**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 March 31, 2007




OR





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




For
      the
      transition period from  to





Commission
      file number 333-117367







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


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




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




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


**(732)
      367-0129**


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







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




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


Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated
      filer þ




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





As
      of May
      11, 2007, there were 8,072,525 outstanding shares of common stock of Lightstone
      Value Plus Real Estate Investment Trust, Inc.





1




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


**INDEX**




**Page****PART I**
            
            **FINANCIAL
                INFORMATION**Item 1.
            
            Financial
                StatementsConsolidated
                Balance Sheets as of March 31, 2007 (unaudited) and December 31,
                2006
            
            3Consolidated
                Statements of Operations (unaudited) for the Three Months Ended March
                31,
                2007 and 2006
            
            4Consolidated
                Statement of Stockholders’ Equity (unaudited) for the Three Months Ended
                March 31, 2007
            
            5Consolidated
                Statements of Cash Flows (unaudited) for the Three Months Ended March
                31,
                2007 and 2006
            
            6Notes
                to Consolidated Financial Statements
            
            7Item 2.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            24Item 3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            35Item 4.
            
            Controls
                and Procedures
            
            35**PART II**
            
            **OTHER
                INFORMATION**Item
                1.
            
            Legal
                Proceedings
            
            36Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            37Item
                3.
            
            Defaults
                Upon Senior Securities
            
            38Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            38Item
                5.
            
            Other
                Information
            
            38Item
                6.
            
            Exhibits
            
            39









2


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


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





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


**CONSOLIDATED
      BALANCE SHEETS**




***Assets***
            
            **March
                31,****2007(Unaudited)**
            
            **December
                31, 2006(Audited)**Investment
                property:Land
            
            $
            32,908,833
            
            $
            20,141,357Buildings
                and improvements
            
            
            133,889,664
            
            
            82,217,115166,798,497
            
            
            102,358,472Less
                accumulated depreciation and amortization
            
            
            (2,077,883
            )
            
            (1,184,590
            )Net
                investment property
            
            
            164,720,614
            
            
            101,173,882Investment
                in unconsolidated joint venture
            
            
            10,965,968
            
            
            -Cash
                and cash equivalents
            
            
            11,026,894
            
            
            19,280,710Restricted
                escrows
            
            
            8,390,050
            
            
            6,912,578Deposit
                for purchase of real estate
            
            
            3,685,000
            
            
            8,435,000Due
                from escrow agent
            
            
            -
            
            
            163,949Tenant
                and other accounts receivable
            
            
            958,570
            
            
            316,232Acquired
                in-place lease intangibles (net of accumulated amortization of $1,789,741
                and $1,365,512, respectively)
            
            
            2,926,357
            
            
            1,801,678Acquired
                above market lease intangibles (net of accumulated amortization of
                $136,835 and $75,258, respectively)
            
            
            943,605
            
            
            601,987Deferred
                intangible leasing costs (net of accumulated amortization of $209,538
                and
                $123,230, respectively)
            
            
            1,247,098
            
            
            758,438Deferred
                leasing costs (net of accumulated amortization of $27,430 and $0,
                respectively)
            
            
            320,095
            
            
            -Deferred
                financing costs (net of accumulated amortization of $50,445 and $26,813
                respectively)
            
            
            1,011,959
            
            
            691,777Prepaid
                expenses and other assets
            
            
            549,732
            
            
            571,986**Total
                Assets**
            
            $
            206,745,942
            
            $
            140,708,217***Liabilities
                and Stockholders' Equity***Mortgages
                payable
            
            $
            148,500,000
            
            $
            95,475,000Accounts
                payable and accrued expenses
            
            
            2,561,756
            
            
            1,980,052Tenant
                allowances and deposits payable
            
            
            667,086
            
            
            301,970Distributions
                payable
            
            
            874,915
            
            
            601,286Prepaid
                rental revenues
            
            
            500,453
            
            
            81,020Acquired
                below market lease intangibles (net of accumulated amortization of
                $1,087,737 and $953,435, respectively)
            
            
            2,832,947
            
            
            2,011,063Total
                liabilities
            
            
            155,937,157
            
            
            100,450,391Minority
                interest in partnership
            
            
            5,835,687
            
            
            4,282,122Commitments
                and contingencies
            
            
            -
            
            
            -Stockholders’
                equity:Preferred
                shares, 10,000,000 shares authorized, none outstanding
            
            
            -
            
            
            -Common
                stock, $.01 par value; 60,000,000 shares authorized, 5,898,227 and
                4,316,989 shares issued and outstanding, respectively
            
            
            58,982
            
            
            43,170Additional
                paid-in-capital
            
            
            52,906,245
            
            
            38,686,993Accumulated
                distributions in addition to net loss
            
            
            (7,992,129
            )
            
            (2,754,459
            )Total
                stockholders’ equity
            
            
            44,973,098
            
            
            35,975,704**Total
                Liabilities and Stockholders' Equity**
            
            $
            206,745,942
            
            $
            140,708,217




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




3




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


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**Three
                Months Ended March 31, 2007**
            
            **Three
                Months Ended March 31, 2006**Revenues:Rental
                income
            
            $
            4,499,624
            
            $
            9,299Tenant
                recovery income
            
            
            716,279
            
            
            3,5115,215,903
            
            
            12,810Expenses:Property
                operating expenses
            
            
            1,985,214
            
            
            8,792Real
                estate taxes
            
            
            584,643
            
            
            1,641Depreciation
                and amortization
            
            
            1,432,299
            
            
            1,520General
                and administrative costs
            
            
            2,000,618
            
            
            95,7766,002,774
            
            
            107,729Operating
                loss
            
            
            (786,871
            )
            
            (94,919
            )Other
                income
            
            
            350,697
            
            
            9,386Interest
                expense
            
            
            (1,906,876
            )
            
            (4,663
            )Equity
                in loss from investment in unconsolidated joint venture
            
            
            (2,019,896
            )
            
            -Loss
                allocated to minority interest
            
            
            191
            
            
            34Net
                loss
            
            $
            (4,362,755
            )
            $
            (90,162
            )Basic
                and diluted loss per common share
            
            $
            (0.86
            )
            $
            (0.37
            )Weighted
                average number of common shares outstanding
            
            
            5,089,327
            
            
            244,210





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




4





**PART
      I. FINANCIAL INFORMATION:**


**ITEM
      1. FINANCIAL STATEMENTS.**







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


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY**


**(UNAUDITED)**




**Preferred
                Shares**
            
            **Common
                Shares**
            
            
            
            **Accumulated****Additional**
            
            **Distributions**
            
            **Total****Preferred**
            
            
            
            **Common**
            
            
            
            **Paid-In**
            
            **in
                Addition to**
            
            **Stockholders'****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Net
                Loss**
            
            **Equity**BALANCE,
                December 31, 2006
            
            
            -
            
            $
            -
            
            
            4,316,989
            
            $
            43,170
            
            $
            38,686,993
            
            $
            (2,754,459
            )
            $
            35,975,704Proceeds
                from the offering
            
            
            —
            
            
            —
            
            
            1,550,727
            
            
            15,507
            
            
            15,483,462
            
            
            —
            
            
            15,498,969Selling
                commissions and dealer manager fees
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,233,076
            )
            
            —
            
            
            (1,233,076
            )Other
                offering costs
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (320,681
            )
            
            —
            
            
            (320,681
            )Distributions
                declared
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (874,915
            )
            
            (874,915
            )Proceeds
                from distribution reinvestment program
            
            
            —
            
            
            —
            
            
            30,511
            
            
            305
            
            
            289,547
            
            
            —
            
            
            289,852Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (4,362,755
            )
            
            (4,362,755
            )BALANCE,
                March 31, 2007
            
            
            -
            
            $
            -
            
            
            5,898,227
            
            $
            58,982
            
            $
            52,906,245
            
            $
            (7,992,129
            )
            $
            44,973,098





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







5





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


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





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


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**Three
                Months Ended March 31, 2007**
            
            **Three
                Months**
              **Ended
                March 31, 2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (4,362,755
            )
            $
            (90,162
            )Loss
                allocated to minority interest
            
            
            (191
            )
            
            (34
            )Adjustments
                to reconcile net loss to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            1,318,564
            
            
            1,520Amortization
                of deferred financing costs
            
            
            23,632
            
            
            53Amortization
                of deferred leasing costs
            
            
            113,738
            
            
            —Amortization
                of above and below-market lease intangibles
            
            
            (72,725
            )
            
            (1,563
            )Equity
                in loss from investment in unconsolidated joint
                venture
            
            
            2,019,896
            
            
            —Changes
                in assets and liabilities:Decrease
                (increase) in prepaid expenses and other assets
            
            
            21,212
            
            
            (200,855
            )Increase
                in tenant and other accounts receivable
            
            
            (642,338
            )
            
            —Increase
                in prepaid rental revenues
            
            
            419,433
            
            
            —Increase
                in tenant allowance and securities deposits payable
            
            
            365,116
            
            
            89,600Increase
                in accounts payable and accrued expenses
            
            
            581,704
            
            
            277,360Net
                cash (used in ) provided by operating activities
            
            
            (214,714
            )
            
            75,919**CASH
                FLOWS USED IN INVESTING ACTIVITIES:**Purchase
                of investment property, net
            
            
            (56,962,340
            )
            
            (26,921,450
            )Investment
                in unconsolidated joint venture
            
            
            (12,985,864
            )
            
            —Refundable
                deposit for investment in real estate
            
            
            (3,685,000
            )
            
            —Leasing
                costs
            
            
            (922,491
            )
            
            —Funding
                of restricted escrows, net
            
            
            (1,477,472
            )
            
            (4,810,303
            )Net
                cash used in investing activities
            
            
            (76,033,167
            )
            
            (31,731,753
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from mortgage financing
            
            
            53,025,000
            
            
            27,250,000Payment
                of loan fees and expenses
            
            
            (343,814
            )
            
            (196,619
            )Proceeds
                from issuance of common stock
            
            
            15,498,969
            
            
            5,170,417Proceeds
                from issuance of special general partnership units
            
            
            1,553,757
            
            
            537,041Payment
                of offering costs
            
            
            (1,553,757
            )
            
            (311,076
            )Distributions
                paid
            
            
            (350,039
            )Due from
              escrow
              agent
            
            
            163,949
            
            
            —Increase
                in amounts due to affiliates, net
            
            
            —
            
            
            662,469Net
                cash provided by financing activities
            
            
            67,994,065
            
            
            33,112,232**Net
                change in cash**
            
            
            (8,253,816
            )
            
            1,456,398**Cash,
                beginning of period**
            
            
            19,280,710
            
            
            205,030**Cash,
                end of period**
            
            $
            11,026,894
            
            $
            1,661,428**Supplemental
                Disclosure of Cash Flow Information**Cash
                paid for interest
            
            $
            1,637,285
            
            $
            4,663Dividends
                declared and unpaid
            
            $
            874,915
            
            $
            38,699





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


6





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


**Notes
      to Consolidated Financial Statements**


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




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




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




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




The
      Company sold 20,000 shares to the Advisor on July 6, 2004, for $10 per share.
      The Company invested the proceeds from this sale in the Operating Partnership,
      and as a result, held a 99.9% 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
      March 31, 2007, cumulative gross offering proceeds of approximately $58.4
      million have been released to the Lightstone REIT and used for the purchase
      of a
      99.99% general partnership interest in the Operating Partnership. The Company
      expects that its ownership percentage in the Operating Partnership will remain
      significant as it plans to continue to invest all net proceeds from the Offering
      in the Operating Partnership.




Lightstone
      SLP, LLC, an affiliate of the Advisor, intends to periodically purchase special
      general partner interests in the Operating Partnership at a cost of
      $100,000 per unit for each $1.0 million in offering subscriptions. Proceeds
      from
      the sale of the special general partnership interests will be used to repay
      advances from the Advisor that were used to fund organizational and offering
      costs incurred by the Company. Through March 31, 2007, the Lightstone REIT
      offset proceeds of approximately $5.8 million from the sale of special general
      partnership interests against approximately $6.7 million of Advisor cash
      advances used for offering costs.




The
      Advisor is responsible for offering and organizational costs exceeding 10%
      of
      the gross offering proceeds without recourse to the Company. Since its
      inception, and through March 31, 2007, the Advisor has not allocated any
      organizational costs to the Company. Advances for offering costs in excess
      of
      the 10% threshold (approximately $0.9 million at March 31, 2007) will only
      be
      reimbursed to the Advisor as additional offering proceeds are received by the
      Company.




7


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


Through
      its Operating Partnership, the Company will seek to acquire and operate
      commercial and residential properties, principally in the United States. All
      such properties may be acquired and operated by the Company alone or jointly
      with another party. Since inception, the Company has completed the acquisition
      of the Belz Factory Outlet World in St. Augustine, Florida, four multi-family
      communities in Southeast Michigan, a retail power center in Omaha, Nebraska
      and
      a portfolio of 12 industrial and 2 office properties located in New
      Orleans, LA (5 industrial and 2 office properties), Baton Rouge, LA (3
      industrial properties) and San Antonio, TX (4 industrial properties). In
      addition, the Company has made an investment in a sub-leasehold interest in
      a
      ground lease to an office building located at 1407 Broadway in New York, NY.
      All
      of the acquired properties 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 outlined in each of the respective agreements.




**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 March 31, 2007, 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.




Investments
      in real estate partnerships 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. See further discussion in Note 3.




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.




Revenue
      Recognition




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




8





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


**Notes
      to Consolidated Financial Statements**




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.




Investment
      in Real Estate




*Accounting
      for Acquisitions*




The
      Company accounts for acquisitions of Properties in accordance with SFAS No.
      141,
“Business Combinations.” The fair value of the real estate acquired is allocated
      to 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.




Upon
      the
      acquisition of real estate operating properties, the Company estimates the
      fair
      value of acquired tangible assets (consisting of land, building and
      improvements) and identified intangible assets and liabilities (consisting
      of
      above and below-market leases, in-place leases and tenant relationships), and
      assumed debt in accordance with SFAS No. 141, Business Combinations (“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 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
      were
      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.




9





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


**Notes
      to Consolidated Financial Statements**




*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 (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement
      requires that long-lived assets be reviewed for impairment whenever events
      or
      changes in circumstances indicate that recoverability of the asset is not
      assured.




The
      Company evaluates the 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 at March 31, 2007 or December 31, 2006. The estimated
      cash flows used for the impairment analysis and the determination of estimated
      fair value are based on the Company’s plans for the respective assets and the
      Company’s views of market and economic conditions. The estimates consider
      matters such as current and historical rental rates, occupancies for the
      respective Properties and comparable properties, and recent sales data for
      comparable properties. Changes in estimated future cash flows due to changes
      in
      the Company’s plans or views of market and economic conditions could result in
      recognition of impairment losses, which, under the applicable accounting
      guidance, could be substantial.




Depreciation
      and Amortization




Depreciation
      expense for real estate assets is computed using a straight-line method 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.




Deferred
      Costs




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




Income
      Taxes




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.




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 March 31, 2007, the Company has
      complied with the requirements for maintaining its REIT status.




10


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


Organization
      and Offering Costs




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




As
      of
      March 31, 2007, the Advisor has advanced approximately $6.8 million to the
      Company for offering costs, including commission and dealer manager fees. Based
      on gross proceeds of approximately $58.4 million from its public offering
      as of March 31, 2007, the Company’s responsibility for the reimbursement of
      advances for commissions and dealer manager fees was limited to approximately
      $4.6 million (or 8% of the gross offering proceeds), and its obligation for
      advances for organization and third-party offering costs was limited to
      approximately $1.2 million (or 2% of the gross offering proceeds).




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 fixed-rate mortgage debt and unsecured notes
      as of March 31, 2007 approximated the book value of approximately $148.5
      million. The fair value of the mortgage debt was determined by discounting
      the
      future contractual interest and principal payments by a market
      rate.




Use
      of
      Estimates




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




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 does not have any options and 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.




11


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


New
      Accounting Pronouncements




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities Including an Amendment of FASB
      Statement No. 115” (“SFAS No. 159”). This standard permits entities to choose to
      measure many financial instruments and certain other items at fair value and
      is
      effective for the first fiscal year beginning after November 15, 2007. The
      Company does not expect SFAS No. 159 to have a material impact on its financial
      statements.




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




In
      June
      2006, the FASB issued FIN No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* .
      This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, *Accounting
      for Income Taxes* .
      This
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This Interpretation also provides guidance
      on de-recognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This Interpretation is effective for fiscal
      years beginning after December 15, 2006. The Company adopted FIN 48 effective
      January 1, 2007. 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
      March 31, 2007, the Company had no material uncertain income tax positions.
      The tax years 2004 through 2006 remain open to examination by the major taxing
      jurisdictions to which the Company is subject.




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




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




*St
      Augustine Retail Outlet Mall*




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




Approximately
      $22.4 million of the total acquisition cost was funded by a mortgage loan from
      Wachovia Bank, National Association (“Wachovia”) and approximately $4.5 million
      was funded with offering proceeds from the sale of the Company’s common stock.
      Loan proceeds from Wachovia were also used to fund approximately $4.8 million
      of
      escrows for future leasing-related expenditures, real estate taxes, insurance
      and debt service.




12


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


*Southeastern
      Michigan Multi-Family Properties*




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




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




Approximately
      $40.7 million of the total acquisition cost was funded by a mortgage loan from
      Citigroup, and approximately $4.6 million was funded with offering proceeds
      from
      the sale of the Company’s common stock. Loan proceeds from Citigroup were also
      used to fund approximately $1.1 million of escrows for capital improvements,
      real estate taxes, and insurance.




In-place
      rents, net of rent concessions, and average occupancy for the four properties
      at
      March 31, 2007 was as follows:




In
                place rents, net
            
            $
            717,824Occupancy
                percentage
            
            
            93.12%




*Oakview
      Plaza*




On
      December 21, 2006, the Company, through LVP Oakview Strip Center LLC, a wholly
      owned subsidiary of the Operating Partnership, acquired a retail shopping mall
      in Omaha, Nebraska from Oakview Plaza North, LLC (“Oakview”), Frank R. Krejci,
      Vera Jane Krejci, George W. Venteicher and Susan J. Venteicher (Oakview, Mr.
      and
      Mrs. Krejci and Mr. and Mrs. Venteicher, collectively, “Seller”), none of whom
      are affiliated with the Company.




Subject
      to Oakview’s development and leasing of an additional 2.1 acre parcel of land
      (the “Option Land”) located immediately adjacent to the property, the Operating
      Partnership will be required to subsequently purchase the Option Land on the
      commencement of rent under the lease for the Option Land. The contract price
      for
      the fully improved and leased Option Land will be determined by dividing the
      first full year of base rent payments by 9.5%. In the event that it receives
      notice that Oakview is not successful in negotiating the improvement and leasing
      of the Option Land, the Operating Partnership will have 30 days to purchase
      the
      unimproved Option Land from Oakview for a fixed contract price of $650,000.
      The
      Company received notice on March 30, 2007, however the Company deemed the notice
      to be ineffective, as Oakview continued to negotiate the leasing of the Option
      Land, and as such the Company has not yet purchased the unimproved Option
      Land.




The
      acquisition price for the Property was $33.5 million, including an acquisition
      fee paid to the Advisor of $0.9 million and $47,000 in other acquisition-related
      transaction costs. Approximately $6.0 million of the acquisition cost was funded
      with offering proceeds from the sale of our common stock and the remainder
      was
      funded with a $27.5 million fixed rate loan from Wachovia secured by the
      property. Offering proceeds were also used to fund financing related costs
      ($.2
      million) and insurance and tax reserves ($.2 million). The Property was
      independently appraised at $38.0 million.




13





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


**Notes
      to Consolidated Financial Statements**


*Manhattan
      Office Building*




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 seller of the Sublease Interest, Gettinger Associates, L.P., is
      not an affiliate of the Company, its Sponsor or its subsidiaries. The property,
      a 42 story office building built in 1952, fronts on Broadway, 7th Avenue and
      39th Street in midtown Manhattan. The property has approximately 915,000
      leasable square feet, was 87.6% occupied at December 31,
      2006, (approximately 300 tenants) and is currently leased by tenants
      generally engaged in the female apparel business. The ground lease, dated as
      of
      January 14, 1954, provides for multiple renewal rights, with the last renewal
      period expiring on December 31, 2048. The Sublease Interest runs concurrently
      with this ground lease.




The
      acquisition price for the Sublease Interest was $122 million, exclusive of
      acquisition-related costs incurred by the Joint Venture ($3.5 million), pro
      rated operating expenses paid at closing ($4.1 million), financing-related
      costs
      ($1.9 million) and construction, insurance and tax reserves ($1.0 million).
      The
      acquisition was funded through a combination of $26.5 million of capital and
      a
      $106.0 million advance on a $127.3 million variable rate mortgage loan funded
      by
      Lehman Brothers Holding, Inc. In addition, the Company paid $1.6 million
      to the Advisor as an acquisition fee and legal fees to its attorney of
      approximately $0.1 million. The acquisition and legal fees were charged to
      expense by the Company during the first quarter of 2007, and are included in
      general and administrative expenses for the three months ended March 31,
      2007.




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. Equity from our co-venturer totaled $13.5
      million (representing a 51% ownership interest). Our 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. 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 three months ended March 31, 2007, the Company’s results included a $2.0
      million loss from investment in this unconsolidated joint venture, resulting
      in
      a balance of approximately $11.0 million as of March 31, 2007. 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 $21.3 million are available to fund these
      improvements.




14





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


**Notes
      to Consolidated Financial Statements**




The
      following table represents the condensed income statement for the unconsolidated
      joint venture for the period from January 4, 2007 through March 31,
      2007:




Total
                revenue
            
            $
            8,888,394Total
                property expenses
            
            
            6,292,086Depreciation
                and amortization
            
            
            4,573,148Interest
                expense
            
            
            2,145,396Net
                operating loss
            
            $
            (4,122,236
            )Company's share
                of net operating loss (49%)
            
            $
            (2,019,896
            )




The
      following table represents the condensed balance sheet for the unconsolidated
      joint venture as March 31, 2007:




**At
                March 31, 2007**Real
                estate, at cost (net):
            
            $
            111,265,424Intangible
                assets
            
            
            18,194,853Other
                assets
            
            
            16,573,888Total
                assets
            
            $
            146,034,165Mortgage
                note payable
            
            $
            106,000,000Other
                liabilities
            
            
            17,662,546Members'
                capital
            
            
            22,371,619Total
                liabilities and members' capital
            
            $
            146,034,165




*Gulf
      Coast Industrial Portfolio*




On
      February 1, 2007, the Company, through wholly owned subsidiaries of the
      Operating Partnership, acquired 12 industrial and 2 office properties
      located in New Orleans, LA (5 industrial and 2 office properties), Baton
      Rouge, LA (3 industrial properties) and San Antonio, TX (4 industrial
      properties). As a group, the properties were 92% occupied at March 31, 2007,
      and
      represent approximately 1.0 million leasable square feet principally suitable
      for flexible industrial (54%), distribution (36%) and office (10%) uses. The
      properties were independently appraised at $70.7 million.




The
      acquisition price for the properties was $63.9 million, exclusive of
      approximately $1.9 million of closing costs, escrow funding for immediate
      repairs ($0.9 million) and insurance ($0.1 million), and financing related
      costs
      of approximately $0.6 million. In connection with the transaction, the Advisor
      received an acquisition fee equal to 2.75% of the purchase price, or
      approximately $1.8 million. The acquisition was funded through a combination
      of
      $14.4 million in offering proceeds and approximately $53.0 million in loan
      proceeds from a fixed rate mortgage loan secured by the properties. The Company
      does not intend to make significant renovations or improvements to the
      properties. The Company believes the properties are adequately
      insured.




15





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


**Notes
      to Consolidated Financial Statements**




As
      of
      March 31, 2007, the approximate fixed future minimum rentals from the Company’s
      commercial real estate properties are as follows:




2007
            
            2008
            
            2009
            
            2010
            
            2011
            
            Thereafter
            
            TotalMinimum
                Rents
            
            $
            7,995,440
            
            $
            9,584,946
            
            $
            7,392,324
            
            $
            4,308,127
            
            $
            2,756,653
            
            $
            1,712,740
            
            $
            33,750,230




The
      following unaudited pro forma combined condensed statements of operations set
      forth the consolidated results of operations for the three months ended March
      31, 2007 and March 31, 2006, respectively, as if the above described
      acquisitions and equity investments had occurred at January 1, 2006. 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
      three months ended March 31, 2007 and March 31, 2006, respectively, or for
      any
      future period.




Three
                Months EndedMarch
                31,2007
            
            2006Real
                estate revenues
            
            $
            5,925,800
            
            $
            6,228,269Equity
              in loss from investment in unconsolidated joint venture
            
            
            (2,019,896
            )
            
            (2,428,670
            )Net
                loss
            
            
            (4,351,321
            )
            
            (3,081,904
            )Basic
                and diluted loss per share
            
            $
            (0.85
            )
            $
            (0.72
            )




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




Mortgages
      payable, totaling approximately $148.5 million at March 31, 2007, consists
      of
      four secured loans, two of which mature in 2016, and two of which mature in
      2017. The loans bear interest at a fixed annual rate of 6.09%, 5.96%, 5.49%
      and
      5.83%, respectively. Monthly installments of interest only are required through
      the first 12, 60, 60 and 60 months, respectively, and monthly installments
      of
      principal and interest are required throughout the remainder of their stated
      terms. At their maturity, approximately $23.4 million, $37.9 million, $22.6
      million and $49.3 million, respectively, will be due, assuming no prior
      principal prepayment. Each of the loans is secured by acquired real estate
      and
      is non-recourse to the Company.




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




2007
            
            2008
            
            2009
            
            2010
            
            2011
            
            Thereafter
            
            TotalFixed
                rate mortgages
            
            $
            244,904
            
            $
            344,388
            
            $
            365,957
            
            $
            388,876
            
            $
            661,414
            
            $
            146,494,461
            
            $
            148,500,000




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




16


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


Pursuant
      to the Company’s loan agreements, escrows in the amount of $8.4 million were
      held in restricted escrow accounts at March 31, 2007. 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.




**5.**  ***Intangible
      Assets***




At
      March
      31, 2007, 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 March 31,
      2007 and December 31, 2006:




At
                March 31, 2007
            
            At
                December 31, 2006Cost
            
            Accumulated
                Amortization
            
            Net
            
            Cost
            
            Accumulated
                Amortization
            
            NetAcquired
                in-place lease intangibles
            
            $
            4,716,098
            
            $
            (1,789,741
            )
            $
            2,926,357
            
            $
            3,167,190
            
            $
            (1,365,512
            )
            $
            1,801,678Acquired
                above market lease intangibles
            
            
            1,080,440
            
            
            (136,835
            )
            
            943,605
            
            
            677,245
            
            
            (75,258
            )
            
            601,987Leasing
                costs
            
            
            1,456,636
            
            
            (209,538
            )
            
            1,247,098
            
            
            881,668
            
            
            (123,230
            )
            
            758,438Acquired
                below market lease intangibles
            
            
            3,920,684
            
            
            (1,087,737
            )
            
            2,832,947
            
            
            2,964,498
            
            
            (953,435
            )
            
            2,011,063




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 March 31, 2007.




Amortization
                of:
            
            2007
            
            2008
            
            2009
            
            2010
            
            2011
            
            ThereafterAcquired
                above market lease value
            
            $
            227,928
            
            $
            271,115
            
            $
            207,154
            
            $
            98,171
            
            $
            62,894
            
            $
            76,342Acquired
                below market lease value
            
            
            (765,666
            )
            
            (792,395
            )
            
            (578,137
            )
            
            (282,361
            )
            
            (139,533
            )
            
            (274,855
            )Projected
                future net rental income decrease
            
            $
            (537,738
            )
            $
            (521,280
            )
            $
            (370,983
            )
            $
            (184,190
            )
            $
            (76,639
            )
            $
            (198,513
            )Acquired
                in-place lease value
            
            $
            902,103
            
            $
            819,840
            
            $
            528,795
            
            $
            234,066
            
            $
            123,586
            
            $
            317,968









17





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


**Notes
      to Consolidated Financial Statements**




**6** ***.
      Distributions Payable***




On
      March
      15, 2007, the Board of Directors of Lightstone Value Plus Real Estate Investment
      Trust, Inc. (the “Company”) declared a dividend for the three-month period
      ending March 31, 2007. The dividend was calculated based on stockholders 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 dividend
      was
      paid in full in April 2007 using a combination of cash ($474,124), and pursuant
      to the Company’s Distribution Reinvestment Program, shares of the Company’s
      stock at a discounted price of $9.50 per share ($400,790). The amount of
      dividends to be distributed to our stockholders in the future will be determined
      by our Board of Directors and are dependent on a number of factors, including
      funds available for payment of dividends, our financial condition, capital
      expenditure requirements and annual distribution requirements needed to maintain
      our status as a REIT under the Internal Revenue Code.




***7.
      Deposit for Real Estate Purchase***




At
      March
      31, 2007, the Company recorded $3.7 million as a refundable deposit for the
      purchase of real estate. At December 31, 2006, the Company recorded $8.4 million
      as a refundable deposit for two real estate transactions that subsequently
      closed in the first quarter. Deposits for real estate will be returned to the
      Company upon the conclusion of its due diligence where such properties are
      deemed infeasible for acquisition.




***8.
      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
      March 31, 2007 and December 31, 2006, the Lightstone REIT had no
      outstanding preferred shares.




***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.




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.




18





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


**Notes
      to Consolidated Financial Statements**




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 5.9 million and 4.3 million shares of common stock outstanding
      as
      of March 31, 2007 and December 31, 2006, respectively.




***Dividends***




The
      Board
      of Directors of the Lightstone REIT declared a dividend for each quarter in
      2006
      and for the quarter ending March 31, 2007. 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 March 31,
      2007 dividend was paid in full in April 2007 using a combination of cash
      ($474,124), and pursuant to the Company’s Distribution Reinvestment Program,
      shares of the Company’s stock at a discounted price of $9.50 per share
      ($400,790).




**9.**  ***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.




**Fees**
            
            **Amount**Selling
                Commission
            
            The
                Dealer Manager will be paid up to 7% of the gross offering proceeds
                before
                reallowance of commissions earned by participating broker-dealers.
                Selling
                commissions are expected to be approximately $21,000,000 if the maximum
                offering of 30 million shares is sold.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 reimburse offering costs paid to the Advisor or
                its
                affiliates on the Lightstone REIT’s behalf.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 a property. The actual
                amounts
                of these fees and reimbursements depend upon results of operations
                and,
                therefore, cannot be determined at the present time. However, $33,000,000
                may be paid as an acquisition fee and for the reimbursement of acquisition
                expenses if the maximum offering is sold, assuming aggregate long-term
                permanent leverage of approximately
                75%.


19





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


**Notes
      to Consolidated Financial Statements**




Property
                Management -
              *Residential
                / Retail*
            
            The
                Property Manager will be paid a monthly management fee of 5% of the
                gross
                revenues from residential and retail 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.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 proceeding quarter.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 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.Reimbursement
                of
              Other
                Expenses
            
            The
                Advisor or its affiliates will be reimbursed for expenses that may
                include
                costs of goods and services, administrative services and non-supervisory
                services performed directly for the Lightstone REIT by independent
                parties.




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. Such
      distributions will always be subordinated until stockholders receive a stated
      preferred return. Lightstone SLP LLC has not received any portion of regular
      distributions made by the Operating Partnership to date. Such distributions
      will
      always be subordinated until stockholders receive a stated preferred return,
      as
      described below:




20





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


**Notes
      to Consolidated Financial Statements**




**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.




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:




**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.
 21


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


**10** ***.
      Segment Information***




The
      Company operates in four business segments as of March 31, 2007: (i) retail
      real
      estate, (ii) residential real estate, (iii) industrial real estate and (iv)
      office real estate. 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
      months ended March 31, 2007 and 2006 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 March 31, 2007
      and March 31, 2006. The accounting policies of the segments are the same as
      those described in Note 2: Significant Accounting Policies, excluding
      depreciation and amortization.




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 March 31, 2007 and 2006,
      respectively and selected asset information as of March 31, 2007 and 2006
      regarding the Company’s operating segments are as follows:


**Three
                    months ended March 31,
                    2007****Retail**
                
                **Multi
                    Family**
                
                **Industrial**
                
                **Office**
                
                **Corporate**
                
                **Total**Revenues:Rental
                    income
                
                $
                1,434,480
                
                $
                1,974,519
                
                $
                1,090,625
                
                $
                -
                
                $
                -
                
                $
                4,499,624Tenant
                    recovery income
                
                
                455,809
                
                
                -
                
                
                260,470
                
                
                -
                
                
                -
                
                
                716,2791,890,289
                
                
                1,974,519
                
                
                1,351,095
                
                
                -
                
                
                -
                
                
                5,215,903Expenses:Property
                    operating expenses
                
                
                675,885
                
                
                1,076,432
                
                
                232,897
                
                
                -
                
                
                -
                
                
                1,985,214Real
                    estate taxes
                
                
                236,167
                
                
                225,931
                
                
                122,545
                
                
                -
                
                
                -
                
                
                584,643Depreciation
                    and amortization
                
                
                568,484
                
                
                392,399
                
                
                471,416
                
                
                -
                
                
                -
                
                
                1,432,299General
                    and adminsitrative costs
                
                
                -
                
                
                -
                
                
                -
                
                
                1,693,950
                
                
                306,668
                
                
                2,000,618Operating
                    expenses
                
                
                1,480,536
                
                
                1,694,762
                
                
                826,858
                
                
                1,693,950
                
                
                306,668
                
                
                6,002,774Net
                    property operations
                
                
                409,753
                
                
                279,757
                
                
                524,237
                
                
                (1,693,950
                )
                
                (306,668
                )
                
                (786,871
                )Other
                    income
                
                
                25,885
                
                
                208,533
                
                
                11,094
                
                
                -
                
                
                105,185
                
                
                350,697Interest
                    expense
                
                
                (781,067
                )
                
                (612,520
                )
                
                (513,289
                )
                
                -
                
                
                -
                
                
                (1,906,876
                )Equity
                    in loss in unconsolidated joint ventures
                
                
                -
                
                
                -
                
                
                -
                
                
                (2,019,869
                )
                
                -
                
                
                (2,019,869
                )Minority
                    interest
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                191
                
                
                191Net
                    income (loss) applicable to common shares
                
                $
                (345,429
                )
                $
                (124,230
                )
                $
                22,042
                
                $
                (3,713,846
                )
                $
                (201,292
                )
                $
                (4,362,755
                )**As
                    of March 31, 2007****Balance
                    sheet financial data:**Real
                    estate assets, net
                
                $
                58,826,897
                
                $
                41,760,982
                
                $
                64,132,735
                
                $
                -
                
                $
                -
                
                $
                164,720,614Investment
                  in unconsolidated joint venture
                
                
                -
                
                
                -
                
                
                -
                
                
                10,965,968
                
                
                -
                
                
                10,965,968Restricted
                    escrows
                
                
                5,316,207
                
                
                1,838,279
                
                
                1,235,564
                
                
                -
                
                
                -
                
                
                8,390,050Deposit
                    for real estate purchase
                
                
                3,685,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                3,685,000Tenant
                    and other accounts receivable
                
                
                623,310
                
                
                52,240
                
                
                247,635
                
                
                -
                
                
                35,385
                
                
                958,570Acquired
                    in-place lease intangibles, net
                
                
                1,431,859
                
                
                74,150
                
                
                1,420,348
                
                
                -
                
                
                -
                
                
                2,926,357Acquired
                    above market lease intangibles, net
                
                
                564,210
                
                
                -
                
                
                379,395
                
                
                -
                
                
                -
                
                
                943,605Deferred
                    leasing costs, net
                
                
                751,438
                
                
                -
                
                
                815,755
                
                
                -
                
                
                -
                
                
                1,567,193Deferred
                    financing costs, net
                
                
                462,327
                
                
                211,548
                
                
                338,084
                
                
                -
                
                
                -
                
                
                1,011,959Other
                    assets
                
                
                49,634
                
                
                368,130
                
                
                15,002
                
                
                -
                
                
                116,966
                
                
                549,732Non-segmented
                    assets
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                11,026,894
                
                
                11,026,894Total
                    Assets
                
                $
                71,710,882
                
                $
                44,305,329
                
                $
                68,584,518
                
                $
                10,965,968
                
                $
                11,179,245
                
                $
                206,745,942Mortgages
                    payable
                
                $
                54,750,000
                
                $
                40,725,000
                
                $
                53,025,000
                
                $
                -
                
                $
                -
                
                $
                148,500,000
   22
 **LIGHTSTONE
            VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND
            SUBSIDIARIES**
 **Notes
            to Consolidated Financial Statements**
 **Three
                        months ended March 31, 2006****Retail**
                    
                    **Multi
                        Family**
                    
                    **Industrial**
                    
                    **Office**
                    
                    **Corporate**
                    
                    **Total**Revenues:Rental
                        income
                    
                    $
                    9,299
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    9,299Tenant
                        recovery income
                    
                    
                    3,511
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    3,51112,810
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    12,810Expenses:Property
                        operating expenses
                    
                    
                    8,792
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    8,792Real
                        estate taxes
                    
                    
                    1,641
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,641General
                        and adminsitrative costs
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    95,776
                    
                    
                    95,776Depreciation
                        and amortization
                    
                    
                    1,520
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,520Operating
                        expenses
                    
                    
                    11,953
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    95,776
                    
                    
                    107,729Net
                        property operations
                    
                    
                    857
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (95,776
                    )
                    
                    (94,919
                    )Other
                        income
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    9,386
                    
                    
                    9,386Interest
                        expense
                    
                    
                    (4,663
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (4,663
                    )Minority
                        interest
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    34
                    
                    
                    34Net
                        income applicable to common shares
                    
                    $
                    (3,806
                    )
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    (86,356
                    )
                    $
                    (90,162
                    )**Balance
                        sheet financial data:**
                    
                    
                    **As
                        of March 31, 2006**Real
                        estate assets, net
                    
                    $
                    27,274,255
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    27,274,255Acquired
                        in-place lease intangibles, net
                    
                    
                    234,238
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    234,238Acquired
                        above market lease intangibles, net
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Restricted
                        escrows
                    
                    
                    4,810,303
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,810,303Deferred
                        financing costs, net
                    
                    
                    196,566
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    196,566Other
                        assets
                    
                    
                    200,855
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    200,855Non-segmented
                        assets
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,661,428
                    
                    
                    1,661,428Total
                        Assets
                    
                    $
                    32,716,217
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    1,661,428
                    
                    $
                    34,377,645Mortgages
                        Payable
                    
                    $
                    27,250,000
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    27,250,000





23




**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 subsidiary, LVP St. Augustine Outlets, LLC,
      which we collectively refer to as “the Operating Partnership.”




**Forward-Looking
      Statements**




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





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





Risks
      and
      other factors that might cause differences, some of which could be material,
      include, but are not limited to, economic and market conditions, competition,
      tenant or joint venture partner(s) bankruptcies, failure to increase tenant
      occupancy and operating income, rejection of leases by tenants in bankruptcy,
      financing and development risks, construction and lease-up delays, cost
      overruns, the level and volatility of interest rates, the rate of revenue
      increases versus expense increases, the financial stability of various tenants
      and industries, the failure of the Company (defined herein) to make additional
      investments in real estate properties, the failure to upgrade our tenant mix,
      restrictions in current financing arrangements, the failure to fully recover
      tenant obligations for common area maintenance (“CAM”), insurance, taxes and
      other property expenses, the failure of the Lightstone REIT to qualify as a
      real
      estate investment trust (“REIT”), the failure to refinance debt at favorable
      terms and conditions, an increase in impairment charges, loss of key personnel,
      failure to achieve earnings/funds from operations targets or estimates,
      conflicts of interest with the Advisor and its affiliates, failure of joint
      venture relationships, significant costs related to environmental issues as
      well
      as other risks listed from time to time in this Form 10-Q, our 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.




24




**Overview**




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




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. The Lightstone
      REIT has completed five acquisitions to date. To date, the Lightstone REIT
      acquired: the Belz Factory Outlet World, a retail outlet shopping mall in St.
      Augustine, Florida, on March 31, 2006; 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 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, NY, on January 4, 2007; and a
      portfolio of 12 industrial and 2 office buildings in Louisiana and Texas,
      on February 1, 2007.




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 in Alabama, California,
      Connecticut, District of Columbia, Florida, Georgia, Illinois, Indiana,
      Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Nebraska, New Jersey,
      New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South
      Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin
      and
      Puerto Rico.




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




We
      may
      finance our property acquisitions through a variety of means, including but
      not
      limited to individual non-recourse mortgages and through the exchange of an
      interest in the property for limited partnership units of the Operating
      Partnership. 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, 2006. We plan to own
      substantially all of our assets and conduct our operations through the Operating
      Partnership.




We
      do not
      have employees. We entered into an advisory agreement dated April 22, 2005
      with
      Lightstone Value Plus REIT LLC, a Delaware limited liability company, which
      we
      refer to as the “Advisor,” pursuant to which the Advisor supervises and manages
      our day-to-day operations and selects our real estate and real estate related
      investments, subject to oversight by our board of directors. We pay the Advisor
      fees for services related to the investment and management of our assets, and
      we
      will reimburse the Advisor for certain expenses incurred on our
      behalf.




25




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 March 31, 2007, cumulative gross offering
      proceeds of approximately $58.4 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.




Through
      March 31, 2007, the Advisor has advanced in excess of $6.7 million to the
      Company for its organization and other offering costs, which consist of actual
      legal, accounting, printing and other accountable expenses (including sales
      literature and the prospectus), as well as selling commissions and dealer
      manager fees. We have reimbursed such advances to the extent of 10% of our
      gross
      offering proceeds (approximately $5.8 million as of March 31, 2007) using
      proceeds from the sale of general partnership interests to Lightstone SLP
      LLC, an affiliate of our Advisor.




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




For
      the
      year ending December 31, 2006, the Company 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 March 31, 2007, the Company has complied with the
      requirements for maintaining its REIT status.




**2007
      Acquisitions**




***Acquisition
      of Equity Investment in a Joint Venture***




On
      January 4, 2007, the Lightstone REIT, 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 of the Joint Venture 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 seller of the Sublease Interest,
      Gettinger Associates, L.P., is not an affiliate of the Lightstone REIT or its
      subsidiaries. Equity from our co-venturer totaled $13.5 million (representing
      a
      51% ownership interest). Our capital investment, funded with proceeds from
      our
      common stock offering, was $13.0 million (representing a 49% ownership
      interest). The property, a 42 story office building built in 1952, fronts on
      Broadway, 7th Avenue and 39th Street in midtown Manhattan. The property has
      approximately 915,000 leasable square feet, was 87.6%
      occupied (approximately 300 tenants) and is currently leased by tenants
      primarily engaged in the female apparel business. The ground lease, dated as
      of
      January 14, 1954, provides for multiple renewal rights, with the last renewal
      period expiring on December 31, 2048. The Sublease Interest runs concurrently
      with the ground lease.




26




The
      acquisition price for the Sublease Interest was $122 million, exclusive of
      acquisition-related costs incurred by the Joint Venture ($3.5 million), pro
      rated operating expenses paid at closing ($4.1 million), financing-related
      costs
      ($1.9 million) and construction, insurance and tax reserves ($1.0 million).
      Incremental acquisition costs of approximately $1.7 million, representing an
      acquisition fee to the Advisor and legal fees for our counsel, were paid outside
      of the closing and included in general and administrative expenses during the
      first quarter ended March 31, 2007.




The
      acquisition was funded through a combination of $26.5 million of capital and
      a
      $106.0 million advance on a $127.3 million variable rate mortgage loan funded
      by
      Lehman Brothers Holding, Inc. The loan is secured by the Sublease Interest.
      We
      plan to continue an ongoing renovation project at the property that consists
      of
      lobby, elevator and window redevelopment projects. Additional loan proceeds
      of
      up to $21.3 million are available to fund these improvements.




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. 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. 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 three months ended March 31, 2007, the Company’s
      results included a $2.0 million loss from investment in this unconsolidated
      joint venture.




The
      following table represents the condensed income statement for the unconsolidated
      joint venture for the period from January 4, 2007 through March 31,
      2007:




Total
                revenue
            
            $
            8,888,394Total
                property expenses
            
            
            6,292,086Depreciation
                and amortization
            
            
            4,573,148Interest
                expense
            
            
            2,145,396Net
                operating loss
            
            $
            (4,122,236
            )Company’s
                share of net operating loss (49%)
            
            $
            (2,019,896
            )




27




The
      following table represents the condensed balance sheet for the unconsolidated
      joint venture as March 31, 2007:




**At
                March 31, 2007**Real
                estate, at cost (net):
            
            $
            111,265,424Intangible
                assets
            
            
            18,194,853Other
                assets
            
            
            16,573,888Total
                assets
            
            $
            146,034,165Mortgage
                note payable
            
            $
            106,000,000Other
                liabilities
            
            
            17,662,546Total
                members' capital
            
            
            22,371,619Total
                liabilities and members' capital
            
            $
            146,034,165




***Acquisition
      of Industrial and Office Portfolio***




On
      February 1, 2007, the Lightstone REIT, through wholly owned subsidiaries of
      the
      Operating Partnership, acquired 12 industrial and 2 office properties
      located in New Orleans, LA (5 industrial and 2 office properties), Baton
      Rouge, LA (3 industrial properties) and San Antonio, TX (4 industrial
      properties). As a group, the properties were 92% occupied at December 31, 2006,
      and represent approximately 1.0 million leasable square feet principally
      suitable for flexible industrial (54%), distribution (36%) and office (10%)
      uses. The properties were independently appraised at $70.7 million.




The
      acquisition price for the properties was $63.9 million, exclusive of
      approximately $1.9 million of closing costs, approximately $1.0 million of
      escrow funding for immediate repairs ($0.9 million) and insurance ($0.1
      million), and financing related costs of approximately $0.6 million. In
      connection with the transaction, the Advisor received an acquisition fee equal
      to 2.75% of the purchase price, or approximately $1.8 million. The acquisition
      was funded through a combination of $14.4 million in offering proceeds and
      approximately $53.0 million in loan proceeds from a fixed rate mortgage loan
      secured by the properties. The Lightstone REIT does not intend to make
      significant renovations or improvements to the properties. The Lightstone REIT
      believes the properties are adequately insured.




**Critical
      Accounting Policies**




There
      were no changes during the three months ended March 31, 2007 to our
      critical accounting policies as reported in our Annual Report on Form 10-K,
      for
      the year ended December 31, 2006.




**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.




28


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.




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. Such
      distributions will always be subordinated until stockholders receive a stated
      preferred return. Lightstone SLP, LLC has not received any portion of regular
      distributions made by the Operating Partnership through March 31,
      2007.




Our
      Advisor is responsible for offering and organizational costs exceeding 10%
      of
      the gross offering proceeds without recourse to the Company. As of March 31,
      2007, the Company had fully reimbursed the Advisor’s cash advances used for
      offering costs totaling 10% of gross offering proceeds or $5.8 million, through
      that date.




**Income
      Taxes**




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. 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 of March 31, 2007 and December 31, 2006.
      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.




**Results
      of Operations**




We
      commenced operations on February 1, 2006 upon the release of our offering
      proceeds from escrow. Additionally, we acquired out 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.





29


***Revenues***




Total
      revenues increased by approximately $5.2 million to approximately $5.2 million
      for the three months ended March 31, 2007 compared to $12,810 for the same
      period last year. Base rents increased by approximately $4.5 million primarily
      as a result of our acquiring the Belz Outlets in St. Augustine, Florida on
      March
      31, 2006, the southeastern Michigan multi-family properties on June 29, 2006,
      the Oakview Plaza in Omaha, Nebraska on December 21, 2006 and the gulf coast
      industrial portfolio on February 1, 2007. Tenant reimbursements increased by
      approximately $0.7 million, as a result of our acquiring the Belz Outlets at
      St.
      Augustine, Florida on March 31, 2006, the Oakview Plaza in Omaha, Nebraska
      on
      December 21, 2006 and the Gulf Coast industrial portfolio on February 1, 2007.




***Total
      Property Expenses***




Total
      expenses increased by $5.9 million, to approximately $6.0 million for the three
      months ended March 31, 2007, compared to approximately $0.1 million for the
      same
      period last year. Increases in property operating expenses ($2.0 million),
      real
      estate taxes ($0.6 million), and depreciation and amortization ($1.4 million)
      were primarily the result of the acquisition of the new properties on March
      31,
      2006, June 29, 2006, December 21, 2006 and February 1, 2007, respectively.




***General
      and administrative expenses***




General
      and administrative costs increased by approximately $1.9 million to
      approximately $2.0 million, primarily as a result of the payment of acquisition
      and legal fees in the amount of $1.6 million and $50,000, respectively, related
      to the Lightstone REIT’s investment in the sub lease interest to a ground lease
      of a Manhattan office building. The remaining increase of $0.3 million related
      to the payment of asset management fees, director’s and officer’s liability
      insurance and fees to our board of directors, auditors and
      attorneys. General and administrative expenses for the three months ended
      March 31, 2006 totaled $95,776. We expect general and administrative expenses
      to
      increase in the future as a result of acquisitions in future periods.




***Depreciation
      and Amortization***




Depreciation
      and amortization expense increased by approximately $1.4 million for the
      three months ended March 31, 2007 as compared to $1,520 at March 31, 2006
      primarily due to the acquisition and financing of the new properties on March
      31, 2006, June 29, 2006, December 21, 2006 and February 1, 2007, respectively.




***Other
      Income***




Other
      income increased by approximately $0.3 million due principally to $0.1 million
      of interest income on the short-term investment of cumulative Offering proceeds
      during the three-month period ended March 31, 2007, as well as $0.2 million
      related to vending and other ancillary revenue sources at our
      properties.




***Interest
      expense***




Interest
      expense increased approximately $1.9 million for the three months ended March
      31, 2007, primarily as a result of the acquisition and financing of the new
      properties on March 31, 2006, June 29, 2006, December 21, 2006 and February
      1,
      2007, respectively.




30




*Equity in loss from investment in unconsolidated
      joint venture*




A
      $2.0
      million loss from investment in unconsolidated joint venture for the three
      months ended March 31, 2007 relates to our investment in the sub lease interest
      to a ground lease of a Manhattan office building on January 4, 2007. There
      were
      no investments in unconsolidated joint ventures at March 31, 2006.




***Minority
      interest***




The
      loss
      allocated to minority interests, representing approximately $191 and $34 for
      the
      three months ended March 31, 2007 and 2006, respectively, relates to the
      interests in the Operating Partnership held by our Sponsor.




**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 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
      financing 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 $148.5 million of outstanding mortgage debt. 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, the approval of our board of
      directors and 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 March 31, 2007, our total borrowings
      represented 293% of net assets.




31




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.
      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.




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. Any mortgages secured by a property will comply with
      the restrictions set forth by the Commissioner of Corporations of the State
      of
      California.




We
      may
      also obtain lines of credit to be used to acquire properties. These lines of
      credit will be at prevailing market terms 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.




Total
      asset management and acquisition fees of $3.5 million and $0.7 were paid to
      the
      Advisor for the three months ended March 31, 2007 and 2006, respectively. As
      of
      March 31, 2007, approximately $0.3 million was due to our Property Manager,
      an
      affiliate of our Advisor, for the reimbursement of property level operating
      expenses.




As
      of
      March 31, 2007, we had approximately $11.0 million of cash and cash equivalents
      on hand and $3.7 million of refundable real estate deposits. Our cash and cash
      equivalents on hand resulted primarily from proceeds from our Offering.




32




***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):




**Three
                Months Ended March 31, 2007**
            
            **Three
                Months Ended March 31, 2006**Cash
                flows (used in ) provided by operating activities
            
            $
            (214,714
            )
            $
            75,919Cash
                flows used in investing activities
            
            
            (76,033,167
            )
            
            (31,731,753
            )Cash
                flows provided by financing activities
            
            
            67,994,065
            
            
            33,112,232Cash,
                beginning of the period
            
            
            19,280,710
            
            
            205,030Cash,
                end of the period
            
            $
            11,026,894
            
            $
            1,661,428




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 our retail property in St. Augustine, Florida acquired in March
      of 2006, and the four residential apartment communities we acquired in June
      of
      2006, the Oakview Plaza in Omaha, Nebraska on December 21, 2006 and the Gulf
      Coast industrial portfolio on February 1, 2007, substantially offset by the
      payment of a $1.6 million acquisition fee related to our investment in a joint
      venture which acquired a sub-leasehold interest in a ground lease to an office
      building located at 1407 Broadway, New York, New York .




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 $76.0 million resulted primarily from the purchases
      of the Gulf Coast Industrial portfolio on February 1, 2007 and the investment
      in
      the unconsolidated joint venture. Cash used in investing consisted of $57.0
      million used in the purchase of investment property, approximately $13.0 million
      used in the investment in an unconsolidated joint venture, $3.7 million in
      refundable deposits for the purchase of real estate, $1.5 million of funding
      for
      restricted escrows related to completed acquisitions, and $0.9 million in
      leasing costs.




Cash
      provided by financing activities is primarily the proceeds from mortgage
      financing ($53.0 million) and the proceeds from the issuance of common stock
      ($15.5 million).




Mortgages
      payable totaled approximately $148.5 million at March 31, 2007, and consisted
      of
      four secured loans, two of which mature in 2016, and two of which mature in
      2017. The loans bear interest at a fixed annual rate of 6.09%, 5.96%, 5.49%
      and
      5.83%, respectively. Monthly installments of interest only are required through
      the first 12, 60, 60 and 60 months, respectively, and monthly installments
      of
      principal and interest are required throughout the remainder of their stated
      terms. At their maturity, approximately $23.4 million, $37.9 million, $22.6
      million and $49.3 million, respectively, will be due, assuming no prior
      principal prepayment. Each of the loans is secured by acquired real estate
      and
      is non-recourse to the Company.




33




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




2007
            
            2008
            
            2009
            
            2010
            
            2011
            
            Thereafter
            
            TotalFixed
                rate mortgages
            
            $
            244,904
            
            $
            344,388
            
            $
            365,957
            
            $
            388,876
            
            $
            661,414
            
            $
            146,494,461
            
            $
            148,500,000




***New
      Accounting Pronouncements***




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities Including an Amendment of FASB
      Statement No. 115” (“SFAS No. 159”). This standard permits entities to choose to
      measure many financial instruments and certain other items at fair value and
      is
      effective for the first fiscal year beginning after November 15, 2007. We do
      not
      expect SFAS No. 159 to have a material impact on its financial statements.




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




In
      June
      2006, the FASB issued FIN No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* .
      This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, *Accounting
      for Income Taxes* .
      This
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This Interpretation also provides guidance
      on de-recognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This Interpretation is effective for fiscal
      years beginning after December 15, 2006. We adopted FIN 48 effective
      January 1, 2007. The adoption of FIN 48 did not have a material impact on
      our financial position, results of operation, or cash flows. As of
      March 31, 2007, we had no material uncertain income tax positions. The tax
      years 2004 through 2006 remain open to examination by the major taxing
      jurisdictions to which the Company is subject.




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




34




**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 durative transactions
      to date.




Mortgages
      payable, totaling approximately $148.5 million at March 31, 2007, consists
      of
      four secured loans, two of which mature in 2016, and two of which mature in
      2017. The loans bear interest at a fixed annual rate of 6.09%, 5.96%, 5.49%
      and
      5.83%, respectively. Monthly installments of interest only are required through
      the first 12, 60, 60 and 60 months, respectively, and monthly installments
      of
      principal and interest are required throughout the remainder of their stated
      terms. At their maturity, approximately $23.4 million, $37.9 million, $22.6
      million and $49.3 million, respectively, will be due, assuming no prior
      principal prepayment. Each of the loans is secured by acquired real estate
      and
      is non-recourse to the Company.




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




2007
            
            2008
            
            2009
            
            2010
            
            2011
            
            Thereafter
            
            TotalFixed
                rate mortgages
            
            $
            244,904
            
            $
            344,388
            
            $
            365,957
            
            $
            388,876
            
            $
            661,414
            
            $
            146,494,461
            
            $
            148,500,000




Our
      combined future earnings, cash flows and fair values relating to financial
      instruments are currently not dependent upon prevalent market rates of interest
      as a result of our having only fixed rate debt and limited cash balances
      available for investment.   The fair value of our debt approximates its
      carrying amount at March 31, 2007.




In
      addition to changes in interest rates, the value of our real estate and real
      estate related investments is subject to fluctuations based on changes in local
      and regional economic conditions and changes in the creditworthiness of lessees,
      which may affect our ability to refinance our debt if necessary. As of March
      31,
      2007, the Company has no off-balance sheet arrangements nor has it entered
      into
      any derivative instruments.




**ITEM
      4. CONTROLS AND PROCEDURES.**




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




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





35


**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.  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
      President, 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.





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




36


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




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




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


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.





Through
      March 31, 2007, we had sold approximately 5.8 million shares for gross offering
      proceeds of approximately $58.4 million. There were 69,008 shares sold pursuant
      to our Dividend Reinvestment Plan as of March 31, 2007. From the effective
      date
      of our public offering through March 31, 2007, we have incurred the following
      expenses in connection with the issuance and distribution of the registered
      securities:





**Type
                of Expense Amount**
            
            **Amount**
            
            **Estimated
                /**
              **Actual**Underwriting
                discounts and commissions
            
            $
            4,570,577
            
            
            ActualFinders’
                fees
            
            
            —Expenses
                paid to or for underwriters
            
            
            —Other
                expenses to affiliates
            
            
            —Other
                expenses paid to non-affiliates
            
            
            1,264,550
            
            
            Actual**Total
                expenses**
            
            $
            5,835,127




The
      net
      offering proceeds to us, after deducting the total expenses paid as described
      above, and after accounting for $5.8 million in contributions by Lightstone
      SLP,
      LLC to the operating partnership pursuant to the arrangement described in the
      “Compensation Table” and “Capital Resources” sections of our Prospectus, are
      approximately $58.4 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 $58.4 million, and new mortgage debt in the amount
      of
      $148.5 million we acquired approximately $170.1 million in real estate
      investments (including $4.5 million in acquisition fees) and related assets.
      In
      addition we invested $13.0 million in a joint venture which acquired a
      sub-leasehold interest in a ground lease to an office building located at 1407
      Broadway, New York, New York. Cumulatively, we have used the net offering
      proceeds as follows:





**Type
                of Expense Amount  - Actual**
            
            **At
                March 31, 2007**Construction
                of plant, building and facilities
            
            $
            -Purchase
                of real estate interests
            
            
            42,715,249Acquisition
                of other businesses
            
            
            -Repayment
                of indebtedness
            
            
            -Purchase
                and installation of machinery and equipment
            
            
            -Working
                capital (as of March 31, 2007)
            
            
            -Temporary
                investments (as of March 31, 2007)
            
            
            11,026,894Other
                uses
            
            
            4,609,126**Total
                uses**
            
            $
            58,351,269





37


As
      of May
      9, 2007, we have sold approximately 8.0 million shares at an aggregate
      offering price of $67.8 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.


38


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


**ITEM
      6. EXHIBITS**




**Exhibit**
              **Number**
            
            
            **Description**3.1
            
            
            Amended
                and Restated Charter of Lightstone Value Plus Real Estate Investment
                Trust, Inc. (filed
                as Exhibit 3.1 to Post-Effective Amendment No. 1 to the Form S-11
                Registration Statement of Lightstone Value Plus Real Estate Investment
                Trust, Inc. (File No. 333-117367 as amended to date, the “Registration
                Statement”) on May 23, 2005 and incorporated herein by
                reference).3.2
            
            
            Bylaws
                of Lightstone Value Plus Real Estate Investment Trust, Inc. (filed
                as
                Exhibit 3.2 to Amendment No. 3 to the Registration Statement on March
                11,
                2005 and incorporated herein by reference).4.1
            
            
            Amended
                and Restated Agreement of Limited Partnership of Lightstone Value
                Plus
                REIT LP (filed
                as Exhibit 4.1 to Post-Effective Amendment No. 1 to the Registration
                Statement on May 23, 2005 and incorporated herein by
                reference)**.**4.2
            
            
            Specimen
                Certificate for the Shares****(filed
                as Exhibit 4.2 to the Registration Statement on July 14, 2004 and
                incorporated herein by reference)**.**10.1
            
            
            Assignment
                and Assumption of Seller’s Interest in Operating Lease between Gettinger
                Associates, L.P. and 1407 Broadway Real Estate LLC (filed as Exhibit
                10.1
                to the registrant’s Current Report on Form 8-K dated January 10, 2007 and
                incorporated herein by reference).10.2
            
            
            Participation
                Agreement between Gettinger Associates, L.P. and 1407 Broadway Real
                Estate
                LLC (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K
                dated January 10, 2007 and incorporated herein by
                reference).10.3
            
            
            Property
                Management Agreement between 1407 Broadway Real Estate LLC and Trebor
                Management Corp. (filed as Exhibit 10.3 to the registrant’s Current Report
                on Form 8-K dated January 10, 2007 and incorporated herein by
                reference).10.4
            
            
            Leasehold
                Mortgage, Assignment of Leases and Rents, Security Agreement and
                Fixture
                Financing Statement by 1407 Broadway Real Estate LLC in favor of
                Lehman
                Brothers Holdings Inc. (filed as Exhibit 10.4 to the registrant’s Current
                Report on Form 8-K dated January 10, 2007 and incorporated herein
                by
                reference).10.5
            
            
            Promissory
                Note by 1407 Broadway Real Estate LLC in favor of Lehman Brothers
                Holdings
                Inc. (filed as Exhibit 10.5 to the registrant’s Current Report on Form 8-K
                dated January 10, 2007 and incorporated herein by
                reference).10.6
            
            
            Guaranty
                of Recourse Obligations by Lightstone Holdings LLC in favor of Lehman
                Brothers Holdings Inc. (filed as Exhibit 10.6 to the registrant’s Current
                Report on Form 8-K dated January 10, 2007 and incorporated herein
                by
                reference).10.7
            
            
            Net
                Profits Agreement between 1407 Broadway Real Estate LLC in favor
                and
                Lehman Brothers Holdings Inc. (filed as Exhibit 10.7 to the registrant’s
                Current Report on Form 8-K dated January 10, 2007 and incorporated
                herein
                by reference).10.8
            
            
            First
                Amendment to Agreement of Purchase and Sale, dated January 10, 2007,
                by
                and among Sealy SHV/NO, L.P., Sealy Ohio, L.P., Sealy Alamo Buildings,
                L.P., Sealy FRLA SBC, L.L.C., Sealy FRLA I, L.L.C., Sealy FRLA II,
                L.L.C.,
                Sealy BR4, L.P. and Lightstone Value Plus Real Estate Investment
                Trust,
                Inc. (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K
                dated January 18, 2007 and incorporated herein by reference).


39









**Exhibit**
              **Number**
            
            
            **Description**10.9
            
            
            Assignment
                and Assumption of Agreement of Purchase and Sale, dated January 11,
                2007,
                by and between Lightstone Value Plus Real Estate Investments Trust,
                Inc.
                and The Lightstone Group, LLC (filed as Exhibit 10.3 to the registrant’s
                Current Report on Form 8-K dated February 7, 2007 and incorporated
                herein
                by reference).10.10
            
            
            Mortgage
                and Security Agreement, dated January 31, 2007, by LVP Gulf Coast
                Industrial Portfolio LLC in favor of Wachovia Bank, National Association
                (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K
                dated February 7, 2007 and incorporated herein by
                reference).10.11
            
            
            Promissory
                Note, dated February 1, 2007, by Light 5405 Bandera LLC, Light 1700
                Grandstand LLC, LVP 7042 Alamo Downs LLC, LVP 7402 Reindeer LLC and
                LVP
                Gulf Coast Industrial Portfolio LLC in favor of Wachovia Bank, National
                Association (filed as Exhibit 10.5 to the registrant’s Current Report on
                Form 8-K dated February 7, 2007 and incorporated herein by
                reference).10.12
            
            
            Form
                of Limited Liability Company Agreement of 1407 Broadway Mezz II LLC,
                by
                and among Lightstone 1407 Manager LLC, LVP 1407 Broadway LLC and
                Michelle
                A. Dreyer (filed as Exhibit 10.46 to the registrant’s Annual Report on
                Form 10-K for the year ended December 31, 2006 and incorporated herein
                by
                reference).23.1
            
            
            Consents
                of Amper, Politziner & Mattia, P.C. (filed as Exhibit 23.1 to
                Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 11
                to the
                Registration Statement on March 22, 2007 and incorporated herein
                by
                reference).23.2
            
            
            Consent
                of Rampell and Rampell, P.A. (filed as Exhibit 23.3 to Pre-Effective
                Amendment No. 1 to Post-Effective Amendment No. 9 to the Registration
                Statement on June 20, 2006 and incorporated herein by
                reference).23.3
            
            
            Consents
                of The Schonbraun McCann Group LLP (filed as Exhibit 23.3 to Pre-Effective
                Amendment No. 1 to Post-Effective Amendment No. 11 to the Registration
                Statement on March 22, 2007 and incorporated herein by
                reference).23.4
            
            
            Consent
                of Proskauer Rose LLP (filed as Exhibit 5.1 to Amendment No. 4 to
                the
                Registration Statement on Form S-11 filed on April 4, 2005 and
                incorporated herein by reference).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


40


**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: May
                15, 2007
            
            By:
            
            /s/    David
                LichtensteinDavid
                Lichtenstein
              President,
                Chief Executive Officer and Director
              (Principal
                Executive Officer)Date: May
                15, 2007
            
            By:
            
            /s/    Michael
                M. SchurerMichael
                M. Schurer
              Chief
                Financial Officer and Treasurer
              (Duly
                Authorized Officer and Principal Financial and Accounting
                Officer)






41