**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, 2006




OR




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




For
      the
      transition period from  to




Commission
      file number 333-117367







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


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




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




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




**(732)
      367-0129**


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







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




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




Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated
      filer þ




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





As
      of May
      9, 2006, there were 914,395 outstanding shares of common stock of Lightstone
      Value Plus Real Estate Investment Trust, Inc.









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


**INDEX**




**Page****PART I**
            
            **FINANCIAL
                INFORMATION**Item 1.
            
            Financial
                StatementsConsolidated
                Balance Sheets as of March 31, 2006 (unaudited) and December 31,
                2005
            
            3Consolidated
                Statements of Operations (unaudited) for the Three Months Ended March
                31,
                2006 and 2005
            
            4Consolidated
                Statement of Stockholders’ Equity (unaudited) for the Three Months Ended
                March 31, 2006 and the Year Ended December 31, 2005
            
            5Consolidated
                Statements of Cash Flows (unaudited) for the Three Months Ended March
                31,
                2006 and 2005
            
            6Notes
                to Consolidated Financial Statements
            
            7Item 2.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            15Item 3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            19Item 4.
            
            Controls
                and Procedures
            
            19**PART II**
            
            **OTHER
                INFORMATION**Item
                1.
            
            Legal
                Proceedings
            
            20Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            20Item
                3.
            
            Defaults
                Upon Senior Securities
            
            21Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            21Item
                5.
            
            Other
                Information
            
            21Item
                6.
            
            Exhibits
            
            22






2





**PART
      I. FINANCIAL INFORMATION:**


**ITEM
      1. FINANCIAL STATEMENTS.**







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


**CONSOLIDATED
      BALANCE SHEETS**




**March
                  31, 2006**
              
              **December
                  31, 2005*****Assets***
              
              **(UNAUDITED)**Investment
                  property:Land
              
              $
              5,384,290
              
              $
              —Building
              
              
              21,891,485
              
              
              —27,275,775
              
              
              —Less
                  accumulated depreciation
              
              
              (1,520
              )
              
              —Net
                  investment property
              
              
              27,274,255
              
              
              —Cash
              
              
              1,661,428
              
              
              205,030Restricted
                  escrows
              
              
              4,810,303
              
              
              —Acquired
                  in-place lease intangibles (net of accumulated amortization of
                  $245 and
                  $0, respectively)
              
              
              234,238
              
              
              —Deferred
                  financing costs (net of accumulated amortization of $53 and $0,
                  respectively)
              
              
              196,566
              
              
              —Deferred
                  offering costs
              
              
              —
              
              
              225,966Prepaid
                  and other assets
              
              
              200,855
              
              
              —**Total
                  Assets**
              
              $
              34,377,645
              
              $
              430,996***Liabilities
                  and Stockholders' Equity***Mortgage
                  payable
              
              $
              27,250,000
              
              $
              —Accrued
                  expenses
              
              
              161,124
              
              
              37,511Real
                  estate taxes payable
              
              
              153,747
              
              
              —Tenant
                  allowances and deposits payable
              
              
              89,600
              
              
              —Distributions
                  payable
              
              
              38,699
              
              
              —Acquired
                  below market lease intangibles (net of accumulated amortization
                  of $1,808
                  and $0, respectively)
              
              
              586,999Due
                  to affiliate
              
              
              971,525
              
              
              309,05629,251,694
              
              
              346,567Minority
                  interest in partnership
              
              
              537,843
              
              
              836Commitments
                  and contingenciesStockholders'
                  equity:Preferred
                  shares, 10,000,000 shares authorized, none outstanding
              
              
              —
              
              
              —Common
                  stock, $.01 par value; 60,000,000 shares authorized, 537,219 and
                  20,000
                  shares issued and outstanding, respectively
              
              
              5,372
              
              
              200Additional
                  paid-in-capital
              
              
              4,828,004
              
              
              199,800Accumulated
                  distributions in addition to net loss
              
              
              (245,268
              )
              
              (116,407
              )Total
                  stockholder’s equity
              
              
              4,588,108
              
              
              83,593**Total
                  Liabilities and Stockholders' Equity**
              
              $
              34,377,645
              
              $
              430,996


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




3


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


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








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


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**Three
                  Months Ended March 31, 2006**
              
              **Three
                  Months Ended March 31, 2005**Revenues:Rental
                  income
              
              $
              9,299
              
              $
              —Tenant
                  recovery income
              
              
              3,511
              
              
              —12,810
              
              
              —Expenses:Property
                  operating expenses
              
              
              8,792
              
              
              —Real
                  estate taxes
              
              
              1,641
              
              
              —Depreciation
                  and amortization
              
              
              1,520
              
              
              —General
                  and administrative costs
              
              
              95,776
              
              
              —107,729
              
              
              —Operating
                  loss
              
              
              (94,919
              )
              
              —Other
                  income
              
              
              9,386
              
              
              —Interest
                  expense
              
              
              (4,663
              )
              
              —Loss
                  allocated to minority interest
              
              
              34
              
              
              —Net
                  loss
              
              $
              (90,162
              )
              $
              —Basic
                  and diluted loss per common share
              
              $
              (0.37
              )
              $
              -Weighted
                  average number of common shares outstanding
              
              
              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.**


**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, 2005**
              
              
              —
              
              $
              —
              
              
              20,000
              
              $
              200
              
              $
              199,800
              
              $
              (116,407
              )
              $
              83,593Issuance
                  of common shares
              
              
              —
              
              
              —
              
              
              517,219
              
              
              5,172
              
              
              5,165,245
              
              
              —
              
              
              5,170,417Selling
                  commissions and dealer manager fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (429,633
              )
              
              —
              
              
              (429,633
              )Other
                  offering costs
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (107,408
              )
              
              —
              
              
              (107,408
              )Distributions
                  declared
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (38,699
              )
              
              (38,699
              )Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (90,162
              )
              
              (90,162
              )**BALANCE,
                  March 31, 2006**
              
              
              —
              
              $
              —
              
              
              537,219
              
              $
              5,372
              
              $
              4,828,004
              
              $
              (245,268
              )
              $
              4,588,108
  The
      accompanying notes are an integral part of these consolidated financial
      statements.




5


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


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





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


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**Three
                  Months Ended March 31, 2006**
              
              **Three
                  Months Ended March 31, 2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (90,162
              )
              $
              —Loss
                  allocated to minority interest
              
              
              (34
              )
              
              -Adjustments
                  to reconcile net loss to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              1,520
              
              
              —Amortization
                  of deferred financing costs
              
              
              53
              
              
              —Amortization
                  of above and below-market lease intangibles
              
              
              (1,563
              )
              
              —Changes
                  in assets and liabilities:Increase
                  in other assets
              
              
              (200,855
              )
              
              —Increase
                  in real estate taxes payable
              
              
              153,747
              
              
              —Increase
                  in tenant allowance and securities deposits payable
              
              
              89,600
              
              
              —Increase
                  in accounts payable and accrued expenses
              
              
              123,613
              
              
              —Net
                  cash provided by operating activities
              
              
              75,919
              
              
              —**CASH
                  FLOWS USED IN INVESTING ACTIVITIES:**Purchase
                  of investment property
              
              
              (26,921,450
              )
              
              —Restricted
                  escrows
              
              
              (4,810,303
              )
              
              —Net
                  cash used in investing activities
              
              
              (31,731,753
              )
              
              —**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  form mortgage financing
              
              
              27,250,000
              
              
              —Payment
                  of deferred financing costs
              
              
              (196,619
              )
              
              —Proceeds
                  from issuance of common stock
              
              
              5,170,417
              
              
              —Proceeds
                  from issuance of special general partnership units
              
              
              537,041
              
              
              —Payment
                  of offering costs
              
              
              (311,076
              )
              
              —Increase
                  (decrease) in amounts due to affiliates, net
              
              
              662,469
              
              
              (136,431
              )Net
                  cash provided by (used in) financing activities
              
              
              33,112,232
              
              
              (136,431
              )**Net
                  change in cash**
              
              
              1,456,398
              
              
              (136,431
              )**Cash,
                  beginning of period**
              
              
              205,030
              
              
              205,489**Cash,
                  end of period**
              
              $
              1,661,428
              
              $
              69,058**Supplemental
                  Disclosure of Cash Flow Information**Cash
                  paid for interest
              
              $
              4,663
              
              $
              —**Supplemental
                  Schedule of Non-Cash Financing Activities**Dividends
                  declared and unpaid
              
              $
              38,699
              
              $
              —


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




6


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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements





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




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





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





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





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





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





As
      of
      March 31, 2006, cumulative gross offering proceeds of $5,370,417 have been
      released to the Lightstone REIT and used for the purchase of a 99.96% general
      partnership interest in the Operating Partnership. The Company expects that
      its
      ownership percentage in the Operating Partnership will remain significant as
      it
      plans to continue to invest all net proceeds from the Offering in the Operating
      Partnership.





Lightstone
      SLP, LLC, an affiliate of the Advisor, intends to periodically purchase special
      general partner units in the Operating Partnership at a cost of $100,000 per
      unit for each $1.0 million in offering subscriptions. Proceeds from the sale
      of
      the special general partnership interests will be used to repay advances from
      the Advisor that were used to fund organizational and offering costs incurred
      by
      the Company. Through March 31, 2006, the Lightstone REIT offset proceeds of
      approximately $537,000 from the sale of special general partnership units
      against approximately $1.7 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, 2006, the Advisor has not allocated any
      organizational costs to the Company. Advances for offering costs in excess
      of
      the 10% threshold (approximately $1.2 million at March 31, 2006) will only
      be
      reimbursed to the Advisor as additional offering proceeds are received by the
      Company.




7




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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements





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




Through
      its Operating Partnership, the Company will seek to acquire and operate
      commercial and residential properties, principally in the United States. All
      such properties may be acquired and operated by the Company alone or jointly
      with another party. The Company completed its first acquisition on March 31,
      2006 (the Belz Factory Outlet World in St. Augustine, Florida). Prime Retail
      Property Management, LLC, an affiliate of Lightstone Value Plus REIT Management
      LLC, (the “Property Manager”), is serving as the property manager. No other
      acquisitions have been completed or identified by the Company as of May 5,
      2006.




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





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




Basis
      of Presentation




The
      consolidated financial statements include the accounts of the Lightstone REIT
      and the Operating Partnership. As of March 31, 2006, the Lightstone REIT had
      a
      99.96% general partnership interest in the Operating Partnership. All
      inter-company balances and transactions have been eliminated in
      consolidation.





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





The
      December 31, 2005 balance sheet data was derived from audited financial
      statements, but does not include all disclosures required by accounting
      principles generally accepted in the United States of America. The consolidated
      financial statements should be read in conjunction with the notes to the
      consolidated financial statements and Management's Discussion and Analysis
      of
      Financial Condition and Results of Operations included in the Company’s Form
      10-K/A for the year ended December 31, 2005.





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
      tenants’ sales, are recognized once the sales reported by such tenants exceed
      any applicable breakpoints as specified in the tenants’ leases. Recoveries from
      tenants for real estate taxes, insurance and other shopping center operating
      expenses 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. Other revenues primarily
      consist of interest earned on money market investments.




8





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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements





Investment
      in Real Estate




*Accounting
      for Acquisitions*




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





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





In
      determining the fair value of the identified intangible assets and liabilities
      of an acquired property, above-market and below-market in-place lease values
      are
      recorded based on the present value (using an interest rate which reflects
      the
      risks associated with the leases acquired) of the difference between (i) the
      contractual amounts to be paid pursuant to the in-place leases and (ii)
      management’s estimate of fair market lease rates for the corresponding in-place
      leases, measured over a period equal to the remaining non-cancelable term of
      the
      lease. The capitalized above-market lease values and the capitalized
      below-market lease values are amortized as an adjustment to rental income over
      the initial lease term.





The
      aggregate value of in-place leases is determined by evaluating various factors,
      including an estimate of carrying costs during the expected lease-up periods,
      current market conditions and similar leases. In estimating carrying costs,
      management includes real estate taxes, insurance and other operating expenses,
      and estimates of lost rental revenue during the expected lease-up periods based
      on current market demand. Management also estimates costs to execute similar
      leases including leasing commissions, legal and other related costs. The value
      assigned to this intangible asset is amortized over the remaining lease term.
      Optional renewal periods were not considered.





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





*Carrying
      Value of Assets*




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





*Impairment
      Evaluation*




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





The
      Company evaluates the recoverability of its investments in real estate assets
      to
      be held and used each quarter and will record an impairment charge when there
      is
      an indicator of impairment and the undiscounted projected cash flows are less
      than the carrying amount for a particular property. Management concluded no
      impairment adjustment was required at March 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.


9


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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements




*Depreciation
      and Amortization*




Depreciation
      expense for real estate assets is computed using a straight-line method and
      estimated useful lives for buildings and improvements using a weighted average
      composite life of forty years and equipment and fixtures of five to ten years.
      Expenditures for leasehold improvements and construction allowances paid to
      tenants are capitalized and amortized over the initial term of each lease.
      Cash
      allowances paid for improvements to real estate owned by retailers are
      capitalized as contract intangibles and amortized over the life of the operating
      agreements. Cash allowances paid to retailers that are used for purposes other
      than improvements to the real estate are amortized as a reduction to minimum
      rents over the initial lease term. Maintenance and repairs are charged to
      expense as incurred.





Deferred
      Costs




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





Income
      Taxes




For
      the
      year ending December 31, 2006, the Company intends to make an election to be
      taxed as a real estate investment trust (a “REIT”), under Sections 856 through
      860 of the Internal Revenue Code of 1986, as amended (the “Code”) and intends to
      be taxed as such beginning with its taxable year ending December 31, 2006.
      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.





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, 2006, the Advisor has advanced approximately $1.7 million to the
      Company for offering costs, including commission and dealer manager fees. Based
      on gross proceeds of approximately $ 5.4
      million from
      its
      public offering as of March 31, 2006, the Company’s responsibility for the
      reimbursement of advances for commissions and dealer manager fees was limited
      to
      approximately $430,000 (or 8% of the gross offering proceeds), and its
      obligation for advances for organization and third-party offering costs was
      limited to approximately $107,000 (or 2% of the gross offering
      proceeds).




10





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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements





Use
      of
      Estimates




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





Reclassifications




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





New
      Accounting Pronouncements




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





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




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





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





Intangibles
      recorded at the acquisition date are comprised of an asset for acquired in-place
      leases of $234,483 and a liability for acquired below-market leases of $588,808.
      The intangibles are being amortized as a net increase to minimum rents on a
      straight-line basis over the lives of the leases. Net amortization for all
      of
      the acquired intangibles is an increase to net income in the amount of $1,563
      and $0, for the three months ended March 31, 2006 and 2005, respectively. The
      net book value of the below-market leases is $586,999 and $0 as of March 31,
      2006 and December 31, 2005, respectively, and the net book value of the acquired
      in-place leases is $234,238 and $0 as of March 31, 2006 and December 31, 2005,
      respectively.




As
      of
      March 31, 2006, the approximate fixed future minimum rentals from tenants
      of the Property are as follows:





2006
            
            2007
            
            2008
            
            2009
            
            2010
            
            Thereafter
            
            TotalFixed
                Future Minimum Rentals
            
            $
            1,758,063
            
            $
            1,638,106
            
            $
            1,229,103
            
            $
            834,866
            
            $
            263,189
            
            $
            269,366
            
            $
            5,992,693






11




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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements ****





**4.** ***Mortgage
      Payable*** ****




LVP
      St.
      Augustine secured a mortgage loan from Wachovia in the principal amount of
      $27,250,000. The loan has a 30 year amortization period, matures in 10 years,
      bears interest at a fixed rate of 6.09% per annum and requires monthly
      installments of interest only through the first 12 months, and monthly
      installments of principal and interest throughout the remainder of its stated
      term. The loan will mature on April 11, 2016, at which time a balance of
      approximately $23,427,000 will be due, assuming no prior principal prepayment.
      The loan is secured by the Property and is non-recourse to the Company.





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




2006
            
            2007
            
            2008
            
            2009
            
            2010
            
            ThereafterFixed
                rate debt
            
            $
            —
            
            $
            244,904
            
            $
            344,388
            
            $
            365,957
            
            $
            388,876
            
            $
            25,905,875





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





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




On
      January 26, 2006, the Company’s Board of Directors declared a dividend for the
      two-month period ending March 31, 2006. The dividend of $38,699 at March 31,
      2006, was calculated based on shareholders of record each day during this period
      at a rate of $0.0019178 per day. If paid each day for a 365-day period, the
      dividend represented a 7.0 percent annualized rate based on a share price of
      $10.00. The dividend was paid in full in mid-April 2006 using a combination
      of
      cash ($22,155), and pursuant to the Company’s Distribution Reinvestment Program,
      shares of the Company’s stock at a discounted price of $9.50 per share
      ($16,544). The amount of dividends to be distributed to stockholders in the
      future will be determined by the Board of Directors and are dependent on a
      number of factors, including funds available for payment of dividends, our
      financial condition, capital expenditure requirements and annual distribution
      requirements needed to maintain our status as a REIT under the Internal Revenue
      Code.





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




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


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






12




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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc.


Notes
      to
      Consolidated Financial Statements




**5.** ***Related
      Party Transactions (continued):***




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





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




13


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


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





Lightstone
      Value Plus Real Estate Investment Trust, Inc. and Subsidiary


Notes
      to
      Consolidated Financial Statements (continued)




**5.** ***Related
      Party Transactions (continued):***





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




**Operating
                Stage**
              **Distributions**
            
            **Amount
                of Distribution**7%
                Stockholder Return Threshold
            
            Once
                a 7% return on their net investment is realized by stockholders,
                Lightstone SLP, LLC will receive available distributions from the
                Operating Partnership until it has received an amount equal to a
                cumulative non-compounded return of 7% per year on the purchase price
                of
                the special general partner interests. “Net investment” refers to $10 per
                share, less a pro rata share of any proceeds received from the sale
                or
                refinancing of the Company’s assets.12%
              Stockholder Return Threshold
            
            Once
              a cumulative non-compounded return of 12% per year is realized by
              stockholders on their net investment (including amounts equaling a
              7%
              return on their net investment as described above), 70% of the aggregate
              amount of any additional distributions from the Operating Partnership
              will
              be payable to the stockholders, and 30% of such amount will be payable
              to
              Lightstone SLP, LLC.Returns
              in Excess of 12%
            
            After
              the 12% return threshold is realized by stockholders and Lightstone
              SLP,
              LLC, 60% of any remaining distributions from the Operating Partnership
              will be distributable to stockholders, and 40% of such amount will
              be
              payable to Lightstone SLP, LLC.


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




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






14




**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.




**Overview**




Lightstone
      Value Plus Real Estate Investment Trust, Inc. (the “Company”) intends to acquire
      and operate commercial and residential properties, principally in the United
      States. We intend to acquire fee interests in multi-tenanted, community, power
      and lifestyle shopping centers, and in malls located in highly trafficked retail
      corridors, high-barrier to entry markets, and sub-




15


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


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





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.





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




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





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





We
      do not
      have employees. We entered into an advisory agreement dated April 22, 2005
      with
      Lightstone Value Plus REIT LLC, a Delaware limited liability company, which
      we
      refer to as the “Advisor,” pursuant to which the Advisor supervises and manages
      our day-to-day operations and selects our real estate and real estate related
      investments, subject to oversight by our board of directors. We pay the Advisor
      fees for services related to the investment and management of our assets, and
      we
      will reimburse the Advisor for certain expenses incurred on our behalf. Through
      March 31, 2006, the Advisor has advanced in excess of $1.7 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.





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”).




16





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


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




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, 2006, cumulative gross offering proceeds of
      $5,370,417 have been released to the Lightstone REIT and used for the purchase
      of a 99.96% general partnership interest in the Operating Partnership. The
      Company expects that its ownership percentage in the Operating Partnership
      will
      remain significant as it plans to continue to invest all net proceeds from
      the
      Offering in the Operating Partnership.





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





We
      intend
      to make an election to be taxed as a real estate investment trust (a “REIT”)
      under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended
      (the “Code”) and intend to be taxed as such beginning with its taxable year
      ending December 31, 2006. To qualify as a REIT, we must meet certain
      organizational and operational requirements, including a requirement to
      distribute at least 90% of our ordinary taxable income to stockholders. If
      we
      qualify as a REIT for federal income tax purposes, we generally will not be
      subject to federal income tax on taxable income that we have distributed to
      our
      stockholders. If we fail to qualify as a REIT in any taxable year, we will
      then
      be subject to federal income taxes on our 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 us relief under certain
      statutory provisions. Such an event could materially adversely affect our net
      income and net cash available for distribution to stockholders. However, we
      believe that we will be organized and operate in such a manner as to qualify
      for
      treatment as a REIT and intend to operate in such a manner so that we will
      remain qualified as a REIT for federal income tax purposes.





**Liquidity
      and Capital Resources**




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





As
      of
      March 31, 2006, we have received proceeds of approximately $5.4 million from
      our
      public offering of common stock, net advances of approximately $2.2 million
      from
      our Advisor, and approximately $537,000 from the sale of special general
      partnership units to an affiliate of our Advisor.





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




2006
            
            2007
            
            2008
            
            2009
            
            2010
            
            ThereafterFixed
                rate debt
            
            $
            —
            
            $
            244,904
            
            $
            344,388
            
            $
            365,957
            
            $
            388,876
            
            $
            25,905,875




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




17





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


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





**Critical
      Accounting Policies**




General





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




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




**Results
      of Operations**




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





Revenues




Total
      revenues increased 100%, or $12,810 for the three months ended March 31, 2006
      compared to $0 for the same period last year. Base rents increased by
      approximately $9,300 and tenant reimbursements increased by approximately
      $3,500, each as a result of our acquiring the Belz Outlets at St. Augustine,
      Florida on March 31, 2006 (represents one day of operating results).





Expenses




Total
      expenses increased 100%, or approximately $107,700, for the three months ended
      March 31, 2006, compared to $0 for the same period last year. Real estate taxes
      and property operating expenses increased by approximately $10,400, and
      depreciation and amortization increased by approximately $1,500. Each of these
      expenses increased during the quarter ended March 31, 2006 as a result of our
      having closed on our first real estate acquisition on March 31, 2006 (one day
      of
      results).





General
      and administrative expenses were approximately $95,800 for the three months
      ended March 31, 2006, compared to $0 for the corresponding period in 2005.
      The
      increase is primarily due to professional fees, board of director fees and
      insurance costs reported during the first quarter ended March 31, 2006. We
      had
      not incurred any general and administrative costs during the same period last
      year as our Company had not yet begun operations.





Other
      Income




Other
      income increased by approximately $9,400 due principally to the investment
      of
      cumulative Offering proceeds during the two-month period ending March 31,
      2006.




18





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


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





Interest
      expense




Interest
      expense increased 100%, or approximately $4,663 for the three months ended
      March
      31, 2006, due to the acquisition and financing of the Belz Outlets at St.
      Augustine on March 31, 2006.  The
      acquisition was funded in part though a mortgage


loan
      from
      Wachovia in the principal amount of $27,250,000. The loan has a 30 year
      amortization period, matures in 10 years, bears interest at a fixed rate of
      6.09% per annum and requires monthly installments of interest only through
      the
      first 12 months, and monthly installments of principal and interest throughout
      the remainder of its stated term.




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




At
      March
      31, 2006, we had one mortgage outstanding with a fixed interest rate of 6.09%,
      and a term to maturity of 10 years. At December 31, 2005, we had no debt
      outstanding. The fair value of our debt was $27,250,000 million and $0 at March
      31, 2006 and December 31, 2005, respectively, compared to its carrying amounts
      of $27,250,000 million and $0, respectively. 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 outstanding and nominal cash balances ($1.7 million) available
      for investment.





The
      fair
      value of our debt approximates its carrying amount at March 31,
      2006.





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.




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.




**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.




19




**PART
      II. OTHER INFORMATION:**




**ITEM
      1. LEGAL PROCEEDINGS**




On
      March
      29, 2006, Jonathan Gould, a former member of our Board of Directors and Senior
      Vice-President-Acquisitions, filed a lawsuit against us in the District Court
      for the Southern District of New York. The suit alleges, among other things,
      that Mr. Gould was insufficiently compensated for his services to us as director
      and officer. Mr. Gould seeks 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. Management believes
      that this suit is frivolous and entirely without merit and intends to defend
      against these charges vigorously.




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




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





During
      the period covered by this Form 10-Q, we did not sell any equity securities
      that
      were not registered under the Securities Act of 1933, and we did not repurchase
      any of our securities.





Through
      March 31, 2006, we had sold approximately 537,000 shares for gross offering
      proceeds of approximately $5.4 million. No shares were sold pursuant to our
      Dividend Reinvestment Plan as of March 31, 2006. From the effective date of
      our
      public offering through March 31, 2006, 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
              
              $
              429,633
              
              
              ActualFinders’
                  fees
              
              
              —Expenses
                  paid to or for underwriters
              
              
              —Other
                  expenses to affiliates
              
              
              —Other
                  expenses paid to non-affiliates
              
              
              107,408
              
              
              Actual**Total
                  expenses**
              
              $
              537,041




The
      net
      offering proceeds to us, after deducting the total expenses paid as described
      above, and after accounting for $537,000 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 $5.4 million. The underwriting discounts and commissions were
      paid
      to our dealer manager, which reallowed all or a portion of the commissions
      to
      soliciting dealers.




20





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


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




With
      the
      net offering proceeds of $5.4 million, and new mortgage debt in the amount
      of
      $27.3 million, as reflected under “Cash Flows from Financing Activities” in our
      consolidated statements of cash flows, we acquired approximately $26.9 million
      in real estate investments (including $.7 million in acquisition fees) and
      related assets. Cumulatively, we have used the net offering proceeds as
      follows:


**Type
                  of Expense Amount**
              
              **Amount**
              
              **Estimated
                  / Actual**Construction
                  of plant, building and facilities
              
              $
              —Purchase
                  of real estate interests
              
              
              4,506,429
              
              
              ActualAcquisition
                  of other businesses
              
              
              —Repayment
                  of indebtedness
              
              
              —Purchase
                  and installation of machinery and equipment
              
              
              —Working
                  capital (as of March 31, 2006)
              
              
              —Temporary
                  investments (as of March 31, 2006)
              
              
              863,988
              
              
              ActualOther
                  uses
              
              
              —**Total
                  uses**
              
              $
              5,370,417


As
      of May 9, 2006, we have sold approximately 914,395 million shares at an
      aggregate offering price of $9.1 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.




21




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


**ITEM
      6. EXHIBITS**




**Exhibit**
              **Number**
            
            
            **Description**3.2
            *
            
            Bylaws
                of Lightstone Value Plus Real Estate Investment Trust,
                Inc.4.1
            *
            
            Amended
                and Restated Agreement of Limited Partnership of Lightstone Value
                Plus
                REIT LP.10.1
            *
            
            Escrow
                Agreement by and among Lightstone Value Plus Real Estate Investment
                Trust,
                Inc., Trust Company of America and Lightstone
                Securities.10.2
            *
            
            Advisory
                Agreement by and among Lightstone Value Plus Real Estate Investment
                Trust,
                Inc., Lightstone Value Plus REIT LLC.10.3
            *
            
            Management
                Agreement, by and among Lightstone Value Plus Real Estate Investment
                Trust, Inc., Lightstone Value Plus REIT LP and Lightstone Value Plus
                REIT
                Management LLC.10.4
            *
            
            Form
                of the Company’s Stock Option Plan.10.5
            *
            
            Form
                of Indemnification Agreement by and between The Lightstone Group
                and the
                directors and executive officers of Lightstone Value Plus Real Estate
                Investment Trust, Inc.10.6
            *
            
            Agreement
              by and among Lightstone Value Plus REIT LP, Lightstone SLP, LLC, and
              David
              Lichtenstein.10.7
            *
            
            Purchase
              and Sale Agreement between St. Augustine Outlet World, Ltd. and Prime
              Outlets Acquisition Company LLC.10.8
            *
            
            Assignment
                and Assumption of Purchase and Sale Agreement by and between Prime
                Outlets
                Acquisition Company LLC and LVP St. Augustine Outlets
                LLC.10.9
            *
            
            Note
                and Mortgage Modification Agreement Evidencing Renewal Promissory
                Note
                Including Future Advance and Amended and Restated Mortgage, Security
                Agreement and Fixture Filing by LVP St. Augustine Outlets LLC in
                favor
                of Wachovia Bank, National Association.10.10
            *
            
            Renewal
                Promissory Note Including Future Advance by LVP St. Augustine Outlets
                LLC
                to the order of Wachovia Bank, National Association.10.11
            *
            
            Guaranty
              by Lightstone Holdings, LLC for the benefit of Wachovia Bank, National
              Association.10.12
            *
            
            Indemnification
              Agreement between Lightstone Value Plus Real Estate Investment Trust,
              Inc.
              and Lightstone Holdings, LLC.31.1
            
            
            Certification
              Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the
              Sarbanes-Oxley Act of 200231.2
            
            
            Certification
              Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the
              Sarbanes-Oxley Act of 200232.1
            
            
            Certification
              Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
              906 of
              the Sarbanes-Oxley Act of 200232.2
            
            
            Certification
              Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
              906 of
              the Sarbanes-Oxley Act of 2002




*
            Incorporated
                by reference from Lightstone Value Plus Real Estate Investment Trust,
                Inc.’s Registration Statement on Form S-11 (File No. 333-117367).




22


**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, 2006
            
            By:
            
            /s/    David
                LichtensteinDavid
                Lichtenstein
              President,
                Chief Executive Officer and Director
              (Principal
                Executive Officer)Date: May
                15, 2006
            
            By:
            
            /s/    Michael
                M. SchurerMichael
                M. Schurer
              Chief
                Financial Officer and Treasurer
              (Duly
                Authorized Officer and Principal Financial and Accounting
                Officer)






23