~~Noncontrolling interests represents~~Certain prior period amounts have been reclassified to conform to the noncontrolling ownership interest’s proportionate share of the equity in our consolidated real estate investments. Income and losses are allocated to noncontrolling interest holders based generally on their ownership percentage. If a property reaches a defined return threshold, then it will result in distributions to noncontrolling interests which is different from the standard pro-rata allocation percentage. In certain instances, our joint venture agreements provide for liquidating distributions based on achieving certain return metrics (“promoted interest”).current year presentation.

Marketable securities currently consist of debt securities that are designated as available-for-sale and are recorded at fair value. Unrealized holding gains or losses for debt securities 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.

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. The Company considers 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 its intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

The Company had no potentially dilutive securities outstanding during the periods presented. Accordingly, earnings per share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the applicable period.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) that amends the existing lease accounting guidance and requires lessees to recognize a lease liability and a right-of-use asset for all leases on their balance sheets. Lessees of operating leases will continue to recognize lease expense in a manner similar to current accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods, but eliminates current real estate- specific provisions and changes the treatment of initial direct costs. The standard became effective for the Company on January 1, 2019.

The Company elected the following package of practical expedients provided by the standard: (i) an entity need not reassess whether any expired or existing contract is a lease or contains a lease, (ii) an entity need not reassess the lease classification of any expired or existing leases, and (iii) an entity need not reassess initial direct costs for any existing leases. The Company also elected the short-term lease exception provided for in the standard and therefore will only recognize right-of-use assets and lease liabilities for leases with a term greater than one year.

The Company did not recognize any right-of-use assets or lease liabilities upon adoption of the standard. The Company does not have any material leases such as ground leases or building leases or any material leases with a term greater than one year. From time to time the Company will enter into immaterial leases for office equipment such as copiers. The resulting right-of-use assets or lease liabilities would be immaterial in the aggregate and are recognized in the period they are incurred as lease expense.

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

~~Recently Adopted Accounting Pronouncements~~The ASU provides a practical expedient which allows lessors to not separate lease and non-lease components in a contract and allocate the consideration in the contract to the separate components if both: (i) the timing and pattern of revenue recognition for the non-lease component and the related lease component are the same and (ii) the combined single lease component would be classified as an operating lease. The Company elected the practical expedient to account for lease and non-lease components as a single component in lease contracts where we are the lessor. The ASU also provides a transition option that permits entities to not recast the comparative periods presented when transitioning to the standard, which the Company also elected.

Effective January 1, 2018, the Company adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that that requires companies to measure investments in equity securities, except those accounted for under the equity method, at fair value and recognize any changes in fair value in net income, using a modified-retrospective transition method. Since the Company had no investments in equity securities, except those accounted for under the equity method prior to January 1, 2018, theThe adoption of this standard ~~had no effect on its consolidated financial statements when adopted.~~

~~Effective January 1, 2018, the Company adopted guidance issued by the FASB that clarifies the definition of~~did not have a business and assists in the evaluation of whether a transaction will be accounted for as an acquisition of an asset or as a business combination. The guidance provides a test to determine when a set of assets and activities acquired is not a business. When substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. Additionally, assets acquired, liabilities assumed, and any noncontrolling interest will be measured at their relative fair values. The Company anticipates future acquisitions of real estate assets, if any, will likely qualify as an asset acquisition. Therefore, any future transaction costs associated with an asset acquisition will be capitalized and accounted for in accordance with this guidance.

Effective January 1, 2018, the Company adopted guidance issued by the FASB that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. The new guidance requires companies to apply a five-step model in accounting for revenue arising from contracts with customers, as well as enhance disclosures regarding revenue recognition. Lease contracts are excluded from this revenue recognition criteria; however, the sale of real estate is required to follow the new model. The Company has adopted this standard using the modified retrospective transition method. The adoption of this pronouncement had nomaterial effect on our consolidated financial ~~statements since, with the disposal~~position or our results of ~~the Courtyard Kauai Coconut Beach Hotel in August 2017, all revenues now consist of rental income from leasing arrangements, which is specifically excluded from the standard.~~operations.

~~In August 2018, the SEC adopted the final rule amending certain disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded.~~In addition, the amendments expand the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. ~~The rule was effective on November 5, 2018~~and will be effective for the quarter that begins after the effective date. Since the Company already includes a year to date consolidated statement of stockholders’ equity in our interim financial statement filings, the adoption of this guidance will result in the inclusion of a quarter to date consolidated statement of stockholders equity in our second and third quarter interim financial statement filings and the inclusion of corresponding prior periods statement of stockholders’ equity for all periods presented.

In June 2016, the FASB issued ~~an accounting standards update~~new guidance which replaces the incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, ~~2019,~~2022, including interim periods within those fiscal years. ~~This guidance~~The Company is currently in the process of evaluating the impact the adoption of this standard will ~~not~~ have ~~a material impact~~ on the Company’s consolidated financial statements.

In February 2016, the FASB issued an accounting standards update which supersedes the existing lease accounting model, and modifies both lessee and lessor accounting. The new guidance will require lessees to recognize a liability to make lease payments and a right-of-use asset, initially measured at the present value of lease payments, for both operating and financing leases, with classification affecting the pattern of expense recognition in the statement of operations. For leases with a term of 12 months or less, lessees will be permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. The standard offers several practical expedients for transition and certain expedients specific to lessees or lessors. Both lessees and lessors are permitted to make an election to apply a package of practical expedients available for implementation under the standard. The Company intends to apply the package of practical expedients and certain other transition expedients. For transition, the Company intends to recognize all effects of transition in the beginning of the adoption reporting period on January 1, 2019.We expect that the adoption of this standard will result in the recognition of right-of-use assets and related lease liability accounts on the consolidated balance sheet but is not expected to have a material effect on our consolidated financial position or our results of operations,~~however, the ultimate impact of adopting this standard will depend on the Company’s lease portfolio as of the adoption date.~~

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

The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.

On February 14, 2019, the Company completed the acquisition of a 384-unit multifamily property located in Ann Arbor, Michigan (the “Valley Ranch Apartments”) from an unrelated third party, for an aggregate purchase price of approximately $70.3 million, excluding closing and other related transaction costs. In connection with the acquisition, our Advisor received an aggregate of approximately $1.3 million in acquisition fees and acquisition expense reimbursements.

~~Certain prior period amounts have been reclassified to conform~~In connection with the acquisition of the Valley Ranch Apartments, the Company simultaneously entered into a $43.4 million non-recourse mortgage loan (the “Valley Ranch Apartments Loan”) collateralized by the Valley Ranch Apartments (see Note 7).

The Company determined this acquisition was an asset acquisition and allocated the total purchase price, including acquisition fees and expenses, to the ~~current~~assets acquired based on their relative fair value. Approximately $24.1 million was allocated to land and improvements, $46.3 million was allocated to building and improvements, and $1.1 million was allocated to in-place lease intangibles.

The capitalization rate for the acquisition of the Valley Ranch Apartments was approximately 5.35%. The Company calculates the capitalization rate for a real property by dividing the net operating income (“NOI”) of the property by the purchase price of the property, excluding costs. For purposes of this calculation, NOI was based upon the year ~~presentation.~~ended November 30, 2018. Additionally, NOI is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation.

On February 28, 2019, the Company entered into a $12.0 million mezzanine loan promissory note (the “500 West 22nd Street Mezzanine Loan”) with an unaffiliated third party (the “500 West 22nd Street Mezzanine Loan Borrower”). On the same date, the Company initially funded $8.0 million of the 500 West 22nd Street Mezzanine Loan. Through September 30, 2019, the Company funded an additional $2.0 million of the 500 West 22nd Street Mezzanine Loan and has funded an aggregate of $10.0 million of the 500 West 22nd Street Mezzanine Loan and as of September 30, 2019, $2.0 million remained unfunded.

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

The 500 West 22nd Street Mezzanine Loan is recorded in note receivable, net on the consolidated balance sheet. In connection with the fundings made for the 500 West 22nd Street Mezzanine Loan, our Advisor has received an aggregate of approximately $0.2 million in acquisition fees from the Company during the nine months ended September 30, 2019. The acquisition fees are accounted for as an addition to thecarrying value of the500 West 22^nd Street Mezzanine Loanand are being amortized as a reduction to interest income over the initial term of the500 West 22^nd Street Mezzanine Loan using a straight-line method that approximates the effective interest method.

The 500 West 22^nd Street Mezzanine Loan is due August 31, 2021 and is collateralized by the ownership interests of the 500 West 22^nd Street Mezzanine Loan Borrower. The 500 West 22nd Street Mezzanine Loan Borrower owns a parcel of land located at 500 West 22^nd Street, New York, New York. The 500 West 22^nd Street Mezzanine Loan bears interest at a rate of LIBOR + 11.0% per annum with a floor of 13.493% (13.493% as of September 30, 2019). The Company received an origination fee of 1.0% of the loan balance, or approximately $0.1 million, which ispresented in the consolidated balance sheets as a direct deduction from the carrying value of the500 West 22^nd Street Mezzanine Loanand is being amortizedto interest income, using a straight-line method that approximates the effective interest method,over the initial term of the500 West 22nd Street Mezzanine Loan. The 500 West 22^nd Street Mezzanine Loan may be extended two additional six- month periods by the 500 West 22^nd Street Mezzanine Loan Borrower provided certain conditions are met, including the establishment of an additional reserve for interest and the payment of an extension fee equal to 0.25% of the outstanding loan balance.

In connection with the initial funding under the 500 West 22^nd Street Mezzanine Loan, the Company retained approximately $2.1 million of the proceeds to establish a reserve for interest and other items, which ispresented in the consolidated balance sheets as a direct deduction from the carrying value of the500 West 22^nd Street Mezzanine Loanand are beingapplied against the first 8.0% of monthly interest due during the initial term of the 500 West 22nd Street Mezzanine Loan. Through September 30, 2019, approximately $0.4 million of the reserve has been recognized as interest income and the remaining balance of the reserve was approximately $1.7 million as of September 30, 2019. The additional monthly interest due above the 8.0% threshold is added to the balance of the 500 West 22nd Street Mezzanine Loan and payable at maturity. As of September 30, 2019, approximately $0.3 million of additional interest due is included in the balance of the 500 West 22^nd Street Mezzanine Loan.

During the three and nine months ended September 30, 2019, the Company recorded approximately $0.3 million and $0.7 million of interest income, respectively, related to the note receivable and as of September 30, 2019, the outstanding principal balance of the 500 West 22nd Street Mezzanine Loan was approximately $10.3 million.

We determined the following disclosure of estimated fair values using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop the related estimates of fair value. The use of different market assumptions or only estimation methodologies may have a material effect on the estimated fair value amounts.

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

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, management estimated that the carrying value of cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable, accrued and other liabilities, accrued property tax and payables to related parties ~~and distributions payable to noncontrolling interests~~ were at amounts that reasonably approximated their fair value based on their highly-liquid nature and short-term maturities. The carrying amount of the note receivable approximates fair value because the interest rate is variable and reflective of the market rate. The fair value of the notes payable is categorized as a Level 2 in the fair value hierarchy. The fair value was estimated using a discounted cash flow analysis valuation on the borrowing rates currently available for loans with similar terms and maturities. The fair value of the notes payable was determined by discounting the future contractual interest and principal payments by a market rate. Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, ~~2018~~2019 and December 31, ~~2017.~~2018. Carrying amounts of our notes payable and the related estimated fair value is summarized as follows:

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

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. As of September 30, ~~2018,~~2019, the Company did not recognize any impairment charges.

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

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:

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

The fair values of the Company’s investments in ~~Corporate Bonds~~debt securities are measured using quoted prices for these investments; however, the markets for these assets are not active. As of September 30, ~~2018,~~2019, all of the Company’s ~~Corporate Bonds~~debt securities were classified as Level 2 assets and there were no transfers between the level classifications during the nine months ended September 30, ~~2018.~~2019.

The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

The Company’s loan agreements stipulate that it complies with certain reporting and financial covenants. The Company ~~did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.~~is currently in compliance with all of its debt covenants.

On February 14, 2019, the Company entered into the Valley Ranch Apartments Loan scheduled to mature on March 1, 2026. The Valley Ranch Apartments Loan bears interest at 4.16% and requires monthly interest-only payments through its stated maturity. The Valley Ranch Apartments Loan is collateralized by the Valley Ranch Apartments and is non-recourse to the Company. In connection with the Valley Ranch Apartments Loan, our Advisor received an aggregate of approximately $0.4 million in financing fees.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

~~Notes Payable~~

~~Notes payable consists of the following:~~

Property Interest Rate Weighted
Average
Interest Rate as of
September 30,
2018 Maturity Date Amount Due at
Maturity As of
September 30,
2018 As of
December 31,
2017

River Club and the Townhomes at River Club LIBOR + 1.78% 4.06% May 1, 2025 $ 28,419 $ 30,359 $ -

River Club and the Townhomes at River Club (Repaid in full on May 1, 2018) - 23,511

Gardens Medical Pavilion LIBOR + 1.90% 3.24% June 1, 2021 12,300 12,960 -

Lakes of Margate 5.49% and 5.92% 5.75% January 1, 2020 13,384 13,760 13,973

Arbors Harbor Town 3.99% 3.99% January 1, 2019 23,632 23,765 24,153

22 Exchange 3.93% 8.93% Due on demand 18,935 18,935 18,963

Parkside 4.45% 4.45% June 1, 2025 15,782 17,947 -

Parkside (Repaid in full on June 1, 2018) - 9,721

Total notes payable 4.99% $ 112,452 117,726 90,321

Less: Deferred financing costs (1,560 ) (400 )

Total notes payable, net $ 116,166 $ 89,921

On May 1, 2018, the Company entered into a non-recourse mortgage loan (the “River Club Mortgage”) in the amount of $30.4 million. The River Club Mortgage has a term of seven years, bears interest at Libor plus 1.78% and requires monthly interest-only payments during the first five years and interest and principal payments pursuant to a 30-year amortization schedule for the remaining two years through its stated maturity with the entire unpaid balance due upon maturity. The River Club Mortgage is cross-collateralized by the River Club and the Townhomes at River Club. At closing, approximately $23.4 million of the proceeds from the River Club Mortgage were used to repay in full the existing non-recourse mortgage loan on the River Club and Townhomes at River Club.

On June 1, 2018, the Company entered into a non-recourse mortgage loan (the “Parkside Mortgage”) in the amount of $18.0 million. The Parkside Mortgage has a term of seven years, bears interest at 4.45% and requires monthly interest and principal payments pursuant to a 30-year amortization schedule through its stated maturity with the entire unpaid balance due upon maturity. The Parkside Mortgage is collateralized by the Parkside Apartments (“Parkside”). At closing, approximately $9.6 million of the proceeds from the Parkside Mortgage were used to repay in full the existing non-recourse mortgage loan on the Parkside.

On June 28, 2018, the Company entered into a non-recourse mortgage loan (the “Gardens Medical Mortgage”) in the amount of $13.0 million. The Gardens Medical Mortgage has a term of three years, bears interest at Libor plus 1.90% and requires monthly interest and principal payments through its stated maturity with the entire unpaid balance due upon maturity. The Gardens Medical Mortgage is collateralized by the Gardens Medical Pavilion.

We are subject to various customary financial covenants, including maintaining minimum debt service coverage ratios, loan to value ratios and liquidity. We did not meet the debt service coverage requirements for our 22 Exchange loan for all of the quarterly periods in 2017 and as a result, the lender elected to sweep the cash from operations beginning in January 2018. Additionally, the cash flow from operations was not sufficient to fully pay the scheduled monthly debt service due on January 5, 2018, which constituted an event of default, and therefore the 22 Exchange loan which was scheduled to mature in May 2023 became due on demand. We received notice on January 9, 2018 that the 22 Exchange loan had been transferred to a special servicer effective immediately. Subsequently, the special servicer placed the property in receivership and has commenced foreclosure proceedings.

~~Lightstone Value Plus Real Estate Investment Trust V, Inc.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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

The Company is accruing default interest expense on the 22 Exchange loan pursuant to the terms of its loan agreement. Default interest expense of $0.2 million and $0.7 million was accrued during the three and nine months ended September 30, 2018. As a result, accrued default interest expense of $0.7 million is included in accounts payable, accrued and other liabilities on our consolidated balance sheet as of September 30, 2018. However,On June 13, 2019, the Company ~~does not expect~~entered into a seven-year $28.8 million mortgage loan (the “Flats at Fishers Loan”) scheduled to ~~pay any~~mature on July 1, 2026. The Flats at Fishers Loan bears interest at 3.78% and requires monthly interest-only payments through the first two years of the ~~accrued default~~loan term and thereafter, monthly payments of principal and interest ~~expense as~~based upon a 30-year amortization. The Flats at Fishers Loan is collateralized by the ~~22 Exchange loan~~Flats at Fishers and is non-recourse to ~~it. Additionally,~~ the ~~Company believes~~Company. In connection with the ~~continued loss~~Flats at Fishers Loan, our Advisor received an aggregate of ~~excess cash flow, the expected loss of this property and the special servicer’s placement of the non-recourse mortgage indebtedness~~approximately $0.3 million in ~~default will not have a material impact on our consolidated results of operations or financial position.~~financing fees.

The following table provides information with respect to the contractual maturities and scheduled principal repayments of our indebtedness as of September 30, ~~2018.~~2019.

	2018		2019		2020		2021		2022		Thereafter		Total			2019		2020		2021		2022		2023		Thereafter		Total
Principal maturities	$	19,272	$	24,463	$	13,924	$	12,735	$	330	$	47,002	$	117,726		$	212	$	13,924	$	13,443	$	1,468	$	2,122	$	181,848	$	213,017

Less: deferred financing costs														(1,560	)														(3,370	)

Total notes payable, net													$	116,166														$	209,647

~~Besides~~In addition, the ~~22 Exchange~~Company’s non-recourse mortgage loan secured by the Lakes of Margate (outstanding principal balance of $13.5 million as of September 30, ~~2018, the Company’s only other debt maturing over the next twelve months is debt of approximately $23.8 million associated with Arbors Harbor Town, which~~2019) matures in January ~~2019.~~2020. We currently expect to refinance all or ~~repay in full with available cash~~a portion of this ~~debt~~maturing indebtedness on or before its ~~maturity date.~~scheduled maturity. However, if we are unable to refinance the outstanding indebtedness at favorable terms, we will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales.

8.Leases

The Company’s office, multifamily and student housing properties are leased to tenants under operating leases. Substantially all of our multifamily and student housing leases have initial terms of 12 months or less. Our office leases expire between 2019 and 2025.

We, as a lessor, retain substantially all of the risks and benefits of ownership of the investment properties and continue to account for our leases as operating leases. We accrue fixed lease income on a straight-line basis over the terms of the leases. Some of our tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. We recognize this variable lease consideration only when each tenant’s sales exceed the applicable sales threshold. We amortize any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the related lease.

We structure our leases to allow us to recover a portion of our property operating expenses from our tenants. A portion of our leases require the tenant to reimburse us for a portion of our operating expenses, including common area maintenance (“CAM”), real estate taxes and insurance. Such property operating expenses typically include utility, insurance and other administrative expenses. For some of our leases we receive a fixed payment from the tenant for the CAM component which is recognized as revenue on a straight-line basis over the term of the lease. When not reimbursed by the fixed CAM component, CAM expense reimbursements are based on the tenant’s proportionate share of the allocable operating expenses for the property. We accrue reimbursements from tenants for recoverable portions of all of these expenses as variable lease consideration in the period the applicable expenditures are incurred. We recognize differences between estimated recoveries and the final billed amounts in the subsequent year. These differences were not material in any period presented.

As of September 30, 2019, the approximate fixed future minimum rental payments, excluding variable lease consideration, from the Company’s office property, Gardens Medical Pavilion, due to us under non-cancelable are as follows:

2019				2020				2021				2022				2023				Thereafter				Total
$	388			$	1,424			$	1,081			$	973			$	895			$	767			$	5,528

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Pursuant to the lease agreements, tenants of the property may be required to reimburse the Company for some or the entire portion of the particular tenant's pro rata share of the real estate taxes and operating expenses of the property. Such amounts are not included in the future minimum lease payments above, but are included in rental revenues on the accompanying consolidated statements of operations. Rental revenue of approximately $0.5 million and $1.7 million for the three and nine months ended September 30, 2019, respectively, and rental revenue of approximately $0.2 million and $0.6 million for the three and nine months ended September 30, 2018, respectively, related to variable lease payments was included in rental revenues on the accompanying consolidated statements of operations.

The Company has excluded our multifamily and student housing leases from this table as substantially all of its multifamily and student housing leases have initial terms of 12 months of less.

9.	Distributions

U.S. federal tax law requires a REIT distribute at least 90% of its annual REIT taxable income (which does not equal net income, as calculated in accordance with ~~generally accepted accounting principles, or~~ GAAP) determined without regard to the deduction for dividends paid and excluding any net capital gain. In order to continue to qualify for REIT status, we may be required to make distributions in excess of cash available. Distributions are authorized at the discretion of our board of directors based on its analysis of our performance over the previous periods and expectations of performance for future periods. These analyses may include actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for our portfolio, capital expenditure needs, general financial and market conditions, proceeds from asset sales, and other factors that our board of directors deems relevant. Our board of director’s decisions will be substantially influenced by the obligation to ensure that we maintain our federal tax status as a REIT. We cannot provide assurance that we will pay distributions at any particular level, or at all.

9.10.

Related Party Transactions

Advisor

Our external advisor and certain of its affiliates may receive fees and compensation in connection with the management and sale of our assets based on an advisory management agreement, as amended and restated.

From January 4, 2008 through February 10, 2017, we were party to various advisory management agreements, each with a term of one year or less, with the Behringer Advisor. On February 10, 2017, we and the Behringer Advisor terminated the then existing advisory management agreement effective as of the close of business.

Concurrently, we engaged the Advisor to provide us with advisory services pursuant to various advisory management agreements, each with an initial term of one year. The fees earned by and expenses reimbursed to the Advisor are substantially the same as the fees earned by and expenses reimbursed to the Behringer Advisor. The following discussion describes the fees and expenses payable to our external advisor and its respective affiliates under the various advisory management agreements.

~~Lightstone Value Plus Real Estate Investment Trust V, Inc.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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

We pay our external advisor acquisition and advisory fees of 1.5% of the amount paid in respect of the purchase, development, construction, or improvement of each asset we acquire, including any debt attributable to those assets. In addition, we pay acquisition and advisory fees of 1.5% of the funds advanced in respect of a loan investment. We incurred no acquisition and advisory fees payable to either of our external advisors for the three and nine months ended September 30, 2018 and 2017 because we had no acquisitions during these periods.

We also pay our external advisor an acquisition expense reimbursement in the amount of (i) 0.25% of the funds paid for purchasing an asset, including any debt attributable to the asset, plus 0.25% of the funds budgeted for development, construction, or improvement in the case of assets that we acquire and intend to develop, construct, or improve or (ii) 0.25% of the funds advanced in respect of a loan investment.

For the three months ended September 30, 2019, we incurred an aggregate of less than $0.1 million payable to our external advisor for acquisition and advisory fees and acquisition expense reimbursement. For the nine months ended September 30, 2019, we incurred an aggregate of $1.4 million payable to our advisor for acquisition and advisory fees and acquisition expense reimbursement. We incurred no acquisition and advisory fees and acquisition expense reimbursement payable to our external advisor for the three and nine months ended September 30, 2018 because we had no acquisitions during these periods. Generally, these fees are capitalized to the applicable asset and amortized over its estimated useful life.

We also pay third parties, or reimburse our external advisor or its affiliates, for any investment-related expenses due to third parties in the case of a completed investment, including, but not limited to, legal fees and expenses, travel and communication expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance, premium expenses, and other closing costs.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Our external advisor and its affiliates are also responsible for paying all of the investment-related expenses that we or the external advisor or its affiliates incur that are due to third parties or related to the additional services provided by our external advisor as described above with respect to investments we do not make, other than certain non-refundable payments made in connection with any acquisition. For the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we incurred no acquisition expense reimbursements.

Prior to June 10, 2018 we paid our external advisor a debt financing fee of 0.5% of the amount available under any loan or line of credit made available to us and pay directly all third-party costs associated with obtaining the debt financing, on June 10, 2018 we amended the advisory management agreement with our advisor and increased the debt financing fee to 1.0% of the amount available under any loan or line of credit made available to ~~us.~~us and pay directly all third-party costs associated with obtaining the debt financing. For the nine months ended September 30, ~~2018 and 2017,~~2019, we incurred ~~$0.3~~$0.7 million ~~and $0.2 million, respectively,~~ of external advisor debt financing fees. NoWe incurred no debt financing fees ~~were incurred~~ for the three months ended September 30, 2019 and the three and nine months ended September 30, 2018 as we had no debt financing transactions during these periods. Generally these fees are capitalized as a direct reduction to the applicable financing and ~~2017.~~amortized over its term.

We pay our external advisor a development fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project if such affiliate provides the development services and if a majority of our independent directors determines that such development fee is fair and reasonable to us. We incurred no development fees for the three and nine months ended September 30, ~~2018~~2019 and ~~2017.~~2018.

We pay our external advisor a monthly asset management fee of one-twelfth of 0.7% of the value of each asset. The value of our assets will be the value as determined in connection with the establishment and publication of an estimated net asset value (“NAV”) per share unless the asset was acquired after our publication of a NAV per share (in which case the value of the asset will be the contractual purchase price of the asset). For the three and nine months ended September 30, 2019, we expensed $0.6 million and $1.8 million, respectively, of asset management fees payable to our external advisor. For the three and nine months ended September 30, 2018, we expensed $0.4 million and $1.2 million, respectively, of asset management fees payable to our external ~~advisor and for the three and nine months ended September 30, 2017 we expensed $0.4 million and $1.4 million of asset management fees payable to each of our external advisors.~~advisor.

Our external advisor is responsible for paying all of the expenses it incurs associated with persons employed by the external advisor to the extent that they provide services to us for which our external advisor receives an acquisition, asset management, or debt financing fee, including wages and benefits of the applicable personnel. Instead of reimbursing our external advisor for specific expenses paid or incurred in connection with providing services to us, we pay our external advisor an administrative services fee, ~~also referred~~which is an allocation of a portion of the actual costs that the external advisor paid or incurred providing these services to ~~as an administrative services reimbursement~~us (the “Administrative Services ~~Fee”~~Reimbursement”). The Administrative Services ~~Fee~~Reimbursement is intended to reimburse the external advisor for all its costs associated with providing services to us. For the calendar year ending December 31, 2017, the Administrative Services Fee was up to $1.325 million annually, pro-rated for the first six months of the year and up to $1.30 million annually, pro-rated for the second six months of the year. On February 10, 2018, the advisory management agreements were extended an additional four months through June 10, 2018.

For the period January 1, 2018 through June 10, 2018, the Administrative Services ~~Fee is~~Reimbursement was up to $1.3 million annually, pro-rated for the period. For the period June 11, 2018 through June 10, 2019, the Administrative Services Reimbursement was up to $1.29 million. On June 10, ~~2018,~~2019, the advisory management agreements were extended an additional year through June 10, ~~2019.~~2020. For the period June ~~10, 2018~~11, 2019 through June 10, ~~2019,~~2020, the Administrative Services ~~Fee~~Reimbursement is up to ~~$1.29~~$1.312 million. The Administrative ~~Service Fee~~Services Reimbursement is payable in four equal quarterly installments within 45 days of the end of each calendar quarter. In addition, under the various advisory management agreements, we are to reimburse the external advisor for certain due diligence services provided in connection with asset acquisitions and dispositions and debt financings separately from the Administrative Services ~~Fee.~~Reimbursement. We incurred and expensed $0.4 million and $1.0 million for the three and nine months ended September 30, 2019, respectively, and $0.3 million and $1.0 million for the three and nine months ended September 30, 2018, respectively, ~~and $0.5 million and $1.2 million for the three and nine months ended September 30, 2017, respectively,~~ of such costs for administrative services and due diligence services.

~~Lightstone Value Plus Real Estate Investment Trust V, Inc.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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

Notwithstanding the fees and cost reimbursements payable to our external advisor pursuant to our advisory management agreement, under our charter we may not reimburse the external advisor for any amount by which our operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of: (i) 2% of our average invested assets, or (ii) 25% of our net income determined without reduction for any additions to reserves for depreciation, bad debts, or other similar non-cash reserves and excluding any gain from the sale of our assets for that period unless a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the four fiscal quarters ended September 30, ~~2018,~~2019, our total operating expenses (including the asset management fee) exceeded the limit on total operating expenses; however, our independent directors determined the excess expenses were justified primarily as a result of the timing of the redeployment of our cash proceeds from asset sales and financings.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Property Manager

From January 4, 2008 through February 10, 2017, we were party to various property management and leasing agreements between us, our operating partnership, and certain affiliates of Behringer (collectively, the “Behringer Manager”). On February 10, 2017, we and the Behringer Manager terminated the then existing property management and leasing agreements effective as of the close of business.

~~Concurrently, we~~The Company engaged an affiliate of Lightstone (the “Lightstone Manager”) pursuant to a property management and leasing agreement. ~~The fees earned by and expenses reimbursed to the Lightstone Manager are substantially the same as the fees earned by and expenses reimbursed to the Behringer Manager.~~ The following discussion describes the fees and expenses payable to our affiliated property manager and its respective affiliates under both the various property management and leasing agreements.

We pay our property manager and affiliate of our external advisor, fees for the management, leasing, and construction supervision of our properties which is 4.0% of gross revenues of the properties managed by our property manager. We pay our property manager an oversight fee equal to 0.5% of the gross revenues of the property managed for any property for which we contract directly with a third-party property manager. In no event will our property manager or its affiliates receive both a property management fee and an oversight fee with respect to any particular property. In the event we own a property through a joint venture that does not pay our property manager directly for its services, we will pay our property manager a management fee or oversight fee, as applicable, based only on our economic interest in the property. For the three and nine months ended September 30, 2019, we incurred and expensed property management fees or oversight fees to the related-party property manager of $0.1 million and $0.3 million, respectively. For both the three and nine months ended September 30, 2018, we incurred and expensed property management fees or oversight fees to the related-party property manager of ~~less than~~ $0.1 ~~million and $0.1 million, respectively, compared to $0.1 million and $0.1 million in the same periods in 2017, respectively.~~million.

We pay our property manager a construction management fee in an amount not to exceed 5% of all hard construction costs incurred in connection with, but not limited to capital repairs and improvements, major building reconstruction and tenant improvements, if such affiliate supervises construction performed by or on behalf of us or our affiliates. We incurred no construction management fees for the three months ended September 30, ~~2018~~2019 and ~~2017.~~2018.

As of both September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had a payable to our external advisor and its affiliates of less than $0.1 million. These balances consist of accrued fees, including asset management fees, administrative service expenses, property management fees, and other miscellaneous costs payable to our external advisor and property manager.

~~Lightstone Value Plus Real Estate Investment Trust V, Inc.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

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

We are dependent on our external advisor and our property manager for certain services that are essential to us, including asset disposition decisions, property management and leasing services, and other general administrative responsibilities. In the event that these companies were unable to provide us with their respective services, we would be required to obtain such services from other sources.

11.

~~10.~~

~~Subsequent Events~~Investment in Unconsolidated Joint Venture

~~Share Redemption Program~~

~~On November 9, 2018, our board of directors approved redemptions for the third quarter of 2018~~We provided mezzanine financing totaling ~~104,299~~$15.3 million to an unaffiliated third-party entity (the “Borrower”) that owned an apartment complex in Denver, Colorado (the “Prospect Park”). The Borrower also had a senior construction loan with a third-party construction lender (the “Senior Lender”) in an aggregate ~~redemption~~original principal amount of $40.0 million. The senior construction loan was guaranteed by the owners of the developer. We also had a personal guaranty from the owners of the developer guaranteeing completion of Prospect Park and payment of ~~approximately $0.8 million. See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” for a full description~~any cost overruns. Our mezzanine loan was secured by all of the ~~price at which we redeem shares under our share redemption program.~~membership interests of the Borrower and was subordinate to the senior construction loan. Our advances of $15.3 million initially had annual stated interest rates ranging from 10% to 18%.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Pursuant to the terms of the mezzanine loan, we participated in the residual interests of Prospect Park attributable to a sale or refinancing even though we had no actual ownership interest. We previously evaluated this arrangement and determined that its characteristics were similar to a jointly-owned investment or partnership. Accordingly, our investment, which was a variable interest entity (“VIE”) was accounted for as an unconsolidated joint venture under the equity method of accounting instead of loan accounting.

On December 15, 2017, the Borrower sold Prospect Park to an unrelated third-party for a contractual sales price of approximately $100.5 million. In connection with the sale, the Borrower repaid the Senior Construction Loan in full and we received aggregate proceeds of approximately $21.6 million representing the repayment in full of the outstanding principal and accrued interest due on our mezzanine loan. Additionally, the Borrower placed approximately $15.1 million of the net proceeds from the sale into an escrow account to be used for settlement of the amount due to us for our participation in the residual interests of Prospect Park. The carrying value of our unconsolidated investment in Prospect Park, which represented the minimum amount payable to us for our participation in the residual interests of Prospect Park, was $10.9 million as of December 31, 2018.

On January 4, 2019, the Company and the Borrower received payments of $10.9 million and $1.9 million, respectively, from the escrow account. As a result, the carrying value of our unconsolidated investment in Prospect Park has been reduced to zero and as of September 30, 2019, approximately $2.3 million remains in the escrow account to be used for settlement of any potential remaining amount due to us for our participation in the residual interests of Prospect Park and any additional amounts received will be recognized upon receipt.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

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 consolidated financial statements and the notes thereto.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include discussion and analysis of the financial condition of the Company, including our ability to rent space on favorable terms, to address our debt maturities and to fund our liquidity requirements, to sell our assets when we believe advantageous to achieve our investment objectives, our anticipated capital expenditures, the amount and timing of anticipated future cash distributions to our stockholders, the estimated per share value of our common stock, and other matters. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.

These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy, and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors ~~listed and described herein and under “Item 1A, Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2018 and the factors~~ described below:

market and economic challenges experienced by the U.S. and global economies or real estate industry as a whole and the local economic conditions in the markets in which our investments are located;

the availability of cash flow from operating activities for distributions, if any;

conflicts of interest arising out of our relationships with our advisor and its affiliates;

our ability to retain or replace our executive officers and other key individuals who provide advisory and property management services to us;

our level of debt and the terms and limitations imposed on us by our debt agreements;

the availability of credit generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions and requirements of that debt;

our ability to make accretive investments in a diversified portfolio of assets;

future changes in market factors that could affect the ultimate performance of ~~our~~any development or redevelopment projects that we undertake, including but not limited to construction costs, plan or design changes, schedule delays, availability of construction financing, performance of developers, contractors and consultants, and growth in rental rates and operating costs;

our ability to secure leases at favorable rental rates;

our ability to acquire and/or sell assets at a price and on a timeline consistent with our investment objectives;

impairment charges;

unfavorable changes in laws or regulations impacting our business, our assets, or our key relationships; and

factors that could affect our ability to qualify as a real estate investment trust.

Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Report, and may ultimately prove to be incorrect. 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, except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 21E of the Exchange Act.

Cautionary Note

The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Quarterly Report on Form 10-Q are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties. Moreover, these representations, warranties, or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.

Executive Overview

We were formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic and value-add basis. In particular, we have focused generally on acquiring commercial properties with significant possibilities for capital appreciation, such as those requiring development, redevelopment or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who were distressed or faced time-sensitive deadlines. In addition, our opportunistic and value-add investment strategy has included investments in real estate-related assets that present opportunities for higher current income. Since inception, we have acquired a wide variety of commercial properties, including office, industrial, retail, hospitality, and multifamily. We have purchased existing, income-producing properties and newly constructed properties. We have also invested in other real estate-related investments such as mortgage and mezzanine loans. We have made our investments in or in respect of real estate assets located in the United States and other countries based on our view of existing market conditions. Currently, our investments include ~~multifamily~~properties (multifamily and student housing communities, and an office ~~building.~~building) and a mezzanine loan. All of our current investments are located in the United States.

Our common stock is not currently listed on a national securities exchange. The timing of a liquidity event for our stockholders will depend upon then prevailing market conditions. We previously targeted the commencement of a liquidity event within six years after the termination of our initial public offering, which occurred on July 3, 2011. On June 29, 2017, our board of directors elected to extend the targeted timeline an additional six years until June 30, 2023 based on their assessment of our investment objectives and liquidity options for our stockholders. However, we can provide no assurances as to the actual timing of the commencement of a liquidity event for our stockholders or the ultimate liquidation of the Company. We will seek stockholder approval prior to liquidating our entire portfolio.

Liquidity and Capital Resources

We had unrestricted cash and cash equivalents of ~~$52.4~~$34.0 million and marketable securities, available for sale of $5.4 million as of September 30, ~~2018.~~2019. Our principal demands for funds going forward will be for the payment of (a) operating expenses, (b) interest and principal payments on our outstanding indebtedness, (c) share redemptions and ~~(d)~~ distributions, if any, authorized by our board of ~~directors.~~directors, (d) remaining funding of our mezzanine loan and (e) other real estate or real estate-related investments. Generally, we expect to meet the cash needs for ~~the payment of operating expenses, interest on~~these items with our ~~outstanding indebtedness and share redemptions with~~available cash as well as our future cash flow from operations, ~~and to fund authorized distributions (if any) from available cash flow from operations and/or~~ proceeds received from ~~asset sales. To the extent that our cash flow from operations is not sufficient to cover these items, we expect to use cash generated from borrowings and selective~~potential asset sales ~~to fund such needs.~~

and/or new borrowings. We intend to hold our various real properties until such time as our board of directors determines that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that the objectives will not be met.

In addition to our debt obligations, we consider other factors in evaluating our liquidity. For example, to the extent our portfolio is concentrated in certain geographic regions and types of assets, downturns relating generally to such regions and assets may result in tenants defaulting on their lease obligations at a number of our properties within a short time period. Such defaults could negatively affect our liquidity and adversely affect our ability to fund our ongoing operations.

We may, but are not required to, establish capital reserves from cash flow generated by operating properties and other investments, or net sales proceeds from the sale of our properties and other investments. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions, and major capital expenditures. Alternatively, a lender may establish its own criteria for escrow of capital reserves.

We have borrowed and may continue to borrow money to acquire properties and make other investments. Under our charter, the maximum amount of our indebtedness is limited to 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors. In addition to our charter limitation, our board of directors has adopted a policy to generally limit our aggregate borrowings to approximately 75% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Our policy limitation, however, does not apply to individual real estate assets.

Commercial real estate debt markets may experience volatility and uncertainty as a result of certain related factors, including ~~the tightening of~~changes to underwriting standards by lenders and credit rating agencies, macro-economic issues related to fiscal, tax and regulatory policies, and global financial issues. Should the overall cost of borrowings increase, either by increases in the index rates or by increases in lender spreads, we will need to factor such increases into the economics of our developments and investments. This may result in our investment operations generating lower overall economic returns and a reduced level of cash flow, which could potentially impact our ability to make distributions to our stockholders. In addition, disruptions in the debt markets may reduce the amount of capital that is available to finance real estate, which in turn could: (i) lead to a decline in real estate values generally; (ii) slow real estate transaction activity; (iii) reduce the loan to value ratio upon which lenders are willing to extend debt; and (iv) result in difficulty in refinancing debt as it becomes due, all of which may reasonably be expected to have a material adverse impact on the value of real estate investments and the revenues, income or cash flow from the operations of real properties and mortgage loans.

Debt Financings

From time to time, we have obtained mortgage, bridge, or mezzanine loans for acquisitions and investments, as well as property development. In the future, we may obtain new financings to acquire properties and for property renovation development and redevelopment activities or refinance our existing real estate assets, depending on multiple factors.

On May 1, 2018, we entered into a non-recourse mortgage loan (the “River Club Mortgage”) in the amount of $30.4 million. The River Club Mortgage has a term of seven years, bears interest at Libor plus 1.78% and requires monthly interest-only payments during the first five years and interest and principal payments pursuant to a 30-year amortization schedule for the remaining two years through its stated maturity with the entire unpaid balance due upon maturity. The River Club Mortgage is cross-collateralized by the River Club and the Townhomes at River Club. At closing, approximately $23.4 million of the proceeds from the River Club Mortgage were used to repay in full the existing non-recourse mortgage loan on the River Club and Townhomes at River Club.

On June 1, 2018, we entered into a non-recourse mortgage loan (the “Parkside Mortgage”) in the amount of $18.0 million. The Parkside Mortgage has a term of seven years, bears interest at 4.45% and requires monthly interest and principal payments pursuant to a 30-year amortization schedule through its stated maturity with the entire unpaid balance due upon maturity. The Parkside Mortgage is collateralized by Parkside. At closing, approximately $9.6 million of the proceeds from the Parkside Mortgage were used to repay in full the existing non-recourse mortgage loan on Parkside.

On June 28, 2018, we entered into a non-recourse mortgage loan (the “Gardens Medical Mortgage”) in the amount of $13.0 million. The Gardens Medical Mortgage has a term of three years, bears interest at Libor plus 1.90% and requires monthly interest and principal payments through its stated maturity with the entire unpaid balance due upon maturity. The Gardens Medical Mortgage is collateralized by the Gardens Medical Pavilion.

As of September 30, ~~2018,~~2019, our outstanding notes payable were ~~$116.2~~$209.7 million, net of deferred financing fees of ~~$1.6~~$3.4 million and had a weighted average interest rate of ~~5.0%~~4.3%. As of December 31, ~~2017,~~2018, the Company had notes payable of ~~$89.9~~$139.0 million, net of deferred financing fees of ~~$0.4~~$2.4 million, with a weighted average interest rate of ~~5.0%~~4.3%. For loans in place as of September 30, 2018, we have guaranteed payment of certain recourse liabilities with respect to certain customary nonrecourse carveouts as set forth in the guaranties in favor of the unaffiliated lenders with respect to the 22 Exchange.

Our loan agreements stipulate that we comply with certain reporting and financial covenants. These covenants include, among other things, maintaining minimum debt service coverage ratios, loan to value ratios, and liquidity. We are currently in compliance with all of our debt ~~covenants other than~~covenants.

Our non-recourse mortgage loan secured by the ~~debt associated with 22 Exchange~~Lakes of Margate (outstanding principal balance of ~~approximately $18.9~~$13.5 million as of September 30, ~~2018) as discussed below.~~

We did not meet the debt service coverage requirements for our 22 Exchange loan for all of the quarterly periods in 2017 and, as a result, the lender elected to sweep the cash from operations beginning in January 2018. Additionally, the cash from operations was not sufficient to fully pay the scheduled monthly debt service due on January 5, 2018, which constituted an event of default, and therefore the 22 Exchange loan which was scheduled to mature in May 2023 became due on demand. We received notice on January 9, 2018 that the 22 Exchange loan had been transferred to a special servicer effective immediately. Subsequently, the special servicer placed the property in receivership and has commenced foreclosure proceedings.

Default interest expense of $0.2 million and $0.7 million was accrued during the three and nine months ended September 30, 2018. As a result, accrued default interest expense of $0.7 million is included in accounts payable, accrued and other liabilities on our consolidated balance sheet as of September 30, 2018. However, we do not expect to pay any of the accrued default interest expense as the 22 Exchange loan is non-recourse to it. Additionally, we believe the loss of cash flow and the expected loss of this property will not have a material impact on our consolidated results of operations or financial condition.

~~Besides the 22 Exchange loan, as of September 30, 2018, our only other debt maturing over the next twelve months is debt of approximately $23.8 million associated with Arbors Harbor Town, which~~2019) matures in January ~~2019.~~2020. We currently expect to refinance all or ~~repay in full with available cash~~a portion of this ~~debt~~maturing indebtedness on or before its ~~maturity date.~~scheduled maturity. However, if we are unable to refinance the outstanding indebtedness at favorable terms, we will look to repay the outstanding balance with available cash and/or proceeds from selective asset sales.

One of our principal short-term and long-term liquidity requirements includes the repayment of maturing debt. The following table provides information with respect to the contractual maturities and scheduled principal repayments of our indebtedness as of September 30, ~~2018~~2019 (dollars in thousands).

Contractual Obligations	2018		2019		2020		2021		2022		Thereafter		Total		2019		2020		2021		2022		2023		Thereafter		Total
Mortgage Payable	$	19,272	$	24,463	$	13,924	$	12,735	$	330	$	47,002	$	117,726	$	212	$	13,924	$	13,443	$	1,468	$	2,122	$	181,848	$	213,017
Interest Payments		1,080		3,429		2,630		2,318		2,001		4,753		16,211		2,286		8,482		8,157		7,816		7,747		15,742		50,230

Total Contractual Obligations	$	20,352	$	27,892	$	16,554	$	15,053	$	2,331	$	51,755	$	133,937	$	2,498	$	22,406	$	21,600	$	9,284	$	9,869	$	197,590	$	263,247

Results of Operations

As of September 30, 2019, we had eight real estate investments (four wholly owned properties and four properties consolidated through investments in joint ventures) and one real estate-related investment (mezzanine loan).

On February 14, 2019, we acquired the Valley Ranch Apartments (the “2019 Acquisition”) and on November 27, 2018 we acquired the Axis at Westmont (the “2018 Acquisition” and collectively, the “Acquisitions”). Additionally, on January 4, 2019 we received proceeds of approximately $10.9 million representing the minimum amount payable for our participation in the residual interests of our equity method investment in Prospect Park. Any additional amounts received will be recognized upon receipt.

On December 28, 2018, we disposed of 22 Exchange (the “Disposition”) and the disposition of this property did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on our operations and financial results. Accordingly, the operating results of this property are reflected in our results from continuing operations for all periods presented through its date of disposition.

As of September 30, 2018, we had eight real estate investments, seven of which were consolidated (one wholly owned property and six properties consolidated through investments in joint ventures) and ~~one real estate~~an equity method investment which we account for under the equity method. On November 30, 2017, we acquired the Flats at Fishers Marketplace (“Flats at Fishers” or the “2017 Acquisition”.) As of September 30, 2017, we had seven real estate investments, six of which were consolidated through investments in ~~joint ventures and one real estate investment which we account for under the equity method.~~Prospect Park.

Our results of operations for the respective periods presented reflect ~~decreases~~increases in most categories principally resulting from our acquisition and disposition ~~of Courtyard Kauai Coconut Beach Hotel in August 2017 (the “2017 Disposition”).~~activities. The ~~effects of~~increases from the ~~2017 Disposition~~Acquisitions are partially offset by ~~increases~~the decrease resulting from the ~~2017 Acquisition.~~Disposition. Properties owned by us during the entire periods presented are referred to as our “Same Store” properties.

The disposition of the Courtyard Kauai Coconut Beach Hotel did not qualify to be reported as discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of the Courtyard Kauai Coconut Beach Hotel are reflected in the Company’s results from continuing operations for all periods presented through its respective date of disposition.

Three months ended September 30, ~~2018~~2019 as compared to the three months ended September 30, ~~2017.~~2018.

The following table provides summary information about our results of operations for the three months ended September 30, ~~2018~~2019 and ~~2017~~2018 (dollars in thousands):

	Three Months Ended										Change		Change			Change
	September 30,				Increase/			Percentage			due to		due to			due to			Three Months Ended										Change		Change			Change due to
	2018		2017		(Decrease)			Change			Acquisitions⁽¹⁾		Dispositions⁽²⁾			Same Store⁽³⁾			September 30,				Increase/			Percentage			due to		due to			Same
																			2019		2018		(Decrease)			Change			Acquisitions⁽¹⁾		Dispositions⁽²⁾			Store⁽³⁾
Rental revenues	$	6,785	$	6,122	$	663			11.0	%	$	1,017	$	-		$	(354	)	$	9,575	$	6,698	$	2,877			43.0	%	$	3,005	$	(389	)	$	261
Hotel revenues		-		2,653		(2,653	)		(100.0	)%		-		(2,653	)		-
Property operating expenses		2,804		2,697		107			4.0	%		283		-			(176	)		3,622		3,043		579			19.0	%		905		(468	)		142
Hotel operating expenses		-		1,921		(1,921	)		(100.0	)%		-		(1,921	)		-
Interest expense, net		1,625		1,601		24			1.0	%		-		(312	)		336
Real estate taxes		1,111		1,090		21			2.0	%		143		(65	)		(57	)		1,412		1,078		334			31.0	%		438		(184	)		80
Property management fees		271		285		(14	)		(5.0	)%		46		(67	)		7
Asset management fees⁽⁴⁾		395		426		(31	)		(7.0	)%		-		(54	)		23
General and administrative		887		863		24			3.0	%		-		-			24			1,514		1,357		157			12.0	%		10		(51	)		198
Depreciation and amortization		2,366		2,353		13			1.0	%		543		(176	)		(354	)		3,402		2,366		1,036			44.0	%		1,417		(271	)		(110	)
Interest expense, net																				2,494		1,625		869			53.0	%		928		(440	)		381
Gain on sale of real estate		312		21,336		(21,024	)		(99.0	)%		-		(21,024	)		-			-		312		(312	)		(100.0	%)		-		(312	)		-

(1)

Represents the effect on our operating results for the ~~three months ended September 30, 2018 compared to the same period in 2017~~periods indicated resulting from our ~~2017~~2018 acquisition of the ~~Flats~~Axis at ~~Fishers.~~Westmont and our 2019 acquisition of the Valley Ranch Apartments.

(2)

Represents the effect on our results for the ~~three months ended September 30, 2018 compared to the same period in 2017 principally~~periods indicated resulting from our ~~2017~~2018 disposition of ~~the Courtyard Kauai Coconut Beach Hotel.~~22 Exchange.

(3)

Represents the change for the three months ended September 30, ~~2018~~2019 compared to the same period in ~~2017~~2018 for real estate and real estate-related investments owned by us during the entire periods presented (“Same Store”). Our results for Same Store properties ~~for results~~ for the three months ended September 30, ~~2018~~2019 and ~~2017~~2018 include Gardens Medical Pavilion, River Club and the Townhomes at River Club, Lakes of Margate, Arbors Harbor Town, ~~22 Exchange~~Parkside and ~~Parkside.~~

~~(4)~~

Asset management fees payable to the Advisor are an obligation of the Company, and as such, asset management fees associated with all investments owned during the period are classified in continuing operations. Therefore, the amounts above include asset management fees associated with any property owned during a particular period, including those related to our disposed properties.Flats at Fishers.

The following table reflects total rental ~~and hotel~~ revenues and total property ~~and hotel~~ operating expenses for the three months ended September 30, ~~2018~~2019 and ~~2017~~2018 for: (i) our Same Store properties (ii) the ~~2017 Disposition~~Acquisitions and (iii) the ~~2017 Acquisition~~Disposition (dollars in thousands):

Three Months Ended September 30,
Description 2018 2017 Change
Revenues:
Same store $ 5,768 $ 6,122 $ (354 )
Acquisition 1,017 - 1,017
Disposition - 2,653 (2,653 )
Total rental revenues $ 6,785 $ 8,775 $ (1,990 )

Property and hotel operating expenses:
Same store $ 2,521 $ 2,697 $ (176 )
Acquisition 283 - 283
Disposition - 1,921 (1,921 )
Total property and hotel operating expenses $ 2,804 $ 4,618 $ (1,814 )

	Three Months Ended September 30,
Description	2019		2018		Change
Rental Revenues:
Same Store	$	6,570	$	6,309	$	261
Acquisitions		3,005		-		3,005
Disposition		-		389		(389	)
Total rental revenues	$	9,575	$	6,698	$	2,877

Property operating expenses:
Same Store	$	2,717	$	2,575	$	142
Acquisitions		905		-		905
Disposition		-		468		(468	)
Total property and hotel operating expenses	$	3,622	$	3,043	$	579

The tables below reflect occupancy and effective monthly rental rates for our operating properties owned as of September 30, ~~2018:~~2019:

Occupancy (%) Effective Monthly Rent per
Square Foot/Unit/Bed ($)⁽¹⁾
As of September 30, As of September 30,
Property 2018 2017 2018 2017
Gardens Medical Pavilion 71 % 74 % $ 2.14 $ 2.26 per sq. ft.
River Club and the Townhomes at River Club 98 % 96 % 451.73 413.91 per bed
Lakes of Margate 95 % 89 % 1,340.16 1,283.22 per unit
Arbors Harbor Town 97 % 94 % 1,262.49 1,241.43 per unit
22 Exchange 49 % 80 % 319.81 571.49 per bed
Parkside 90 % 95 % 1,155.12 1,143.29 per unit
Flats at Fishers 93 % n/a 1,062.78 n/a per bed

	Occupancy						Effective Monthly Rent per Square Foot/Unit/Bed⁽¹⁾
	As of September 30,						As of September 30,
Property	2019			2018			2019		2018
Gardens Medical Pavilion		74	%		72	%	$	2.31	$	2.14	per sq. ft.
River Club and the Townhomes at River Club		99	%		98	%		449.93		451.73	per bed
Lakes of Margate		97	%		95	%		1,381.27		1,340.16	per unit
Arbors Harbor Town		93	%		97	%		1,359.28		1,262.49	per unit
Parkside		96	%		90	%		1,098.13		1,155.12	per unit
Flats at Fishers		94	%		93	%		1,139.28		1,062.78	per unit
Axis at Westmont (2)		93	%		N/A			1,156.97		N/A	per unit
Valley Ranch Apratments (3)		92	%		N/A			1,446.60		N/A	per unit

	(1)	Effective monthly rent is calculated as in-place contracted monthly rental revenue, including any premiums due for short-term or month-to-month leases, less any concessions or discounts.
	(2)	The Axis at Westmont was acquired on November 27, 2018.
	(3)	The Valley Ranch Apartments was acquired on February 14, 2019.

Revenues. Rental revenues for the three months ended September 30, ~~2018~~2019 were ~~$6.8~~$9.6 million, an increase of ~~$0.7~~$2.9 million, compared to ~~$6.1~~$6.7 million for the same period in ~~2017.~~2018. Excluding the effect of our ~~2017 Acquisition,~~acquisition and disposition activities, our rental revenues ~~decreased~~increased by ~~$0.4~~$0.3 million for our Same Store ~~properties and is primarily~~properties. The increase in rental revenues for our Same Store Properties was generally attributable to ~~22 Exchange.~~

~~There were no hotel revenues for~~higher occupancy at most of our Same Store properties during the ~~three months ended September 30, 2018 as a result of the 2017 Disposition. Hotel revenues for the three months ended September 30, 2017 were $2.7 million.~~2019 period.

Property Operating Expenses. Property operating expenses for the three months ended September 30, ~~2018~~2019 were ~~$2.8~~$3.6 million, an increase of ~~$0.1~~$0.6 million, compared to ~~$2.7~~$3.0 million for the same period in ~~2017.~~2018. Excluding the effect of our ~~2017 Acquisition,~~acquisition and disposition activities, our property operating expenses ~~decreased~~increased slightly by ~~$0.2~~$0.1 million for our Same Store properties.

~~Hotel Operating Expenses.~~ There were no hotel operating expenses for the three months ended September 30, 2018 as a result of the 2017 Disposition. Hotel operating expenses for the three months ended September 30, 2017 were $1.9 million.

~~Interest Expense, net.~~ Interest expense for the three months ended September 30, 2018 and 2017 was unchanged at $1.6 million as the decrease resulting from the 2017 Disposition was offset by increases for our Same Store properties. Interest expense for our Same Store properties for the 2018 period reflects approximately $0.2 million of default interest accrued but not paid on the nonrecourse debt associated with 22 Exchange.

Real Estate ~~Taxes~~Taxes.. Real estate taxes for the three months ended September 30, ~~2018 and 2017 was unchanged at~~2019 were $1.4 million, an increase of $0.3 million, compared to $1.1 million asfor the ~~decrease resulting from the 2017 Disposition was offset by the 2017 Acquisition.~~

~~Property Management Fees~~. Property management fees, which are based on revenues, were $0.3 million for both the three months ended September 30, 2018 and 2017 and are comprised of property management fees paid to unaffiliated third parties and our property manager.same period in 2018. Excluding the effect of our ~~2017 Disposition~~acquisition and ~~2017 Acquisition, property management fees were relatively flat.~~

~~Asset Management Fees~~~~. Asset management fees for both the three months ended September 30, 2018 and 2017 were $0.4 million and were comprised of asset management fees paid to~~disposition activities, our external advisor and third parties with respect to our investments. We pay our external advisor or its affiliates a monthly asset management fee of one-twelfth of 0.7% of the value for each asset as determined in connection with our establishment and publication of our estimated net asset value per share. Asset management fees for the three months ended September 30, 2017 includedreal estate taxes increased slightly by $0.1 million ~~related to the 2017 Disposition.~~for our Same Store properties.

General and Administrative Expenses. General and administrative expenses for the three months ended September 30, ~~2018~~2019 were $1.5 million, an increase of $0.1 million, compared to $1.4 million for the same period in 2018. The increase is principally attributable to higher asset management fees during the 2019 period resulting from our acquisition activities. General and ~~2017 was unchanged at $0.9 million, and~~administrative expenses primarily consists of audit fees, legal fees, board of directors’ fees, and other administrative ~~expenses.~~expenses, including certain costs paid to our advisor such as asset management fees and (see Note 10 of the financial statements).

Depreciation and Amortization. Depreciation and amortization expense for the three months ended September 30, ~~2018 and 2017~~2019 was ~~unchanged at~~$3.4 million, an increase of $1.0 million, compared to $2.4 ~~million.~~million for the same period in 2018. Excluding the effect of our ~~2017 Disposition~~acquisition and ~~2017 Acquisition,~~disposition activities, depreciation and amortization decreased slightly by $0.1 million for our Same Store properties.

Interest Expense, net. Interest expense, net for the three months ended September 30, 2019 was $2.5 million, an increase of $0.9 million, compared to $1.6 million for the same period in 2018. Excluding the effect of our acquisition and disposition activities, interest expense, net increased by $0.4 million for our Same Store properties. The change in our interest expense, net for our Same Store properties reflects increases in (i) our weighted average outstanding notes payable balance resulting from our financing activities and (ii) the weighted average interest rate on our indebtedness during the 2019 period.

Interest Income, net. Interest income for the three months ended September 30, 2019 was $0.5 million, an increase of $0.3 million, compared to $0.2 million for the same period in 2018. The increase was principally attributable to the interest earned on our note receivable which was entered into on February 28, 2019 (see Note 4 of the financial statements).

Gain on Sale of Real Estate and Other Assets. WeDuring the three months ended September 30, 2018, we recognized the ~~remaining~~final $0.3 million of a previously deferred gain related to escrow reimbursements received from ~~the Lakewood Flats~~an outstanding insurance claim ~~during the three months ended September 30, 2018. On August 15, 2017, we sold the Courtyard Kauai Coconut Beach Hotel~~ for a ~~contractual sales price~~property we previously disposed of ~~approximately $62.0 million, resulting~~ in a third quarter gain on sale of real estate of $20.9 million. Additionally, we recognized a $0.4 million gain on sale of real estate during the nine months ended September 30, 2017 related to escrow reimbursements received from the Lakewood Flats outstanding insurance claim. On August 16, 2016, we sold Lakewood Flats for a contractual sales price of approximately $68.8 million, resulting in a third quarter gain on sale of real estate of approximately $11.5 million and a deferred gain of approximately $1.2 million.2016. The deferred gain ~~represented the amount~~consisted of monies held in escrow to be reimbursed upon completion of the property’s outstanding insurance claim. ~~There was no remaining deferred gain escrow balance as of September 30, 2018.~~

Nine months ended September 30, ~~2018~~2019 as compared to the nine months ended September 30, ~~2017.~~2018.

The following table provides summary information about our results of operations for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 (dollars in thousands):

Nine Months Ended Change Change Change
September 30, Increase/ Percentage due to due to due to
2018 2017 (Decrease) Change Acquisitions⁽¹⁾ Dispositions⁽²⁾ Same Store⁽³⁾

Rental revenues $ 20,271 $ 18,345 $ 1,926 10.0 % $ 2,664 $ - $ (738 )
Hotel revenues - 13,207 (13,207 ) (100.0 )% - (13,207 ) -
Property operating expenses 7,448 6,758 690 10.0 % 910 - (220 )
Hotel operating expenses - 9,167 (9,167 ) (100.0 )% - (9,167 ) -
Interest expense, net 4,311 4,843 (532 ) (11.0 )% - (990 ) 458
Real estate taxes 3,382 3,315 67 2.0 % 422 (380 ) 25
Property management fees 765 1,043 (278 ) (27.0 )% 101 (331 ) (48 )
Asset management fees⁽⁴⁾ 1,177 1,445 (268 ) (19.0 )% - (265 ) (3 )
General and administrative 2,800 2,624 176 7.0 % 6 - 170
Depreciation and amortization 7,184 7,499 (315 ) (4.0 )% 1,607 (1,236 ) (686 )
Gain on sale of real estate 619 21,619 (21,000 ) (97.0 )% - (21,000 ) -

	Nine Months Ended										Change		Change			Change due to
	September 30,				Increase/			Percentage			due to		due to			Same
	2019		2018		(Decrease)			Change			Acquisitions⁽¹⁾		Dispositions⁽²⁾			Store⁽³⁾
Rental revenues	$	27,619	$	20,010	$	7,609			38.0	%	$	8,292	$	(1,701	)	$	1,018
Property operating expenses		9,494		8,140		1,354			17.0	%		2,471		(1,106	)		(11	)
Real estate taxes		3,844		3,283		561			17.0	%		944		(551	)		168
General and administrative		4,658		4,169		489			12.0	%		25		(158	)		622
Depreciation and amortization		9,851		7,184		2,667			37.0	%		3,988		(847	)		(474	)
Interest expense, net		6,753		4,311		2,442			57.0	%		2,530		(1,307	)		1,219
Gain on sale of real estate		-		619		(619	)		(100.0	%)		-		(619	)		-

(1)

Represents the effect on our operating results for the ~~nine months ended September 30, 2018 compared to the same period in 2017~~periods indicated resulting from our ~~2017~~2018 acquisition of the ~~Flats~~Axis at ~~Fishers.~~Westmont and our 2019 acquisition of the Valley Ranch Apartments.

(2)

Represents the effect on our results for the ~~nine months ended September 30, 2018 compared to the same period in 2017~~periods indicated principally resulting from our ~~2017~~2018 disposition of ~~the Courtyard Kauai Coconut Beach Hotel.~~22 Exchange.

(3)

Represents the change for the nine months ended September 30, ~~2018~~2019 compared to the same period in ~~2017~~2018 for real estate and real estate-related investments owned by us during the entire periods presented (“Same Store”). Our results for Same Store properties ~~for results~~ for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 include Gardens Medical Pavilion, River Club and the Townhomes at River Club, Lakes of Margate, Arbors Harbor Town, ~~22 Exchange~~Parkside and ~~Parkside.~~Flats at Fishers.

~~(4)~~

The following table reflects total rental ~~and hotel~~ revenues and total property ~~and hotel~~ operating expenses for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 for: (i) our Same Store properties (ii) the ~~2017 Disposition~~Acquisitions and (iii) the ~~2017 Acquisition~~Disposition (dollars in thousands):

Nine Months Ended September 30,
Description 2018 2017 Change
Revenues:
Same store $ 17,607 $ 18,345 $ (738 )
Acquisition 2,664 - 2,664
Disposition - 13,207 (13,207 )
Total rental revenues $ 20,271 $ 31,552 $ (11,281 )

Property and hotel operating expenses:
Same store $ 6,546 $ 6,758 $ (212 )
Acquisition 910 - 910
Disposition - 9,167 (9,167 )
Total property and hotel operating expenses $ 7,456 $ 15,925 $ (8,469 )

	Nine Months Ended September 30,
Description	2019		2018		Change
Rental Revenues:
Same Store	$	19,327	$	18,309	$	1,018
Acquisitions		8,292		-		8,292
Disposition		-		1,701		(1,701	)
Total rental revenues	$	27,619	$	20,010	$	7,609

Property operating expenses:
Same Store	$	7,023	$	7,034	$	(11	)
Acquisitions		2,471		-		2,471
Disposition		-		1,106		(1,106	)
Total property and hotel operating expenses	$	9,494	$	8,140	$	1,354

The tables below reflect occupancy and effective monthly rental rates for our operating properties owned as of September 30, ~~2018:~~2019:

	Occupancy (%)						Effective Monthly Rent per Square Foot/Unit/Bed ($)(1)					Occupancy						Effective Monthly Rent per Square Foot/Unit/Bed⁽¹⁾
	As of September 30,						As of September 30,					As of September 30,						As of September 30,
Property	2018			2017			2018		2017			2019			2018			2019		2018
Gardens Medical Pavilion		71	%		74	%	$	2.14	$	2.26	per sq. ft.		74	%		72	%	$	2.31	$	2.14	per sq. ft.
River Club and the Townhomes at River Club		98	%		96	%		451.73		413.91	per bed		99	%		98	%		449.93		451.73	per bed
Lakes of Margate		95	%		89	%		1,340.16		1,283.22	per unit		97	%		95	%		1,381.27		1,340.16	per unit
Arbors Harbor Town		97	%		94	%		1,262.49		1,241.43	per unit		93	%		97	%		1,359.28		1,262.49	per unit
22 Exchange		49	%		80	%		319.81		571.49	per bed
Parkside		90	%		95	%		1,155.12		1,143.29	per unit		96	%		90	%		1,098.13		1,155.12	per unit
Flats at Fishers		93	%		n/a			1,062.78		n/a	per bed		94	%		93	%		1,139.28		1,062.78	per unit
Axis at Westmont (2)													93	%		N/A			1,156.97		N/A	per unit
Valley Ranch Apratments (3)													92	%		N/A			1,446.60		N/A	per unit

	~~(2)~~(1)	Effective monthly rent is calculated as in-place contracted monthly rental revenue, including any premiums due for short-term or month-to-month leases, less any concessions or discounts.
	(2)	The Axis at Westmont was acquired on November 27, 2018
	(3)	The Valley Ranch Apartments was acquired on February 14, 2019

Revenues. Rental revenues for the nine months ended September 30, ~~2018~~2019 were ~~$20.3~~$27.6 million, an increase of ~~$1.9~~$7.6 million, compared to ~~$18.3~~$20.0 million for the same period in ~~2017.~~2018. Excluding the effect of our ~~2017 Acquisition,~~acquisition and disposition activities, our rental revenues ~~decreased~~increased by ~~$0.7~~$1.0 million for our Same Store ~~properties, which~~properties. The increase in rental revenues for our Same Store Properties was ~~primarily~~generally attributable to ~~22 Exchange.~~higher occupancy at most of our Same Store properties during the 2019 period, particularly at Flats at Fishers ($0.6 million of the total increase).

~~There were no hotel revenues for the nine months ended September 30, 2018 as a result of the 2017 Disposition. Hotel revenues for the nine months ended September 30, 2017 were $13.2 million.~~

Property Operating Expenses. Property operating expenses for the nine months ended September 30, ~~2018~~2019 were ~~$7.5~~$9.5 million, an increase of ~~$0.7~~$1.4 million, compared to ~~$6.8~~$8.1 million for the same period in ~~2017.~~2018. Excluding the effect of our ~~2017 Acquisition,~~acquisition and disposition activities, our property operating expenses ~~decreased by $0.2 million~~were relatively flat for our Same Store properties.

~~Hotel Operating Expenses.~~ There were no hotel operating expenses for the nine months ended September 30, 2018 as a result of the 2017 Disposition. Hotel operating expenses for the nine months ended September 30, 2017 were $9.2 million.

~~Interest Expense, net.~~ Interest expense for the nine months ended September 30, 2018 was $4.3 million, a decrease of $0.5 million, compared to $4.8 million for the same period in 2017. Excluding the effect of our 2017 Disposition, our interest expense increased by $0.5 million for our Same Store properties, which reflects approximately $0.7 million of default interest accrued but not paid on the nonrecourse debt associated with 22 Exchange.

Real Estate Taxes. Real estate taxes for the nine months ended September 30, ~~2018 was $3.4~~2019 were $3.8 million, ~~a slight~~an increase of ~~$0.1~~$0.5 million, compared to $3.3 million for the same period in ~~2017. The increase of $0.1 million was attributable to our Same Store properties as the decrease resulting from the 2017 Disposition was offset by the 2017 Acquisition.~~

~~Property Management Fees~~. Property management fees, which are based on revenues, were $0.8 million for the nine months ended September 30, 2018 and $1.0 million for the nine months ended September 30, 2017, and are comprised of property management fees paid to unaffiliated third parties and our property manager.2018. Excluding the effect of our ~~2017 Disposition~~acquisition and ~~2017 Acquisition, property management fees were relatively flat.~~

~~Asset Management Fees~~~~. Asset management fees~~disposition activities, our real estate taxes increased slightly by $0.2 million for ~~the nine months ended September 30, 2018 and 2017 were $1.2 million and $1.4 million, respectively, and were comprised of asset management fees paid to~~ our external advisor and third parties with respect to our investments. We pay our external advisor or its affiliates a monthly asset management fee of one-twelfth of 0.7% of the value for each asset as determined in connection with our establishment and publication of an estimated net asset value per share. Asset management fees for the nine months ended September 30, 2017 included $0.3 million related to the 2017 Disposition.Same Store properties.

General and Administrative Expenses. General and administrative expenses ~~which increased by $0.2 million during~~for the nine months ended September 30, ~~2018~~2019 were $4.7 million, an increase of $0.5 million, compared to $4.2 million for the same period in ~~2017,~~2018. The increase is principally attributable to higher asset management fees during the 2019 period resulting from our acquisition activities. General and administrative expenses primarily consists of audit fees, legal fees, board of directors’ fees, and other administrative ~~expenses.~~expenses, including certain costs paid to our advisor (see Note 10 of the financial statements).

Depreciation and Amortization. Depreciation and amortization ~~decreased by $0.3 million during~~expense for the nine months ended September 30, ~~2018~~2019 was $9.9 million, an increase of $2.7 million, compared to $7.2 million for the same period in ~~2017.~~2018. Excluding the effect of our ~~2017 Disposition~~acquisition and ~~2017 Acquisition,~~disposition activities, depreciation and amortization decreased by ~~$0.7~~$0.5 million for our Same Store properties.

Interest Expense, net. Interest expense for the nine months ended September 30, 2019 was $6.8 million, an increase of $2.5 million, compared to $4.3 million for the same period in 2018. Excluding the effect of our acquisition and disposition activities, interest expense increased by $1.2 million for our Same Store properties. The change in our interest expense, net for our Same Store properties reflects increases in (i) our weighted average outstanding notes payable balance resulting from our financing activities and (ii) the weighted average interest rate on our indebtedness during the 2019 period.

Interest Income, net. Interest income for the nine months ended September 30, 2019 was $1.2 million, an increase of $0.7 million, compared to $0.5 million for the same period in 2018. The increase was principally attributable to the interest earned on our note receivable which was entered into on February 28, 2019 (see Note 4 of the financial statements).

Gain on Sale of Real Estate and Other Assets. WeDuring the nine months ended September 30, 2018, we recognized ~~the remaining~~an aggregate $0.6 million of a previously deferred gain related to escrow reimbursements received from ~~the Lakewood Flats~~an outstanding insurance claim ~~during the nine months ended September 30, 2018. On August 15, 2017, we sold the Courtyard Kauai Coconut Beach Hotel~~ for a ~~contractual sales price~~property we previously disposed of ~~approximately $62.0 million, resulting~~ in a third quarter gain on sale of real estate of $20.9 million. Additionally, we recognized a $0.7 million gain on sale of real estate during the nine months ended September 30, 2017 related to escrow reimbursements received from the Lakewood Flats outstanding insurance claim. On August 16, 2016, we sold Lakewood Flats for a contractual sales price of approximately $68.8 million, resulting in a third quarter gain on sale of real estate of approximately $11.5 million and a deferred gain of approximately $1.2 million.2016. The deferred gain ~~represented the amount~~consisted of monies held in escrow to be reimbursed upon completion of the property’s outstanding insurance claim. ~~There was no remaining deferred gain escrow balance as of September 30, 2018.~~

Summary of Cash Flows

Operating activities

The net cash flows provided by operating activities of ~~$2.1~~$9.0 million for the nine months ended September 30, ~~2018~~2019 consists of the following:

cash inflows of approximately ~~$1.2~~$4.3 million from our net loss after adjustment for non-cash items; and

cash inflows of approximately ~~$0.9~~$4.7 million associated with the net changes in operating assets and liabilities.

Investing activities

The net cash used in investing activities of ~~$17.4~~$65.8 million for the nine months ended September 30, ~~2018~~2019 consists primarily of the following:

the acquisition of the Valley Ranch Apartments for $71.5 million;

net funding of note receivable of $7.9 million;

capital expenditures of ~~$2.3~~$6.5 million;

proceeds of approximately $10.9 million related to our equity method investment in Prospect Park; and

net ~~purchases~~proceeds from the sale of marketable securities, available for sale of ~~$15.1~~9.2 million.

Financing activities

The net cash provided by financing activities of ~~$14.7~~$62.7 million for the nine months ended September 30, ~~2018~~2019 consists primarily of the following:

~~debt principal payments of $33.9 million;~~

net proceeds from notes payable of ~~$59.9~~$70.8 million;

~~aggregate distributions to our noncontrolling interests~~debt principal payments of ~~$3.4~~$0.6 million; and

redemptions and cancellation of common stock of ~~$7.9~~$7.4 million.

Funds from Operations and Modified Funds from Operations

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be less informative.

Because of these factors, the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has published a standardized measure of performance known as funds from operations ("FFO"), which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT's operating performance. FFO is not equivalent to our net income or loss as determined under ~~GAAP.~~generally accepted accounting principles in the United States of America (“GAAP”).

We ~~define~~calculate FFO, a non-GAAP measure, consistent with the standards ~~set forth~~established over time by the Board of Governors of NAREIT, as restated in ~~the~~a White Paper ~~on FFO~~ approved by the Board of Governors of NAREIT ~~as revised~~effective in ~~February 2004~~December 2018 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, ~~but~~ excluding ~~gains or losses from sales of property and real estate related impairments, plus real estate related~~ depreciation and amortization related to real estate, gains and ~~after adjustments for unconsolidated partnerships~~losses from the sale of certain real estate assets, gains and ~~joint ventures.~~losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Our FFO calculation complies with NAREIT's definition.

We believe that the use of FFO provides a more complete understanding of our performance to investors and to management and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT's definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries. These changes had a particularly significant impact on publicly registered, non-listed REITs, which typically have a significant amount of acquisition activity in the early part of their existence, particularly during the period when they are raising capital through ongoing initial public offerings.

Because of these factors, the Investment Program Association (the "IPA"), an industry trade group, published a standardized measure of performance known as modified funds from operations ("MFFO"), which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs. MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. MFFO is not equivalent to our net income or loss as determined under GAAP.

We define MFFO, a non-GAAP measure, consistent with the IPA's Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the "Practice Guideline") issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for acquisition and transaction-related fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline and exclude acquisition and transaction-related fees and expenses (which includes costs incurred in connection with strategic alternatives), amounts relating to deferred rent receivables and amortization of market lease and other intangibles, net (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), accretion of discounts and amortization of premiums on debt investments and borrowings, mark-to-market adjustments included in net income (including gains or losses incurred on assets held for sale), gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.

We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring properties and once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.

Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. FFO and MFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.

Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, NAREIT, the IPA or another industry trade group may publish updates to the White Paper or the Practice Guidelines or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry, and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculations of FFO and MFFO are presented below (dollars and shares in thousands, except per share amounts):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Description	2018			2017			2018			2017			2019			2018			2019			2018
Net (loss) income	$	(2,150	)	$	20,537		$	(5,645	)	$	18,269
Net loss													$	(2,242	)	$	(2,150	)	$	(5,366	)	$	(5,645	)
FFO adjustments:
Depreciation and amortization of real estate assets		2,366			2,353			7,184			7,499			3,402			2,366			9,851			7,184
Gain on sale of real estate		(312	)		(21,336	)		(619	)		(21,619	)		-			(312	)		-			(619	)
Income tax benefit associated with real estate sale		-			(1,592	)		-			(1,592	)
FFO		(96	)		(38	)		920			2,557			1,160			(96	)		4,485			920
MFFO adjustments:
Other adjustments:
Acquisition and other transaction related costs expensed⁽¹⁾		-			-			16			-			-			-			10			16
Noncash adjustments:		.
Amortization of above or below market leases and liabilities⁽²⁾		(3	)		1			(9	)		7			(22	)		(3	)		(60	)		(9	)
Non-recurring (loss)/gain from extinguishment/sale of debt, derivatives or securities holdings⁽³⁾		-			-			(2	)		-			-			-			54			(2	)
Accretion of discounts and amortization of premiums on debt investments⁽⁴⁾		-			(42	)		(70	)		(126	)		-			-			-			(70	)
MFFO before straight-line rent		(99	)		(79	)		855			2,438			1,138			(99	)		4,489			855
Straight-line rent⁽⁵⁾		(22	)		-			(33	)		(42	)		16			(22	)		19			(33	)
MFFO - IPA recommended format⁽⁶⁾	$	(121	)	$	(79	)	$	822		$	2,396		$	1,154		$	(121	)	$	4,508		$	822

Net (loss) income	$	(2,150	)	$	20,537		$	(5,645	)	$	18,269
Net loss													$	(2,242	)	$	(2,150	)	$	(5,366	)	$	(5,645	)
Less: income (loss) attributable to noncontrolling interests		160			(4,430	)		250			(4,557	)		78			160			94			250
Net loss applicable to Company's common shares	$	(1,990	)	$	16,107		$	(5,395	)	$	13,712		$	(2,164	)	$	(1,990	)	$	(5,272	)	$	(5,395	)
Net loss per common share, basic and diluted	$	(0.08	)	$	0.65		$	(0.22	)	$	0.55		$	(0.10	)	$	(0.08	)	$	(0.23	)	$	(0.22	)

FFO	$	(96	)	$	(38	)	$	920		$	2,557		$	1,160		$	(96	)	$	4,485		$	920
Less: FFO attributable to noncontrolling interests		(41	)		(67	)		(366	)		(833	)		(83	)		(41	)		(373	)		(366	)
FFO attributable to Company's common shares	$	(137	)	$	(105	)	$	554		$	1,724		$	1,077		$	(137	)	$	4,112		$	554
FFO per common share, basic and diluted	$	(0.01	)	$	(0.00	)	$	0.02		$	0.07		$	0.05		$	(0.01	)	$	0.18		$	0.02

MFFO - IPA recommended format	$	(121	)	$	(79	)	$	822		$	2,396		$	1,154		$	(121	)	$	4,508		$	822
Less: MFFO attributable to noncontrolling interests		(36	)		(147	)		(351	)		(853	)		(81	)		(36	)		(366	)		(351	)
MFFO attributable to Company's common shares	$	(157	)	$	(226	)	$	471		$	1,543
MFFO attributable to company's common shares													$	1,073		$	(157	)	$	4,142		$	471

Weighted average number of common shares outstanding, basic and diluted		24,101			24,899			24,407			25,031			22,680			24,101			23,058			24,407

The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. Such fees and expenses are paid in cash, and therefore such funds will not be available to distribute to investors. Such fees and expenses negatively impact our operating performance during the period in which properties are being acquired. Therefore, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. Acquisition fees and expenses will not be paid or reimbursed, as applicable, to our advisor even if there are no further proceeds from the sale of shares in our offering, and therefore such fees and expenses would need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.

Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.

Management believes that adjusting for gains or losses related to extinguishment/sale of debt, derivatives or securities holdings is appropriate because they are items that may not be reflective of ongoing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods.

Management believes that adjusting for mark-to-market adjustments is appropriate because they are nonrecurring items that may not be reflective of ongoing operations and reflects unrealized impacts on value based only on then current market conditions, although they may be based upon current operational issues related to an individual property or industry or general market conditions. Mark-to-market adjustments are made for items such as ineffective derivative instruments, certain marketable securities and any other items that GAAP requires we make a mark-to-market adjustment for. The need to reflect mark-to-market adjustments is a continuous process and is analyzed on a quarterly and/or annual basis in accordance with GAAP.

Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance.

Our MFFO results include certain unusual items as set forth in the table below. We believe it is helpful to our investors in understanding our operating results to both highlight them and present adjusted MFFO excluding their impact (as shown below).

	For the Three Months Ended			For the Nine Months Ended			For the Three Months Ended			For the Nine Months Ended
	September 30, 2018			September 30, 2018			September 30, 2018			September 30, 2018
Default interest expense^(a)	$	242		$	718		$	242		$	718
Allocations to noncontrolling interests		(24	)		(72	)		(24	)		(72	)
Total after allocations to noncontrolling interests	$	218		$	646		$	218		$	646

(a)

Represents the accrual of default interest expense on our non-recourse mortgage loan which was collateralized by 22 Exchange. Although the lender for 22 Exchange ~~is currently~~did not ~~charging~~charge us ~~or being~~and was not paid interest at the stated default rate, we ~~have~~ accrued interest at the default rate pursuant to the terms of the respective loan agreement. On December 28, 2018, we and the 10.0% noncontrolling member relinquished our ownership of 22 Exchange through a deed-in-lieu of foreclosure transaction with the lender.

Excluding the impact of this unusual item from our MFFO, after taking into consideration allocations to noncontrolling interests, our adjusted MFFO attributable to Company's common shares would have been ~~$62~~$61 and $1,117, for the three and nine months ended September 30, 2018.

Distributions

U.S. federal tax law requires a REIT distribute at least 90% of its annual REIT taxable income (which does not equal net income, as calculated in accordance with generally accepted accounting principles, or GAAP) determined without regard to the deduction for dividends paid and excluding any net capital gain. In order to continue to qualify for REIT status, we may be required to make distributions in excess of cash available. Distributions are authorized at the discretion of our board of directors based on its analysis of our performance over the previous periods and expectations of performance for future periods. These analyses may include actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for our portfolio, capital expenditure needs, general financial and market conditions, proceeds from asset sales, and other factors that our board of directors deems relevant. The board of director’s decisions will be substantially influenced by the obligation to ensure that we maintain our federal tax status as a REIT. We cannot provide assurance that we will pay distributions at any particular level, or at all.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP 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 period. On a regular basis, we evaluate these estimates, including investment impairment. These estimates include such items as impairment of long-lived assets, depreciation and amortization, and allowance for doubtful accounts. Actual results could differ from those estimates.

Other than as disclosed ~~below,~~in Note 2 to the financial statements, our critical accounting policies and estimates have not changed significantly from the discussion found in the Management Discussion and Analysis and Results of Operations in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on ~~March 29, 2018.~~

~~Marketable Securities~~

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

~~Interest Rate Risk~~

We may be exposed to interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other permitted investments. Our management’s objectives, with regard to interest rate risks, are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at fixed rates or variable rates with the lowest margins available and in some cases, with the ability to convert variable rates to fixed rates. With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We may enter into derivative financial instruments such as options, forwards, interest rate swaps, caps, or floors to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate portion of our variable rate debt. As of September 30, 2018, approximately $43.3 million, or 37%, of our debt, is a variable rate instrument (not subject to an interest rate cap or swap) and our interest expense associated with this instrument is, therefore, subject to changes in market interest rates. A 1% adverse movement (increase in Libor or Prime rate) would increase annual interest expense by approximately $0.4 million

~~Item 4.~~

~~Controls and Procedures.~~

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our principal executive officer and principal financial officer, evaluated, as of September 30, ~~2018,~~2019, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e) using the criteria established inInternal Control-New Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective, as of September 30, ~~2018,~~2019, to provide reasonable assurance that information required to be disclosed by us in this report is recorded, processed, summarized, and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There has been no change in internal control over financial reporting that occurred during the quarter ended September 30, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings.

We are not a party to, and none of our properties are subject to, any material pending legal proceedings.

~~Item 1A.~~

~~Risk Factors.~~

~~There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2017.~~

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

During the period covered by this quarterly report, we did not sell any equity securities that were not registered under the Securities Act of 1933.

Share Redemption Program

Our board of directors has adopted a share redemption program that permits stockholders to sell their shares back to us, subject to the significant conditions and limitations of the program. Our board of directors can amend the provisions of our share redemption program at any time without the approval of our stockholders.

~~Prior~~From our inception through December 31, 2018, we had redeemed 3.3 million shares of our common stock at an average price per share of $6.97 per share. For the nine months ended September 30, 2019, we repurchased 932,045 shares of common stock at an average price per share of $7.90 per share, pursuant to our share repurchase program.

The terms on which we redeemed shares prior to July 1, 2018 ~~the terms on which we redeem shares may differ~~differed between redemptions upon a stockholder’s death, “qualifying disability” (as defined in the share redemption program) or confinement to a long-term care facility (collectively, Exceptional Redemptions) and all other redemptions or Ordinary Redemptions.

Any shares approved for redemption will be redeemed on a periodic basis as determined from time to time by our board of directors, and no less frequently than annually. We will not redeem, during any 12-month period, more than 5% of the weighted average number of shares outstanding during the 12-month period immediately prior to the date of redemption. In addition, the cash available for redemptions is limited to no more than $10 million in any twelve-month period. The redemption limitations apply to all redemptions, whether Ordinary or Exceptional Redemptions.

Prior to July 1, 2018, the per share redemption price for Ordinary Redemptions and Exceptional Redemptions iswas equal to the lesser of 80% and 90%, respectively, of (i) the then current estimated NAV per ~~share value~~Share and (ii) the average price per share the investor paid for all of his shares (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock) less the Special Distributions (as defined in the share redemption program).

Effective December 4, 2017, our estimated value per share was $7.98. For a full description of the methodologies used to estimate the value of our common stock as of September 30, 2017, see Part II, Item 5, “Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Market Information” included in our Annual Report on Form 10-K for the year ended December 31, 2017.

On August 9, 2017, our board of directors adopted a Fourth Amended and Restated Share Redemption Program (the “Amended Share Redemption Program”) to be effective July 1, 2018. Under the Amended Share Redemption Program, beginning July 1, 2018, we will no longer process redemptions upon death, “qualifying disability,” or confinement to a long-term care facility on terms different than those on which we process all other redemptions. Additionally, the price at which we will redeem shares submitted for redemption will be a percentage of the estimated NAV per Share as of the Effective Date (as defined in the Amended Share Redemption Program), as follows:

For Redemptions with an Effective Date Between
July 1, 2018 and June 30, 2019:			92.5% of the estimated NAV per Share
July 1, 2019 and June 30, 2020:			95.0% of the estimated NAV per Share
July 1, 2020 and June 30, 2021:			97.5% of the estimated NAV per Share
Thereafter:			100% of the estimated NAV per Share

~~Notwithstanding~~Pursuant to the terms of the Fourth Amended Share Redemption Program, any shares approved for redemption ~~prices set forth above, our board of directors may determine, whether pursuant~~are redeemed on a periodic basis as determined from time to ~~formulas or processes approved or set~~time by our board of directors, ~~the redemption price~~and no less frequently than annually. We will not redeem, during any twelve-month period, more than 5% of the weighted average number of shares ~~which may differ between Ordinary Redemptions and Exceptional Redemptions; provided, however, that we must provide at least 30 days’ notice~~outstanding during the twelve-month period immediately prior to ~~stockholders before applying this new price determined by our board~~the date of ~~directors.~~

redemption. In addition, the cash available for redemptions is limited to no more than $10.0 million in any twelve-month period. Any redemption requests are honored pro rata among all requests received based on funds available and are not honored on a first come, first served basis. ~~During the quarter ended September 30,~~

On December 28, 2018, our board of directors ~~approved all~~adopted a Fifth Amended and Restated Share Redemption ~~requests received~~Program (the “Fifth Amended Share Redemption Program”) which became effective on January 31, 2019. The only material change to the program was to change the measurement period for the limitations on the number and dollar amount of shares that ~~complied with~~may be accepted for redemption from a rolling 12 month-period to a calendar year. On March 26, 2019, our board of directors set the ~~applicable requirements and guidelines~~cash available for redemptions at $2.5 million for the quarterly period ended March 31, 2019. On April 15, 2019, the Company redeemed approximately 0.3 million shares of our common stock, for quarterly period ended December 31, 2018, for approximately $2.4 million. On May 9, 2019, our board of directors set the cash available for redemptions at $2.5 million per quarter, for each of the ~~share redemption program~~quarterly periods ending June 30, 2019, September 30, 2019 and December 31, 2019. On May 31, 2019, the Company redeemed approximately 0.3 million shares of our common stock, for ~~an aggregate of 952,789 shares redeemed~~quarterly period ended March 31, 2019, for approximately ~~$7.0~~$2.5 million. On August 23, 2019, the Company redeemed approximately 0.3 million ~~(approximately $7.38 per share). All redemptions were funded with cash on hand.~~shares of our common stock, for quarterly period ended June 30, 2019, for approximately $2.5 million.

~~During the quarter ended September 30, 2018, we redeemed shares as follows:~~

2018
Total Number of
Shares Redeemed

Average Price
Paid Per Share

Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs

Maximum
Number of Shares
That May Be
Purchased Under
the Plans or
Programs
July — — —
August 952,789 $ 7.38 952,789 (1)
September — — —
952,789 $ 7.38 952,789

~~(1)~~

~~A description of the maximum number of shares that may be purchased under our redemption program is included in the narrative preceding this table.~~

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

None.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.

SIGNATURE

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 V, INC.


Date: November ~~14, 2018~~7, 2019	By:	/s/ Mitchell C. Hochberg
		Mitchell C. Hochberg
		Chief Executive Officer (Principal Executive Officer)


Date: November ~~14, 2018~~7, 2019	By:	/s/ Seth Molod
		Seth Molod
		Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)

Index to Exhibits

Exhibit Number		Description
10.1		Renewal Agreement (Advisory Management Agreement) among Value Plus Real Estate Investment Trust V, Inc., Lightstone Value Plus REIT V OP LP and LSG-BH II Advisor LLC effective as of June 10, 2019. (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on August 14, 2019)
10.2		Second Amendment to Advisory Agreement among Lightstone Value Plus Real Estate Investment Trust V, Inc., Lightstone Value Plus REIT V OP LP and LSG Development Advisor LLC effective as of June 10, 2019. (incorporated by reference to Exhibit 10.2 to Form 10-Q filed on August 14, 2019)
31.1*		Rule 13a-14(a)/15d-14(a) Certification
31.2*		Rule 13a-14(a)/15d-14(a) Certification
32.1*		Section 1350 Certification**
32.2*		Section 1350 Certification**
101*		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2018,~~2019, filed on November ~~14, 2018,~~7, 2019, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

Filed or furnished herewith

In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

Maryland		20-8198863
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Large accelerated filero¨		Accelerated filero¨
Non-accelerated filerx		Smaller reporting companyx
		Emerging growth companyo¨

	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
	(Unaudited)						(unaudited)
Assets
Investment property:
Land and improvements	$	40,526		$	40,354		$	71,141		$	46,175
Building and improvements		158,889			157,073			245,696			194,726
Furniture, fixtures and equipment		6,239			5,812			6,867			6,285
Gross investment property		205,654			203,239			323,704			247,186
Less accumulated depreciation		(44,990	)		(38,373	)		(54,491	)		(46,182	)
Net investment property		160,664			164,866			269,213			201,004

Investment in unconsolidated joint venture		10,944			10,944			-			10,944
Cash and cash equivalents		52,368			52,147			33,958			29,607
Marketable securities, available for sale		14,888			-			5,432			14,386
Restricted cash		4,387			5,213			4,570			3,045
Note receivable, net								8,665			-
Prepaid expenses and other assets		4,266			2,994			2,641			5,471
Total Assets	$	247,517		$	236,164		$	324,479		$	264,457

Liabilities and Stockholders' Equity
Notes payable, net	$	116,166		$	89,921		$	209,647		$	139,016
Accounts payable, accrued and other liabilities		4,902			4,150
Accounts payable and accrued and other liabilities								4,460			3,634
Payables to related parties		68			33			16			316
Distributions payable to noncontrolling interests		-			27
Accrued property tax		3,840			2,398			3,149			1,670
Total liabilities		124,976			96,529			217,272			144,636

Commitments and Contingencies

Stockholders' Equity:
Preferred stock, $.0001 par value per share; 50,000,000 shares authorized, none issued and outstanding		-			-
Preferred stock, $.0001 par value per share; 50.0 million shares authorized, none issued and outstanding								-			-
Convertible stock, $.0001 par value per share; 1,000 shares authorized, issued and outstanding		-			-			-			-
Common stock, $.0001 par value per share; 350,000,000 shares authorized, 23,535,706 and 24,646,494 shares issued and outstanding, respectively		2			2
Common stock, $.0001 par value per share; 350.0 million shares authorized, 22.5 million and 23.4 million shares issued and outstanding, respectively								2			2
Additional paid-in-capital		217,065			224,923			207,170			214,537
Accumulated other comprehensive loss		(199	)		(27	)
Accumulated other comprehensive income/(loss)								51			(217	)
Accumulated deficit		(95,503	)		(90,108	)		(100,567	)		(95,295	)
Total Company stockholders' equity		121,365			134,790			106,656			119,027
Noncontrolling interests		1,176			4,845			551			794


Total Stockholder's Equity		122,541			139,635			107,207			119,821

Total Liabilities and Stockholders' Equity	$	247,517		$	236,164		$	324,479		$	264,457

										Additional			Accumulated Other									Total
	Convertible Stock				Common Stock					Paid-In			Comprehensive			Accumulated			Noncontrolling			Stockholders'
	Shares		Amount		Shares			Amount		Capital			Loss			Deficit			Interests			Equity			Convertible Stock				Common Stock					Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Noncontrolling			Total Stockholders'
																									Shares		Amount		Shares			Amount		Capital			Loss			Deficit			Interests			Equity
BALANCE, December 31, 2017		1	$	-		24,647		$	2	$	224,923		$	(27	)	$	(90,108	)	$	4,845		$	139,635			1	$	-		24,647		$	2	$	224,923		$	(27	)	$	(90,108	)	$	4,845		$	139,635

Net loss		-		-		-			-		-			-			(5,395	)		(250	)		(5,645	)		-		-		-			-		-			-			(5,395	)		(250	)		(5,645	)
Distributions to noncontrolling interest holders		-		-		-			-		-			-			-			(3,419	)		(3,419	)		-		-		-			-		-			-			-			(3,419	)		(3,419	)
Redemption and cancellation of shares		-		-		(1,111	)		-		(7,858	)		-			-			-			(7,858	)		-		-		(1,111	)		-		(7,858	)		-			-			-			(7,858	)
Other comprehensive loss:
Holding loss on marketable securities, available for sale		-		-		-			-		-			(172	)		-			-			(172	)		-		-		-			-		-			(172	)		-			-			(172	)

BALANCE, September 30, 2018		1	$	-		23,536		$	2	$	217,065		$	(199	)	$	(95,503	)	$	1,176		$	122,541			1	$	-		23,536		$	2	$	217,065		$	(199	)	$	(95,503	)	$	1,176		$	122,541

	Convertible Stock				Common Stock					Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Noncontrolling			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			(Loss)/Income			Deficit			Interests			Equity
BALANCE, June 30, 2018		1	$	-		24,489		$	2	$	224,097		$	(205	)	$	(93,513	)	$	1,343		$	131,724

Net loss		-		-		-			-		-			-			(1,990	)		(160	)		(2,150	)
Distributions to noncontrolling interest holders		-		-		-			-		-			-			-			(7	)		(7	)
Redemption and cancellation of shares		-		-		(953	)		-		(7,032	)		-			-			-			(7,032	)
Other comprehensive loss:
Holding gain on marketable securities, available for sale		-		-		-			-		-			7			-			-			7
Foreign currency translation loss		-		-		-			-		-			(1	)		-			-			(1	)

BALANCE, September 30, 2018		1	$	-		23,536		$	2	$	217,065		$	(199	)	$	(95,503	)	$	1,176		$	122,541

				Page
PART I		FINANCIAL INFORMATION		3

Item 1.		Financial Statements (Unaudited)		3

		Consolidated Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018		3

		Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018		4

		Consolidated ~~Statement~~Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018		5

		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018		6

		Notes to Consolidated Financial Statements		7

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	3218

Item 4.		Controls and Procedures		3331

PART II		OTHER INFORMATION		32

Item 1.		Legal Proceedings	34

~~Item 1a.~~	~~Risk Factors~~	3432

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		3432

Item 3.		Defaults Upon Senior Securities		3533

Item 4.		Mine Safety Disclosures		3533

Item 5.		Other Information		3533

Item 6.		Exhibits		3533

	As of September 30, 2018				As of December 31, 2017
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Notes payable	$	117,726	$	118,075	$	90,321	$	91,449

	As of September 30, 2019				As of December 31, 2018
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Notes payable	$	213,017	$	213,523	$	141,423	$	140,986

	As of September 30, 2018									As of September 30, 2019
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Debt securities:
Corporate Bonds	$	15,060	$	2	$	(174	)	$	14,888
Corporate and Government Bonds										$	5,318	$	116	$	(2	)	$	5,432

•	~~Level 1 – Quoted prices in active markets for identical assets or liabilities.~~

•	Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•		Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

	As of September 30, 2018		As of September 30, 2019
Due in 1 year	$	2,844	$	1,097
Due in 1 year through 5 years		9,296		4,335
Due in 5 years through 10 years		2,748		-
Due after 10 years		-		-
Total	$	14,888	$	5,432

Property	Interest Rate	Weighted Average Interest Rate as of September 30, 2019			Maturity Date	Amount Due at Maturity		As of September 30, 2019			As of December 31, 2018
River Club and the Townhomes at River Club	LIBOR + 1.78%		3.93	%	May 1, 2025	$	28,419	$	30,359		$	30,359

Gardens Medical Pavilion	LIBOR + 1.90%		4.57	%	September 1, 2021		12,300		12,720			12,900

Lakes of Margate	5.49% and 5.92%		5.75	%	January 1, 2020		13,384		13,462			13,687

Arbors Harbor Town	4.53%		4.53	%	December 28, 2025		29,000		29,000			29,000

Parkside	4.45%		4.45	%	September 1, 2025		15,782		17,662			17,877

Axis at Westmont	4.39%		4.39	%	February 1, 2026		34,343		37,600			37,600

Vally Ranch Apartments	4.16%		4.16	%	March 1, 2026		43,414		43,414			-

Flats at Fishers	3.78%		3.78	%	July 1, 2026		26,090		28,800			-

Total notes payable			4.32	%		$	202,732		213,017			141,423

Less: Deferred financing costs									(3,370	)		(2,407	)

Total notes payable, net								$	209,647		$	139,016

Property	Interest Rate	Weighted Average Interest Rate as of September 30, 2018	Maturity Date	Amount Due at Maturity		As of September 30, 2018			As of December 31, 2017

River Club and the Townhomes at River Club	LIBOR + 1.78%	4.06%	May 1, 2025	$	28,419	$	30,359		$	-

River Club and the Townhomes at River Club		(Repaid in full on May 1, 2018)					-			23,511

Gardens Medical Pavilion	LIBOR + 1.90%	3.24%	June 1, 2021		12,300		12,960			-

Lakes of Margate	5.49% and 5.92%	5.75%	January 1, 2020		13,384		13,760			13,973

Arbors Harbor Town	3.99%	3.99%	January 1, 2019		23,632		23,765			24,153

22 Exchange	3.93%	8.93%	Due on demand		18,935		18,935			18,963

Parkside	4.45%	4.45%	June 1, 2025		15,782		17,947			-

Parkside		(Repaid in full on June 1, 2018)					-			9,721

Total notes payable		4.99%		$	112,452		117,726			90,321

Less: Deferred financing costs							(1,560	)		(400	)

Total notes payable, net						$	116,166		$	89,921

	Three Months Ended September 30,
Description	2018		2017		Change
Revenues:
Same store	$	5,768	$	6,122	$	(354	)
Acquisition		1,017		-		1,017
Disposition		-		2,653		(2,653	)
Total rental revenues	$	6,785	$	8,775	$	(1,990	)

Property and hotel operating expenses:
Same store	$	2,521	$	2,697	$	(176	)
Acquisition		283		-		283
Disposition		-		1,921		(1,921	)
Total property and hotel operating expenses	$	2,804	$	4,618	$	(1,814	)

	Occupancy (%)						Effective Monthly Rent per Square Foot/Unit/Bed ($)⁽¹⁾
	As of September 30,						As of September 30,
Property	2018			2017			2018		2017
Gardens Medical Pavilion		71	%		74	%	$	2.14	$	2.26	per sq. ft.
River Club and the Townhomes at River Club		98	%		96	%		451.73		413.91	per bed
Lakes of Margate		95	%		89	%		1,340.16		1,283.22	per unit
Arbors Harbor Town		97	%		94	%		1,262.49		1,241.43	per unit
22 Exchange		49	%		80	%		319.81		571.49	per bed
Parkside		90	%		95	%		1,155.12		1,143.29	per unit
Flats at Fishers		93	%		n/a			1,062.78		n/a	per bed

	Nine Months Ended September 30,
Description	2018		2017		Change
Revenues:
Same store	$	17,607	$	18,345	$	(738	)
Acquisition		2,664		-		2,664
Disposition		-		13,207		(13,207	)
Total rental revenues	$	20,271	$	31,552	$	(11,281	)

Property and hotel operating expenses:
Same store	$	6,546	$	6,758	$	(212	)
Acquisition		910		-		910
Disposition		-		9,167		(9,167	)
Total property and hotel operating expenses	$	7,456	$	15,925	$	(8,469	)

2018	Total Number of Shares Redeemed		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Be Purchased Under the Plans or Programs
July		—		—		—
August		952,789	$	7.38		952,789	(1)
September		—		—		—
		952,789	$	7.38		952,789