**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, 2008





OR





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





For
      the
      transition period from  to





Commission
      file number 333-117367





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


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





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





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





**(732)
      367-0129**


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





Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes þ No  ̈




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


Large
                accelerated filer    ̈
            
            Accelerated
                filer    ̈
            
            Non-accelerated
                filer    þ




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes  ̈ No þ





As
      of May
      6, 2008, there were 18.4 million 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, 2008 (unaudited) and December 31,
                2007
            
            3Consolidated
                Statements of Operations (unaudited) for the Three Months Ended March
                31,
                2008 and 2007
            
            4Consolidated
                Statement of Stockholders’ Equity and Other Comprehensive Loss (unaudited)
                for the Three Months Ended March 31, 2008
            
            5Consolidated
                Statements of Cash Flows (unaudited) for the Three Months Ended March
                31,
                2008 and 2007
            
            6Notes
                to Consolidated Financial Statements
            
            7Item 2.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            26Item 3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            38Item 4.
            
            Controls
                and Procedures
            
            39**PART II**
            
            **OTHER
                INFORMATION**Item
                1.
            
            Legal
                Proceedings
            
            40Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            41Item
                3.
            
            Defaults
                Upon Senior Securities
            
            42Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            42Item
                5.
            
            Other
                Information
            
            42Item
                6.
            
            Exhibits
            
            42





2


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


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





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


**CONSOLIDATED
      BALANCE SHEETS**


**March 31, 2008**
              
              **December 31, 2007**(unaudited)***Assets***Investment
                  property:Land
              
              $
              62,045,065
              
              $
              62,032,138Building
              
              
              240,381,820
              
              
              240,221,044Construction
                  in Progress
              
              
              9,481,806
              
              
              7,499,319311,908,691
              
              
              309,752,501Less
                  accumulated depreciation
              
              
              (6,879,446
              )
              
              (5,455,550
              )Net
                  investment property
              
              
              305,029,245
              
              
              304,296,951Investment
                  in unconsolidated real estate joint venture
              
              
              5,342,186
              
              
              6,284,675Cash
                  and cash equivalents
              
              
              60,371,813
              
              
              29,589,815Marketable
                  Securities
              
              
              11,228,129
              
              
              10,752,910Restricted
                  escrows
              
              
              9,695,408
              
              
              9,595,453Tenant
                  and other accounts receivable
              
              
              1,764,978
              
              
              1,531,180Acquired
                  in-place lease intangibles (net of accumulated amortization of
                  $2,639,375
                  and $2,646,629, respectively)
              
              
              1,733,426
              
              
              1,982,292Acquired
                  above market lease intangibles (net of accumulated amortization
                  of
                  $468,745 and $373,175, respectively)
              
              
              728,914
              
              
              830,727Deferred
                  intangible leasing costs (net of accumulated amortization of $594,551
                  and
                  $605,093, respectively)
              
              
              1,023,007
              
              
              1,153,712Deferred
                  leasing costs (net of accumulated amortization of $56,000 and $50,606,
                  respectively)
              
              
              277,049
              
              
              154,879Deferred
                  financing costs (net of accumulated amortization of $292,481 and
                  $172,939,
                  respectively)
              
              
              2,041,089
              
              
              2,154,560Prepaid
                  expenses and other assets
              
              
              1,143,944
              
              
              1,374,200**Total
                  Assets**
              
              $
              400,379,188
              
              $
              369,701,354***Liabilities
                  and Stockholders' Equity***Mortgages
                  payable
              
              $
              238,217,148
              
              $
              237,610,371Note
                  payable
              
              
              6,386,370
              
              
              5,825,286Accounts
                  payable and accrued expenses
              
              
              5,947,181
              
              
              5,811,535Due
                  to sponsor
              
              
              690,985
              
              
              521,427Tenant
                  allowances and deposits payable
              
              
              950,679
              
              
              943,854Distributions
                  payable
              
              
              2,923,055
              
              
              2,463,361Prepaid
                  rental revenues
              
              
              953,001
              
              
              1,066,724Acquired
                  below market lease intangibles (net of accumulated amortization
                  of
                  $1,525,547 and $1,874,843, respectively)
              
              
              2,058,352
              
              
              2,391,883258,126,771
              
              
              256,634,441Minority
                  interest in partnership
              
              
              16,739,580
              
              
              12,954,715Commitments
                  and contingenciesStockholders'
                  equity:Preferred
                  shares, 10,000,000 shares authorized, none outstanding
              
              
              -
              
              
              -Common
                  stock, $.01 par value; 60,000,000 shares authorized, 17,338,504
                  and
                  13,606,608 shares issued and outstanding, respectively
              
              
              173,385
              
              
              136,066Additional
                  paid-in-capital
              
              
              154,225,742
              
              
              120,297,590Accumulated
                  other comprehensive loss
              
              
              (4,779,853
              )
              
              (1,199,278
              )Accumulated
                  distributions in addition to net loss
              
              
              (24,106,437
              )
              
              (19,122,180
              )Total
                  stockholder’s equity
              
              
              125,512,837
              
              
              100,112,198**Total
                  Liabilities and Stockholders' Equity**
              
              $
              400,379,188
              
              $
              369,701,354





The
      Company’s 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. AND
      SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**





**Three Months ended**
              **March 31, 2008**
            
            **Three Months ended**
              **March 31, 2007**Revenues:Rental
                income
            
            $
            8,704,282
            
            $
            4,499,624Tenant
                recovery income
            
            
            1,069,527
            
            
            716,2799,773,809
            
            
            5,215,903Expenses:Property
                operating expenses
            
            
            4,116,309
            
            
            1,985,214Real
                estate taxes
            
            
            1,038,193
            
            
            584,643General
                and administrative costs
            
            
            1,036,216
            
            
            2,000,618Depreciation
                and amortization
            
            
            2,160,570
            
            
            1,432,2998,351,288
            
            
            6,002,774Operating
                income (loss)
            
            
            1,422,521
            
            
            (786,871
            )Other
                income
            
            
            146,091
            
            
            211,282Interest
                income
            
            
            884,597
            
            
            139,415Interest
                expense
            
            
            (3,571,978
            )
            
            (1,906,876
            )Loss
                from investment in unconsolidated joint venture
            
            
            (942,488
            )
            
            (2,019,896
            )Minority
                interest
            
            
            55
            
            
            191Net
                loss applicable to common shares
            
            $
            (2,061,202
            )
            $
            (4,362,755
            )Net
                loss per common share, basic and diluted
            
            $
            (0.14
            )
            $
            (0.86
            )Weighted
                average number of common shares outstanding, basic and
                diluted
            
            
            15,239,189
            
            
            5,089,327





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




4





**PART
      I. FINANCIAL INFORMATION:**


**ITEM
      1. FINANCIAL STATEMENTS.**





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


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


**(UNAUDITED)**





**Accumulated****Preferred
                Shares**
            
            **Common
                Shares**
            
            **Additional**
            
            **Accumulated****Other**
            
            **Distributions in**
            
            **Total****Preferred**
            
            
            
            **Common**
            
            
            
            **Paid-In**
            
            **Comprehensive**
            
            **Addition
                to Net**
            
            **Stockholders'****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Loss**
            
            **Loss**
            
            **Equity****BALANCE,
                December 31, 2007**
            
            
            -
            
            $
            -
            
            
            13,606,608
            
            $
            136,066
            
            $
            120,297,590
            
            $
            (1,199,278
            )
            $
            (19,122,180
            )
            $
            100,112,198**Comprehensive
                loss:**Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,061,202
            )
            
            (2,061,202
            )Unrealized loss
                on available for sale securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,580,575
            )
            
            -
            
            
            (3,580,575
            )Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (5,641,777
            )Distributions
                declared
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -
            
            
            (2,923,055
            )
            
            (2,923,055
            )Proceeds
                from offering
            
            
            -
            
            
            -
            
            
            3,638,331
            
            
            36,383
            
            
            36,507,949
            
            
            -
            
            
            -
            
            
            36,544,332Selling
                commissions and dealer manager fees
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,699,239
            )
            
            -
            
            
            -
            
            
            (2,699,239
            )Other
                offering costs
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (768,487
            )
            
            -
            
            
            -
            
            
            (768,487
            )Proceeds
                from distribution reinvestment program
            
            
            
            
            
            
            
            
            93,565
            
            
            936
            
            
            887,929
            
            
            -
            
            
            -
            
            
            888,865**BALANCE,
                March 31, 2008**
            
            
            -
            
            $
            -
            
            
            17,338,504
            
            $
            173,385
            
            $
            154,225,742
            
            $
            (4,779,853
            )
            $
            (24,106,437
            )
            $
            125,512,837




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




5




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


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




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


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




**Three months**
              **ended March 31,**
              **2008**
            
            **Three months**
              **ended March** **31,**
              **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (2,061,202
            )
            $
            (4,362,755
            )Loss
                allocated to minority interests
            
            
            (55
            )
            
            (191
            )Adjustments
                to reconcile net loss to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            2,006,747
            
            
            1,318,564Amortization
                of deferred financing costs
            
            
            119,542
            
            
            23,632Amortization
                of deferred leasing costs
            
            
            153,823
            
            
            113,738Amortization
                of above and below-market lease intangibles
            
            
            (231,718
            )
            
            (72,725
            )Equity
                in loss from investment in unconsolidated joint venture
            
            
            942,488
            
            
            2,019,896Changes
                in assets and liabilities:Increase
                in prepaid expenses and other assets
            
            
            286,866
            
            
            21,212Increase
                in tenant and other accounts receivable
            
            
            (233,798
            )
            
            (642,338
            )Increase
                in tenant allowance and security deposits payable
            
            
            6,825
            
            
            365,116Increase
                in accounts payable and accrued expenses
            
            
            135,645
            
            
            581,704Increase
                in due to sponsor
            
            
            238,111
            
            
            -Increase
                in prepaid rents
            
            
            (113,722
            )
            
            419,433Net
                cash provided by (used in)operating activities
            
            
            1,249,552
            
            
            (214,714
            )**CASH
                FLOWS USED IN INVESTING ACTIVITIES:**Purchase
                of investment property, net
            
            
            (2,692,071
            )
            
            (57,884,831
            )Purchase
                of marketable securities
            
            
            (4,055,794
            )
            
            -Investment
                in unconsolidated joint venture
            
            
            -
            
            
            (12,985,864
            )Funding
                of restricted escrows
            
            
            (99,956
            )
            
            (1,477,472
            )Refundable
                deposit for investment in real estate
            
            
            -
            
            
            (3,685,000
            )Net
                cash used in investing activities
            
            
            (6,847,821
            )
            
            (76,033,167
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from mortgages financing
            
            
            685,561
            
            
            53,025,000Proceeds
                from note payable
            
            
            561,084
            
            
            -Mortgage
                payments
            
            
            (78,785
            )
            
            -Payment
                of loan fees and expenses
            
            
            (6,071
            )
            
            (343,814
            )Proceeds
                from issuance of common stock
            
            
            36,544,332
            
            
            15,498,969Proceeds
                from issuance of special general partnership units
            
            
            3,716,367
            
            
            1,553,757Payment
                of offering costs
            
            
            (3,467,726
            )
            
            (1,553,757
            )Due
                from escrow agent
            
            
            -
            
            
            163,949Distributions
                paid
            
            
            (1,574,495
            )
            
            (350,039
            )Net
                cash provided by financing activities
            
            
            36,380,267
            
            
            67,994,065**Net
                change in cash and cash equivalents**
            
            
            30,781,998
            
            
            (8,253,816
            )**Cash
                and cash equivalents, beginning of period**
            
            
            29,589,815
            
            
            19,280,710**Cash
                and cash equivalents, end of period**
            
            $
            60,371,813
            
            $
            11,026,894**Supplemental
                disclosure of cash flow information:**Cash
                paid for interest
            
            $
            3,416,746
            
            $
            1,637,284Distributions
                declared
            
            $
            2,923,055
            
            $
            874,915Unrealized
                loss on available for sale securities
            
            $
            3,580,575
            
            $
            -Proceeds
                from shares issued in distribution reinvestment program
            
            $
            888,865
            
            $
            289,852





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




6




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


**Notes
      to Consolidated Financial Statements**





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




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




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




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




The
      Company sold 20,000 shares to the Advisor on July 6, 2004, for $10 per share.
      The Company invested the proceeds from this sale in the Operating Partnership,
      and as a result, held a 99.9% limited partnership interest in the Operating
      Partnership. The Advisor also contributed $2,000 to the Operating Partnership
      in
      exchange for 200 limited partner units in the Operating Partnership. The limited
      partner has the right to convert operating partnership units into cash or,
      at
      the option of the Company, an equal number of common shares of the Company,
      as
      allowed by the limited partnership agreement.




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




As
      of
      March 31, 2008, cumulative gross offering proceeds, of approximately $170.4
      million, which includes $3.1 million of proceeds from shares issued in
      distribution reinvestment program have been released to the Lightstone REIT
      and
      used for the purchase of a 99.99% general partnership interest in the Operating
      Partnership. The Company expects that its ownership percentage in the Operating
      Partnership will remain significant as it plans to continue to invest all net
      proceeds from the Offering in the Operating Partnership.





Lightstone
      SLP, LLC, an affiliate of the Advisor, intends to periodically purchase special
      general partner interests (“SLP Units”) in the Operating Partnership at a cost
      of $100,000 per unit for each $1.0 million in offering subscriptions. Proceeds
      from the sale of the SLP Units will be used to fund organizational and offering
      costs incurred by the Company. As of March 31, 2008, offering costs of $16.7
      million have been substantially offset by $16.7 million of proceeds from the
      sale of SLP Units. Lightstone SLP, LLC has purchased an additional $0.1 million
      of SLP Units subsequent to March 31, 2008.





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, 2008, the Advisor has not allocated any
      organizational costs to the Company. Advances for offering costs in excess
      of
      the 10% will only be reimbursed to the Advisor as additional offering proceeds
      are received by the Company. As of March 31, 2008, offering costs incurred
      were
      slightly less than 10%.




7




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


Through
      its Operating Partnership, the Company will seek to acquire and operate
      commercial, residential, and hospitality properties, principally in the
      United States. Primarily all such properties may be acquired and operated by
      the
      Company alone or jointly with another party. Since inception, the Company has
      completed the acquisition of the St. Augustine Outlet Mall in St. Augustine,
      Florida, the Michigan apartments, four multi-family communities in Southeast
      Michigan, Oakview Power Center, a retail power center and raw land in Omaha,
      Nebraska and the Gulf States industrial portfolio, which consisted of industrial
      and office properties located in New Orleans, LA (5 industrial and 2
      office properties), Baton Rouge, LA (3 industrial properties) and San
      Antonio, TX (4 industrial properties). In addition, the Company has made an
      investment in a sub-leasehold interest in a ground lease to an office building
      located at 1407 Broadway in New York, NY, purchased a land parcel in Lake
      Jackson, TX on which it completed the development of the Brazos Crossing Power
      Center in the first quarter of 2008, an 8.5-acre parcel of undeveloped land,
      including development rights, which is intended to be used for further
      development of the adjacent St. Augustine Outlet mall, and the Southeast
      Apartments, which consisted of five apartment communities located in Tampa,
      FL
      (one property), Charlotte, North Carolina (two properties) and Greensboro,
      North
      Carolina (two properties), and the Sugarland and Katy Highway Extended Stay
      Hotels located in Houston, TX . All of the acquired properties and development
      activities are managed by affiliates of Lightstone Value Plus REIT Management
      LLC (the “Property Manager”).





The
      Company’s Advisor, Property Manager and Dealer Manager are each related parties.
      Each of these entities will receive compensation and fees for services related
      to the offering and for the investment and management of the Company’s assets.
      These entities will receive fees during the offering, acquisition, operational
      and liquidation stages. The compensation levels during the offering, acquisition
      and operational stages are based on percentages of the offering proceeds sold,
      the cost of acquired properties and the annual revenue earned from such
      properties, and other such fees outlined in each of the respective agreements.
      (See Note 9, Related Party Transactions).




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




Basis
      of Presentation




The
      consolidated financial statements include the accounts of the Company and the
      Operating Partnership and its subsidiaries (over which Lightstone REIT exercises
      financial and operating control). As of March 31, 2008, the Company had a 99.99%
      general partnership interest in the Operating Partnership. All inter-company
      balances and transactions have been eliminated in consolidation.




The
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States of America (GAAP).
      GAAP requires the Company’s management to make estimates and assumptions that
      affect the reported amounts of assets and liabilities, the disclosure of
      contingent assets and liabilities and the reported amounts of revenues and
      expenses during a reporting period. The most significant assumptions and
      estimates relate to the valuation of real estate, depreciable lives, revenue
      recognition, the collectability of trade accounts receivable and the
      realizability of deferred tax assets. Application of these assumptions requires
      the exercise of judgment as to future uncertainties and, as a result, actual
      results could differ from these estimates.





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




Cash
      and Cash Equivalents




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




8


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




Marketable
      Securities





Our
      marketable securities consist of equity securities that are designated as
      available-for-sale and are recorded at fair value, in accordance with Statement
      of Financial Accounting Standards (FAS) No. 115, *Accounting
      for Certain Investments in Debt and Equity Securities* .
      Unrealized holding gains or losses are reported as a component of accumulated
      other comprehensive income (loss). Realized gains or losses resulting from
      the
      sale of these securities are determined based on the specific identification
      of
      the securities sold. Marketable securities with original maturities greater
      than
      three months and less than one year are classified as short-term; otherwise
      they
      are classified as long-term. An impairment charge is recognized when the decline
      in the fair value of a security below the amortized cost basis is determined
      to
      be other-than-temporary. We consider various factors in determining whether
      to
      recognize an impairment charge, including the duration and severity of any
      decline in fair value below our amortized cost basis, any adverse changes in
      the
      financial condition of the issuers’ and our intent and ability to hold the
      investment for a period of time sufficient to allow for any anticipated recovery
      in market value. The Board has authorized the Company to from time to time
      to
      invest the Company’s available cash in marketable securities of real estate
      related companies. The Board has approved investments up to 30% of the Company’s
      total assets to be made at the Company’s discretion, subject to compliance with
      any REIT or other restrictions. At March 31, 2008 and December 31, 2007, the
      Company has included $4.8 million and $1.2 million of unrealized losses in
      accumulated other comprehensive loss. The following is a summary of the
      Company’s available for sale securities at March 31, 2008 and December 31,
      2007:





**At March 31, 2008**
            
            **At December 31, 2007****Cost**
            
            $
            16,007,982
            
            $
            11,952,188**Unrealized
                loss**
            
            
            (4,779,853
            )
            
            (1,199,278
            )**Fair
                Value at period end**
            
            $
            11,228,129
            
            $
            10,752,910




Revenue
      Recognition




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





Accounts
      Receivable




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




9




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




Investment
      in Real Estate




*Accounting
      for Acquisitions*




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




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





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




The
      aggregate value of in-place leases is determined by evaluating various factors,
      including an estimate of carrying costs during the expected lease-up periods,
      current market conditions and similar leases. In estimating carrying costs,
      management includes real estate taxes, insurance and other operating expenses,
      and estimates of lost rental revenue during the expected lease-up periods based
      on current market demand. Management also estimates costs to execute similar
      leases including leasing commissions, legal and other related costs. The value
      assigned to this intangible asset is amortized over the remaining lease terms
      ranging from one month to approximately 11 years. Optional renewal periods
      are
      not considered.




The
      aggregate value of other acquired intangible assets includes tenant
      relationships. Factors considered by management in assigning a value to these
      relationships include: assumptions of probability of lease renewals, investment
      in tenant improvements, leasing commissions and an approximate time lapse in
      rental income while a new tenant is located. The value assigned to this
      intangible asset is amortized over the remaining lease terms ranging from one
      month to approximately 11 years.




*Carrying
      Value of Assets*




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




10




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


*Impairment
      Evaluation*




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




The
      Company evaluates the long-lived assets, in accordance with SFAS No. 144 on
      a
      quarterly basis and will record an impairment charge when there is an indicator
      of impairment and the undiscounted projected cash flows are less than the
      carrying amount for a particular property. Management concluded no impairment
      adjustment was required through March 31, 2008. The estimated cash flows used
      for the impairment analysis and the determination of estimated fair value are
      based on the Company’s plans for the respective assets and the Company’s views
      of market and economic conditions. The estimates consider matters such as
      current and historical rental rates, occupancies for the respective Properties
      and comparable properties, and recent sales data for comparable properties.
      Changes in estimated future cash flows due to changes in the Company’s plans or
      views of market and economic conditions could result in recognition of
      impairment losses, which, under the applicable accounting guidance, could be
      substantial.





Depreciation
      and Amortization




Depreciation
      expense for real estate assets is computed using a straight-line method using
      a
      weighted average composite life of thirty-nine years for buildings and
      improvements and five to ten years for equipment and fixtures. Expenditures
      for
      tenant improvements and construction allowances paid to commercial tenants
      are
      capitalized and amortized over the initial term of each lease, currently one
      month to 11 years. Maintenance and repairs are charged to expense as
      incurred.




Deferred
      Costs




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





Income
      Taxes





The
      Company made an election in 2006 to be taxed as a real estate investment trust
      (a “REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986,
      as amended (the “Code”), beginning with ts first taxable year, which ended
      December 31, 2005. Accordingly, no provision for income tax has been
      recorded.




We
      elected and qualified to be taxed as a REIT under Sections 856 through 860
      of the Internal Revenue Code in conjunction with the filing of our 2006 federal
      tax return. To maintain its status as a REIT, the Company must meet certain
      organizational and operational requirements, including a requirement to
      distribute at least 90% of its ordinary taxable income to stockholders. As
      a
      REIT, the Company generally will not be subject to federal income tax on taxable
      income that it distributes to its stockholders. If the Company fails to qualify
      as a REIT in any taxable year, it will then be subject to federal income taxes
      on its taxable income at regular corporate rates and will not be permitted
      to
      qualify for treatment as a REIT for federal income tax purposes for four years
      following the year during which qualification is lost unless the Internal
      Revenue Service grants the Company relief under certain statutory provisions.
      Such an event could materially adversely affect the Company’s net income and net
      cash available for distribution to stockholders. However, the Company believes
      that it will be organized and operate in such a manner as to maintain treatment
      as a REIT and intends to operate in such a manner so that the Company will
      remain qualified as a REIT for federal income tax purposes. Through March 31,
      2008, the Company has complied with the requirements for maintaining its REIT
      status.




11




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


The
      Company has net operating loss carryforwards for Federal income tax purposes
      as
      of March 31, 2008. The availability of such loss carryforwards will begin to
      expire in 2026. As the Company does not consider it likely that it will realize
      any future benefit from its loss carry-forward, any deferred asset resulting
      from the final determination of its tax losses will be fully offset by a
      valuation allowance of the same amount.




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




Organization
      and Offering Costs




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





Through
      March 31, 2008, the Advisor has advanced approximately $16.7 million to the
      Company for offering costs, including commission and dealer manager fees. Based
      on gross proceeds of approximately $170.4 million from its public offering
      as of March 31, 2008, the Company’s responsibility for the reimbursement of
      advances for commissions and dealer manager fees was limited to 10% of gross
      offering proceeds, which generally approximate $13.6 million (or 8% of the
      gross
      offering proceeds), and its obligation for advances for organization and
      third-party offering costs was limited to approximately $3.4 million (or 2%
      of
      the gross offering proceeds).




Financial
      Instruments




The
      carrying amounts of cash and cash equivalents, accounts receivable and accounts
      payable approximate their fair values because of the short maturity of these
      instruments. The fair value of the mortgage-debt and note payable as of March
      31, 2008 approximated the book value of approximately $244.6 million. The fair
      value of the mortgage debt and notes payable was determined by discounting
      the
      future contractual interest and principal payments by a market
      rate.




Use
      of
      Estimates




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





Net
      Loss per Share




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





12


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


New
      Accounting Pronouncements




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities Including an Amendment of FASB
      Statement No. 115” (“SFAS No. 159”). This standard permits entities to choose to
      measure many financial instruments and certain other items at fair value and
      is
      effective for the first fiscal year beginning after November 15, 2007. The
      Company adopted SFAS No. 159 as required effective January 1,
      2008.  The adoption of SFAS No. 157 did not have a material effect on
      the consolidated results of operations or financial position.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* .
      This
      Statement applies under other accounting pronouncements that require or permit
      fair value measurements. Accordingly, this Statement does not require any new
      fair value measurements. However, for some entities, the application of this
      Statement will change current practice. This Statement clarifies that market
      participant assumptions include assumptions about risk, for example, the risk
      inherent in a particular valuation technique used to measure fair value (such
      as
      a pricing model) and/or risk inherent in the inputs to the valuation technique.
      This Statement clarifies that market participant assumptions also include
      assumptions about the effect of a restriction on the sale or use of an asset.
      This Statement also clarifies that a fair value measurement for a liability
      reflects its nonperformance risk. The statement is effective in the fiscal
      first
      quarter of 2008 except for non-financial assets and liabilities recognized
      or
      disclosed at fair value on a recurring basis, for which the effective date
      is
      fiscal years beginning after November 15, 2008. The Company adopted SFAS
      No. 157 as required effective January 1, 2008.  The adoption of
      SFAS No. 157 did not have a material effect on the consolidated results of
      operations or financial position.




In
      June
      2007, the AICPA issued Statement of Position (“SOP”) 07-1, “Clarification of the
      Scope of the Audit and Accounting Guide, Investment Companies and Accounting
      by
      Parent Companies and Equity Method Investors for Investments in Investment
      Companies.” SOP 07-1 provides guidance for determining whether an entity is
      within the scope of the AICPA Audit and Accounting Guide, “Investment Companies”
(the “Guide”) and when companies that own or have significant stakes in
      investment companies should and should not retain, in their financial
      statements, the specialized industry accounting under the Guide. This statement
      is effective for financial statements issued for fiscal years beginning after
      December 15, 2007, and interim periods within those fiscal years. The Company
      adopted SOP 07-1 as required effective January 1, 2008.  The adoption
      of SOP 07-1 did not have a material effect on the consolidated results of
      operations or financial position.





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





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





13




**LIGHTSTONE
            VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES**
 **Notes
            to Consolidated Financial Statements (continued)**
  Reclassifications
  Certain
              prior period amounts have been reclassified to conform to the current
              year
              presentation.


**3.**
            ***Investment
                in Joint Venture***





*1407
      Broadway*




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





The
      Company accounted for the investment in this unconsolidated joint venture under
      the equity method of accounting as the Company exercises significant influence,
      but does not control these entities. Initial equity from the Sponsor, our
      co-venturer totaled $13.5 million (representing a 51% ownership interest).
      Our
      initial capital investment, funded with proceeds from our common stock offering,
      was $13.0 million (representing a 49% ownership interest). This $13.0 million
      investment was recorded initially at cost and will be subsequently adjusted
      for
      cash contributions and distributions, and the Company’s share of earnings and
      losses. The Company and the co-Venturer contributed approximately an additional
      $0.6 million in 2007. Earnings for each investment are recognized in accordance
      with this investment agreement and where applicable, based upon an allocation
      of
      the investment’s net assets at book value as if the investment was
      hypothetically liquidated at the end of each reporting period. For the three
      months ended March 31, 2008 and 2007, the Company’s results included a $1.0
      million and $2.0 million loss from investment in this unconsolidated joint
      venture, respectively resulting in a net investment balance of approximately
      $5.3 million as of March 31, 2008. The Joint Venture plans to continue an
      ongoing renovation project at the property that consists of lobby, elevator
      and
      window redevelopment projects. Additional loan proceeds of up to $15.5 million
      are available to fund these improvements.





In-place
      rents, net of rent concessions was $35.8 million, annualized at March 31, 2008
      and average occupancy for the property at March 31, 2008 was 87.7%.





The
      following table represents the condensed income statement for the unconsolidated
      joint venture for the three month period ended March 31, 2008 and for the period
      from January 4, 2007 through March 31, 2007:





For the three
              months ended
              March 31, 2008
            
            For the period January
              4, 2007 through March
              31, 2007Total
                Revenue
            
            $
            9,815,133
            
            $
            8,888,393Total
                property operating expenses
            
            
            6,329,600
            
            
            6,292,085Depreciation
                & Amortization
            
            
            3,247,463
            
            
            4,573,148Interest
                Expense
            
            
            2,161,516
            
            
            2,145,396Net
                operating loss
            
            $
            (1,923,446
            )
            $
            (4,122,236
            )Company's share
                of net operating loss (49%)
            
            $
            (942,488
            )
            $
            (2,019,896
            )


14
 **LIGHTSTONE
              VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES**
 **Notes
              to Consolidated Financial Statements (continued)**


The
      following table represents the condensed balance sheet for the unconsolidated
      joint venture as of March 31, 2008 and December 31, 2007:




At March 31, 2008
            
            At December 31, 2007Real
                estate, at cost (net):
            
            $
            111,392,285
            
            $
            111,361,237Intangible
                assets (net)
            
            
            7,521,461
            
            
            9,009,677Cash
                and restricted cash
            
            
            14,049,926
            
            
            11,458,096Other
                assets
            
            
            7,333,641
            
            
            9,475,857Total
                Assets
            
            $
            140,297,313
            
            $
            141,304,867Mortgage
                note payable
            
            $
            111,699,219
            
            $
            110,847,201Other
                liabilities
            
            
            17,704,236
            
            
            17,640,362Member
                capital
            
            
            10,893,858
            
            
            12,817,304Total
                liabilities and members' capital
            
            $
            140,297,313
            
            $
            141,304,867








***4.***
            ***Future
                Minimum Rentals***





As
      of
      March 31, 2008, the approximate fixed future minimum rentals from the Company’s
      commercial real estate properties are as follows:





Beyond2008
            
            2009
            
            2010
            
            2011
            
            2012
            
            2012
            
            TotalTotal
                Minimum Rents
            
            $
            8,479,212
            
            $
            9,542,911
            
            $
            6,423,791
            
            $
            4,599,656
            
            $
            3,332,555
            
            $
            2,595,151
            
            $
            34,973,276





***5.***
            ***Pro
                Forma Combined Condensed Statements of
                Operations***





The
      following unaudited pro forma combined condensed statements of operations set
      forth the consolidated results of operations for the three months ended March
      31, 2008 and March 31, 2007, respectively, as if the acquisitions and equity
      investments listed in Note 1 had occurred at January 1, 2007. There were no
      acquisitions during the three months ended March 31, 2008, and as such, the
      pro
      forma numbers are as reported. The unaudited pro forma information does not
      purport to be indicative of the results that actually would have occurred if
      the
      acquisitions had been in effect for the three months ended March 31, 2008 and
      March 31, 2007, respectively, or for any future period.




Three Months EndedMarch 31,2008
              
              2007Real
                  estate revenues
              
              $
              9,773,809
              
              $
              9,783,455Loss
                  from investment in unconsolidated joint venture
              
              
              (942,488
              )
              
              (2,019,896
              )Net
                  loss
              
              
              (2,061,202
              )
              
              (4,580,857
              )Basic
                  and diluted loss per share
              
              $
              (0.14
              )
              $
              (0.50
              )
  15
 **LIGHTSTONE
          VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES**
 **Notes
          to Consolidated Financial Statements (continued)**
  **6.**
              ***Mortgages
                  Payable*******
 
 At
        March
        31, 2008, the Company had mortgage debt totaling approximately $238.2 million
        as
        follows:
  Property
              
              Loan Amount
              
              Interest Rate
              
              Maturity Date
              
              Amount Due at MaturitySt.
                  Augustine
              
              $
              26,972,787
              
              
              6.09
              %
              
              April 2016
              
              $
              23,747,523Southeastern
                  Michigan Multi Family Properties
              
              
              40,725,000
              
              
              5.96
              %
              
              July 2016
              
              
              38,138,605Oakview
                  Plaza
              
              
              27,500,000
              
              
              5.49
              %
              
              January 2017
              
              
              25,583,137Gulf
                  Coast Industrial Portfolio
              
              
              53,025,000
              
              
              5.83
              %
              
              February 2017
              
              
              49,556,985Houston
                  Extended Stay Hotels (Two Individual Loans)
              
              
              10,725,561
              
              
              LIBOR
                  + 1.75
              %
              
              October 2008
              
              
              10,040,000Camden
                  Multi Family Properties - (Five Individual Loans)
              
              
              79,268,800
              
              
              5.44
              %
              
              December 2014
              
              
              74,955,771Total
                  of eleven outstanding mortgage loans at March 31, 2008
              
              $
              238,217,148
              
              
              
              
              
              
              
              $
              222,022,021
  LIBOR
        at
        March 31, 2008 was 2.7%. Monthly installments of interest only were required
        through the first 12 months for the St. Augustine loan, and monthly installments
        of principal and interest are required throughout the remainder of its stated
        term. Monthly installments of interest only are required through the first
        60
        months for the Southeastern Michigan multi-family properties, and through
        the
        first 48 months for the Camden Multi-Family properties’ loans, and monthly
        installments of principal and interest are required throughout the remainder
        of
        its stated term. The remaining loans are interest only until their maturity,
        at
        which time the amounts listed in the table above are due, assuming no prior
        principal prepayment. Each of the loans is secured by acquired real estate
        and
        is non-recourse to the Company.
 
 The
        following table shows the mortgage debt maturing during the next five
        years:
 
 **Balance**
                **of 2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **2012**
              
              **Thereafter**
              
              **Total**Mortgage
                  Payable
              
              $
              10,960,137
              
              $
              338,052
              
              $
              359,526
              
              $
              1,586,956
              
              $
              2,781,012
              
              $
              222,191,465
              
              $
              238,217,148
 
 Lightstone
        Holdings, LLC (“Guarantor”), a company wholly owned by the Advisor, has
        guaranteed to the extent of a $27.2 million mortgage loan on the St. Augustine
        Outlet Mall, in St. Augustine, Florida, the payment of losses that the lender
        (“Wachovia”) may sustain as a result of fraud, misappropriation, misuse of loan
        proceeds or other acts of misconduct by the Company and/or its principals
        or affiliates.  Such losses are recourse to the Guarantor under the
        guaranty regardless of whether Wachovia has attempted to procure payment
        from
        the Company or any other party.  Further, in the event of the Company's
        voluntary bankruptcy, reorganization or insolvency, or the interference by
        the
        Company or its affiliates in any foreclosure proceedings or other remedy
        exercised by Wachovia, 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.
  Pursuant
        to the Company’s loan agreements, escrows in the amount of $9.7 million were
        held in restricted escrow accounts at March 31, 2008. These escrows will
        be
        released in accordance with the loan agreements as payments of real estate
        taxes, insurance and capital improvement transactions, as required. Our mortgage
        debt also contains clauses providing for prepayment penalties.
 
 In
        connection with the acquisition of the Sugarland and Katy Highway Extended
        Stay
        Hotels, the Houston Partnership along with ESD #5051 - Houston - Sugar Land,
        LLC
        and ESD #5050 - Houston - Katy Freeway, LLC, its wholly owned subsidiaries
        (the
“Houston Borrowers”) secured a mortgage loan from Bank of America, N.A. in the
        principal amount of $12.85 million, which included up to an additional $2.8
        million of renovation proceeds which will be borrowed as the renovation
        proceeds. At March 31, 2008, available renovation proceeds totaled $2.1
        million.
  16
 **LIGHTSTONE
          VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES**
 **Notes
          to Consolidated Financial Statements (continued)**
 The
        mortgage loan has a term of one year with the option of a 6-month term
        extension, bears interest on a daily basis expressed as a floating rate equal
        to
        the lesser of (i) the maximum non-usurious rate of interest allowed by
        applicable law or (ii) the British Bankers Association Libor Daily Floating
        Rate
        plus one hundred seventy-five basis points (1.75%) per annum rate and requires
        monthly installments of interest only through the first 12 months. The mortgage
        loan will mature on October 16, 2008, subject to the 6-month extension option
        described above, at which time payment of the entire principal balance, together
        with all accrued and unpaid interest and all other amounts payable thereunder
        will be due. The mortgage loan is secured by the Hotels and will be non-recourse
        to the Company. The Company intends to extend, repay or refinance this loan
        upon
        its maturity in October of 2008.
 
 On
        November 16, 2007, in connection with the acquisition of the Camden Properties,
        the Company through its wholly owned subsidiaries obtained from Fannie Mae
        five
        substantially similar fixed rate mortgages aggregating $79.3 million (the
        “Loans”). The loans have a 30 year amortization period, mature in 7 years, and
        bear interest at a fixed rate of 5.44% per annum. The loans require monthly
        installments of interest only through the first three years and monthly
        installments of principal and interest throughout the remainder of their
        stated
        terms. The Loans will mature on December 1, 2014, at which time a balance
        of
        approximately $75.0 million will be due. Although the loans were allocated
        among
        the Camden Properties, the aggregate loan amount is secured by all of the
        Properties.
 
 The
        Company is required to maintain minimum debt service coverage ratios as defined
        in the loan documents for the St. Augustine, Houston extended stay hotels
        and
        Southeastern Michigan multi family properties. The Company was in compliance
        with its financial covenants at March 31, 2008.
 
 **7.**
              ***Note
                  Payable*******
  On
        December 5, 2007, the Company entered into a construction loan to fund the
        development of the Brazos Crossing Power Center, in Lake Jackson, Texas.
        The
        loan allows the Company to draw up to $8.2 million, and then will require
        monthly installments of interest only through the first 12 months and bears
        interest at 150 basis points (1.5%) in excess of LIBOR. For the second twelve
        months, principal payments shall be made in monthly installments in amounts
        equal to one-twelfth of the principal component of an annual amortization
        of the
        principal of the loan on the basis of an assumed interest rate of 6.82% and
        a
        thirty year term. The loan is secured by acquired real estate and is
        non-recourse to the Company. The loan is guaranteed by the Company. The balance
        at March 31, 2008 and December 31, 2007 was $6.4 million and $5.8 million,
        respectively. The loan matures on December 4, 2009.
  17




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


**Notes
        to Consolidated Financial Statements (continued)**


**8.**
                    ***Intangible
                        Assets***




At
      March
      31, 2008, the Company had intangible assets relating to above-market leases
      from
      property acquisitions, intangible assets related to leases in place at the
      time
      of acquisition, intangible assets related to leasing costs, and intangible
      liabilities relating to below-market leases from property
      acquisitions.




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





At March 31, 2008
            
            At December 31, 2007Cost
            
            Accumulated
              Amortization
            
            Net
            
            Cost
            
            Accumulated
              Amortization
            
            NetAcquired
                in-place lease intangibles
            
            **$**
            4,372,801
            
            **$**
            (2,639,375
            )
            **$**
            1,733,426
            
            $
            4,628,921
            
            $
            (2,646,629
            )
            $
            1,982,292Acquired
                above market lease intangibles
            
            
            1,197,659
            
            
            (468,745
            )
            
            728,914
            
            
            1,203,902
            
            
            (373,175
            )
            
            830,727Acquired
                leasing costs
            
            
            1,617,558
            
            
            (594,551
            )
            
            1,023,007
            
            
            1,758,805
            
            
            (605,093
            )
            
            1,153,712Acquired
                below market lease intangibles
            
            
            3,583,899
            
            
            (1,525,547
            )
            
            2,058,352
            
            
            4,266,726
            
            
            (1,874,843
            )
            
            2,391,883





The
      following table presents the amortization of the acquired in-place lease
      intangibles, acquired above market lease costs and the below market lease costs
      for properties owned at March 31, 2008:


Balance of
                  2008
                
                2009
                
                2010
                
                2011
                
                2012
                
                Thereafter
                
                TotalAmortization
                      of:Acquired
                    above market lease value
                
                $
                284,945
                
                $
                206,755
                
                $
                97,975
                
                $
                53,943
                
                $
                23,379
                
                $
                61,917
                
                $
                728,914Acquired
                    below market lease value
                
                
                (795,117
                )
                
                (573,541
                )
                
                (279,256
                )
                
                (134,961
                )
                
                (93,627
                )
                
                (181,850
                )
                
                (2,058,352
                )Projected
                    future net rental income decrease
                
                $
                (510,172
                )
                $
                (366,786
                )
                $
                (181,281
                )
                $
                (81,018
                )
                $
                (70,248
                )
                $
                (119,933
                )
                $
                (1,329,438
                )Acquired
                    in-place lease value
                
                $
                567,967
                
                $
                516,806
                
                $
                228,424
                
                $
                113,783
                
                $
                72,871
                
                $
                233,575
                
                $
                1,733,426




9.
            ***Distributions
                Payable***




On
      March
      21, 2008, the Company declared a dividend for the three-month period ending
      March 31, 2008. The dividend was calculated based on shareholders of record
      each
      day during this three-month period at a rate of $0.0019178 per day, and equaled
      a daily amount that, if paid each day for a 365-day period, would equal a 7.0%
      annualized rate based on a share price of $10.00. The March 31, 2008 dividend
      was paid in full in April 2008 using a combination of cash ($1.6 million) and
      ($1.1 million) which represents 93,565 shares of the Company’s common stock
      issued pursuant to the Company’s Distribution Reinvestment Program, at a
      discounted price of $9.50 per share.   The amount of dividends distributed
      to our stockholders in the future will be determined by our Board of Directors
      and is dependent on a number of factors, including funds available for payment
      of dividends, our financial condition, capital expenditure requirements and
      annual distribution requirements needed to maintain our status as a REIT under
      the Internal Revenue Code.





18




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


***10.***
            ***Stockholders’
                Equity***




***Preferred
      Shares***




Shares
      of
      preferred stock may be issued in the future in one or more series as authorized
      by the Lightstone REIT’s board of directors. Prior to the issuance of shares of
      any series, the board of directors is required by the Lightstone REIT’s charter
      to fix the number of shares to be included in each series and the terms,
      preferences, conversion or other rights, voting powers, restrictions,
      limitations as to dividends or other distributions, qualifications and terms
      or
      conditions of redemption for each series. Because the Lightstone REIT’s board of
      directors has the power to establish the preferences, powers and rights of
      each
      series of preferred stock, it may provide the holders of any series of preferred
      stock with preferences, powers and rights, voting or otherwise, senior to the
      rights of holders of our common stock. The issuance of preferred stock could
      have the effect of delaying, deferring or preventing a change in control of
      the
      Lightstone REIT, including an extraordinary transaction (such as a merger,
      tender offer or sale of all or substantially all of our assets) that might
      provide a premium price for holders of the Lightstone REIT’s common stock. As of
      March 31, 2008 and December 31, 2007, the Lightstone REIT had no
      outstanding preferred shares.




***Common
      Shares***




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




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




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





Under
      its
      charter, the Lightstone REIT cannot make some material changes to its business
      form or operations without the approval of stockholders holding at least a
      majority of the shares of our stock entitled to vote on the matter. These
      include (1) amendment of its charter, (2) its liquidation or dissolution, (3)
      its reorganization, and (4) its merger, consolidation or the sale or other
      disposition of its assets. Share exchanges in which the Lightstone REIT is
      the
      acquirer, however, do not require stockholder approval. The Lightstone REIT
      had
      approximately 17.3 million and 13.6 million shares of common stock outstanding
      as of March 31, 2008 and December 31, 2007, respectively.




***Dividends***





The
      Board of Directors of the Lightstone REIT declared a dividend for each quarter
      2006, 2007 and March 31, 2008. The dividends have been calculated based on
      stockholders of record each day during this three-month period at a rate of
      $0.0019178 per day, which, if paid each day for a 365-day period, would equal
      a
      7.0% annualized rate based on a share price of $10.00. The March 31, 2008
      dividend was paid in full in April 2008 using a combination of cash ($1.6
      million), and ($1.1 million) which represent 93,565 shares of the Company’s
      common stock issued pursuant to the Company’s Distribution Reinvestment Program,
      shares of the Company’s stock at a discounted price of $9.50 per share.




19




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


**11.**
            ***Related
                Party Transactions*******




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


Selling
                  Commission
              
              The
                  Dealer Manager will be paid up to 7% of the gross offering proceeds
                  before
                  reallowance of commissions earned by participating broker-dealers.
                  Selling
                  commissions are expected to be approximately $21,000,000 if the
                  maximum
                  offering of 30 million shares is sold.Dealer
                  Management Fee
              
              The
                  Dealer Manager will be paid up to 1% of gross offering proceeds
                  before
                  reallowance to participating broker-dealers. The estimated dealer
                  management fee is expected to be approximately $3,000,000 if the
                  maximum
                  offering of 30 million shares is sold.Soliciting
                  Dealer Warrants
              
              The
                  Dealer Manager may buy up to 600,000 warrants at a purchase price
                  of
                  $.0008 per warrant. Each warrant will be exercisable for one share
                  of the
                  Lightstone REIT’s common stock at an exercise price of $12.00 per
                  share.Reimbursement
                  of Offering Expenses
              
              Reimbursement
                  of all offering costs, including the commissions and dealer management
                  fees indicated above, are estimated at approximately $30 million
                  if the
                  maximum offering of 30 million shares is sold. The Lightstone REIT
                  will
                  sell a special general partnership interest in the Operating Partnership
                  to Lightstone SLP, LLC (an affiliate of the Sponsor) and apply
                  all the
                  sales proceeds to offset such costs.Acquisition
                  Fee
              
              The
                  Advisor will be paid an acquisition fee equal to 2.75% of the gross
                  contract purchase price (including any mortgage assumed) of each
                  property
                  purchased. The Advisor will also be reimbursed for expenses that
                  it incurs
                  in connection with the purchase of a property. The Lightstone REIT
                  anticipates that acquisition expenses will be between 1% and 1.5%
                  of a
                  property's purchase price, and acquisition fees and expenses are
                  capped at
                  5% of the gross contract purchase price of the property. The actual
                  amounts of these fees and reimbursements depend upon results of
                  operations
                  and, therefore, cannot be determined at the present time. However,
                  $33,000,000 may be paid as an acquisition fee and for the reimbursement
                  of
                  acquisition expenses if the maximum offering is sold, assuming
                  aggregate
                  long-term permanent leverage of approximately
                  75%.




**Fees**
            
            **Amount**Property
                Management -*Residential/Retail/*
              *Hospitality*
            
            The
                Property Manager will be paid a monthly management fee of up to 5%
                of the
                gross revenues from residential, hospitality and retail properties.
                Lightstone REIT may pay the Property Manager a separate fee for the
                one-time initial rent-up or leasing-up of newly constructed properties
                in
                an amount not to exceed the fee customarily charged in arm’s length
                transactions by others rendering similar services in the same geographic
                area for similar properties as determined by a survey of brokers
                and
                agents in such area.




20




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


Property
                Management -*Office/Industrial*
            
            The
                Property Manager will be paid monthly property management and leasing
                fees
                of up to 4.5% of gross revenues from office and industrial properties.
                In
                addition, the Lightstone REIT may pay the Property Manager a separate
                fee
                for the one-time initial rent-up or leasing-up of newly constructed
                properties in an amount not to exceed the fee customarily charged
                in arm’s
                length transactions by others rendering similar services in the same
                geographic area for similar properties as determined by a survey
                of
                brokers and agents in such area.Asset
                Management Fee
            
            The
                Advisor or its affiliates will be paid an asset management fee of
                0.55% of
                the Lightstone REIT’s average invested assets, as defined, payable
                quarterly in an amount equal to 0.1375 of 1% of average invested
                assets as
                of the last day of the immediately preceeding
                quarter.




**Fees**
            
            **Amount**Reimbursement
                ofOther
                expenses
            
            For
                any year in which the Lightstone REIT qualifies as a REIT, the Advisor
                must reimburse the Lightstone REIT for the amounts, if any, by which
                the
                total operating expenses, the sum of the advisor asset management
                fee plus
                other operating expenses paid during the previous fiscal year exceed
                the
                greater of 2% of average invested assets, as defined, for that fiscal
                year, or, 25% of net income for that fiscal year. Items such as property
                operating expenses, depreciation and amortization expenses, interest
                payments, taxes, non-cash expenditures, the special liquidation
                distribution, the special termination distribution, organization
                and
                offering expenses, and acquisition fees and expenses are excluded
                from the
                definition of total operating expenses, which otherwise includes
                the
                aggregate expense of any kind paid or incurred by the Lightstone
                REIT.The
                Advisor or its affiliates will be reimbursed for expenses that may
                include
                costs of goods and services, administrative services and non-supervisory
                services performed directly for the Lightstone REIT by independent
                parties.




Lightstone
      SLP, LLC, an affiliate of our Sponsor, has and continues to purchase special
      general partner interests in the Operating Partnership. These special general
      partner interests, the purchase price of which will be repaid only after
      stockholders receive a stated preferred return and their net investment, will
      entitle Lightstone SLP, LLC to a portion of any regular distributions made
      by
      the Operating Partnership. Distributions of $0.3 million were declared and
      $0.2
      million were paid during the three months ended March 31, 2008. Distributions
      for the first quarter of 2007 were not declared until the third quarter of
      2007.
      The distribution for the first quarter 2008 in the amount of $0.3 million was
      paid in April 2008. Such distributions, paid current at a 7% annualized rate
      of
      return to Lightstone SLP, LLC through March 31, 2008 and will always be
      subordinated until stockholders receive a stated preferred return, as described
      below:




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





21
 
  **LIGHTSTONE
          VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES**
 **Notes
            to Consolidated Financial Statements (continued)**


**Liquidating Stage**
              **Distributions**
            
            **Amount of Distribution**7%
                Stockholder Return Threshold
            
            Once
                stockholders have received liquidation distributions, and a cumulative
                non-compounded 7% return per year on their initial net investment,
                Lightstone SLP, LLC will receive available distributions until it
                has
                received an amount equal to its initial purchase price of the special
                general partner interests plus a cumulative non-compounded return
                of 7%
                per year.




**Liquidating Stage**
              **Distributions**
            
            **Amount of Distribution**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.




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




22




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


The
      Lightstone REIT pursuant to the arrangements described above has recorded the
      following amounts for the three months ended March 31, 2008 and
      2007:





**March 31, 2008**
            
            **M arch 31, 2007**Acquisition
                fees
            
            $
            -
            
            $
            1,643,950Asset
                management fees
            
            
            508,183
            
            
            161,003Property
                management fees
            
            
            413,624
            
            
            222,763Total
            
            **$**
            **921,807**
            
            **$**
            **2,027,716**




**12.**
            ***Segment
                Information***




The
      Company currently operates in five business segments as of March 31, 2008:
      (i) retail real estate, (ii) residential real estate, (iii) industrial real
      estate (iv) office real estate and (v) hospitality. The Company’s advisor and
      its affiliates provide leasing, property and facilities management, acquisition,
      development, construction and tenant-related services for its portfolio. The
      Company’s revenues for the three months ended March 31, 2008 and 2007 were
      exclusively derived from activities in the United States. No revenues from
      foreign countries were received or reported. The Company had no long-lived
      assets in foreign locations as of March 31, 2008 and 2007. The accounting
      policies of the segments are the same as those described in Note 2: Summary
      of
      Significant Accounting Policies, excluding depreciation and
      amortization.





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





Selected
      results of operations for the three months ended March 31, 2008, and selected
      asset information regarding the Company’s operating segments are as
      follows:


**Retail**
              
              **Multi Family**
              
              **Industrial**
              
              **Hospitality**
              
              **Office**
              
              **Corporate**
              
              **ThreeMonths** **Ended**
                **March 31,**
                **2008**Revenues:Rental
                  income
              
              $
              1,521,232
              
              $
              4,800,772
              
              $
              1,646,795
              
              $
              735,483
              
              $
              -
              
              $
              -
              
              $
              8,704,282Tenant
                  recovery income
              
              
              496,354
              
              
              188,166
              
              
              380,068
              
              
              4,939
              
              
              -
              
              
              -
              
              
              1,069,5272,017,586
              
              
              4,988,938
              
              
              2,026,863
              
              
              740,422
              
              
              -
              
              
              -
              
              
              9,773,809Expenses:Property
                  operating expenses
              
              
              669,100
              
              
              2,444,097
              
              
              597,144
              
              
              405,968
              
              
              -
              
              
              -
              
              
              4,116,309Real
                  estate taxes
              
              
              212,507
              
              
              530,165
              
              
              242,926
              
              
              52,595
              
              
              -
              
              
              -
              
              
              1,038,193General
                  and adminsitrative costs
              
              
              15,329
              
              
              130,816
              
              
              23,952
              
              
              11,302
              
              
              -
              
              
              854,817
              
              
              1,036,216Depreciation
                  and amortization
              
              
              551,131
              
              
              736,756
              
              
              768,160
              
              
              104,523
              
              
              -
              
              
              -
              
              
              2,160,570Operating
                  expenses
              
              
              1,448,067
              
              
              3,841,834
              
              
              1,632,182
              
              
              574,388
              
              
              -
              
              
              854,817
              
              
              8,351,288Net
                  property operations
              
              
              569,519
              
              
              1,147,104
              
              
              394,681
              
              
              166,034
              
              
              -
              
              
              (854,817
              )
              
              1,422,521Other
                  income/(expense)
              
              
              4,975
              
              
              130,019
              
              
              15,344
              
              
              (4,247
              )
              
              -
              
              
              -
              
              
              146,091Interest
                  income
              
              
              12,849
              
              
              174
              
              
              2,840
              
              
              -
              
              
              -
              
              
              868,734
              
              
              884,597Gain
                  on Sale of Securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  expense
              
              
              (878,425
              )
              
              (1,740,590
              )
              
              (790,022
              )
              
              (162,941
              )
              
              -
              
              
              -
              
              
              (3,571,978
              )Loss
                  in Unconsolidated joint ventures
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (942,488
              )
              
              -
              
              
              (942,488
              )Minority
                  interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              55
              
              
              55Net
                  income applicable to common shares
              
              $
              (291,082
              )
              $
              (463,293
              )
              $
              (377,157
              )
              $
              (1,154
              )
              $
              (942,488
              )
              $
              13,972
              
              $
              (2,061,202
              )**Balance
                  sheet financial data at March 31, 2008:**Real
                  estate assets, net
              
              $
              71,148,043
              
              $
              140,447,366
              
              $
              76,457,971
              
              $
              16,893,529
              
              $
              -
              
              $
              82,336
              
              $
              305,029,245Restricted
                  escrows
              
              
              6,064,216
              
              
              2,631,991
              
              
              939,564
              
              
              -
              
              
              -
              
              
              59,637
              
              
              9,695,408Investment
                  in unconsolidated joint venture
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,342,186
              
              
              -
              
              
              5,342,186Deposit
                  for real estate purchase
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Due
                  from Affiliate
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Tenant
                  and other accounts receivable
              
              
              767,490
              
              
              424,616
              
              
              299,275
              
              
              60,384
              
              
              -
              
              
              213,213
              
              
              1,764,978Acquired
                  in-place lease intangibles, net
              
              
              986,919
              
              
              -
              
              
              746,507
              
              
              -
              
              
              -
              
              
              -
              
              
              1,733,426Acquired
                  above market lease intangibles, net
              
              
              400,387
              
              
              84,420
              
              
              244,107
              
              
              -
              
              
              -
              
              
              -
              
              
              728,914Deferred
                  leasing costs, net
              
              
              701,963
              
              
              -
              
              
              598,093
              
              
              -
              
              
              -
              
              
              -
              
              
              1,300,056Deferred
                  financing costs, net
              
              
              635,505
              
              
              1,023,163
              
              
              303,702
              
              
              78,719
              
              
              -
              
              
              -
              
              
              2,041,089Other
                  assets
              
              
              53,559
              
              
              493,161
              
              
              122,319
              
              
              317,884
              
              
              -
              
              
              157,021
              
              
              1,143,944Non-segmented
                  assets
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              71,599,942
              
              
              71,599,942Total
                  Assets
              
              $
              80,758,082
              
              $
              145,104,717
              
              $
              79,711,538
              
              $
              17,350,516
              
              $
              5,342,186
              
              $
              72,112,149
              
              $
              400,379,188Mortgage
                  Payable
              
              $
              54,472,787
              
              $
              119,993,800
              
              $
              53,025,000
              
              $
              10,725,561
              
              $
              -
              
              $
              -
              
              $
              238,217,148Note
                  Payable
              
              
              6,386,370
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              6,386,370
  23
 **LIGHTSTONE
          VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARIES**
 **Notes
            to Consolidated Financial Statements (continued)**


Selected
      results of operations for the three months ended March 31, 2007, and selected
      asset information regarding the Company’s operating segments are as
      follows:


**Retail**
              
              **Multi Family**
              
              **Industrial**
              
              **Hospitality**
              
              **Office**
              
              **Corporate**
              
              **Three Months**
                **Ended**
                **March 31, 2007**Revenues:Rental
                  income
              
              $
              1,434,480
              
              $
              1,974,519
              
              $
              1,090,625
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              4,499,624Tenant
                  recovery income
              
              
              455,809
              
              
              -
              
              
              260,470
              
              
              -
              
              
              -
              
              
              -
              
              
              716,2791,890,289
              
              
              1,974,519
              
              
              1,351,095
              
              
              -
              
              
              -
              
              
              -
              
              
              5,215,903Expenses:Property
                  operating expenses
              
              
              675,885
              
              
              1,076,432
              
              
              232,897
              
              
              -
              
              
              -
              
              
              -
              
              
              1,985,214Real
                  estate taxes
              
              
              236,167
              
              
              225,931
              
              
              122,545
              
              
              -
              
              
              -
              
              
              -
              
              
              584,643General
                  and adminsitrative costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,693,950
              
              
              306,668
              
              
              2,000,618Depreciation
                  and amortization
              
              
              568,484
              
              
              392,399
              
              
              471,416
              
              
              -
              
              
              -
              
              
              -
              
              
              1,432,299Operating
                  expenses
              
              
              1,480,536
              
              
              1,694,762
              
              
              826,858
              
              
              -
              
              
              1,693,950
              
              
              306,668
              
              
              6,002,774Net
                  property operations
              
              
              409,753
              
              
              279,757
              
              
              524,237
              
              
              -
              
              
              (1,693,950
              )
              
              (306,668
              )
              
              (786,871
              )Other
                  income/(expense)
              
              
              2,649
              
              
              208,533
              
              
              100
              
              
              -
              
              
              -
              
              
              -
              
              
              211,282Interest
                  income
              
              
              23,236
              
              
              -
              
              
              10,994
              
              
              -
              
              
              -
              
              
              105,185
              
              
              139,415Gain
                  on Sale of Securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  expense
              
              
              (781,067
              )
              
              (612,520
              )
              
              (513,289
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,906,876
              )Loss
                  in Unconsolidated joint ventures
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,019,896
              )
              
              -
              
              
              (2,019,896
              )Minority
                  interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              191
              
              
              191Net
                  income applicable to common shares
              
              $
              (345,429
              )
              $
              (124,230
              )
              $
              22,042
              
              $
              -
              
              $
              (3,713,846
              )
              $
              (201,292
              )
              $
              (4,362,755
              )**Balance
                  sheet financial data at March 31, 2007:**


Real
                  estate assets, net
              
              $
              58,826,897
              
              $
              41,760,982
              
              $
              64,132,735
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              164,720,614Restricted
                  escrows
              
              
              5,316,207
              
              
              1,838,279
              
              
              1,235,564
              
              
              -
              
              
              -
              
              
              -
              
              
              8,390,050Investment
                  in unconsolidated joint venture
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              10,965,968
              
              
              -
              
              
              10,965,968Deposit
                  for real estate purchase
              
              
              3,685,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,685,000Due
                  from Affiliate
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Tenant
                  and other accounts receivable
              
              
              623,310
              
              
              52,240
              
              
              247,635
              
              
              -
              
              
              -
              
              
              35,385
              
              
              958,570Acquired
                  in-place lease intangibles, net
              
              
              1,431,859
              
              
              74,150
              
              
              1,420,348
              
              
              -
              
              
              -
              
              
              -
              
              
              2,926,357Acquired
                  above market lease intangibles, net
              
              
              564,210
              
              
              -
              
              
              379,395
              
              
              -
              
              
              -
              
              
              -
              
              
              943,605Deferred
                  leasing costs, net
              
              
              751,438
              
              
              -
              
              
              815,755
              
              
              -
              
              
              -
              
              
              -
              
              
              1,567,193Deferred
                  financing costs, net
              
              
              462,327
              
              
              211,548
              
              
              338,084
              
              
              -
              
              
              -
              
              
              -
              
              
              1,011,959Other
                  assets
              
              
              49,634
              
              
              368,130
              
              
              15,002
              
              
              -
              
              
              -
              
              
              116,966
              
              
              549,732Non-segmented
                  assets
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              11,026,894
              
              
              11,026,894Total
                  Assets
              
              $
              71,710,882
              
              $
              44,305,329
              
              $
              68,584,518
              
              $
              -
              
              $
              10,965,968
              
              $
              11,179,245
              
              $
              206,745,942Mortgage
                  Payable
              
              $
              54,750,000
              
              $
              40,725,000
              
              $
              53,025,000
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              148,500,000






**13.**
            ***Subsequent
                Events***





***Park
      Avenue Funding***





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




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




24




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




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





The
      Company intends to account for the investment in this preferred equity
      contribution under the cost method of accounting as the Company does not
      exercise significant influence over the operations of this entity.




25


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


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




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




**Forward-Looking
      Statements**




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





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





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




26




**Overview**





Lightstone
      Value Plus Real Estate Investment Trust, Inc. (the “Lightstone REIT” or
“Company”) intends to acquire and operate commercial, residential and
      hospitality properties, principally in the United States. Principally through
      the Lightstone Value Plus REIT, LP, (the “Operating Partnership”), Our
      acquisitions may include both portfolios and individual properties. We expect
      that our commercial holdings will consist of retail (primarily multi-tenanted
      shopping centers), lodging (primarily extended stay hotels), industrial and
      office properties and that our residential properties will be principally
      comprised of ‘‘Class B’’ multi-family complexes. We intend to acquire fee
      interests in multi-tenanted, community, power and lifestyle shopping centers,
      and in malls located in highly trafficked retail corridors, high-barrier to
      entry markets, and sub- markets with constraints on the amount of additional
      property supply. Additionally, we seek to acquire mid-scale, extended stay
      lodging properties and multi-tenanted industrial properties located near major
      transportation arteries and distribution corridors; multi-tenanted office
      properties located near major transportation arteries; and market-rate, middle
      market multifamily properties at a discount to replacement cost. We do not
      intend to invest in single family residential properties; leisure home sites;
      farms; ranches; timberlands; unimproved properties not intended to be developed;
      or mining properties.





Investments
      in real estate will be made through the purchase of all or part of a fee simple
      ownership, or all or part of a leasehold interest. We may also purchase limited
      partnership interests, limited liability company interests and other equity
      securities. We may also enter into joint ventures with affiliated entities
      for
      the acquisition, development or improvement of properties as well as general
      partnerships, co-tenancies and other participations with real estate developers,
      owners and others for the purpose of developing, owning and operating real
      properties. We will not enter into a joint venture to make an investment that
      we
      would not be permitted to make on our own. Not more than 10% of our total assets
      will be invested in unimproved real property. For purposes of this paragraph,
      “unimproved real properties” does not include properties acquired for the
      purpose of producing rental or other operating income, properties under
      construction and properties for which development or construction is planned
      within one year. Additionally, we will not invest in contracts for the sale
      of
      real estate unless in recordable form and appropriately recorded. As of March
      31, 2008, Lightstone REIT has completed nine acquisitions: the St. Augustine
      Outlet Center, a retail outlet shopping mall in St. Augustine, Florida, on
      March
      31, 2006; the Southeast Michigan Apartments, four multi-family communities
      in
      Southeast Michigan on June 29, 2006; the Oakview Power Center, a retail shopping
      mall located in Omaha, Nebraska, on December 21, 2006; 1407 Broadway, a 49%
      equity interest in a joint venture, formed to purchase a sub-leasehold interest
      in a ground lease to an office building in New York, NY, on January 4,
      2007; the Gulf States Industrial portfolio, a portfolio of 12 industrial
      and 2 office buildings in Louisiana and Texas, on February 1, 2007; and has
      developed the Brazos Crossing Power Center after acquiring a land parcel in
      Lake
      Jackson, TX, on June 29, 2007, the Sugarland and Katy Highway Extended Stay
      Hotels in Houston, Texas on October 17, 2007, the Southeast Apartments, which
      included, five multi family apartment communities, one in Tampa, Florida, two
      in
      Greensboro, North Carolina and two in Charlotte, North Carolina on November
      16,
      2007, and the Sarasota Industrial Property, an industrial building in Sarasota,
      Florida on November 13, 2007.





Although
      we are not limited as to the geographic area where we may conduct our
      operations, we intend to invest in properties located near the existing
      operations of our Sponsor, in order to achieve economies of scale where
      possible. Our Sponsor currently maintains operations throughout the United
      States (Hawaii, South Dakota, Vermont and Wyoming excluded), the District of
      Columbia, Puerto Rico and Canada.




We
      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. Aggregate long-term permanent borrowings in
      excess of 75% of the aggregate fair market value of all properties, currently
      exceeds 75% and was appropriately approved by a majority of the independent
      directors and is disclosed to our stockholders.





27




We
      may
      finance our property acquisitions through a variety of means, including but
      not
      limited to individual non-recourse mortgages and through the exchange of an
      interest in the property for limited partnership units of the Operating
      Partnership. At December 31, 2006, we qualified as a REIT and have elected
      to be
      taxed as a REIT for the taxable year ending December 31, 2008, 2007 and 2006.
      We
      plan to own substantially all of our assets and conduct our operations through
      the Operating Partnership. The Company has assessed it qualified as a REIT
      for
      the year ended December 31, 2007 and the period ended March 31,
      2008.




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





The
      Company intends to sell a maximum of 30 million common shares, at a price of
      $10
      per share (exclusive of 4 million shares available pursuant to the Company’s
      dividend reinvestment plan, 600,000 shares that could be obtained through the
      exercise of selling dealer warrants when and if issued and 75,000 shares that
      are reserved for issuance under the Company’s stock option plan). The Company’s
      Registration Statement on Form S-11 (the “Registration Statement”) was declared
      effective under the Securities Act of 1933 on April 22, 2005, and on May 24,
      2005, the Lightstone REIT began offering its common shares for sale to the
      public. Lightstone Securities, LLC (the “Dealer Manager”), an affiliate of the
      Sponsor, is serving as the dealer manager of the Company’s public offering (the
“Offering”). As of December 31, 2005, the Company had reached its minimum
      offering of $2.0 million by receiving subscriptions for approximately 226,000
      of
      its common shares, representing gross offering proceeds of approximately $2.3
      million. On February 1, 2006, cumulative gross offering proceeds of
      approximately $2.7 million were released to the Company from escrow and invested
      in the Operating Partnership. As of March 31, 2008, cumulative gross offering
      proceeds of approximately $170.4 million have been released to the Lightstone
      REIT and used for the purchase of a 99.99% general partnership interest in
      the
      Operating Partnership. The Company expects that its ownership percentage in
      the
      Operating Partnership will remain significant as it plans to continue to invest
      all net proceeds from the Offering in the Operating Partnership.





Lightstone
      SLP, LLC, an affiliate of the Advisor, intends to periodically purchase special
      general partner interests (“SLP Units”) in the Operating Partnership at a cost
      of $100,000 per unit for each $1.0 million in offering subscriptions. Proceeds
      from the sale of the SLP Units will be used to fund organizational and offering
      costs incurred by the Company. As of March 31, 2008, offering costs of $16.7
      million have been substantially offset by $16.7 million of proceeds from the
      sale of SLP Units. Lightstone SLP, LLC has purchased an additional $0.1 million
      of SLP Units subsequent to March 31, 2008





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, 2008, the Advisor has not allocated any
      organizational costs to the Company. Advances for offering costs in excess
      of
      the 10% will only be reimbursed to the Advisor as additional offering proceeds
      are received by the Company. As of March 31, 2008, offering costs incurred
      were
      slightly less than 10%.





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




28




Beginning
      with the year ended December 31, 2006, the Company qualified to be taxed as
      a
      real estate investment trust (a “REIT”), under Sections 856 through 860 of the
      Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, no
      provision for income tax was recorded to date. To qualify as a REIT, the Company
      must meet certain organizational and operational requirements, including a
      requirement to distribute at least 90% of its ordinary taxable income to
      stockholders. As a REIT, the Company generally will not be subject to federal
      income tax on taxable income that it distributes to its stockholders. If the
      Company fails to qualify as a REIT in any taxable year, it will then be subject
      to federal income taxes on its taxable income at regular corporate rates and
      will not be permitted to qualify for treatment as a REIT for federal income
      tax
      purposes for four years following the year during which qualification is lost
      unless the Internal Revenue Service grants the Company relief under certain
      statutory provisions. Such an event could materially adversely affect the
      Company’s net income and net cash available for distribution to stockholders.
      However, the Company believes that it will be organized and operate in such
      a
      manner as to qualify for treatment as a REIT and intends to operate in such
      a
      manner so that the Company will remain qualified as a REIT for federal income
      tax purposes. As of December 31, 2007, and March 31, 2008 the Company has
      complied with the requirements for maintaining its REIT status.




**Property
      Summary**





**Location**
            
            **Year Built (Range**
              **of years built)**
            
            **Leasable Square**
              **Feet**
            
            **Percentage**
              **Occupied as of**
              **3/31/08**
            
            **Annualized Revenues**
              **based on rents at**
              **March 31, 2008****Wholly-Owned
                Real Estate Properties:**St.
                Augustine Outlet Mall **(2)**
            
            
            St. Augstine, FL
            
            
            1998
            
            
            253,346
            
            
            59.5
            %
            $
            2.5
                millionOakview
                Power Center
            
            
            Omaha, NE
            
            
            1999
                - 2005
            
            
            177,331
            
            
            99.2
            %
            $
            2.5
                million7
                Flex/Office/Industrial Buildings from the Gulf States Industrial
                portfolio
            
            
            New Orleans, LA
            
            
            1980-2000
            
            
            339,700
            
            
            92.3
            %
            $
            3.1
                million4
                Flex/Industrial Buildings from the Gulf States Industrial
                portfolio
            
            
            San Antonio, TX
            
            
            1982-1986
            
            
            484,260
            
            
            83.9
            %
            $
            2.0
                million3
                Flex/Industrial Buildings from the Gulf States Industrial
                portfolio
            
            
            Baton Rouge, LA
            
            
            1985-1987
            
            
            182,792
            
            
            100.0
            %
            $
            1.2
                millionBrazos
                Crossing Power Center **(1)**
            
            
            Lake Jackson, TX
            
            
            2007-2008
            
            
            61,213
            
            
            100.0
            %
            $
            0.8
                millionSarasota
                Industrial Property
            
            
            Sarasota, FL
            
            
            1992
            
            
            281,276
            
            
            0.0
            %
            $
            -**Portfolio
                  total**
            
            
            
            
            
            **1,779,918**
            
            
            **72.5**
            **%**


**(1)**
      Opened March 2008


**(2)**Currently undergoing expansion/renovation, 88.1% occupied including
          temporary tenants




**Location**
            
            **Year Built (Range**
              **of years built)**
            
            **Leasable Units**
            
            **Percentage**
              **Occupied as of**
              **3/31/08**
            
            **Annualized Revenues**
              **based on rents at**
              **March 31, 2008**Michigan
                Apartments (Four Multi Family Apartment Buildings)
            
            
            Southeast MI
            
            
            1965-1972
            
            
            1,017
            
            
            90.6
            %
            $
            7.9
                millionSoutheast
                Apartments (Five Multi Family Apartment Buildings)
            
            
            Greensboro and
                Charlotte, NC/Tampa, FL
            
            
            1980-1987
            
            
            1,576
            
            
            82.7
            %
            $
            9.6
                million**Portfolio
                total**
            
            
            
            
            
            
            
            
            **2,593**
            
            
            **85.8**
            **%**





**Location**
            
            **Year Built**
            
            **Available Rooms**
              **in Q1 2008**
            
            **Percentage**
              **occupied as of**
              **3/31/08**
            
            **Revenue per Available**
              **Room at 3/31/08****Wholly-Owned
                Operating Properties:**Sugarland
                and Katy Highway Extended Stay Hotels**(3)**
            
            
            Houston, TX
            
            
            1998
            
            
            26,390
            
            
            62.4
            %
            $
            30.39





**Location**
            
            **Year Built**
            
            **Leasable Square**
              **Feet**
            
            **Percentage**
              **Occupied as of**
              **3/31/08**
            
            **Annualized Revenues**
              **based on rents at**
              **March 31, 2008****Unconsolidated
                Joint Venture****Properties:**1407
                Broadway **(3)**
            
            
            New York, NY
            
            
            1952
            
            
            914,762
            
            
            87.7
            %
            $
            35.8
                million


**(3)**
      Currently undergoing renovations





29




**2008
      Acquisitions**





There
      were no acquisitions during the first quarter of 2008.





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




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




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





**2008
      Renovation and Expansion**





On
      October 2, 2007, the Company closed on the acquisition of an 8.5-acre parcel
      of
      undeveloped land for $2.75 million, for further development of the adjacent
      Belz
      Outlet mall. Development rights to the land parcel were purchased at an
      additional cost of $1.3 million. We have started the construction of the
      expansion which will add approximately 90,000 square feet to the existing
      center. Upon completion of the expansion and renovation to the existing
      property, the center’s gross leaseable area will approximate 343,000 square
      feet. The cost for the renovation and expansion of the outlet mall is expected
      to approximate $35.2 million. Numerous established retail brands have executed
      lease agreements and will occupy the expanded and renovated outlet mall,
      including Saks 5 th Avenue,
      Ann Taylor, Juicy Couture, Kate Spade, Lucky Brand Jeans, Papaya Clothing and
      BCBG Max Azaria. These tenants will occupy approximately 53,000 square feet.
      The
      following table sets forth the name, business type, primary lease terms and
      certain other information with respect to each of these tenants. Costs to date
      inclusing the purchase of the land and the development rights total $5.5
      million.





The
      Company entered into a construction loan to fund the development of the power
      retail center at its Lake Jackson, Texas Location. The loan requires monthly
      installments of interest only through the first 12 months and bears interest
      at
      150 basis points (1.5%) in excess of LIBOR. For the second twelve months,
      principal payments shall be made in monthly installments in amounts equal to
      one-twelfth of the principal component of an annual amortization of the
      principal of the loan on the basis of an assumed interest rate of 6.82% and
      a
      thirty year term. The loan is secured by acquired real estate and is
      non-recourse to the Company. The total cost of the project, inclusive of project
      construction, tenant incentives, leasing costs, and land is estimated at $10.2
      million. Because the debt financing for the acquisition may exceed certain
      leverage limitations of the REIT, the Board, including all of its independent
      directors has approved any leverage exceptions as required by the Company’s
      Articles of Incorporation.





Three
      tenants will occupy 100% of the property’s rentable square footage. The
      following table sets forth the name, business type, primary lease terms and
      certain other information with respect to each of these major
      tenants:




30





**Name of**
              **Tenant**
            
            **BusinessType**
            
            **Square Feet**
              **Leased**
            
            **Percentage****of**
              **Leasable**
              **Space**
            
            **Annual Rent**
              **Payments**
            
            **Lease Term****from**
              **Commencement**
            
            **Party with**
              **Renewal**
              **Rights**Best
                Buy
            
            
            Electronics
                Retailer
            
            
            
            
            
            20,200
            
            
            
            
            
            32.90
            %
            $
            260,000
            
            
            10
                years
            
            
            TenantOffice
                Depot
            
            
            Office
                Supplies Retailer
            
            
            
            
            
            21,000
            
            
            
            
            
            34.30
            %
            $
            277,200
            
            
            10
                years
            
            
            TenantPetsmart
            
            
            Pet
                Supply Retailer
            
            
            
            
            
            20,087
            
            
            
            
            
            32.80
            %
            $
            231,001
            
            
            10
                years
            
            
            Tenant





**Critical
      Accounting Policies**




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




**Inflation**




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





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




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




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




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




Expense
      reimbursements made to both our Advisor and Property Manager will be expensed
      or
      capitalized to the basis of acquired assets, as appropriate.




Lightstone
      SLP, LLC, an affiliate of our Sponsor, has and advises us that it intends to
      continue to purchase special general partner interests (“SLP Units”) in the
      Operating Partnership. These SLP Units, the purchase price of which will be
      repaid only after stockholders receive a stated preferred return and their
      net
      investment, will entitle Lightstone SLP, LLC to a portion of any regular
      distributions made by the Operating Partnership. Such distributions will always
      be subordinated until stockholders receive a stated preferred return. Lightstone
      SLP, LLC has received its proportional share of distributions to date;
      representing a 7% annualized return on the value of its SLP Units, through
      March
      31, 2008.




31




Proceeds
      from the sale of the SLP Units will be used to fund organizational and offering
      costs incurred by the Company. As of March 31, 2008, offering costs of $16.7
      million have been offset by $16.7 million of proceeds from the sale of SLP
      Units. Lightstone SLP, LLC has purchased an additional $0.1 million of SLP
      Units
      subsequent to March 31, 2008.





32




**Income
      Taxes**




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





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





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




**Results
      of Operations**




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





**For
      the Three Months Ended March 31, 2008 vs March 31,
      2007**





***Revenues***




Total
      revenues increased by approximately $4.6 million to approximately $9.8 million
      for the three months ended March 31, 2008 compared to $5.2 million **** for the
      same period last year. Base rents increased $4.2 million primarily due to our
      acquisition of a portfolio of 12 industrial and 2 office buildings in
      Louisiana and Texas, on February 1, 2007; and a land parcel in Lake Jackson,
      TX,
      intended for immediate development as a power retail center, on June 29, 2007,
      which subsequently opened in April of 2008, two hotels in Houston, Texas on
      October 17, 2007, and five multi family apartment communities, one in Tampa,
      Florida, two in Greensboro, North Carolina and two in Charlotte, North Carolina
      on November 16, 2007. Tenant recovery income increased by approximately $0.4
      million primarily as a result of our acquiring the portfolio of 12 industrial
      and 2 office buildings in Louisiana and Texas.





***Total
      Property Expenses***




Total
      expenses increased by $2.1 million, to approximately $4.1 million for the three
      months ended March 31, 2008, compared to approximately $2.0 million for the
      same
      period last year. Increases in property operating expenses were primarily the
      result of the acquisition of new properties in February of 2007, and during
      the
      fourth quarter of 2007.





***Real
      Estate Taxes***




Total
      real estate taxes increased by $0.4 million, to approximately $1.0 million
      for
      the three months ended March 31, 2008, compared to approximately $0.6 million
      for the same period last year. Increases in real estate taxes were primarily
      the
      result of the acquisition of new properties in February of 2007, and during
      the
      fourth quarter of 2007.





33




***General
      and administrative expenses***




General
      and administrative costs decreased by approximately $1.0 million to
      approximately $1.0 million,
      primarily as a result of the payment of acquisition and legal fees in the amount
      of $1.6 million and $0.1 million, respectively, related to the Lightstone REIT’s
      investment in the sub lease interest to a ground lease of a Manhattan office
      building payment in the first quarter of 2007, which was offset by an increase
      in asset management fees in the amount of $0.3 million related to the
      acquisitions in February of 2007 and during the fourth quarter of 2007. In
      addition we incurred costs for legal fees related to compliance and
      fees related to outside consulting fees to advise the Company regarding Sarbanes
      Oxley compliance testing performed in the first quarter of 2008 for the year
      ended.




***Depreciation
      and Amortization***




Depreciation
      and amortization expense increased by approximately $0.8 million for the three
      months ended March 31, 2008 to $2.2 million, as compared to $1.4 million at
      March 31, 2007 primarily due to the acquisition and financing of new properties
      in February of 2007, and during the fourth quarter of 2007.




***Other
      Income***




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




***Interest
      Income***




Interest
      income increased by approximately $0.7 million, due primarily to the increase
      in
      interest and dividend income recorded on the short-term investments and
      marketable securities. The Cash and cash equivalents, including marketable
      securities was $71.6 million and $11.0 million at March 31, 2008 and March
      31,
      2007, respectively.





***Interest
      expense***




Interest
      expense increased approximately $1.7 million to approximately $3.6 million
      for
      the three months ended March 31, 2008, primarily as a result of the acquisition
      and financing of new properties in February of 2007, and during the fourth
      quarter of 2007.





***Loss
      from investment in unconsolidated joint venture***




A
      $0.9
      million loss from investment in unconsolidated joint venture for the three
      months ended March 31, 2008, compared to $2.0 million loss in the same period
      last year relates to our investment in the sub lease interest to a ground lease
      of a Manhattan office building on January 4, 2007. The improvement resulted
      primarily from increased revenues of approximately $1.0 million at the joint
      venture level, offset by a decrease in depreciation and amortization of $1.4
      million. These changes were the result of tenant rollover, and an increase
      in
      base rents.




***Minority
      interest***




The
      loss
      allocated to minority interests, representing approximately $55 and $191 for
      the
      three months ended March 31, 2008 and 2007, respectively, relates to the
      interests in the Operating Partnership held by our Sponsor.




34





**Financial
      Condition, Liquidity and Capital Resources**




***Overview:***




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




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




We
      intend
      to utilize leverage in acquiring our properties. The number of different
      properties we will acquire will be affected by numerous factors, including
      the
      amount of funds available to us. When interest rates on mortgage loans are
      high
      or financing is otherwise unavailable on terms that are satisfactory to us,
      we
      may purchase certain properties for cash with the intention of obtaining a
      mortgage loan for a portion of the purchase price at a later time.




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




We
      currently have $238.2 million of outstanding mortgage debt. We intend to limit
      our aggregate long-term permanent borrowings to 75% of the aggregate fair market
      value of all properties unless any excess borrowing is approved by a majority
      of
      the independent directors and is disclosed to our stockholders. We may also
      incur short-term indebtedness having a maturity of two years or
      less.




Our
      charter provides that the aggregate amount of borrowing, both secured and
      unsecured, may not exceed 300% of net assets in the absence of a satisfactory
      showing that a higher level is appropriate and the approval of our board of
      directors, and subsequent disclosure to stockholders. Net assets means our
      total
      assets, other than intangibles, at cost before deducting depreciation or other
      non-cash reserves less our total liabilities, calculated at least quarterly
      on a
      basis consistently applied. Any excess in borrowing over such 300% of net assets
      level must be approved by a majority of our independent directors and disclosed
      to our stockholders in our next quarterly report to stockholders, along with
      justification for such excess. As of March 31, 2008, our total borrowings
      represented 173% of net assets.




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





35




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




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




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




Total
      asset management and acquisition fees of $0.5 million and approximately $1.8
      million were recorded to the Advisor for the three months ended March 31, 2008
      and 2007, respectively. Total property management fees of $0.4 million and
      approximately $0.2 million were recorded to the Advisor for the three months
      ended March 31, 2008 and 2007, respectively. As of March 31, 2008, $0 was due
      to
      our Property Manager, an affiliate of our Advisor, for the reimbursement of
      property level operating expenses; $0.7 million was due to the Advisor for
      asset
      management fees.




As
      of
      March 31, 2008 we had approximately $60.4 million of cash and cash equivalents
      on hand and $11.2 million of marketable securities. Our cash and cash
      equivalents on hand and marketable securities resulted primarily from proceeds
      from our Offering.





***Summary
      of Cash Flows***




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





**Three Months**
              **Ended March 31,**
              **2008**
            
            **Three Months**
              **Ended March 31,**
              **2007**Cash
                flows provided by (used in) from operating activities
            
            $
            1,249,552
            
            $
            (214,714
            )Cash
                flows used in investing activities
            
            
            (6,847,821
            )
            
            (76,033,167
            )Cash
                flows from financing activities
            
            
            36,380,267
            
            
            67,994,065Net
                change in cash and cash equivalents
            
            
            30,781,998
            
            
            (8,253,816
            )Cash
                and cash equivalents, beginning of the period
            
            
            29,589,815
            
            
            19,280,710Cash
                and cash equivalents, end of the period
            
            $
            60,371,813
            
            $
            11,026,894




36




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





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




Cash
      used
      in investing activities of $6.8 million resulted primarily from the development
      costs at our Lake Jackson and St. Augustine properties.




Cash
      provided by financing activities in the amount of $36.4 million resulted
      primarily from the proceeds from the issuance of common stock ($36.5 million),
      proceeds from issuance of special partnership interests ($3.7 million), offset
      by the payment of offering costs ($3.5 million).





At
      March
      31, 2008, we had mortgage debt totaling approximately $238.2 million as
      follows:




Property
            
            Loan Amount
            
            Interest Rate
            
            Maturity Date
            
            Amount Due at maturitySt.
                Augustine
            
            $
            26,972,787
            
            
            6.09
            %
            April
              2016
            
            $
            23,747,523Southeastern
                Michigan Multi Family Properties
            
            
            40,725,000
            
            
            5.96
            %
            July
              2016
            
            
            38,138,605Oakview
                Plaza
            
            
            27,500,000
            
            
            5.49
            %
            January
              2017
            
            
            25,583,137Gulf
                Coast Industrial Portfolio
            
            
            53,025,000
            
            
            5.83
            %
            February
              2017
            
            
            49,556,985Houston
                Extended Stay Hotels (Two Individual Loans)
            
            
            10,725,561
            
            
            LIBOR
                + 1.75
            %
            October
              2008
            
            
            10,040,000Camden
                Multi Family Properties - (Five Individual Loans)
            
            
            79,268,800
            
            
            5.44
            %
            December
              2014
            
            
            74,955,771Total
                of eleven outstanding mortgage loans at March 31, 2008
            
            $
            238,217,148
            
            
            
            
            
            
            $
            222,022,021





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





**Balance****of 2008**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **2012**
            
            **Thereafter**
            
            **Total**Mortgage
                Payable
            
            $
            10,960,137
            
            $
            338,052
            
            $
            359,526
            
            $
            1,586,956
            
            $
            2,781,012
            
            $
            222,191,465
            
            $
            238,217,148




37




***New
      Accounting Pronouncements***




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities Including an Amendment of FASB
      Statement No. 115” (“SFAS No. 159”). This standard permits entities to choose to
      measure many financial instruments and certain other items at fair value and
      is
      effective for the first fiscal year beginning after November 15, 2007. The
      Company adopted SFAS No. 159 as required effective January 1,
      2008.  The adoption of SFAS No. 157 did not have a material effect on
      the consolidated results of operations or financial position.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* .
      This
      Statement applies under other accounting pronouncements that require or permit
      fair value measurements. Accordingly, this Statement does not require any new
      fair value measurements. However, for some entities, the application of this
      Statement will change current practice. This Statement clarifies that market
      participant assumptions include assumptions about risk, for example, the risk
      inherent in a particular valuation technique used to measure fair value (such
      as
      a pricing model) and/or risk inherent in the inputs to the valuation technique.
      This Statement clarifies that market participant assumptions also include
      assumptions about the effect of a restriction on the sale or use of an asset.
      This Statement also clarifies that a fair value measurement for a liability
      reflects its nonperformance risk. The statement is effective in the fiscal
      first
      quarter of 2008 except for non-financial assets and liabilities recognized
      or
      disclosed at fair value on a recurring basis, for which the effective date
      is
      fiscal years beginning after November 15, 2008. The Company adopted SFAS
      No. 157 as required effective January 1, 2008.  The adoption of
      SFAS No. 157 did not have a material effect on the consolidated results of
      operations or financial position.




In
      June
      2007, the AICPA issued Statement of Position (“SOP”) 07-1, “Clarification of the
      Scope of the Audit and Accounting Guide, Investment Companies and Accounting
      by
      Parent Companies and Equity Method Investors for Investments in Investment
      Companies.” SOP 07-1 provides guidance for determining whether an entity is
      within the scope of the AICPA Audit and Accounting Guide, “Investment Companies”
(the “Guide”) and when companies that own or have significant stakes in
      investment companies should and should not retain, in their financial
      statements, the specialized industry accounting under the Guide. This statement
      is effective for financial statements issued for fiscal years beginning after
      December 15, 2007, and interim periods within those fiscal years. The Company
      adopted SOP 07-1 as required effective January 1, 2008.  The adoption
      of SOP 07-1 did not have a material effect on the consolidated results of
      operations or financial position.





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





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




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




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




38





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




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




At
      March
      31, 2008, we had mortgage debt totaling approximately $238.2 million as
      follows:




Property
            
            Loan Amount
            
            Interest Rate
            
            Maturity Date
            
            Amount Due at maturitySt.
                Augustine
            
            $
            26,972,787
            
            
            6.09
            %
            April
              2016
            
            $
            23,747,523Southeastern
                Michigan Multi Family Properties
            
            
            40,725,000
            
            
            5.96
            %
            July
              2016
            
            
            38,138,605Oakview
                Plaza
            
            
            27,500,000
            
            
            5.49
            %
            January
              2017
            
            
            25,583,137Gulf
                Coast Industrial Portfolio
            
            
            53,025,000
            
            
            5.83
            %
            February
              2017
            
            
            49,556,985Houston
                Extended Stay Hotels (Two Individual Loans)
            
            
            10,725,561
            
            
            LIBOR
                + 1.75
            %
            October
              2008
            
            
            10,040,000Camden
                Multi Family Properties - (Five Individual Loans)
            
            
            79,268,800
            
            
            5.44
            %
            December
              2014
            
            
            74,955,771Total
                of eleven outstanding mortgage loans at March 31, 2008
            
            $
            238,217,148
            
            
            
            
            
            
            $
            222,022,021





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





**Balance**
              **of** **2008**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **2012**
            
            **Thereafter**
            
            **Total**Mortgage
                Payable
            
            $
            10,960,137
            
            $
            338,052
            
            $
            359,526
            
            $
            1,586,956
            
            $
            2,781,012
            
            $
            222,191,465
            
            $
            238,217,148





LIBOR
      at
      March 31, 2008 was 2.7%. Monthly installments of interest only are required
      through the first 12 months for the St. Augustine loan, and monthly installments
      of principal and interest are required throughout the remainder of its stated
      term. Monthly installments of interest only are required through the first
      60
      months for the Southeastern Michigan multi-family properties, and through the
      first 48 months for the Camden Multi-Family properties’ loans, and monthly
      installments of principal and interest are required throughout the remainder
      of
      its stated term. The remaining loans are interest only until their maturity,
      at
      which time the amounts listed in the table above are due, assuming no prior
      principal prepayment. Each of the loans is secured by acquired real estate
      and
      is non-recourse to the Company.





**ITEM
      4. CONTROLS AND PROCEDURES.**




As
      of the
      end of the period covered by this report, management, including our chief
      executive officer and interim chief financial officer, evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures. Based upon, and as of the date of, the evaluation, our chief
      executive officer and chief financial officer concluded that the disclosure
      controls and procedures were effective to ensure that information required
      to be
      disclosed in the reports we file and submit under the Exchange Act is recorded,
      processed, summarized and reported as and when required.




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





39





**PART
      II. OTHER INFORMATION:**


**ITEM
      1. LEGAL PROCEEDINGS**





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





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





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





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





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




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





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





40




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





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




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, 2008, we had issued approximately 17.4 million shares for gross
      offering proceeds of approximately $170.4, which includes $3.1 million of
      proceeds from shares issued in distribution reinvestment program. From the
      effective date of our public offering through March 31, 2008, we have incurred
      the following expenses in connection with the issuance and distribution of
      the
      registered securities:





**Type
                of Expense Amount  Estimated/Actual**Underwriting
                discounts and commissions
            
            $
            12,167,536
            
            
            ActualFinders’
                fees
            
            
            -Expenses
                paid to or for underwriters
            
            
            -Other
                expenses to affiliates
            
            
            -Other
                expenses paid to non-affiliates
            
            
            4,475,211**Total
                expenses**
            
            $
            16,642,747





The
      net
      offering proceeds to us, after deducting the total expenses paid as described
      above, and after accounting for $16.6 million in contributions by Lightstone
      SLP, LLC and an additional $0.1 million to be recovered through the sale of
      SLP
      Units to an affiliate of our Sponsor, is approximately $170.4 million. The
      underwriting discounts and commissions were paid to our dealer manager, which
      reallowed all or a portion of the commissions to soliciting
      dealers.




41




With
      the
      net offering proceeds of $170.4 million, and new mortgage debt in the amount
      of
      $238.2 million we acquired approximately $312.0 million in real estate
      investments (including $8.0 million in acquisition fees) and related assets.
      In
      addition we invested $13.5 million in a joint venture, and paid an acquisition
      fee of $1.6 million, to acquire a sub-leasehold interest in a ground lease
      to an
      office building located at 1407 Broadway, New York, New York. Cumulatively,
      we
      have used the net offering proceeds as follows:





**Type of Expense Amount  - Actual**
            
            **At March 31, 2008**Construction
                of plant, building and facilities
            
            $
            4,014,097Purchase
                of real estate interests
            
            
            90,046,215Acquisition
                of other businesses
            
            
            -Repayment
                of indebtedness
            
            
            -Purchase
                and installation of machinery and equipment
            
            
            -Working
                capital (as of March 31, 2008)
            
            
            60,371,813Temporary
                investments (as of March 31, 2008)
            
            
            16,007,982Other
                uses
            
            
            -**Total
                uses**
            
            $
            170,440,107





As
      of May
      6, 2008, we have sold approximately 18.4 million shares at an aggregate
      offering price of $191.0 million.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**




None.





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




None.





**ITEM
      5. OTHER INFORMATION.**




None.





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


**ITEM
      6. EXHIBITS**





**Exhibit****Number**
            
            **Description**10.2*
            
            Amendment
                to advisory Agreement31.1*
            
            Certification
                Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of
                the
                Sarbanes-Oxley Act of 2002.31.2*
            
            Certification
                Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of
                the
                Sarbanes-Oxley Act of 2002.32.1*
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551
                this
                Exhibit is furnished to the SEC and shall not be deemed to be
                “filed.”32.2*
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551
                this
                Exhibit is furnished to the SEC and shall not be deemed to be
                “filed.”




*Filed
      herewith




42




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




Date:
                May 15, 2008
            By:
            /s/ Jenniffer
                CollinsJenniffer
                CollinsInterim
                Chief Financial Officer and Treasurer
              (Duly
                Authorized Officer and Principal Financial and Accounting
                Officer)




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