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

PART I. FINANCIAL INFORMATION, CONTINUED:  

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

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

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Amounts in thousands) (Unaudited)

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

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

(Amounts in thousands)(Unaudited)

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

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

(Amounts in thousands)(Unaudited)

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

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 - CONTINUED

(Amounts in thousands) (Unaudited )

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

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)Unaudited)

Lightstone Value Plus Real Estate Investment Trust, Inc., a Maryland corporation (“Lightstone REIT”) was formed on June 8, 2004 (date of inception) and subsequently qualified as a real estate investment trust (“REIT”) during the year ending December 31, 2006. Lightstone REIT 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.

Lightstone REIT is structured as an umbrella partnership REIT, or UPREIT, and substantially all of its 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”), in which Lightstone REIT as the general partner, held a 98.0%98.1% interest as of September 30, 2013.March 31, 2014.

The Lightstone REIT and the Operating Partnership and its subsidiaries are collectively referred to as the ‘‘Company’’ and the use of ‘‘we,’’ ‘‘our,’’ ‘‘us’’ or similar pronouns refers to the Lightstone REIT, its Operating Partnership or the Company as required by the context in which such pronoun is used.

The Company is managed by Lightstone Value Plus REIT, LLC (the “Advisor”), an affiliate of the Lightstone Group, Inc., under the terms and conditions of an advisory agreement. The Lightstone Group, Inc. previously served as the Company’s sponsor (the “Sponsor”) during its initial public offering, which closed on October 10, 2008. The Sponsor and Advisor are majority owned and controlled by David Lichtenstein, the Chairman of the Company’s board of directors (the “Board”) and its Chief Executive Officer.

The Company’s stock is not currently listed on a national securities exchange. The Company may seek to list its stock for trading on a national securities exchange only if a majority of its independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares of common stock until they are listed for trading. In the event the Company does not obtain listing prior to October 10, 2018 (the tenth anniversary of the completion of its initial public offering,) its charter requires that the Board of Directors must either (i) seek stockholder approval of an extension or amendment of this listing deadline; or (ii) seek stockholder approval to adopt a plan of liquidation of the corporation.

As of September 30, 2013,March 31, 2014, on a collective basis, the Company (i) wholly owned and consolidates the operating results and financial condition of 53 retail properties containing a total of approximately 0.90.7 million square feet of retail space, 15 industrial properties containing a total of approximately 1.3 million square feet of industrial space, 67 multi-family residential properties containing a total of 1,5851,784 units, and 1412 hotel hospitality properties containing a total of 1,8501,557 rooms, (ii) majority owned and consolidates the operating results and financial condition of 1 residential development project, and (iii) owned an interest accounted for under the equity method of accounting in 1 office property containing a total of approximately 1.1 million square feet of office space. All of the Company’s properties are located within the United States. As of September 30, 2013,March 31, 2014, the retail properties, the industrial properties, the multi-family residential properties and the office property were 84.0%83.3%, 69.4%85.9%, 94.4%95.5% and 81.4%81.3% occupied based on a weighted-average basis, respectively. Its hotel hospitality properties’ average revenue per available room (“Rev PAR”) was $64.27$67.92 and occupancy was 68.8%56.2%, respectively for the ninethree months ended September 30, 2013.March 31, 2014.

During the third quarter ofyear ended December 31, 2013 the Company’sCompany disposed of two Extended Stay Hotels located in Houston, Texas (the “Houston Extended Stay Hotels”) met the criteria to be classified as held for sale.and a retail shopping center (“Everson Pointe”) located in Snellville, Georgia. The operating results of the Houston Extended Stay Hotels areand Everson Pointe have been classified as discontinued operations in the Consolidated Statementsconsolidated statements of Operationsoperations for all periods presented.

On January 22, 2014 the Company disposed of Crowe’s Crossing Shopping Center, (“Crowe’s Crossing”) a retail shopping center located in Stone Mountain, Georgia. The operating results of Crowe’s Crossing have been classified as discontinued operations in the consolidated statements of operations for all periods presented.  Additionally, the associated assets and liabilities of the Houston Extended Stay Hotels areCrowe’s Crossing have been classified as held for sale in the Consolidated Balance Sheets for all periods presented.

On July 30, 2012, the Company disposedconsolidated balance sheet as of the Brazos Crossing Power Center (“Brazos”), a retailing shopping center located in Lake Jackson, Texas. The operating results of Brazos through its date of disposition have been classified as discontinued operations in the consolidated statements of operations.December 31, 2013.

Noncontrolling Interests

TheAs of March 31, 2014, the noncontrolling interests consist of (i) parties of the Company that hold units in the Operating Partnership (ii) notes receivable from noncontrolling interests and (iii)(ii) certain interests in consolidated subsidiaries. The units include SLP units, limited partner units Series A Preferred Units and Common Units. The noncontrolling interests in consolidated subsidiaries include ownership interests in Pro-DFJV Holdings LLC (“PRO”), LVP Rego Park, LLC (the “Rego Park Joint Venture”), 50-01 2^nd2nd St Associates LLC (the “2^nd“2nd Street Joint Venture”), LVP CY Baton Rouge Holdings LLC (“CY Baton Rouge”), LVP RI Baton Rouge Holdings LLC, (“RI Baton Rouge”), and LVP FFI Jonesboro Holdings LLC (“FFI Jonesboro”).the interests held by minority owners of certain of our hotels.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)Unaudited)

PartialNoncontrolling Interests - Redemption of Series A Preferred Units and Partial Repayment of Notes Receivable due from Noncontrolling Interests

On September 30, 2013, as a result of various agreements (collectively, the “Series A Agreement”) between and amongst (i)January 2, 2014, the Operating Partnership and certainredeemed all of its subsidiaries and affiliatesthe then remaining outstanding 50,100 Series A preferred units in the Operating Partnership (the “Operating Partnership Parties”“Series A Preferred Units”) and (ii), held by the Arbor Mill Run JRM, LLC, a Delaware limited liability company, (“Arbor JRM”), Arbor National CJ, LLC, a New York limited liability company, (“Arbor CJ”), Prime Holdings LLC, a Delaware limited liability company (“AR Prime”), TRAC Central Jersey LLC, a Delaware limited liability company, (“TRAC”), Central Jersey Holdings II, LLC, a New York limited liability company (“Central Jersey”) and JT Prime LLC, a Delaware limited liability company (“JT Prime” and collectively,(collectively, the “Contributing Parties”) and certain of their subsidiaries and affiliates (collectively, the “Series A Parties”), the Operating Partnership redeemed an aggregate 43,516 Series A Preferred Units, held by the Contributing Parties, at their liquidation preference of approximately $43.5 million and agreed to extend the redemption of the aggregate remaining outstanding 50,100 Series A Preferred Units, held by the Contributing Parties, at their liquidation preference of approximately $50.1 million to January 2, 2014. Furthermore,and the Contributing Parties simultaneously repaid approximately $41.1 million of notes receivable (the “Contributing Parties Loans”) representing the proportionate share of total loans issued to the Contributing Parties which secured by their Series A Preferred Units and Common Units. As a result the remaining outstanding notes receivable due from the Contributing Parties wasaggregating approximately $47.4 million which must be repaid in full upon redemption of the remaining outstanding Series A Preferred Units.

Pursuant to the terms of the Series A Agreement, the Series A Parties provided a full release to the Operating Partnership Parties for any and all claims, both asserted or unasserted, through September 30, 2013. However, the release does not affect the rights of the Contributing Parties in respect of any subsequent claims relating to their remaining outstanding Common Units and Series A Preferred Units. Additionally, the Series A Preferred Units, which were entitled to receive cumulative preferential distributions equal to an annual rate of 4.6316%, if and when declared, are no longer be entitled to distributions for periods subsequent to June 26, 2013 and the Contributing Parties Loans, which provided for interest payable semi-annually at a annual rate of 4.00%, no longer accrue interest for periods subsequent to June 26, 2013. The Series A Preferred Units initially had no mandatory redemption or maturity date and were not redeemable by the Operating Partnership prior to June 26, 2013.full.

Basis of Presentation

The consolidated financial statements include the accounts of the Lightstone REIT and its Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). All inter-company balances and transactions have been eliminated in consolidation.

The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.2013. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus Real Estate Investment Trust, Inc. and its Subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 8-03Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The 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, and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.

The consolidated balance sheet as of December 31, 20122013 included herein has been derived from the consolidated balance sheet included in the Company's Annual Report on Form 10-K.

The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

ReclassificationsPro Forma Financial Information

Certain priorThe following table provides unaudited pro forma results of operations for the period amounts mayindicated, as if the acquisitions that the Company made in 2013 (the Holiday Inn Express - Auburn, the Courtyard - Baton Rouge, the Residence Inn - Baton Rouge, the Aloft – Rogers, the Fairfield Inn – Jonesboro, the Hampton Inn - Miami and the Hampton Inn & Suites - Fort Lauderdale) had been acquired at the beginning of that period. Such pro forma results are not necessarily indicative of the results that actually would have occurred had these acquisitions been reclassified to conform tocompleted on the current year presentation.date indicated, nor are they indicative of the future operating results of the combined company.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)Unaudited)

Reclassifications

Certain prior period amounts may have been reclassified to conform to the current year presentation.

New Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board issued an accounting standards update providing new guidance on the requirements for reporting a discontinued operation. The Company has determinedupdate changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. This update is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that no new accounting pronouncementhave not been reported in the financial statements previously issued or effective during the period had or is expected toavailable for issuance.  The adoption of this standards update affects presentation only and, as such, will not have a material impact on the Company’s consolidated financial statements.

During the first quarter of 2013, the Company received an additional $1.2 million related to the 2012 disposition of its ownership interest in Grand Prairie Holdings LLC (“GPH”) resulting from the satisfaction of certain conditions and recognized a gain on disposition of unconsolidated affiliated real estate entities in its consolidated statements of operations. See Note 13 for additional information.

During the first quarter of 2012, certain equity interests received as part of the consideration in connection with the 2010 disposition of the Company’s ownership interests in Prime Outlets Acquisition Company (“POAC”) and Mill Run LLC (“Mill Run”) were released from escrow because of the satisfaction of certain conditions and the Company recognized a previously deferred gain of $30.3 million in its consolidated statements of operations.

The entitiesentity discussed below are or wereis partially owned by the Company. The Company accounts or accounted for these investmentsthis investment under the equity method of accounting as the Company exercises or exercised significant influence, but does not or did not control these entities.this entity. A summary of the Company’s investment in unconsolidated affiliated real estate entity is as follows:

1407 Broadway

The Company has a 49.0% ownership in 1407 Broadway, which has a sub-leasehold interest in a ground lease to an office building located at 1407 Broadway in New York, New York. During the second quarter of 2011, the Company’s share of cumulative losses resulting from its ownership interest in 1407 Broadway brought the carrying value of its investment in 1407 Broadway to zero. Since the Company was not obligated to fund 1407 Broadway’s deficits and the balance of the Company’s investment in 1407 Broadway was zero, the Company suspended the recording of its portion of equity losses or earnings from 1407 Broadway until such time as the Company’s investment in 1407 Broadway was greater than zero.

On March 11, 2013, 1407 Broadway completed a restructuring of its outstanding non-recourse mortgage note payable with a then outstanding principal balance of approximately $127.3 million with Swedbank AB. In connection with the restructuring, 1407 Broadway made a principal pay down of approximately $1.3 million, bringing the new loan balance to $126.0 million, and extended the maturity of the loan to January 12, 2023. Additionally, during the nine monthsyear ended September 30,December 31, 2013, 1407 Broadway’s members made capital contributions aggregating $16.1 million, of which $13.5 million was placed initially into a capital reserve account with the lender pursuant to the terms of the restructuring. As a result of the Company’s capital contributions which totaled $12.1 million, it commenced recording equity earnings in the first quarter of 2013. The Company’s equity earnings for the ninethree months ended September 30,March 31, 2013 include (i)includes an adjustment to record previously unrecorded losses aggregating $5.2 million through December 31, 2012 and (ii) $3.6 million of earnings representing its pro rata share of 1407 Broadway’s net income for the nine months ended September 30, 2013.2012.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)Unaudited)

1407 Broadway Financial Information

* The nine months ended September 30, 2013 includes an adjustment of $5,210 for previously unrecorded losses.

The following table represents the unaudited condensed balance sheet for 1407 Broadway:

GPH

Marketable Securities:

GPH was wholly owned by POAC through August 30, 2010. In connection with the 2010 disposition of its ownership interests in POAC and Mill Run, the Company retained its aggregate 40.0% ownership interest in GPH.

The Operating Partnership and PRO ownedfollowing is a 25.0% and 15.0% membership interest in GPH, respectively. The Company’s ownership interest was a non-managing interest, with certain consent rights with respect to major decisions. An affiliatesummary of the Company’s Sponsor wasavailable for sale securities as of the majority owner and manager of GPH. Contributions, profits and cash distributions were allocated in accordance with each investor’s ownership percentage. The Company accounted for its ownership interest in GPH in accordance with the equity method of accounting.dates indicated:

GPH, through subsidiaries, held various ownership interests in certain entities, including ownership interests in a entity that owns an outlet center located in Grand Prairie, Texas (the “Grand Prairie Outlet Center”). On December 4, 2012, GPH disposed of these interests and on December 17, 2012, GPH was merged into Marco II LP Units, LLC which simultaneously distributed the Marco II OP Units it held to its members. As a result, the Company no longer has any investment in GPH.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)Unaudited)

Livermore Valley Holdings LLC (“LVH”)

LVH was wholly owned by POAC through August 30, 2010. In connection with the 2010 disposition of its ownership interests in POAC and Mill Run, the Company retained its aggregate 40.0% ownership interest in LVH. The Operating Partnership and PRO owned 25.0% and 15.0% membership interests in LVH, respectively. The Company’s ownership interest was a non-managing interest, with certain consent rights with respect to major decisions. An affiliate of the Company’s Sponsor, was the majority owner and manager of LVH. Contributions, profit and cash distributions were allocated in accordance with each investor’s ownership percentage. The Company accounted for its ownership interest in LVH in accordance with the equity method of accounting.

LVH, through subsidiaries, held various ownership interests in certain entities, including ownership interests in the entity that owns an outlet center located in Livermore Valley, California (the “Livermore Valley Outlet Center”) and an entity that owns a parcel of land (the “Livermore Land Parcel”) located adjacent to the Livermore Outlet Center. On December 4, 2012, LVH disposed of these interests and on December 17, 2012, LVH was merged into Marco II LP Units, LLC which simultaneously distributed the Marco II OP Units it held to its members. As a result, the Company no longer has any investment in LVH.

Florida Hotel Portfolio

On August 30, 2013, the Company, through subsidiaries, completed the portfolio acquisition of (i) a 126-room limited service hotel which operates as a Hampton Inn, located in Miami, Florida (the “Hampton Inn - Miami”), and (ii) a 104-room select service hotel which operates as a Hampton Inn & Suites, located in Fort Lauderdale, Florida (the “Hampton Inn & Suites - Fort Lauderdale”, and collectively the “Florida Hotel Portfolio”), from certain limited liability companies controlled by the same seller, an unrelated third party.

The aggregate purchase price paid for the Florida Hotel Portfolio was approximately $30.8 million, net of $0.2 million of working capital adjustments. Additionally, in connection with the acquisition, our advisor received an acquisition fee equal to 2.75% of the contractual purchase price or approximately $853.

The acquisition was funded with available cash and $19.9 million from the Revolving Credit Facility.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)

We established a separate taxable REIT subsidiary (“TRS”) for both the Hampton Inn - Miami and the Hampton Inn & Suites – Fort Lauderdale, respectively, which have each entered into operating lease agreements for each respective hotel. At closing, each TRS entered into a separate management agreement with a management company for the management of the respective hotel. Additionally, each respective TRS entered into a 15-year franchise agreement with Hampton Inns Franchise LLC, pursuant to which the Hampton Inn - Miami and the Hampton Inn & Suites - Fort Lauderdale, respectively, will continue to operate as a “Hampton Inn” and a “Hampton Inn & Suites,” respectively, commencing on August 30, 2013.

The acquisition of the Florida Hotel Portfolio was accounted for under the purchase method of accounting with the Company treated as the acquiring entity. Accordingly, the consideration paid by the Company to complete the acquisition of the Florida Hotel Portfolio has been allocated to the assets acquired based upon their fair values as of the date of the acquisition. There was no contingent consideration related to this acquisition. Approximately $5.4 million was allocated to land and improvements, $24.3 million was allocated to building and improvements, and $1.1 million was allocated to furniture and fixtures and other assets.

The aggregate capitalization rate for the Florida Hotel Portfolio as of the closing of the acquisition was approximately 9.4%. We calculate the capitalization rate for a real property by dividing net operating income of the property by the purchase price of the property, excluding costs. For purposes of this calculation, net operating income is determined using the projected or budgeted net operating income based upon then-current projections. Additionally, net operating income is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation.

Arkansas Hotel Portfolio

On June 18, 2013, the Company, through LVPFFI Jonesboro Holdings LLC, ajoint venture subsidiary of our Operating Partnership, and LVP Rogers Holdings LLC completed the portfolio acquisition of (i) a 95.0% ownership interest in a 83-room limited service hotel which operates as a Fairfield Inn & Suites by Marriott, located in Jonesboro, Arkansas (the Fairfield Inn - Jonesboro, and (ii) a 100.0% ownership interest in a 130-room select service hotel which operates as a Starwood Hotel Group Aloft Hotel, located in Rogers, Arkansas (the “Aloft – Rogers”, and collectively, the “Arkansas Hotel Portfolio”), from certain limited liability companies controlled by the same seller, an unrelated third party. The remaining 5.0% ownership interest in the Fairfield Inn - Jonesboro was acquired by FFIJ LLC, an unrelated third party.

The Arkansas Hotel Portfolio was acquired as part of a transaction in which the third party sellers sold a portfolio of four hotel properties, two of which comprise the Arkansas Hotel Portfolio, and two hotel properties acquired by Lightstone Value Plus Real Estate Investment Trust II, Inc. (“Lightstone REIT II”).  The aggregate purchase price paid for the four properties was $29.1 million, of which $18.4 million related to the Arkansas Hotel Portfolio and such amount was determined based on an internal allocation of the purchase price which was approved by the separate boards of directors of the Company and Lightstone REIT II on April 11, 2013. In real estate transactions, changes in market and economic conditions may result in upward or downward fluctuations in the estimated fair value of assets. Because of such changes, the aggregate estimated fair value of Lightstone REIT II’s hotels exceeded their allocated purchase price by approximately $1.2 million as of the date of closing. Additionally, in connection with the acquisition, our advisor received an acquisition fee equal to 2.75% of the contractual purchase price of $18.4 million, or approximately $506.

The acquisition was funded with available cash.

We established a separate TRS for both the Fairfield Inn - Jonesboro and the Aloft - Rogers, respectively, which have each entered into operating lease agreements for each respective hotel. At closing, each TRS entered into a separate management agreement with a management company for the management of the respective hotel. The management company for the Fairfield Inn - Jonesboro is controlled by the 5.0% minority owner of the hotel. Additionally, each respective TRS entered into a 20-year franchise agreement with Marriott and Starwood, pursuant to which the Fairfield Inn - Jonesboro and the Aloft - Rogers, respectively, will continue to operate as a “Fairfield Inn & Suites by Marriott” and a “Starwood Hotel Group Aloft Hotel”, respectively, commencing on June 18, 2013.

The acquisition of the Arkansas Hotel Portfolio was accounted for under the purchase method of accounting with the Company treated as the acquiring entity. Accordingly, the consideration paid by the Company to complete the acquisition of the Arkansas Hotel Portfolio has been allocated to the assets acquired based upon their fair values as of the date of the acquisition. There was no contingent consideration related to this acquisition. Approximately $2.2 million was allocated to land and improvements, $14.2 million was allocated to building and improvements, and $2.0 million was allocated to furniture and fixtures and other assets.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)

The aggregate capitalization rate for the Arkansas Hotel Portfolio as of the closing of the acquisition was approximately 10.4%. We calculate the capitalization rate for a real property by dividing net operating income of the property by the purchase price of the property, excluding costs. For purposes of this calculation, net operating income is determined using the projected or budgeted net operating income based upon then-current projections. Additionally, net operating income is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation.

Baton Rouge Hotel Portfolio

On May 16, 2013, the Company, through LVP CY Baton Rouge Holdings LLC and LVP RI Baton Rouge Holdings, LLC, both joint venture subsidiaries of our Operating Partnership, completed the portfolio acquisition of 90.0% ownership interests in two limited service hotels with an a total of 229 rooms (the “Baton Rouge Hotel Portfolio”), which operate as Courtyard by Marriott and Residence Inn by Marriott, both in Baton Rouge, Louisiana, which we refer to as the Courtyard - Baton Rouge and the Residence Inn - Baton Rouge, from certain limited liability companies controlled by the same seller, an unrelated third party. The remaining 10.0% ownership interests were acquired by PR Baton Rouge Property Partners LLC, for the Courtyard - Baton Rouge and Rouge Property Residence Inn Partners LLC, for the Residence Inn - Baton Rouge, both unrelated third parties.

The aggregate cost for the Baton Rouge Hotel Portfolio was approximately $15.6 million. Additionally, in connection with the acquisition, our advisor received an acquisition fee equal to 2.75% of the contractual purchase price of $15.6 million, or approximately $0.4 million.

The acquisition was funded with available cash and the assumption of a $6.5 million mortgage due May 2017 with an interest rate of 5.56%.

We established a separate TRS for both the Courtyard - Baton Rouge and the Residence Inn - Baton Rouge, respectively, which have each entered into operating lease agreements for each respective hotel. At closing, each TRS entered into a separate management agreement with a management company controlled by the minority owner of each hotel for the management of the respective hotel. Additionally, each TRS entered into a 20-year franchise agreement with Marriott, pursuant to which the Courtyard - Baton Rouge and the Residence Inn - Baton Rouge will continue to operate as a “Courtyard by Marriott” and a “Residence-Inn by Marriott,” respectively, commencing on May 16, 2013.

The acquisition of the Baton Rouge Hotel Portfolio was accounted for under the purchase method of accounting with the Company treated as the acquiring entity. Accordingly, the consideration paid by the Company to complete the acquisition of the Baton Rouge Hotel Portfolio has been allocated to the assets acquired based upon their fair values as of the date of the acquisition. There was no contingent consideration related to this acquisition. Approximately $4.2 million was allocated to land and improvements, $9.7 million was allocated to building and improvements, and $1.7 million was allocated to furniture and fixtures and other assets.

The aggregate capitalization rate for the Baton Rouge Hotel Portfolio as of the closing of the acquisition was approximately 9.9%. We calculate the capitalization rate for a real property by dividing net operating income of the property by the purchase price of the property, excluding costs. For purposes of this calculation, net operating income is determined using the projected or budgeted net operating income based upon then-current projections. Additionally, net operating income is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation.

Holiday Inn - Auburn

On January 18, 2013, the Company acquired a Holiday Inn Express Hotel & Suites (the “Holiday Inn Express - Auburn”) located in Auburn, Alabama, from Inkbridge Acquisitions, LLC, an unrelated third party, for aggregate cash consideration of approximately $5.7 million, excluding closing and other related transaction costs. The acquisition of the Holiday Inn Express - Auburn was funded from cash. Additionally, in connection with the acquisition of the Holiday Inn Express- Auburn, the Company’s Advisor received an aggregate acquisition fee equal to 2.75% of the aggregate acquisition price, or approximately $0.2 million.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)

The acquisition of the Holiday Inn Express - Auburn was accounted for under the purchase method of accounting with the Company treated as the acquiring entity. Accordingly, the consideration paid by the Company to complete the acquisition of the Holiday Inn Express - Auburn has been allocated to the assets acquired based upon their fair values as of the date of the acquisition. There was no contingent consideration related to this acquisition. Approximately $0.6 million was allocated to land, $4.3 million was allocated to building and improvements, and $0.8 million was allocated to furniture and fixtures and other assets.

The capitalization rate for the Holiday Inn Express - Auburn as of the closing of the acquisition was 14.2%. The Company calculates the capitalization rate for real property by dividing the net operating income of the property by the purchase price of the property, excluding costs. For purposes of this calculation, net operating income was determined using the projected or budgeted net operating income of the property based upon then-current projections. Additionally, net operating income is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation and amortization.

The Company established a TRS for the Holiday Inn Express - Auburn which has entered into an operating lease agreement for the respective hotel. At closing, the TRS entered into a separate management agreement with an unrelated third party for the management of the respective hotel.

Financial Information

The following table provides the total amount of rental revenue and net loss included in the Company’s consolidated statements of operations from the Holiday Inn Express - Auburn, the Baton Rouge Hotel Portfolio, the Arkansas Hotel Portfolio and the Florida Hotel Portfolio since their respective dates of acquisition for the period indicated:

The following table provides unaudited pro forma results of operations for the period indicated, as if the Holiday Inn Express - Auburn, the Baton Rouge Hotel Portfolio, the Arkansas Hotel Portfolio and the Florida Hotel Portfolio had been acquired at the beginning of that period. Such pro forma results are not necessarily indicative of the results that actually would have occurred had these acquisitions been completed on the date indicated, nor are they indicative of the future operating results of the combined company.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)

Marketable Securities:

The following is a summary of the Company’s available for sale securities as of the dates indicated:

The Marco OP Units and the Marco II OP Units are exchangeable for a similar number of common operating partnership units (“Simon OP Units”) of Simon Property Group, L.P., (“Simon OP”), the operating partnership of Simon Property Group, Inc. (“Simon”). Subject to the various conditions, the Company may elect to exchange the Marco OP Units and/or the Marco II OP Units to Simon OP Units which must be immediately delivered to Simon in exchange for cash or similar number of shares of Simon’s common stock (“Simon Stock”). During the second quarter of 2013 the Company sold 156,000 Marco OP units with a cost basis of approximately $13.6 million for gross proceeds of approximately $27.5 million and realized a gain of approximately $13.9 million, which is included in gain/(loss) on sale of marketable securities, for the nine months ended September 30, 2013 on the consolidated statements of operations.

All of the MBS were issued by various U.S. government-sponsored enterprises (Freddie Mac and Fannie Mae). The Company considers the declines in market value of its investment portfolio to be temporary in nature. The unrealized losses on the Company’s investments were caused primarily by changes in market interest rates or widening credit spreads. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis. During the three months ended September 30,March 31, 2014 and 2013, and 2012, the Company did not recognize any impairment charges. As of September 30, 2013,March 31, 2014, the Company does not consider any of its investments to be other-than-temporarily impaired.

The Company may sell certain of its investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management. For the ninethree months ended September 30,March 31, 2014 and 2013, the Company realized $13.8 million of gross gains related primarily to the sale of 156,000 Marco OP units and for the three and nine months ended September 30, 2012 the Company realized $0.5$1.2 million and $0.1 million of$11of gross gains, respectively, related to sales of securities and early redemptions of MBS by the security issuer. The maturities of the Company’s MBS generally ranged from 27 years to 30 years.

Notes Payable

Margin Loan

The Company has access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain of the Company’s marketable securities. The Margin Loan, which is due on demand, bears interest at Libor plus 0.85% (1.03%(1.00% as of September 30, 2013)March 31, 2014) and is collateralized by the marketable securities in the Company’s account. The amounts available to the Company under the Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in its account. The amount outstanding under this Margin Loan is $21.9$19.6 million and $38.3$20.3 million as of September 30, 2013March 31, 2014 and December 31, 2012,2013, respectively, and is included in Notes Payable on the consolidated balance sheets.

Line of Credit

On September 14, 2012, the Company entered into a non-revolving credit facility (the “Line of Credit”) with a financial institution which permits borrowings up to $25.0 million. The Line of Credit expiredexpires on September 14, 2013December 13, 2014 and was extended to December 14, 2013, but may be extended at the option of the Borrower for an additional one year subject to lender’s approval. The Line of Credit bears interest at Libor plus 3.00% (3.15% as of March 31, 2014). The Line of Credit is collateralized by 440,311 Marco OP Units and PRO guaranteed the Line of Credit.

The amount outstanding under the Line of Credit is $19.9 million as of both March 31, 2014 and December 31, 2013 and is included in Notes Payable on the consolidated balance sheets.

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

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)(Unaudited)Unaudited)

The amount outstanding under the Line of Credit is $19.9 million as of both September 30, 2013 and December 31, 2012 and is included in Notes Payable on the consolidated balance sheets.

The Line of Credit is collateralized by 440,311 Marco OP Units and PRO guaranteed the Line of Credit.

Derivative Financial Instruments

In order tomanage risk related to changes in the price of Simon Stock,in 2010, the Company entered into a hedge of its Marco OP Units.  The hedge transactions were executed with Morgan Stanley on 527,803 of the Marco OP Units.  The hedges were structured as a collar where a series of puts were purchased at an average strike price of $90.32 per share and a series of calls were sold at an average strike price of $109.95 per share.  Morgan Stanley is restricted under the agreement from assigning its rights to this hedge to another counter party.

The initial collateral requirement was approximately $6.9 million and is subject to change based on changes in the share price of Simon stock.  The hedge cost $5.6 million, or $10.70 per share, and expires in December 2013. The dividends, if any, on the hedged shares continue to accrue to the Company, however Morgan Stanley has the right to adjust the put strike price for any future increases in the dividend declared by Simon Inc. and as of September 30, 2013, the strike price of the calls was adjusted to $107.38 per share.

The hedges were classified as fair value hedges and initially recorded on the consolidated balance sheets under prepaid and other assets with changes in the fair value of the hedge reported on the consolidated statements of operations. As of September 30, 2013 and December 31, 2012, the fair value of the hedges was a liability of $21.2 million and $24.2 million, respectively, recorded on the consolidated balance sheets under accounts payable and accrued expenses and the collateral requirement was approximately $23.4 million and $25.4 million, respectively. The collateral is recorded on the consolidated balance sheets under restricted escrows. For the three and nine months ended September 30, 2013, a gain of $4.7 million and $3.0 million, respectively, and for the three and nine months ended September 30, 2012, a gain of $2.0 million and a loss of $11.1 million, respectively, was recorded within the consolidated statements of operations.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

Marketable securities, available for sale, measured at fair value on a recurring basis as of the dates indicated are as follows: