**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D. C. 20549**
  
 **FORM
        10-Q**
  (Mark
        One)
 **x**
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
  For
        the
        quarterly period ended June 30, 2005
  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  ̈ No þ
  Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act).    Yes  ̈ No þ
  As
        of
        August 11, 2005, there were 20,000 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**
              
              3Item 1.
              
              Financial
                  Statements
              
              3Lightstone
                  Value Plus Real Estate Investment Trust, Inc. and Subsidiary Consolidated
                  Balance Sheets as of June 30, 2005 (unaudited) and December 31,
                  2004
              
              3Lightstone
                  Value Plus Real Estate Investment Trust, Inc. and Subsidiary Consolidated
                  Statement of Cash Flows for the Six months ended June 30, 2005
                  (unaudited)
              
              4Notes
                  to Consolidated Financial Statements
              
              5Item 2.
              
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              12Item 3.
              
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              20Item 4.
              
              Controls
                  and Procedures
              
              20**PART II**
              
              **OTHER
                  INFORMATION**
              
              20Item
                  1.
              
              Legal
                  Proceedings
              
              20Item
                  2.
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              
              21Item
                  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. AND SUBSIDIARY**
 **CONSOLIDATED
        BALANCE SHEETS**
 **June
                    30, 2005**
                
                **December 31, 2004****(unaudited)*****Assets***Cash
                    and cash equivalents
                
                $
                254,754
                
                $
                205,489***Liabilities
                    and Stockholder’s Equity***Due
                    to affiliate
                
                $
                52,754
                
                $
                3,489Minority
                    interest
                
                
                2,000
                
                
                2,000Stockholder’s
                    equity:Preferred
                    shares, 10,000,000 shares
                  authorized,
                    none outstandingCommon
                    stock, $.01 par value;
                  60,000,000
                    shares authorized,
                  20,000
                    shares issued and
                  outstanding
                
                
                200
                
                
                200Additional
                    paid-in-capital
                
                
                199,800
                
                
                199,800Retained
                    earnings
                
                
                —
                
                
                —Total
                    stockholder’s equity
                
                
                200,000
                
                
                200,000**Total
                    Liabilities and Stockholder’s Equity**
                
                $
                254,754
                
                $
                205,489
  See
        accompanying notes to consolidated financial statements.
  3
 
 **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        1. FINANCIAL STATEMENTS, CONTINUED:**
 
 **LIGHTSTONE
        VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENT OF CASH FLOWS**
 **FOR
        THE SIX MONTHS ENDED JUNE 30, 2005**
 **(UNAUDITED)**
  **June
                  30, 2005****Cash
                  Flows From Operating Activities**Increase
                  in amounts due to affiliate
              
              $
              49,265Cash
                  and cash equivalents—beginning of period
              
              
              205,489Cash
                  and cash equivalents—end of period
              
              $
              254,754
  See
        accompanying notes to consolidated financial statements.
  4
 
 **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
  **1.** ***Organization*** ****
  Lightstone
        Value Plus Real Estate Investment Trust, Inc. (the “Company”), a Maryland
        corporation formed on June 8, 2004, intends to qualify as a real estate
        investment trust (“REIT”). The Company is externally managed by the Lightstone
        Value Plus REIT, LLC (the “Advisor”).
 
 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
        the
        Company began offering its common shares for sale on May 24, 2005. Lightstone
        Securities, LLC (the “Dealer Manager”) is serving as the dealer manager of the
        Company’s public offering (the “Offering”).
 
 The
        Company intends to sell a minimum of 1,000,000 common shares, and a maximum
        of
        30,000,000 common shares, at a price of $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).
 
 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 Lightstone Value
        Plus
        REIT, L.P., a Delaware limited partnership formed on July
        12,
        2004  (the
        “Operating Partnership”), and as a result, holds a 99.9% limited partnership
        interest in the Operating Partnership. The Advisor also contributed $2,000
        to
        the Operating Partnership in exchange for a .1% limited partner interest
        in the
        Operating Partnership. The limited partner interests have 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.
 
 Lightstone
        SLP, LLC, an affiliate of the Advisor, intends to purchase special general
        partner units in the Operating Partnership at a cost of $100,000 per unit
        for
        each $1,000,000 in offering subscriptions. Proceeds from the sale of the
        special
        general partnership interests will be used to reimburse organizational and
        offering costs paid by the Advisor on the Company’s behalf (see Note 2,
        Organizational Costs). If the minimum offering is not sold, the Company will
        not
        be responsible for the costs of its organization or offering.
 
 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. The Operating Partnership currently
        has
        no operations and no assets other than the partners’ initial capital
        contributions, but the Company anticipates that it will conduct substantially
        all of its operations through the Operating Partnership.
   5
  **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)
 
 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. As of August 11, 2005, the Company has neither purchased
        nor
        contracted to purchase any properties, nor has the Advisor identified any
        properties in which there is a reasonable probability that the Company will
        acquire. Lightstone Value Plus REIT Management LLC, (the “Property Manager”)
        will serve as the Company’s property manager.
  The
        Company’s Advisor, Property Manager and Dealer Manager are each related parties.
        Each of these entities will receive compensation and fees for services related
        to the offering and for the investment and management of the Company’s assets.
        These entities will receive fees during the offering, acquisition, operational
        and liquidation stages. The compensation levels during the offering, acquisition
        and operational stages are based on percentages of the offering proceeds
        sold,
        the cost of acquired properties and the annual revenue earned from such
        properties and other such fees outlined in each of the respective agreements.
        (See Note 3, Related Party Transactions).
 ****
 **2.** ***Summary
        of Significant Accounting Policies*** ****
  ***Basis
        of Presentation***
  The
        Company has prepared the consolidated balance sheet as of June 30, 2005 and
        the
        consolidated statement of cash flows for the six months ended June 30, 2005
        in
        accordance with the rules and regulations of the Securities and Exchange
        Commission. In the opinion of management, all necessary adjustments (which
        include normal recurring adjustments) have been made to present fairly the
        financial position as of June 30, 2005 and cash flows for the six months
        then
        ended. Balance sheet data as of December 31, 2004 has been derived from the
        audited financial statements as of that date.
  Certain
        information and footnote disclosures, normally included in financial statements
        prepared in accordance with accounting principles generally accepted in the
        United States of America, have been condensed or omitted, although management
        believes that the disclosures are adequate to make the information presented
        not
        misleading. These consolidated financial statements should be read in
        conjunction with the financial statements and footnotes for the year ended
        December 31, 2004 included in the Registration Statement.
  ***Cash
        Equivalents***
  Cash
        and
        cash equivalents include cash in banks and money market funds, and temporary
        investments in short-term instruments with original maturities equal to or
        less
        than three months.
  ***Principles
        of Consolidation***
  The
        financial statements include the accounts of the Operating Partnership. All
        inter-company balances and transactions have been eliminated in consolidation.
  6
  **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)
 
 ***Use
        of Estimates***
  The
        presentation of the balance sheet in conformity with accounting principles
        generally accepted in the United States requires the Company to make estimates
        and assumptions that affect the amounts of assets and liabilities and disclosure
        of contingent assets and liabilities at the date of the balance sheet. Actual
        results could differ from those estimates.
 
 ***Income
        Taxes***
  For
        the
        year ending December 31, 2005, 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, 2005.
        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 $1,500,000 if the minimum
        offering of 1,000,000 shares is sold, and approximately $30,000,000 if the
        maximum offering of 30,000,000 shares is sold. The Advisor had incurred on
        behalf of the Company, organization and other offering costs, which consist
        of
        actual legal, accounting, printing and other accountable expenses (including
        sales literature and the prospectus), other than selling commissions and
        dealer
        manager fees, of approximately $890,527 and $412,001 as of June 30, 2005
        and
        December 31, 2004, respectively. These costs are not recorded in the financial
        statements of the Company as of June 30, 2005 and December 31, 2004 because
        such
        costs will not be a liability of the Company until the minimum number of
        shares
        of its common stock is issued, and such costs will only become a liability
        of
        the Company to the extent they do not exceed 10% (including selling commissions
        and dealer manager fees) of the gross proceeds of the Offering. When recorded
        by
        the Company, organizational costs will be expensed as incurred, and offering
        costs will be charged to stockholders’ equity.
   7
  **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)
 
 **3.** ***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.
                  The
                  estimated selling commissions are expected to be approximately
                  $700,000,
                  if the minimum offering is sold, and approximately $21,000,000
                  if the
                  maximum offering is sold.Dealer
                  Management Fee
              
              The
                  Dealer Manager will be paid up to 1% of gross offering proceeds
                  before
                  reallowance to participating broker-dealers. The estimated dealer
                  management fee is expected to be approximately $100,000, if the
                  minimum
                  offering of shares is sold, and approximately $3,000,000 if the
                  maximum
                  offering 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.Reimbursement
                  of Offering Expenses
              
              The
                  Company estimates offering costs of approximately $1,500,000, if
                  the
                  minimum offering is sold, and approximately $30,000,000 if the
                  maximum
                  offering is sold. After having sold at least the minimum offering
                  amount,
                  the Company will reimburse offering costs paid by the Advisor or
                  its
                  affiliates on the Company’s behalf. If the minimum offering is not sold,
                  the Company will not be responsible for the costs of its organization
                  or
                  offering.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.
 
  8
  **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)
 
 **3.** ***Related
        Party Transactions (continued):***
  **Fees
                  /**
                **Compensation**
              ****
              **Amount**Acquisition
                  Fee
              
              The
                  Advisor will be paid 2.75% of the gross contract purchase price
                  of any
                  property purchased by an affiliate. The acquisition fee and expenses
                  for
                  any particular property will not exceed, in the aggregate, 5% of
                  the gross
                  contract purchase price of the property.
                
                The
                  following amounts may be paid as an acquisition fee, and for the
                  reimbursement of acquisition expenses including but not limited
                  to legal
                  fees and expenses, travel and communication, cost of appraisals,
                  nonrefundable option payments on property not acquired, accounting
                  fees,
                  title insurance and miscellaneous expenses related to selection
                  and
                  acquisition of properties: a maximum of $275,000 ($1,100,000, assuming
                  long-term permanent leverage of approximately 75%) if the minimum
                  number
                  of shares are sold; $8,250,000 ($33,000,000, assuming long-term
                  permanent
                  leverage of approximately 75%) if the maximum number of shares
                  are sold.
                  However, the actual amounts cannot be determined at the present
                  time.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.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.
  9
  **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)
 
 **3.** ***Related
        Party Transactions (continued):***
 
 **Fees
                  /**
                **Compensation******
              ****
              **Amount**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 proceeding 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.
  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.
  10
  **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)
 
 **3.** ***Related
        Party Transactions (continued):***
 
 **Operating
                  Stage**
                **Distributions**
              
              **Amount
                  of Distribution**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.
  11
  **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)
 
 **3.** ***Related
        Party Transactions (continued):***
 
 **Liquidating
                  Stage**
                **Distributions**
              
              **Amount
                  of Distribution**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.
 
 **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., which we 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. All
        forward-looking statements should be read in light of the factors identified
        in
        the “Risk Factors” section of the Registration Statement on Form S-11 (File No.
        333-117367) of Lightstone Value Plus Real Estate Investment Trust, Inc. filed
        with the Securities and Exchange Commission (the “SEC”), as the same may be
        amended and supplemented from time to time.
   12
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS, CONTINUED:**
 
 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”) is a recently
        formed real estate company that intends to acquire and operate commercial
        and
        residential properties, principally in the United States. We intend to acquire
        fee interests in multi-tenanted, community, power and lifestyle shopping
        centers, and in malls located in highly trafficked retail corridors,
        high-barrier to entry markets, and sub-markets with constraints on the amount
        of
        additional property supply. Additionally, we seek to acquire multi-tenanted
        industrial properties located near major transportation arteries and
        distribution corridors; multi-tenanted office properties located near major
        transportation arteries; and market-rate, middle market multifamily properties
        at a discount to replacement cost. We do not intend to invest in single family
        residential properties; hotels or motels; leisure home sites; farms; ranches;
        timberlands; unimproved properties not intended to be developed; or mining
        properties.
 
 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 our sponsor, The Lightstone Group, in order to achieve economies
        of
        scale where possible. The Lightstone Group currently maintains operations
        in
        Alabama, California, Connecticut, Florida, Georgia, Illinois, Indiana, Maryland,
        Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North
        Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee,
        Texas, Virginia, Washington, West Virginia, Wisconsin and Puerto Rico.
  13
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS, CONTINUED:**
 
 We
        intend
        to utilize leverage in acquiring our properties. The number of different
        properties we will acquire will be affected by numerous factors, including,
        the
        amount of funds available to us. When interest rates on mortgage loans are
        high
        or financing is otherwise unavailable on terms that are satisfactory to us,
        we
        may purchase certain properties for cash with the intention of obtaining
        a
        mortgage loan for a portion of the purchase price at a later time. 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, 2005, 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 our “Advisor,” pursuant to which our 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 will pay
        our
        Advisor fees for services related to the investment and management of our
        assets, and we will reimburse our Advisor for certain expenses incurred on
        our
        behalf. The Advisor had incurred on behalf of the Company, organization and
        other offering costs, which consist of actual legal, accounting, printing
        and
        other accountable expenses (including sales literature and the prospectus),
        other than selling commissions and dealer manager fees, of approximately
        $890,527 and $412,001 as of June 30, 2005 and December 31, 2004,
        respectively.
  We
        filed
        a Registration Statement with the SEC to offer a maximum of 30,000,000 common
        shares, par value $.01 per share, at a price of $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). As of August 11, 2005, we have received
        subscriptions for 6,000 shares at $10 per share.
  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 under Section 856(c) of the Internal Revenue Code to
        be
        taxed as a REIT under the Internal Revenue Code, beginning with the taxable
        year
        ending December 31, 2005. If we qualify as a REIT for federal income tax
        purposes, we generally will not be subject to
  14
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS, CONTINUED:**
 
 federal
        income tax on income that we distribute to our stockholders. If we fail to
        qualify as a REIT in any taxable year, we will be subject to federal income
        tax
        on our taxable income at regular corporate rates and, if at such time we
        have
        previously qualified as a REIT, we will not be permitted to qualify for
        treatment as a REIT for federal income tax purposes for four years following
        the
        year in which our qualification is denied. Such an event could materially
        and
        adversely affect our net income. However, we believe that we are organized
        and
        will operate in a manner that will enable us to qualify for treatment as
        a REIT
        for federal income tax purposes during the year ending December 31, 2005,
        and
        thereafter we intend to continue to operate so as to remain qualified as
        a REIT
        for federal income tax purposes.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
  As
        of
        June 30, 2005, our sole source of funds was $200,000 from the sale of 20,000
        shares to the Advisor on July 6, 2004, our Advisor’s contribution of $2,000 to
        the Operating Partnership, and a short-term advance of working capital from
        our
        Advisor in the amount of $52,754, for a total of $254,754 in cash. We are
        dependent upon the net proceeds to be received from the Offering to conduct
        our
        proposed activities. The capital required to purchase real estate and real
        estate related investments will be obtained from the Offering and from any
        indebtedness that we may incur in connection with the acquisition of any
        real
        estate and real estate related investments thereafter.
  Our
        sources of funds will primarily be the net proceeds of the Offering, operating
        cash flows and borrowings. We believe that these cash resources will be
        sufficient to satisfy our cash requirements for the foreseeable future, and
        we
        do not anticipate a need to raise funds from other than these sources within
        the
        next twelve months.
  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.
        As
        of June 30, 2005, we had not entered into any loan agreements or incurred
        any
        indebtedness, excluding an obligation to repay a working capital advance
        of
        $52,754 to our Advisor.
 
 In
        addition to making investments in accordance with our investment objectives,
        we
        expect to use our capital resources to make certain payments to our Advisor,
        Lightstone Securities, LLC (our “Dealer Manager”), and Lightstone Value Plus
        REIT Management LLC, (our “Property Manager) during the various phases of our
        organization and operation. During the organizational and offering stage,
        these
        payments will include payments to our Dealer Manager for selling commissions
        and
        the dealer manager fee, and payments to our Advisor for the reimbursement
        of
        organization and offering costs. During the acquisition and development stage,
        these payments will include asset acquisition fees and asset management fees,
        and the reimbursement of acquisition related expenses to our Advisor. During
        the
        operational stage, we will pay our Property Manager a property management
        fee
        and our Advisor an asset management fee. We will also reimburse our Advisor
        and
        its affiliates for actual expenses it incurs for administrative and other
        services provided to us. Additionally, the Operating Partnership may be required
        to make distributions to Lightstone SLP, LLC, an affiliate of the Advisor,
  15
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS, CONTINUED:**
  as
        a
        result of its planned purchase of special general partner units in the Operating
        Partnership. If the minimum offering is not sold, the Company will not be
        responsible for the payment of any of these fees nor the costs of its
        organization and offering.
 
 The
        amount of dividends to be distributed to our stockholders will be determined
        by
        our board of directors and is dependent on a number of factors, including
        funds
        available for payment of dividends, our financial condition, capital expenditure
        requirements and annual distribution requirements needed to maintain our
        status
        as a REIT under the Internal Revenue Code.
  **RESULTS
        OF OPERATIONS**
  As
        of the
        date of this Form 10-Q, our operations had not commenced because we were
        in our
        organizational stage. 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.
  **CRITICAL
        ACCOUNTING POLICIES**
  We
        believe our most critical accounting policies will be the accounting for
        lease
        revenues (including straight-line rent), the regular evaluation of whether
        the
        value of a real estate asset has been impaired, real estate purchase price
        allocations and the accounting for our derivatives and hedging activities,
        if
        any. Each of these items involves estimates that require management to make
        judgments that are subjective in nature. We rely on our experience, collect
        historical data and current market data, and analyze these assumptions in
        order
        to arrive at what we believe to be reasonable estimates. Under different
        conditions or assumptions, materially different amounts could be reported
        related to the accounting policies described below. In addition, application
        of
        these accounting policies involves the exercise of judgments on the use of
        assumptions as to future uncertainties and, as a result, actual results could
        materially differ from these estimates.
  ***Revenue
        Recognition and Collectibility of Related Receivables***
  Our
        revenue, which will be comprised largely of rental income, will include rents
        that tenants pay in accordance with the terms of their respective leases
        reported on a straight-line basis over the initial term of the lease. Since
        our
        leases may provide for rental increases at specified intervals, straight-line
        basis accounting will require us to record as an asset, and include in revenue,
        unbilled rent that we will only receive if the tenant makes all rent payments
        required through the expiration of the initial term of the lease. Accordingly,
        we must determine, in our judgment, to what extent the unbilled rent receivable
        applicable to each specific tenant is collectible. We will review unbilled
        rent
        receivables on a quarterly basis and take into consideration the tenant’s
        payment history, the financial condition of the tenant, business conditions
        in
        the industry in which the tenant operates and economic conditions in the
        area in
        which the property is located. In the event that the collectibility of unbilled
        rent with respect to any given tenant is in doubt, we would be required to
        record an increase in our allowance for doubtful accounts or record a direct
        write-off of the specific rent receivable, which would have an adverse effect
        on
        our net income for the year in which the allowance is increased or the direct
        write-off is recorded and would decrease our total assets and stockholders’
        equity.
   16
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS, CONTINUED:**
 
 ***Investments
        in Real Estate***
  We
        will
        record investments in real estate at cost and will capitalize improvements
        and
        replacements when they extend the useful life or improve the efficiency of
        the
        asset. We will expense costs of repairs and maintenance as incurred. We will
        compute depreciation using the straight-line method over the estimated useful
        lives of our real estate assets, which we expect will be approximately 40
        years
        for buildings and improvements, three to seven years for equipment and fixtures
        and the shorter of the useful life or the remaining lease term for tenant
        improvements and leasehold interests.
 
 We
        will
        be required to make subjective assessments as to the useful lives of our
        properties for purposes of determining the amount of depreciation to record
        on
        an annual basis with respect to our investments in real estate. These
        assessments will have a direct impact on our net income because, if we were
        to
        shorten the expected useful lives of our investments in real estate, we would
        depreciate these investments over fewer years, resulting in more depreciation
        expense and lower net income on an annual basis.
  We
        have
        adopted Statement of Financial Accounting Standard No. 144, “Accounting for the
        Impairment or Disposal of Long-Lived Assets,” which we refer to as SFAS 144, and
        which establishes a single accounting model for the impairment or disposal
        of
        long-lived assets including discontinued operations. SFAS 144 requires that
        the
        operations related to properties that have been sold or that we intend to
        sell
        be presented as discontinued operations in the statement of income for all
        periods presented, and properties we intend to sell be designated as “held for
        sale” on our balance sheet.
  When
        circumstances such as adverse market conditions indicate a possible impairment
        of the value of a property, we will review the recoverability of the property’s
        carrying value. The review of recoverability will be based on our estimate
        of
        the future undiscounted cash flows, excluding interest charges, expected
        to
        result from the property’s use and eventual disposition. Our forecast of these
        cash flows will consider factors such as expected future operating income,
        market and other applicable trends and residual value, as well as the effects
        of
        leasing demand, competition and other factors. If impairment exists due to
        the
        inability to recover the carrying value of a property, an impairment loss
        will
        be recorded to the extent that the carrying value exceeds the estimated fair
        value of the property. We will be required to make subjective assessments
        as to
        whether there are impairments in the values of our investments in real estate.
        We will evaluate the collectibility of both interest and principal related
        to
        any real estate related investments in which we may invest. If circumstances
        indicate that such investment is impaired, we will reduce the carrying value
        of
        the investment to its net realizable value. Such reduction in value will
        be
        reflected as a charge to operations in the period in which the determination
        is
        made.
  ***Real
        Estate Purchase Price Allocation***
  We
        will
        allocate the purchase price of an acquired property to tangible assets (which
        includes land, buildings and tenant improvements) based on the estimated
        fair
        values of those tangible assets assuming the building was vacant. We will
        record
        above-market and below-market in-place lease values for acquired properties
        based on the present value (using an interest rate which reflects the risks
        associated with the leases acquired) of the difference between (1) the
        contractual amounts to be paid
  17
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS, CONTINUED:**
 
 pursuant
        to the in-place leases and (2) 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. We will amortize any capitalized
        above-market lease values as a reduction of rental income over the remaining
        non-cancelable terms of the respective leases. We will amortize any capitalized
        below-market lease values as an increase to rental income over the initial
        term
        and any fixed-rate renewal periods in the respective leases.
  We
        will
        measure the aggregate value of other intangible assets acquired based on
        the
        difference between (1) the property valued with existing in-place leases
        adjusted to market rental rates and (2) the property valued as if vacant.
        Our
        estimates of value are expected to be made using methods similar to those
        used
        by independent appraisers ( *e.g.* ,
        discounted cash flow analysis). Factors we may consider in our analysis include
        an estimate of carrying costs during hypothetical expected lease-up periods
        considering current market conditions and costs to execute similar leases.
        We
        will also consider information obtained about each property as a result of
        our
        pre-acquisition due diligence, marketing and leasing activities in estimating
        the fair value of the tangible and intangible assets acquired. In estimating
        carrying costs, we will also include real estate taxes, insurance and other
        operating expenses and estimates of lost rentals at market rates during the
        expected lease-up periods. We will also estimate costs to execute similar
        leases
        including leasing commissions, legal and other related expenses to the extent
        that such costs are not already incurred in connection with a new lease
        origination as part of the transaction.
 
 The
        total
        amount of other intangible assets acquired will be further allocated to in-place
        lease values and customer relationship intangible values based on our evaluation
        of the specific characteristics of each tenant’s lease and our overall
        relationship with that respective tenant. Characteristics we will consider
        in
        allocating these values include the nature and extent of our existing business
        relationships with the tenant, growth prospects for developing new business
        with
        the tenant, the tenant’s credit quality and expectations of lease renewals
        (including those existing under the terms of the lease agreement), among
        other
        factors.
  We
        will
        amortize the value of in-place leases to expense over the initial term of
        the
        respective leases, which we would not expect to exceed 20 years. The value
        of
        customer relationship intangibles will be amortized to expense over the initial
        term and any renewal periods in the respective leases, but in no event will
        the
        amortization period for intangible assets exceed the remaining depreciable
        life
        of the building. Should a tenant terminate its lease, the unamortized portion
        of
        the in-place lease value and customer relationship intangibles would be charged
        to expense.
  ***Joint
        Venture Investments***
  We
        will
        evaluate our joint venture investments in accordance with Financial Accounting
        Standards Board, Interpretation No. 46 (revised December 2003), *Consolidation
        of Variable Interest Entities* ,
        which
        we refer to as FIN 46R. If we determine that the joint venture is a “variable
        interest entity,” or a “VIE,” and that we are the “primary beneficiary” as
        defined in FIN 46R, we would account for such investment as if it were a
        consolidated subsidiary. For a joint venture investment which is not a VIE
        or in
        which we are not the primary beneficiary, we will consider Accounting Principle
        Board Opinion 18— *The
        Equity Method of Accounting for Investments in Common Stock* ,
  18
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS, CONTINUED:**
 
 Statement
        of Opinion 78-9— *Accounting
        for Investments in Real Estate Ventures* ,
        and
        Emerging Issues Task Force Issue 96-16— *Investors
        Accounting for an Investee When the Investor has the Majority of the Voting
        Interest but the Minority Partners have Certain Approval or Veto
        Rights* ,
        to
        determine the method of accounting for each of our partially-owned entities.
        In
        accordance with the above pronouncements, we will account for our investments
        in
        partially-owned entities under the equity method when we do not exercise
        direct
        or indirect control of the entity and our ownership interest is more than
        3% but
        less than 50%, in the case of a partially-owned limited partnership, or more
        than 20% but less than 50%, in the case of all other partially-owned entities.
        Factors that we will consider in determining whether or not we exercise control
        include substantive participating rights of partners on significant business
        decisions, including dispositions and acquisitions of assets, financing and
        operating and capital budgets, board and management representatives and
        authority and other contractual rights of our partners. To the extent that
        we
        are deemed to control these entities, these entities would be consolidated.
 
 On
        a
        periodic basis we will evaluate whether there are any indicators that the
        value
        of our investments in partially-owned entities are impaired. An investment
        is
        impaired if our estimate of the value of the investment is less than the
        carrying amount. The ultimate realization of our investment in partially-owned
        entities is dependent on a number of factors including the performance of
        that
        entity and market conditions. If we determine that a decline in the value
        of a
        partially-owned entity is other than temporary, then we would record an
        impairment charge.
 
 ***Accounting
        for Derivative Financial Investments and Hedging Activities***
  We
        will
        account for our derivative and hedging activities, if any, using SFAS 133,
        “Accounting for Derivative Instruments and Hedging Activities,” as amended by
        SFAS 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral
        of the Effective Date of FASB Statement No. 133,” and SFAS 149, “Amendment of
        Statement 133 on Derivative Instruments and Hedging Activities,” which require
        all derivative instruments to be carried at fair value on the balance sheet.
  Derivative
        instruments designated in a hedge relationship to mitigate exposure to
        variability in expected future cash flows, or other types of forecasted
        transactions, will be considered cash flow hedges. We will formally document
        all
        relationships between hedging instruments and hedged items, as well as our
        risk-
        management objective and strategy for undertaking each hedge transaction.
        We
        will periodically review the effectiveness of each hedging transaction, which
        involves estimating future cash flows. Cash flow hedges will be accounted
        for by
        recording the fair value of the derivative instrument on the balance sheet
        as
        either an asset or liability, with a corresponding amount recorded in other
        comprehensive income within shareholders’ equity. Amounts will be reclassified
        from other comprehensive income to the income statement in the period or
        periods
        the hedged forecasted transaction affects earnings. Derivative instruments
        designated in a hedge relationship to mitigate exposure to changes in the
        fair
        value of an asset, liability, or firm commitment attributable to a particular
        risk, such as interest rate risk, will be considered fair value hedges under
        SFAS 133. We are not currently a party to any derivatives
        contracts.
  19
  **PART
        I. FINANCIAL INFORMATION, CONTINUED:**
 **ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**
  Market
        risk includes risks that arise from changes in interest rates, foreign currency
        exchange rates, commodity prices, equity prices and other market changes
        that
        affect market sensitive instruments. In pursuing our business plan, we expect
        that the primary market risk to which we will be exposed is interest rate
        risk.
  We
        may be
        exposed to the effects of interest rate changes primarily as a result of
        borrowings used to maintain liquidity and fund 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. Because we have not commenced operations, we currently have limited
        exposure to financial market risks. Currently our cash balance represents
        the
        majority of our assets and a 10% increase or decrease in interest rates would
        have no material effect on our financial position or results of operations.
  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,
        and 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 2006.
  There
        have been no changes in our internal control over financial reporting that
        occurred during our last fiscal quarter that has materially affected, or
        is
        reasonably likely to materially affect, our internal control over financial
        reporting. There were no significant deficiencies or material weaknesses
        identified in the evaluation, and therefore, no corrective actions were
        taken.
  **PART
        II. OTHER INFORMATION:**
  **ITEM
        1. LEGAL PROCEEDINGS**
  None.
  20
  **PART
        II. OTHER INFORMATION, CONTINUED:**
 **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.
        Proceeds raised from the Offering will be placed in escrow until such time
        as we
        receive and accept subscriptions for a minimum of 1,000,000 shares, as more
        fully described in the Registration Statement. As of August 11, 2005, we
        had not
        reached this minimum offering and thus had not received any proceeds from
        the
        Offering.
  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.
  **ITEM
        3. DEFAULTS UPON SENIOR SECURITIES**
  None.
  **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  None.
  **ITEM
        5. OTHER INFORMATION.**
  On
        June
        24, 2005, Lightstone Value Plus Real Estate Investment Trust, Inc. (the
“Company”) engaged Amper, Politziner & Mattia, P.C. (“Amper”) as its
        independent registered public accounting firm. No audit or similar committee
        of
        the Board of Directors of the Company (the “Board”) made the decision to engage
        Amper, however the audit committee ratified the appointment of Amper on August
        11, 2005. Since its incorporation and through June 24, 2005, the Company
        has not
        consulted with Amper in respect of the Company’s consolidated financial
        statements for the year ended December 31, 2004 regarding any of the matters
        or
        events set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
  On
        June
        24, 2005, the Company dismissed Kamler, Lewis and Noreman LLP (“Kamler”) as its
        independent registered public accounting firm. Kamler’s report on the financial
        statements of the Company since its incorporation did not contain any adverse
        opinion or disclaimer of opinion and was not qualified or modified as to
        uncertainty, audit scope or accounting principles. Further, since the Company’s
        incorporation and through June 24, 2005, there were no disagreements with
        Kamler
        regarding accounting principles or practices, financial statement disclosure
        or
        auditing scope or procedure, which disagreement, if not resolved to Kamler’s
        satisfaction, would have caused Kamler to reference the disagreement’s subject
        matter in connection with its report. Finally, since the Company’s incorporation
        and through June 24, 2005, there have been no “reportable events,” as defined in
        Regulation S-K, Item 304(a)(1)(v). No audit or similar committee of the Board
        of
        Directors of the Company (the “Board”) made the decision to dismiss
        Kamler.
  21
 
 **PART
        II. OTHER INFORMATION, CONTINUED:**
 **ITEM
        6. EXHIBITS**
  **Exhibit**
                **Number**
              
              
              **Description**3.1
              *
              
              Amended
                  and Restated Charter of Lightstone Value Plus Real Estate Investment
                  Trust, Inc.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.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: August
                  11, 2005
              By:
              /s/    David
                  LichtensteinDavid
                LichtensteinPresident,
                  Chief Executive Officer and Director
                (Principal
                  Executive Officer)
 Date: August
                  11, 2005
              By:
              /s/    Michael
                  M. SchurerMichael
                M. SchurerChief
                  Financial Officer and Treasurer
                (Duly
                  Authorized Officer and Principal Financial and Accounting
                  Officer)
   23