for
      the six months ended June 30, 2008, primarily as a result of the acquisition
      and
      financing of new properties during the fourth quarter of 2007.





***Loss
      from Investments in Unconsolidated Affiliated Real Estate
      Entities***




A
      $1.6
      million loss from investment in unconsolidated joint venture for the six months
      ended June 30, 2008, compared to $4.2 million loss in the same period last
      year
      relates to our investment in the sub lease interest to a ground lease of a
      Manhattan office building on January 4, 2007. The improvement resulted primarily
      from increased revenues of approximately $0.7 million at the joint venture
      level, due to increases in rents per square foot for new and renewal leases,
      a
      decrease in depreciation and amortization of $1.2 million, as a result of tenant
      roll over, and a $0.2 million decline in interest expense, due to the decline
      in
      the LIBOR rate.







**Financial
      Condition, Liquidity and Capital Resources**




***Overview:***




We
      intend
      that rental revenue will be the principal source of funds to pay operating
      expenses, debt service, capital expenditures and dividends, excluding
      non-recurring capital expenditures. To the extent that our cash flow from
      operating activities is insufficient to finance non-recurring capital
      expenditures such as property acquisitions, development and construction costs
      and other capital expenditures, we are dependent upon the net proceeds to be
      received from our public offering and debt offerings to conduct such proposed
      activities. We have financed and expect to continue to finance such activities
      through debt and equity financings. The capital required to purchase real estate
      investments will be obtained from our offering and from any indebtedness that
      we
      may incur in connection with the acquisition and operations of any real estate
      investments thereafter.




We
      expect
      to meet our short-term liquidity requirements generally through funds received
      in our public offering, working capital, and net cash provided by operating
      activities. We frequently examine potential property acquisitions and
      development projects and, at any given time, one or more acquisitions or
      development projects may be under consideration. Accordingly, the ability to
      fund property acquisitions and development projects is a major part of our
      liquidity requirements. We expect to meet our financing requirements through
      funds generated from our public offering and long-term and short-term
      borrowings.




We
      intend
      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.




Our
      source of funds in the future will primarily be the net proceeds of our
      offering, operating cash flows and borrowings. We believe that these cash
      resources will be sufficient to satisfy our cash requirements for the
      foreseeable future, and we do not anticipate a need to raise funds from other
      than these sources within the next twelve months.




We
      currently have $238.9 million of outstanding mortgage debt, and $7.0 million
      in
      a note payable. 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 also incur short-term indebtedness having
      a maturity of two years or less.




Our
      charter provides that the aggregate amount of borrowing, both secured and
      unsecured, may not exceed 300% of net assets in the absence of a satisfactory
      showing that a higher level is appropriate and the approval of our board of
      directors, and subsequent disclosure to stockholders. Net assets means our
      total
      assets, other than intangibles, at cost before deducting depreciation or other
      non-cash reserves less our total liabilities, calculated at least quarterly
      on a
      basis consistently applied. Any excess in borrowing over such 300% of net assets
      level must be approved by a majority of our independent directors and disclosed
      to our stockholders in our next quarterly report to stockholders, along with
      justification for such excess. As of June 30, 2008, our total borrowings
      represented 128% of net assets.




Borrowings
      may consist of single-property mortgages as well as mortgages
      cross-collateralized by a pool of properties. Such mortgages may be put in
      place
      either at the time we acquire a property or subsequent to our purchasing a
      property for cash. In addition, we may acquire properties that are subject
      to
      existing indebtedness where we choose to assume the existing mortgages.
      Generally, though not exclusively, we intend to seek to encumber our properties
      with debt, which will be on a non-recourse basis. This means that a lender’s
      rights on default will generally be limited to foreclosing on the property.
      However, we may, at our discretion, secure recourse financing or provide a
      guarantee to lenders if we believe this may result in more favorable terms,
      and
      construction loans will typically require a recourse guarantee. When we give
      a
      guaranty for a property owning entity, we will be responsible to the lender
      for
      the satisfaction of the indebtedness if it is not paid by the property owning
      entity.


Page
          39
          of 47





We
      intend
      to obtain level payment financing, meaning that the amount of debt service
      payable would be substantially the same each year. Accordingly, we expect that
      some of the mortgages on our property will provide for fixed interest rates.
      However, we expect that most of the mortgages on our properties will provide
      for
      a so-called “balloon” payment and that certain of our mortgages will provide for
      variable interest rates.




We
      may
      also obtain lines of credit to be used to acquire properties. These lines of
      credit will be at prevailing market terms depending upon our needs at the time
      and will be repaid from offering proceeds, proceeds from the sale or refinancing
      of properties, working capital or permanent financing. Our Sponsor or its
      affiliates may guarantee the lines of credit although they will not be obligated
      to do so. We may draw upon the lines of credit to acquire properties pending
      our
      receipt of proceeds from our initial public offering. We expect that such
      properties may be purchased by our Sponsor’s affiliates on our behalf, in our
      name, in order to avoid the imposition of a transfer tax upon a transfer of
      such
      properties to us.




In
      addition to making investments in accordance with our investment objectives,
      we
      expect to use our capital resources to make certain payments to our Advisor,
      our
      Dealer Manager, and our Property Manager during the various phases of our
      organization and operation. During the organizational and offering stage, these
      payments will include payments to our Dealer Manager for selling commissions
      and
      the dealer manager fee, and payments to our Advisor for the reimbursement of
      organization and offering costs. During the acquisition and development stage,
      these payments will include asset acquisition fees and asset management fees,
      and the reimbursement of acquisition related expenses to our Advisor. During
      the
      operational stage, we will pay our Property Manager a property management fee
      and our Advisor an asset management fee. We will also reimburse our Advisor
      and
      its affiliates for actual expenses it incurs for administrative and other
      services provided to us. Additionally, the Operating Partnership may be required
      to make distributions to Lightstone SLP, LLC, an affiliate of the
      Advisor.




**June
                  30, 2008**
              
              **June
                  30, 2007**Acquisition
                  fees
              
              $
              2,336,565
              
              $
              1,643,950Asset
                  management fees
              
              
              1,021,839
              
              
              330,879Property
                  management fees
              
              
              832,065
              
              
              469,871Acquisition
                  expenses reimbursed to advisor
              
              
              1,265,528
              
              
              -Total
              
              **$**
              **5,455,997**
              
              **$**
              **2,444,700**




As
      of
      June 30, 2008 we had approximately $26.1 million of cash and cash equivalents
      on
      hand and $7.8 million of marketable securities. Our cash and cash equivalents
      on
      hand and marketable securities resulted primarily from proceeds from our
      Offering.





***Summary
      of Cash Flows***




The
      following summary discussion of our cash flows is based on the consolidated
      statements of cash flows and is not meant to be an all-inclusive discussion
      of
      the changes in our cash flows for the periods presented below (in
      thousands):




**Six Months**
                  **Ended June
                    30,**
                  **2008**
                
                **Six Months**
                  **Ended June
                    30,**
                  **2007**Cash
                    flows provided by (used in) from operating activities
                
                $
                (1,815,316
                )
                $
                1,177,918Cash
                    flows used in investing activities
                
                
                (89,991,518
                )
                
                (79,416,706
                )Cash
                    flows provided by financing activities
                
                
                88,342,499
                
                
                106,139,113Net
                    change in cash and cash equivalents
                
                
                (3,464,335
                )
                
                27,900,325Cash
                    and cash equivalents, beginning of the period
                
                
                29,589,815
                
                
                19,280,710Cash
                    and cash equivalents, end of the period
                
                $
                26,125,480
                
                $
                47,181,035








Page
          40
          of 47




Our
      principal source of cash flow is currently derived from the issuance of our
      common stock and the operation of our rental properties. We intend that our
      properties will provide a relatively consistent stream of cash flow that
      provides us with resources to fund operating expenses, debt service and
      quarterly dividends. Cash flows from operating activities were generated
      primarily from four multi-family communities in Southeast Michigan on June
      29,
      2006; the Oakview Plaza, a retail shopping mall located in Omaha, Nebraska,
      on
      December 21, 2006; a portfolio of 12 industrial and 2 office buildings in
      Louisiana and Texas, on February 1, 2007;; and five multi family apartment
      communities, one in Tampa, Florida, two in Greensboro, North Carolina and two
      in
      Charlotte, North Carolina on November 16, 2007, offset by temporary declines
      in
      operations at the projects under expansion and renovation, which included a
      retail outlet shopping mall in St. Augustine, Florida, a power retail center
      in
      Texas which was acquired on June 29, 2007, and opened April 2008.





Our
      principal demands for liquidity are our property operating expenses, real estate
      taxes, insurance, tenant improvements, leasing costs, acquisition and
      development activities, debt service and distributions to our stockholders.
      The
      principal sources of funding for our operations are operating cash flows, the
      sale of properties, and the issuance of equity and debt securities and the
      placement of mortgage loans.




Cash
      used
      in investing activities of $90 million resulted primarily from the note
      receivable issued in connection to the signing of a material agreement to enter
      into a contribution and conveyance agreement to acquire a 25% interest in Prime
      Outlets Acquisition Company, which owns 18 retail outlet malls and four
      development projects, $17.6 million related to a note receivable entered into
      in
      connection with our investment in two retail outlet malls in Orlando, Florida,
      a
      preferred equity contribution in the amount of $11 million into a real estate
      lending company, which is an affiliate of our sponsor, and $7.5 million on
      investments in real estate, primarily related to the renovation and expansion
      project ongoing at our St. Augustine retail outlet mall.




Cash
      provided by financing activities in the amount of $88.3 million resulted
      primarily from the proceeds from the issuance of common stock ($88.2 million),
      proceeds from issuance of special partnership interests ($9.2 million), initial
      loan draws of ($2.7 million), offset by the payment of offering costs ($8.2
      million) and distributions of ($3.4 million).





At
      June
      30, 2008, we had mortgage debt totaling approximately $238.9 million as
      follows:




Property
              
              Loan
                  Amount
              
              Interest
                  Rate
              
              Maturity
                  Date
              
              Amount
                  Due at maturitySt.
                  Augustine
              
              $
              26,897,310
              
              
              6.09
              %
              
              April
                  2016
              
              $
              23,747,523Southeastern
                  Michigan Multi Family Properties
              
              
              40,725,000
              
              
              5.96
              %
              
              July
                  2016
              
              
              38,138,605Oakview
                  Plaza
              
              
              27,500,000
              
              
              5.49
              %
              
              January
                  2017
              
              
              25,583,137Gulf
                  Coast Industrial Portfolio
              
              
              53,025,000
              
              
              5.83
              %
              
              February
                  2017
              
              
              49,556,985Houston
                  Extended Stay Hotels (Two Individual Loans)
              
              
              11,517,858
              
              
              LIBOR
                  + 1.75
              %
              
              October
                  2008
              
              
              10,040,000Camden
                  Multi Family Properties - (Five Individual Loans)
              
              
              79,268,800
              
              
              5.44
              %
              
              December
                  2014
              
              
              74,955,771Total
                  of eleven outstanding mortgage loans at June 30, 2008
              
              $
              238,933,968
              
              
              
              
              
              
              
              $
              222,022,021




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




**Remainder
                  of 2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **2012**
              
              **Thereafter**
              
              **Total**Mortgage
                  Payable
              
              $
              11,676,957
              
              $
              338,052
              
              $
              359,526
              
              $
              1,586,956
              
              $
              2,781,012
              
              $
              222,191,465
              
              $
              238,933,968


Page
          41
          of 47


***New
      Accounting Pronouncements***




In
      May
      2008, the FASB issued SFAS No. 162, *The
      Hierarchy of Generally Accepted Accounting Principles* (“SFAS
      162”). SFAS 162 identifies the sources of accounting principles and the
      framework for selecting the principles to be used in the preparation of
      financial statements of nongovernmental entities that are presented in
      conformity with generally accepted accounting principles in the United States.
      SFAS 162 is effective 60 days following the Securities and Exchange Commission’s
      (“SEC”) approval of the Public Company Accounting Oversight Board amendments to
      AU Section 411, The Meaning of Present Fairly in Conformity with Generally
      Accepted Accounting Principles. The Company is currently evaluating the
      potential impact, if any, of the adoption of SFAS 162 on its financial
      statements.





In
      December 2007, the FASB issued FASB No. 141(R) *,
      Business Combinations (Revised),* which
      establishes principles and requirements for how the acquirer shall recognize
      and
      measure in its financial statements the identifiable assets acquired,
      liabilities assumed, any noncontrolling interest in the acquiree and goodwill
      acquired in a business combination. This statement is effective for business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15,
      2008.





In
      December 2007, the FASB issued No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements, which* establishes and expands accounting and reporting standards for minority
      interests, which will be recharacterized as noncontrolling interests, in a
      subsidiary and the deconsolidation of a subsidiary. FASB 160 is effective for
      business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after
      December 15, 2008. This statement is effective for fiscal years beginning
      on or after December 15, 2008.  The Company is currently assessing the
      potential impact that the adoption of FASB No. 160 will have on its financial
      position and results of operations.








**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. We have not entered into any swap agreements or derivative
      transactions to date.




We
      also
      hold equity securities for general investment return purposes. We have incurred
      significant unrealized losses to date, and could be required to record material
      impairment charges related to these securities.




At
      June
      30, 2008, we had mortgage debt totaling approximately $238.9 million as
      follows:




Property
              
              Loan
                  Amount
              
              Interest
                  Rate
              
              Maturity
                  Date
              
              Amount
                  Due at maturitySt.
                  Augustine
              
              $
              26,897,310
              
              
              6.09
              %
              
              April
                  2016
              
              $
              23,747,523Southeastern
                  Michigan Multi Family Properties
              
              
              40,725,000
              
              
              5.96
              %
              
              July
                  2016
              
              
              38,138,605Oakview
                  Plaza
              
              
              27,500,000
              
              
              5.49
              %
              
              January
                  2017
              
              
              25,583,137Gulf
                  Coast Industrial Portfolio
              
              
              53,025,000
              
              
              5.83
              %
              
              February
                  2017
              
              
              49,556,985Houston
                  Extended Stay Hotels (Two Individual Loans)
              
              
              11,517,858
              
              
              LIBOR
                  + 1.75
              %
              
              October
                  2008
              
              
              10,040,000Camden
                  Multi Family Properties - (Five Individual Loans)
              
              
              79,268,800
              
              
              5.44
              %
              
              December
                  2014
              
              
              74,955,771Total
                  of eleven outstanding mortgage loans at June 30, 2008
              
              $
              238,933,968
              
              
              
              
              
              
              
              $
              222,022,021


Page
          42
          of 47


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




**Remainder
                  of 2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **2012**
              
              **Thereafter**
              
              **Total**Mortgage
                  Payable
              
              $
              11,676,957
              
              $
              338,052
              
              $
              359,526
              
              $
              1,586,956
              
              $
              2,781,012
              
              $
              222,191,465
              
              $
              238,933,968




LIBOR
      at
      June 30, 2008 was 2.4625%. Monthly installments of interest only are required
      through the first 12 months for the St. Augustine loan, and monthly installments
      of principal and interest are required throughout the remainder of its stated
      term. Monthly installments of interest only are required through the first
      60
      months for the Southeastern Michigan multi-family properties, and through the
      first 48 months for the Camden Multi-Family properties’ loans, and monthly
      installments of principal and interest are required throughout the remainder
      of
      its stated term. The remaining loans are interest only until their maturity,
      at
      which time the amounts listed in the table above are due, assuming no prior
      principal prepayment. Each of the loans is secured by acquired real estate
      and
      is non-recourse to the Company.





**ITEM
      4. CONTROLS AND PROCEDURES.**




As
      of the
      end of the period covered by this report, management, including our chief
      executive officer and interim 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.




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.







**PART
      II. OTHER INFORMATION:**


**ITEM
      1. LEGAL PROCEEDINGS**





From
      time to time in the ordinary course of business, the Lightstone REIT may become
      subject to legal proceedings, claims or disputes.





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.  Counsel for
      the Lightstone REIT made motion to dismiss Mr. Gould’s complaint, which was
      granted by Judge Sweeney.  Mr. Gould has filed an appeal of the decision
      dismissing his case, which is pending.   Management believes that this suit
      is frivolous and entirely without merit and intends to defend against these
      charges vigorously.





On
      January 4, 2007, 1407 Broadway Real Estate LLC ("Office Owner"), an indirect,
      wholly owned subsidiary of 1407 Broadway Mezz II LLC ("Mezz II"), consummated
      the acquisition of a sub-leasehold interest (the "Sublease Interest") in an
      office building located at 1407 Broadway, New York, New York (the "Office
      Property"). Mezz II is a joint venture between LVP 1407 Broadway LLC ("LVP
      LLC"), a wholly owned subsidiary of our operating partnership, and Lightstone
      1407 Manager LLC ("Manager"), which is wholly owned by David Lichtenstein,
      the
      Chairman of our Board of Directors and our Chief Executive Officer, and Shifra
      Lichtenstein, his wife.





The
      Sublease Interest was acquired pursuant to a Sale and Purchase of Leasehold
      Agreement with Gettinger Associates, L.P. ("Gettinger"). In July 2006, Abraham
      Kamber Company, as sublessor under the sublease ("Sublessor"), served two
      notices of default on Gettinger (the "Default Notices"). The first alleged
      that
      Gettinger had failed to satisfy its obligations in performing certain
      renovations and the second asserted numerous defaults relating to Gettinger's
      purported failure to maintain the Office Property in compliance with its
      contractual obligations.





Page
          43
          of 47


In
      response to the Default Notices, Gettinger commenced legal action and obtained
      an injunction that extends its time to cure any default, prohibits interference
      with its leasehold interest and prohibits Sublessor from terminating its
      sublease pending resolution of the litigation. A motion by Sublessor for partial
      summary judgment, alleging that certain work on the Office Property required
      its
      prior approval, was denied by the Supreme Court, New York County. Subsequently,
      by agreement of the parties, a stay was entered precluding the termination
      of
      the Sublease Interest pending a final decision on Sublessor's claim of defaults
      under the Sublease Interest. In addition, the parties stipulated to the
      intervention of Office Owner as a party to the proceedings. The parties have
      been directed to engage in and complete discovery. We consider the litigation
      to
      be without merit.




Prior
      to
      consummating the acquisition of the Sublease Interest, Office Owner received
      a
      letter from Sublessor indicating that Sublessor would consider such acquisition
      a default under the original sublease, which prohibits assignments of the
      Sublease Interest when there is an outstanding default there under. On February
      16, 2007, Office Owner received a Notice to Cure from Sublessor stating the
      transfer of the Sublease Interest occurred in violation of the Sublease given
      Sublessor's position that Office Seller is in default. Office Owner will
      commence and vigorously pursue litigation in order to challenge the default,
      receive an injunction and toll the termination period provided for in the
      Sublease.





On
      September 4, 2007, Office Owner commenced a new action against Sublessor
      alleging a number of claims, including the claims that Sublessor has breached
      the sublease and committed intentional torts against Office Owner by (among
      other things) issuing multiple groundless default notices, with the aim of
      prematurely terminating the sublease and depriving Office Owner of its valuable
      interest in the sublease.  The complaint seeks a declaratory judgment that
      Office Owner has not defaulted under the sublease, damages for the losses Office
      Owner has incurred as a result of Sublessor’s wrongful conduct, and an
      injunction to prevent Sublessor from issuing further default notices without
      valid grounds or in bad faith.





As
      of the
      date hereof, we are not a party to any other material pending legal
      proceedings.





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




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.





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.





Through
      June 30, 2008, we had issued approximately 22.7 million shares for gross
      offering proceeds of approximately $223.5 million, which includes $4.1 million
      of proceeds from shares issued in distribution reinvestment program. From the
      effective date of our public offering through June 30, 2008, 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
            
            $
            16,016,981
            
            
            ActualFinders’
                fees
            
            
            -Expenses
                paid to or for underwriters
            
            
            -Other
                expenses to affiliates
            
            
            -Other
                expenses paid to non-affiliates
            
            
            5,352,848**Total
                expenses**
            
            $
            21,369,829





The
      net
      offering proceeds to us, after deducting the total expenses paid as described
      above, and after accounting for $21.4 million in contributions by Lightstone
      SLP, LLC is approximately $223.5 million. The underwriting discounts and
      commissions were paid to our dealer manager, which reallowed all or a portion
      of
      the commissions to soliciting dealers.







With
      the
      net offering proceeds of $223.5 million, and new mortgage debt in the amount
      of
      $238.9 million, and a note payable of $7.0 million we acquired approximately
      $316.5 million in real estate investments (including $8.0 million in acquisition
      fees) and related assets. In addition we invested $13.5 million in a joint
      venture, and paid an acquisition fee of $1.6 million, to acquire a sub-leasehold
      interest in a ground lease to an office building located at 1407 Broadway,
      New
      York, New York. On June 26, 2008, we entered into a contribution and conveyance
      agreement to acquire the interest in two retail outlet malls in Orlando,
      Florida, and executed a loan in connection with that acquisition in the amount
      of $17.6 million. Cumulatively, we have used the net offering proceeds as
      follows:


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          44
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**Type
                  of Expense Amount  -
                  Actual**
              
              **June
                  30, 2008**Construction
                  of plant, building and facilities
              
              $
              13,158,460Purchase
                  of real estate interests
              
              
              118,686,215Acquisition
                  of other businesses
              
              
              -Repayment
                  of indebtedness
              
              
              -Purchase
                  and installation of machinery and equipment
              
              
              -Working
                  capital (as of June 30, 2008)
              
              
              26,125,480Temporary
                  investments (as of June 30, 2008)
              
              
              16,007,982Other
                  uses
              
              
              49,500,000**Total
                  uses**
              
              $
              223,478,137





As
      of
      August 5, 2008, we have sold approximately 24.4 million shares at an
      aggregate offering price of $241.0 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.





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


Page
          45
          of 47


**ITEM
      6. EXHIBITS**




**Exhibit**
                **Number**
              
              **Description**10.51*
              
              Promissory
                  Note made as of June 26, 2008 by Arbor Mill Run JRM, LLC in favor
                  of
                  Lightstone Value Plus Real Estate Investment Trust, Inc. in the
                  original
                  principal amount of $17,280.00.10.52*
              
              Promissory
                  Note made as of June 26, 2008 by Arbor National CJ LLC in favor
                  of
                  Lightstone Value Plus Real Estate Investment Trust, Inc. in the
                  original
                  principal amount of $360,000.00.10.53*
              
              Promissory
                  Note made as of June 26, 2008 by AR Prime Holdings, LLC in favor
                  of
                  Lightstone Value Plus Real Estate Investment Trust, Inc. in the
                  original
                  principal amount of 49,500,000.00.10.54*
              
              Exchange
                  Rights Agreement, dated as of June 26, 2008, by and among Lightstone
                  Value
                  Plus Real Estate Investment Trust, Inc., Lightstone Value Plus
                  REIT, LP
                  and the persons named therein.10.55*
              
              First
                  Amendment to Amended and Restated Agreement of Limited Partnership
                  of
                  Lightstone Value Plus REIT LP, dated as of June 26, 2008, by and
                  among
                  Lightstone Value Plus Real Estate Investment Trust, Inc., Lightstone
                  Value
                  Plus REIT LLC, Lightstone SLP, LL10.56*
              
              Tax
                  Protection Agreement, dated as of June 26, 2008, by and between
                  Lightstone
                  Value Plus REIT, LP and Arbor Mill Run JRM, LLC.10.57*
              
              Tax
                  Protection Agreement, dated as of June 26, 2008, by and between
                  Lightstone
                  Value Plus REIT, LP and Arbor Mill National CJ, LLC.10.58*
              
              Tax
                  Protection Agreement, dated as of June 26, 2008, by and between
                  Lightstone
                  Value Plus REIT, LP, Prime Outlets Acquisition Company LLC and
                  AR Prime
                  Holdings, LLC.10.59*
              
              Contribution
                  and Conveyance Agreement, dated as of June 26, 2008, by and between
                  Arbor
                  Mill Run JRM LLC and Lightstone Value Plus REIT, LP.10.60*
              
              Contribution
                  and Conveyance Agreement, dated as of June 26, 2008, by and between
                  Arbor
                  National CJ, LLC and Lightstone Value Plus REIT, LP.10.61*
              
              Contribution
                  and Conveyance Agreement, dated as of June 26, 2008, by and among
                  AR Prime
                  Holdings, LLC, Lightstone Value Plus REIT, LP and Lightstone Value
                  Plus
                  Real Estate Investment Trust, Inc.31.1*
              
              Certification
                  Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302
                  of the
                  Sarbanes-Oxley Act of 2002.31.2*
              
              Certification
                  Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302
                  of the
                  Sarbanes-Oxley Act of 2002.32.1*
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551
                  this
                  Exhibit is furnished to the SEC and shall not be deemed to be
                  “filed.”32.2*
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551
                  this
                  Exhibit is furnished to the SEC and shall not be deemed to be
                  “filed.”




*Filed
      herewith




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          of 47








**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: August
                14, 2008
            By:
            /s/ David
                LichtensteinDavid
                LichtensteinChairman,
                President and Chief Executive Officer
              (Principal
                Executive Officer)




Date:
                August 14, 2008
            By:
            /s/ Jenniffer
                CollinsJenniffer
                CollinsInterim
                Chief Financial Officer and Treasurer
              (Duly
                Authorized Officer and Principal Financial and Accounting
                Officer)




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