LIGHTSTONE VALUE PLUS REIT I, INC. – 10-K – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

You should read the following discussion and analysis together with our
consolidated financial statements and notes thereto included in this Annual
Report on Form 10-K. The following information contains forward-looking
statements, which are subject to risks and uncertainties. Should one or more of
these risks or uncertainties materialize, actual results may differ materially
from those expressed or implied by the forward-looking statements. Please see
"Special Note Regarding Forward-Looking Statements" above for a description of
these risks and uncertainties. Dollar amounts are presented in thousands, except
per share data and where indicated in millions.

Overview

Lightstone Value Plus REIT I, Inc. (the "Lightstone REIT I"), (together with its
operating partnership, Lightstone Value Plus REIT, L.P. (the "Operating
Partnership"), the "Company", also referred to as "we", "our" or "us" herein)
has and expects to continue to acquire and operate or develop in the future,
commercial and, residential properties and/or make real estate-related
investments, principally in the United States. Our acquisitions and investments
are, principally conducted through the Operating Partnership, and may include
both portfolios and individual properties. We evaluate all of our real estate
investments as one operating segment. As of December 31, 2022, we held a 98%
general partnership interest in our Operating Partnership's common units.

As of December 31, 2022, we (i) have ownership interests in and consolidate two
operating properties, one development property and certain land holdings and
(ii) have ownership interests through two unconsolidated joint ventures in nine
unconsolidated multifamily residential properties and seven unconsolidated
commercial hotel properties. Additionally, as of December 31, 2022, we have
other real estate-related investments consisting of a preferred investment in a
related party and a promissory loan we originated, through a joint venture with
a related party, to an unaffiliated third-party borrower. We evaluate all of our
real estate investments as one operating segment.

With respect to our consolidated operating properties, we wholly own a 296-room
Marriott Moxy hotel (the "Lower East Side Moxy Hotel"), located in the Lower
East Side neighborhood in the Manhattan borough of New York City, which we
developed, constructed and opened on October 27, 2022 and have a 59.2% majority
ownership interest in 50-01 2nd St. Associates LLC (the "2nd Street Joint
Venture"), a joint venture between us and a related party, which developed,
constructed and owns a 199-unit luxury, multifamily residential property
("Gantry Park Landing"), located in the Long Island City neighborhood in the
Queens borough of New York City.

With respect to our consolidated development property, we wholly own land
parcels located at 355 & 399 Exterior Street in the Mott Haven neighborhood in
the Bronx borough of New York City, on which we plan to construct a proposed
mixed-use multifamily residential and commercial retail project (the "Exterior
Street Project").

We also wholly own and consolidate certain adjacent land parcels (the "St.
Augustine Land Holdings) located in St. Augustine, Florida.

Additionally, we hold a 19.0% joint venture ownership interest in Columbus
Portfolio Member LLC (the "Columbus Joint Venture"), which owns nine multifamily
residential properties, which we account for using the equity method of
accounting and we and hold a 2.5% joint venture ownership interest in LVP Holdco
JV LLC (the "Hotel Joint Venture") which owns seven hotel properties, which we
account for using a measurement alternative under which the Hotel Joint Venture
is measured at cost, adjusted for observable price changes and impairments, if
any. Both the Columbus Joint Venture and the Hotel Joint Venture are between us
and related parties.

We do not have employees. We entered into an advisory agreement pursuant to
which Lightstone Value Plus REIT, LLC (the "Advisor") supervises and manages our
day-to-day operations and selects our real estate and real estate related
investments, subject to oversight by our board of directors (the "Board of
Directors"). We pay the Advisor fees for services related to the investment and
management of our assets, and we will reimburse the Advisor for certain expenses
incurred on our behalf.

To maintain our qualification as a REIT, we engage in certain activities through
taxable REIT subsidiaries ("TRSs"). As such, we are subject to U.S. federal and
state income and franchise taxes from these activities.


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Investment Strategy and Policies

We have and expect to continue to generally make our real estate investments in
fee title or a long-term leasehold estate through the Operating Partnership or
indirectly through special purpose limited liability companies or through
investments in joint ventures, partnerships, co-tenancies, or other co-ownership
arrangements with the developers of the properties or other persons.

We have not and do not intend to make significant investments in single family
residential properties; leisure home sites; farms; ranches; timberlands;
unimproved properties not intended to be developed; or mining properties.

Not more than 10% of our total assets may be invested in unimproved real
property. For purposes of this paragraph, "unimproved real properties" does not
include properties acquired for the purpose of producing rental or other
operating income, properties under construction and properties for which
development or construction is planned within one year. Additionally, we do not
invest in contracts for the sale of real estate unless in recordable form and
appropriately recorded.

Although we are not limited as to the geographic area where we may conduct our
operations, we have invested and may continue to invest in properties located
near the existing operations of our Sponsor, in order to achieve economies

of
scale where possible.

Current Environment

Our operating results are substantially impacted by the overall health of local,
U.S. national and global economies and may be influenced by market and other
challenges. Additionally, our business and financial performance may be
adversely affected by current and future economic and other conditions;
including, but not limited to, availability or terms of financings, financial
markets volatility, political upheaval or uncertainty, natural and man-made
disasters, terrorism and acts of war, unfavorable changes in laws and
regulations, outbreaks of contagious diseases, cybercrime, loss of key
relationships, inflation and recession.

Our overall performance depends in part on worldwide economic and geopolitical
conditions and their impacts on consumer behavior. Worsening economic
conditions, increases in costs due to inflation, higher interest rates, certain
labor and supply chain challenges, and developments related to the COVID-19
pandemic, and other changes in economic conditions, may adversely affect our
results of operations and financial performance.

We are not currently aware of any other material trends or uncertainties,
favorable or unfavorable, that may be reasonably anticipated to have a material
impact on either capital resources or the revenues or income to be derived from
our operations, other than those referred to above or throughout this Form 10-K.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires our
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities and
the reported amounts of revenues and expenses during a reporting period.

Critical Accounting Estimates and Policies

General

Our consolidated financial statements, included in this annual report, include
our accounts, the Operating Partnership and its subsidiaries (over which we
exercise financial and operating control). All inter-company balances and
transactions have been eliminated in consolidation.

The discussion and analysis of our financial condition and results of operations
is based upon our consolidated financial statements, which have been prepared in
accordance with GAAP. The preparation of our financial statements requires us to
make estimates and judgments about the effects of matters or future events that
are inherently uncertain. These estimates and judgments may affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates, including contingencies and
litigation. We base these estimates on historical experience and on various
other assumptions that we believe to be reasonable in the circumstances. These
estimates form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.


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To assist in understanding our results of operations and financial position, we
have identified our critical accounting policies and discussed them below. These
accounting policies are most important to the portrayal of our results and
financial position, either because of the significance of the financial
statement items to which they relate or because they require our management's
most difficult, subjective or complex judgments.

Investments in Real Estate

We generally record investments in real estate at cost and capitalize
improvements and replacements when they extend the useful life or improve the
efficiency of the asset. We expense costs of ordinary repairs and maintenance as
incurred. We compute depreciation using the straight-line method over the
estimated useful lives of the applicable real estate asset. We generally use
estimated useful lives of up to thirty-nine years for buildings and
improvements, five to ten years for furniture and fixtures and the shorter of
the useful life or the remaining lease term for tenant improvements and
leasehold interests.

We make subjective assessments as to the useful lives of our properties for
purposes of determining the amount of depreciation to record on an annual basis
with respect to our investments in real estate. These assessments have a direct
impact on our net income because, if we were to shorten the expected useful
lives of our investments in real estate, we would depreciate these investments
over fewer years, resulting in more depreciation expense and lower net income on
an annual basis.

We record assets and groups of assets and liabilities which comprise disposal
groups as "held for sale" when all of the following criteria are met: a decision
has been made to sell, the assets are available for sale immediately, the assets
are being actively marketed at a reasonable price in relation to the current
fair value, a sale has been or is expected to be concluded within twelve months
of the balance sheet date, and significant changes to the plan to sell are not
expected. The assets and disposal groups held for sale are valued at the lower
of book value or fair value less disposal costs. For sales of real estate or
assets classified as held for sale, we evaluate whether a disposal transaction
meets the criteria of a strategic shift and will have a major effect on our
operations and financial results to determine if the results of operations and
gains on sale of real estate will be presented as part of our continuing
operations or as discontinued operations in our consolidated statements of
operations. If the disposal represents a strategic shift, it will be classified
as discontinued operations for all periods presented; if not, it will be
presented in continuing operations.

We evaluate the recoverability of our investments in real estate assets at the
lowest identifiable level, the individual property level. An impairment loss is
recognized only if the carrying amount of a long-lived asset is not recoverable
and exceeds its fair value.

We evaluate the long-lived assets for potential impairment whenever events or
changes in circumstances indicate that the undiscounted projected cash flows are
less than the carrying amount for a particular property. No single indicator
would necessarily result in us preparing an estimate to determine if a
long-lived asset's future undiscounted cash flows are less than its book value.
We use judgment to determine if the severity of any single indicator, or the
fact there are a number of indicators of less severity that when combined, would
result in an indication that a long-lived asset requires an estimate of the
undiscounted cash flows to determine if an impairment has occurred. Relevant
facts and circumstances include, among others, significant underperformance
relative to historical or projected future operating results and significant
negative industry or economic trends. The estimated cash flows used for the
impairment analysis are subjective and require us to use our judgment and the
determination of estimated fair value are based on our plans for the respective
assets and our views of market and economic conditions. The estimates consider
matters such as future operating income, market and other applicable trends and
residual value, as well as the effects of demand, competition, and recent sales
data for comparable properties. Changes in estimated future cash flows due to
changes in our plans or views of market and economic conditions could result in
recognition of impairment losses, which, under the applicable accounting
guidance, may be substantial.

Accounting for Asset Acquisitions

The cost of the acquisition in an asset acquisition is allocated to the acquired
tangible assets, consisting of land, building and tenant improvements, and
identified intangible assets and liabilities, consisting of the value of
above-market and below-market leases for acquired in-place leases and the value
of tenant relationships, and certain liabilities such as assumed debt and
contingent liabilities on the basis of their relative fair values. Fees incurred
related to asset acquisitions are capitalized as part of the cost of the
investment.


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Accounting for Development Projects

We incur a variety of costs in the development of a property. The costs of land
and building under development include specifically identifiable costs. The
capitalized costs include, but are not limited to, pre-construction costs
essential to the development of the property, development costs, construction
costs, interest costs, real estate taxes and other costs incurred during the
period of development. We cease capitalization when the development project is
substantially complete and placed in service, which may occur in phases.
Determination of when a development project is substantially complete and
capitalization must cease involves a degree of judgment.

Once a development project is placed in service, which may occur in phases or
for an entire building or project, the costs capitalized to that development
project are transferred to land and improvements, buildings and improvements,
and furniture and fixtures on our consolidated balance sheets at the historical
cost of the property.

Notes Receivable

Notes receivable that we intend to hold to maturity are carried at cost, net of
any unamortized origination costs, fees, discounts, premiums and unfunded
commitments.

Investment income will be recognized on an accrual basis and any related
premium, discount, origination costs and fees are amortized over the life of the
investment using the effective interest method. The amortization is reflected as
an adjustment to investment income in our statements of operations.

Income recognition is suspended when, in the opinion of management, a full
recovery of income and principal becomes doubtful. When the ultimate
collectability of the principal is in doubt, all payments are applied to
principal under the cost recovery method. When the ultimate collectability of
the principal is not in doubt, contractual interest is recorded as investment
income when received, under the cash basis method, until an accrual is resumed
when the instrument becomes contractually current and performance is
demonstrated to be resumed.

Credit Losses and Impairment on Notes Receivable

Notes receivable are considered impaired when, based on current information and
events, it is probable that we will not be able to collect principal and
interest amounts due according to the contractual terms. We assess the credit
quality of our notes receivable and adequacy of reserves on a quarterly basis,
or more frequently as necessary. Significant judgment of management is required
in this analysis. We consider the estimated net recoverable value of the notes
receivable as well as other factors, including but not limited to the fair value
of any collateral, the amount and the status of any senior debt, the quality and
financial condition of the borrower and the competitive situation of the area
where the underlying collateral is located. Because this determination is based
on projections of future economic events, which are inherently subjective, the
amount ultimately realized may differ materially from the carrying value as of
the balance sheet date. If upon completion of the assessment, the estimated fair
value of the underlying collateral is less than the net carrying value of the
notes receivable, a reserve is recorded with a corresponding charge to
investment income. The reserve for each note receivable is maintained at a level
that is determined to be adequate by management to absorb probable losses.

Investments in Unconsolidated Entities

We evaluate all investments in other entities for consolidation. We consider our
percentage interest in the joint venture, evaluation of control and whether a
variable interest entity exists when determining whether or not the investment
qualifies for consolidation or if it should be accounted for as an
unconsolidated investment under the equity method of accounting.

If an investment qualifies for the equity method of accounting, our investment
is recorded initially at cost, and subsequently adjusted for equity in net
income or loss and cash contributions and distributions. The net income or loss
of an unconsolidated investment is allocated to its investors in accordance with
the provisions of the operating agreement of the entity. The allocation
provisions in these agreements may differ from the ownership interest held by
each investor. Differences, if any, between the carrying amount of our
investment in the respective joint venture and our share of the underlying
equity of such unconsolidated entity are amortized over the respective lives of
the underlying assets as applicable. These items are reported in the statements
of operations as income or loss from investments in unconsolidated entities.


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We review investments for impairment in value whenever events or changes in
circumstances indicate that the carrying amount of such investment may not be
recoverable. An investment is impaired only if management's estimate of the fair
value of the investment is less than the carrying value of the investment, and
such decline in value is deemed to be other than temporary. The ultimate
realization of our investment in partially owned entities is dependent on a
number of factors including the performance of that entity and market
conditions. If we determine that a decline in the value of a partially owned
entity is other than temporary, we record an impairment charge.

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

Management of our operations is outsourced to our Advisor and certain other
affiliates of our Sponsor. Fees related to each of these services are accounted
for based on the nature of such service and the relevant accounting literature.
Such fees include acquisition fees associated with the purchase of interests in
affiliated real estate entities; asset management fees paid to our Advisor and
property management fees paid to our Property Manager, which manage certain of
the properties we acquire, or to other unaffiliated third-party property
managers, principally for the management of our hospitality properties. These
fees are expensed or capitalized to the basis of acquired assets, as
appropriate.

Our Property Manager may also perform fee-based construction management services
for both our re-development activities and tenant construction projects. These
fees are considered incremental to the construction effort and will be
capitalized to the associated real estate project as incurred. Costs incurred
for tenant construction will be depreciated over the shorter of their useful
life or the term of the related lease. Costs related to redevelopment activities
will be depreciated over the estimated useful life of the associated project.

Leasing activity at certain of our properties has also been outsourced to our
Property Manager. Any corresponding leasing fees we pay are capitalized and
amortized over the life of the related lease.

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

In connection with our initial public offering, Lightstone SLP, LLC, an
affiliate of the Advisor, purchased an aggregate of $30.0 million of special
partner interests in the Operating Partnership (the "SLP Units") at a cost of
$100,000 per unit through March 31, 2009, and none thereafter. These SLP units
are included in noncontrolling interests on the consolidated balance sheets.

Income Taxes

We elected to be taxed and qualify as a REIT commencing with the taxable year
ended December 31, 2005. If we remain qualified as a REIT, we generally will not
be subject to U.S. federal income tax on our net taxable income that we
distribute currently to our stockholders. To maintain our REIT qualification
under the Internal Revenue Code of 1986, as amended, or the Code, we must meet a
number of organizational and operational requirements, including a requirement
that we annually distribute to our stockholders at least 90% of our REIT taxable
income (which does not equal net income, as calculated in accordance with
generally accepted accounting principles in the United States of America, or
GAAP), determined without regard to the deduction for dividends paid and
excluding any net capital gain. If we fail to remain qualified for taxation as a
REIT in any subsequent year and do not qualify for certain statutory relief
provisions, our income for that year will be taxed at regular corporate rates,
and we may be precluded from qualifying for treatment as a REIT for the
four-year period following our failure to qualify as a REIT. Such an event could
materially adversely affect our net income and net cash available for
distribution to our stockholders. Additionally, even if we continue to qualify
as a REIT for U.S. federal income tax purposes, we may still be subject to some
U.S. federal, state and local taxes on our income and property and to U.S.
federal income taxes and excise taxes on our undistributed income, if any.

To maintain our qualification as a REIT, we engage in certain activities through
taxable REIT subsidiaries ("TRSs"). As such, we may still be subject to U.S.
federal and state income and franchise taxes from these activities.

As of December 31, 2022 and 2021, we had no material uncertain income tax
positions.

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Results of Operations

Significant Transactions and Events during 2022 and 2021

Columbus Joint Venture - Acquisition of Columbus Properties

On November 29, 2022, we along with CRE Columbus Member ("Converge"), a majority
owned subsidiary of Converge Holdings LLC, a reinsurance business owned by the
Sponsor, and LEL Columbus Member LLC (the "BVI Member"), a wholly owned
subsidiary of Lightstone Enterprises Limited ("BVI"), a real estate investment
company owned by the Sponsor, entered into a joint venture agreement to form
Columbus Portfolio Member LLC (the "Columbus Joint Venture") for the purpose of
acquiring nine multifamily properties (the "Columbus Properties") located in the
area of Columbus, Ohio for a contractual purchase price of $465.0 million. We
have an ownership interest of 19% in the Columbus Joint Venture. Converge and
the BVI Member, which are both related parties, have ownership interests of 19%
and 62%, respectively. Additionally, the Manager of the Columbus Joint Venture
is LEL Bronx Manager LLC, an entity wholly owned by BVI.

On November 29, 2022, the Columbus Joint Venture completed the purchase of the
Columbus Properties. The acquisition was funded with $74.3 million of cash and
$390.7 million of aggregate proceeds from preferred investments from unrelated
third-parties and loans from two financial institutions. In connection with the
acquisition and financings, the total cash paid, including closing, financing
and other transaction costs and pro-rations, was $92.3 million and we paid $17.5
million representing our 19.0% pro rata share. In connection with the
acquisition, we also paid the Advisor a separate acquisition fee of $2.4
million, equal to 2.75% of our pro-rata share of the contractual purchase price
which is reflected in the carrying value of our investment in unconsolidated
affiliated real estate entity on the consolidated balance sheets. Commencing on
the date of acquisition, we have accounted for our ownership interest in the
Columbus Joint Venture in accordance with the equity method of accounting.

Opening of Lower East Side Moxy Hotel

On October 27, 2022, we substantially completed the development of our wholly
owned Lower East Side Moxy Hotel located in the Lower East Side neighborhood in
the Manhattan borough of New York City and it opened for business. Additionally,
all four of the food and beverage venues within the Lower East Side Moxy Hotel
opened during the fourth quarter of 2022.

Closure and Demolition of the St. Augustine Outlet Center

We wholly owned the St. Augustine Outlet Center, a retail center located in St.
Augustine, Florida, which was originally built in 1998 and subsequently acquired
by us in 2006 and renovated and further expanded in 2008 to 0.3 million of gross
leasable area. During the COVID-19 pandemic, the occupancy of our St. Augustine
Outlet Center significantly declined and because of limited leasing success, we
began exploring various strategic alternatives for the property. As a result,
during the third quarter of 2021, we determined that we would no longer continue
to pursue leasing of space to tenants and therefore, began to enter into lease
termination agreements with certain tenants and also provided notice to our
other tenants that we would not renew their leases at the scheduled expiration
of their lease. Due to this change in leasing strategy and resulting decrease in
the fair value of the St. Augustine Outlet Center, we recorded a non-cash loss
on impairment of real estate of $11.3 million during the third quarter of 2021.

Because of the aforementioned lease terminations and scheduled expirations,
substantially all of the tenants vacated the property during the first quarter
of 2022 and on June 29, 2022, we entered into a lease termination agreement with
the property's final tenant providing for them to receive an aggregate of $0.8
million provided they vacated the property no later than July 15, 2022. The
final tenant vacated the property in July 2022 and we ceased operations of the
St. Augustine Outlet Center effective July 15, 2022 and shortly thereafter,
commenced demolition of the property's building and improvements in order to
prepare the various land parcels for potential sale and/or lease. The demolition
of the property's buildings and improvements was substantially completed during
the third quarter of 2022 and we recognized a loss on demolition of $16.6
million consisting of the write-off of the carrying value of the property's
building and improvements plus related costs. As a result the remaining carrying
value of the St. Augustine land and improvements was $4.9 million as of
December 31, 2022 and is included in land and improvements on the consolidated
balance sheet.


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In connection with the terms of certain of the lease termination agreements, we
agreed to make various payments to certain tenants provided they closed their
store and vacated the property. We expense lease termination fees in the period
the lease termination agreement is executed and such expenses are included in
property operating expenses on the consolidated statements of operations. During
the years ended December 31, 2022 and 2021, we recognized lease termination fees
of $0.8 million and $0.4 million, respectively.

Disposition of the Santa Clara Project

In January 2019, we acquired a parcel of land located at 2175 Martin Avenue,
Santa Clara, California (the "Martin Avenue Land") from an unaffiliated third
party for $10.6 million. Subsequently, we completed certain activities
associated with the potential development and construction of a data center on
the Martin Avenue Land (the "Santa Clara Project").

On July 7, 2021, we disposed of the Santa Clara Project to an unrelated third
party for a contractual sales price of $13.9 million. In connection with the
disposition of the Santa Clara Project, we recognized a gain on sale of
investment property of $0.2 million during the third quarter of 2021.

The disposition of the Santa Clara Project 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 the Santa Clara Project are reflected in our results from continuing
operations for all periods presented through its date of disposition.

Sale of Land Parcel

On May 25, 2021, we completed the disposition of a parcel of land adjacent to
the St. Augustine Outlet Center to an unrelated third party for a contractual
sales price of $6.8 million and recognized a gain of $3.6 million during the
second quarter of 2021, which is included in gain on disposition of real estate,
net on the consolidated statements of operations.

For the Year Ended December 31, 2022 vs. December 31, 2021

Consolidated

Rental revenues

Our rental revenues are comprised of rental income and tenant recovery income.
Total rental revenues decreased by $0.8 million to $9.6 million for the year
ended December 31, 2022 compared to $10.4 million for the same period in 2021.
This decrease reflects lower rental revenues of $2.3 million for the St.
Augustine Outlet Center resulting from substantially all of its tenants vacating
during the first quarter of 2022 and us subsequently ceasing operations of the
property effective July 15, 2022, partially offset by higher rental revenues of
$1.5 million for Gantry Park Landing resulting from higher occupancy and rental
rates.

Hotel revenues

Hotel revenues were $5.4 million for the year ended December 31, 2022 as a
result of the opening of the Lower East Side Moxy Hotel on October 27, 2022.
Hotel revenues consisted of $3.1 million of room revenue and $2.3 million of
food, beverage and other revenue.

Property operating expenses

Property operating expenses decreased by $0.2 million to $4.0 million for the
year ended December 31, 2022 compared to $4.2 million for the same period in
2021. The decrease is primarily attributable to lower property operating costs
of $0.4 million for the St. Augustine Outlet Center, which ceased operations
effective July 15, 2022, partially offset by higher property operating expenses
of $0.2 million for Gantry Park Landing resulting from higher utility expenses.


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Hotel operating expenses

Hotel operating expenses were $4.7 million for the year ended December 31, 2022
as a result of the opening of the Lower East Side Moxy Hotel on October 27,
2022. Hotel operating expenses consisted of $2.2 million of room expense and
$2.5 million of food and beverage costs.

Real estate taxes

Real estate taxes were $0.3 million for both of the years ended December 31,
2022 and 2021.

General and administrative costs

General and administrative costs were $2.6 million for both of the years ended
December 31, 2022 and 2021.

Impairment charge

During the year ended December 31, 2021, we recorded a third quarter non-cash
impairment charge of $11.3 million to reduce the carrying value of our St.
Augustine Outlet Center to its estimated fair value.

Pre-opening costs

Pre-opening costs generally consist of non-recurring personnel, marketing and
other costs. In preparation for the opening of the Lower East Side Moxy Hotel,
which opened on October 27, 2022, we incurred pre-opening costs of $4.5 million
during the year ended December 31, 2022. No pre-opening costs were incurred
during 2021.

Depreciation and amortization

Depreciation and amortization decreased by $2.3 million to $3.2 million for the
year ended December 31, 2022 compared to $5.5 million for the same period in
2021. The decrease is attributable to lower depreciation and amortization of
$3.1 million for the St. Augustine Outlet Center, which ceased operations
effective July 15, 2022 offset by higher depreciation of $0.8 million for the
Lower East Side Moxy Hotel, which opened on October 27, 2022.

Interest and dividend income

Interest and dividend income decreased by $4.7 million to $9.1 million for the
year ended December 31, 2022 compared to $13.8 million for the same period in
2021. The decrease primarily reflects lower interest and dividend income earned
on our notes receivable of $4.3 million and preferred investments of $0.4
million.

Interest expense

Interest expense, including amortization of deferred financing costs, decreased
by $2.7 million to $5.3 million for the year ended December 31, 2022 compared to
$2.6 million for the same period in 2021. Interest expense is primarily
attributable to financings associated with our investments and reflects both
changes in market interest rates on our variable rate indebtedness and the
weighted average principal outstanding during the periods. Additionally, during
the year ended December 31, 2022 and 2021, $14.5 million and $8.2 million,
respectively, of interest was capitalized to development projects.

Gain on disposition of real estate

During the year ended December 31, 2022, we recognized a gain on disposition of
real estate of $1.1 million related to Oakview, a shopping center located in
Omaha, Nebraska, which we previously disposed of in September 2017.

During the year ended December 31, 2021, we recognized an aggregate gain on the
disposition of real estate of $3.9 million consisting of a gain of $3.6 million
related to the sale of a parcel of land adjacent to the St. Augustine Outlet
Center on May 21, 2021 and a gain of $0.2 million related to the sale of the
Santa Clara Project on July 7, 2021.


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Loss on demolition

We ceased operations of the St. Augustine Outlet Center effective July 15, 2022
and shortly thereafter, commenced demolition of the property's building and
improvements. During the third quarter of 2022, the demolition was substantially
completed and we recognized a loss on demolition of $16.6 million consisting of
the write-off of the carrying value of the property's building and improvements
plus related costs.

Unrealized (loss)/gain on marketable equity securities

During the year ended December 31, 2022, we recorded unrealized losses on
marketable equity securities of $13.4 million and during the year ended
December 31, 2021, we recorded unrealized gains on marketable equity securities
of $16.5 million. These unrealized gains and losses represented the change in
the fair value of our marketable equity securities during those periods.

Gain on sale of marketable securities

During the year ended December 31, 2022, we recorded a gain on the sale of
marketable securities of $0.6 million and during the year ended December 31,
2021, we recorded a gain on the sale of marketable securities of $5.9 million.
These gains represented the difference between the sales price and carrying
value of our marketable securities sold during those periods.

Mark to market adjustments on derivative financial instruments

During the year ended December 31, 2022, we recorded positive mark to market
adjustments on our derivative financial instruments of $3.0 million and during
the year ended December 31, 2021, we recorded positive mark to market
adjustments on our derivative financial instruments of $0.2 million. These mark
to market adjustments represented the change in the fair value of our interest
rate cap contracts during the period.

Noncontrolling interests

The net earnings allocated to noncontrolling interests relates to (i) parties of
that hold units in the Operating Partnership, (ii) the interest in PRO-DFJV
Holdings LLC ("PRO") held by our Sponsor, (iii) the ownership interests in 50-01
2nd St. Associates LLC (the "2nd Street Joint Venture") held by our Sponsor and
other affiliates and (iv) the ownership interest in various joint ventures held
by affiliates of our Sponsor that have originated promissory loans to
unaffiliated third-party borrowers.

Financial Condition, Liquidity and Capital Resources

Overview:

As of December 31, 2022, we had $12.2 million of cash on hand, $10.4 million of
restricted cash and $45.9 million of marketable securities. We also have the
ability to make draws from a line of credit up to $20.0 million, subject to
certain conditions (see "Notes Payable - Line of Credit"). We currently believe
that these items along with revenues from our operating properties; interest and
dividend income earned on our marketable securities, notes receivable and
preferred investment; as well as proceeds received from the sale of our
marketable securities, repayment of our notes receivable and redemption of our
preferred investment will be sufficient to satisfy our expected cash
requirements for at least twelve months from the date of filing this report,
which primarily consist of our anticipated operating expenses, scheduled debt
service, capital expenditures (including certain of our development activities),
contributions to our unconsolidated affiliated real estate entity (Columbus
Joint Venture), redemptions and cancellations of shares of our common stock and
distributions to our shareholders, if any, required to maintain our status as a
REIT for the foreseeable future. However, we may also obtain additional funds
through selective asset dispositions, joint venture arrangements, new borrowings
and refinancing of existing debt.


                                       27

Additionally, we still have remaining costs related to the development and
construction of the Lower East Side Moxy Hotel, which opened on October 27,
2022. These remaining costs are expected to be funded from the remaining
availability under existing construction financings as well as lender escrowed
funds. See "Lower East Side Moxy Hotel" for additional information. We also have
another development project, our Exterior Street Project, which is currently
under development and for which we expect to seek construction financing and/or
a joint venture arrangement to fund a substantial portion of its future
development and construction costs. See "Exterior Street Project" for additional
information.

Our borrowings consist of single-property mortgages as well as mortgages
cross-collateralized by a pool of properties. We typically have obtained level
payment financing, meaning that the amount of debt service payable would be
substantially the same each year. As such, most of the mortgages on our
properties provide for so-called "balloon" payments.

Additionally, in order to leverage our investments in marketable securities and
seek a higher rate of return, we have access to borrowings under a margin loan
and line of credit collateralized by the securities held with the financial
institution that provided the margin loan and line of credit as well as a
portion of our Marco OP Units. These loans are due on demand and any outstanding
balance must be paid upon the liquidation of securities.

Our charter provides that the aggregate amount of borrowing, both secured and
unsecured, may not exceed 300% of net assets in the absence of a justification
showing that a higher level is appropriate, the approval of the Board of
Directors and disclosure to stockholders. Net assets means our total assets,
other than intangibles, at cost before deducting depreciation or other non-cash
reserves less our total liabilities, calculated at least quarterly on a basis
consistently applied. Any excess in borrowing over such 300% of net assets level
must be approved by a majority of our independent directors and disclosed to our
stockholders in our next quarterly report to stockholders, along with
justification for such excess. As of December 31, 2022, our total borrowings of
$265.1 million represented 109% of net assets.

Any future properties that we may acquire or investments we may make may be
funded through a combination of borrowings, proceeds generated from the sale and
redemption of our marketable securities, available for sale, proceeds received
from the selective disposition of our properties and proceeds received from the
redemption of our preferred investments in related parties. These borrowings may
consist of single-property mortgages as well as mortgages cross-collateralized
by a pool of properties. Such mortgages may be put in place either at the time
we acquire a property or subsequent to our purchasing a property for cash. In
addition, we may acquire properties that are subject to existing indebtedness
where we choose to assume the existing mortgages. Generally, though not
exclusively, we intend to seek to encumber our properties with debt, which will
be on a non-recourse basis. This means that a lender's rights on default will
generally be limited to foreclosing on the property. However, we may, at our
discretion, secure recourse financing or provide a guarantee to lenders if we
believe this may result in more favorable terms. When we give a guaranty for a
property owning entity, we will be responsible to the lender for the
satisfaction of the indebtedness if it is not paid by the property owning
entity.

We may also obtain lines of credit to be used to acquire properties or real
estate-related assets. These lines of credit will be at prevailing market terms
and will be repaid from proceeds from the sale or refinancing of properties,
working capital or permanent financing. Our Sponsor or its affiliates may
guarantee the lines of credit although they will not be obligated to do so. We
expect that such properties may be purchased by our Sponsor's affiliates on our
behalf, in our name, in order to minimize the imposition of a transfer tax upon
a transfer of such properties to us.

We have various agreements, including an advisory agreement, with the Advisor to
pay certain fees in exchange for services performed by the Advisor and/or its
affiliated entities. Additionally, our ability to secure financing and our real
estate operations are dependent upon our Advisor and its affiliates to perform
such services as provided in these agreements.

In addition to meeting working capital needs and distributions, if any, to our
stockholders, our capital resources are used to make certain payments to our
Advisor and its affiliates, including payments related to asset acquisition
fees, development fees and leasing commissions, asset management fees, the
reimbursement of acquisition related expenses to our Advisor and property
management fees. We also reimburse our Advisor and its affiliates for actual
expenses it incurs for administrative and other services provided to us.
Additionally, the Operating Partnership may be required to make distributions to
Lightstone SLP, LLC, an affiliate of the Advisor, provided our shareholders.

The advisory agreement has a one-year term and is renewable for an unlimited
number of successive one-year periods upon the mutual consent of the Advisor and
our independent directors.


                                       28

The following table represents the fees incurred and reimbursement associated
with the payments to our Sponsor, Advisor and their affiliates:

                                                                      For the Year Ended
                                                                December 31,       December 31,
                                                                    2022               2021

Asset management fees (general and administrative costs) $ 825 $ 849
Property management fees (property operating expenses)

                    295                362
Acquisition fees(1)                                                     2,430                  -
Development fees and cost reimbursement(2)                              2,681              3,595
Total                                                          $        6,231      $       4,806

(1) Acquisition fees of $2.4 million were capitalized and are reflected in the

carrying value of our investment in the Columbus Joint Venture which is

included in investments in unconsolidated affiliated real estate entity on

the consolidated balance sheets.

(2) Development fees and the reimbursement of development-related costs that we

pay to the Advisor and its affiliates are capitalized and are included in the

carrying value of the associated development project which are classified as

development projects on the consolidated balance sheets. As of December 31,

2022, we owed the Advisor and its affiliated entities $0.7 million for

development fees, which is included in accounts payable, accrued expenses and

other liabilities on the consolidated balance sheets.

Additionally, we may be required to make distributions on the special general
partner interests ("SLP Units") in the Operating Partnership held by Lightstone
SLP, LLC, an affiliate of the Advisor provided our stockholders have received a
stated preferred return. In connection with our initial public offering,
Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units. These
SLP Units, the purchase price of which will be repaid only after stockholders
receive a stated preferred return and their net investment, entitle Lightstone
SLP, LLC to a portion of any regular distributions made by the Operating
Partnership. However, any future distributions on the SLP Units will always be
subordinated until stockholders receive a stated preferred return.

During both the of the years ended December 31, 2022 and 2021, distributions of
$2.1 million were declared and paid on the SLP units.

Our charter states that our operating expenses, excluding offering costs,
property operating expenses and real estate taxes, as well as acquisition fees
and non-cash related items ("Qualified Operating Expenses") are to be less than
the greater of 2% of our average invested net assets or 25% of net income. For
the year ended December 31, 2022, our Qualified Operating Expenses were less
than the greater of 2% of our average invested net assets or 25% of net income.

In addition, our charter states that our acquisition fees and expenses shall not
exceed 6% of the contractual purchase price or in the case of a mortgage, 6% of
funds advanced unless approved by a majority of the independent directors. For
the year ended December 31, 2022, the acquisition fees and acquisition expenses
were less than 6% of each of the contract prices.

Summary of Cash Flows.

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

                                                                  Year Ended         Year Ended
                                                                 December 31,       December 31,
                                                                     2022               2021
Net cash flows provided by operating activities                 $        8,048     $       10,001
Net cash flows (used in)/provided by investing activities              (88,497 )           49,161
Net cash flows provided by/(used in) financing activities               60,440            (63,411 )
Change in cash, cash equivalents and restricted cash                   (20,009 )           (4,249 )

Cash, cash equivalents and restricted cash, beginning of year 42,592

             46,841
Cash, cash equivalents and restricted cash, end of year         $       22,583     $       42,592




                                       29




Operating activities

The net cash provided by operating activities of $8.0 million for the year ended
December 31, 2022 consists of the following:

? cash outflows of $0.8 million from our net loss after adjustment for non-cash

   items; and

? cash inflows of $8.8 million associated with the net changes in operating

   assets and liabilities.



Investing activities

The net cash used in investing activities of $88.5 million for the year ended
December 31, 2022 consists primarily of the following:

? purchases of investment property principally attributable to our development

    activities of $64.0 million;



  ? aggregate proceeds from the full redemption of one of our preferred
    investments in related parties of $8.5 million;

? aggregate payments related to the acquisition of our 19.0% ownership interest

in the Columbus Joint Venture of $20.2 million, including an acquisition fee

    of $2.4 million paid to our Advisor;



  ? net proceeds from sales of marketable securities of $4.0 million; and



  ? net funds used for the issuance of notes receivable of $16.9 million.

Financing activities

The net cash provided by financing activities of $60.4 million for the year
ended December 31, 2022 is primarily related to the following:

? debt principal payments of $1.4 million;

? net proceeds from mortgage financing of $93.2 million;

? redemption and cancellation of common shares of $4.4 million;

? contributions received from our noncontrolling interests of $21.9 million;

? distributions to our noncontrolling interests of $33.8 million; and

? distributions to our common shareholders of $15.1 million.

Lower East Side Moxy Hotel

In December 2018, we, through a subsidiary of the Operating Partnership,
acquired three adjacent parcels of land located at 147-151 Bowery, in the Lower
East Side neighborhood of the borough of Manhattan in New York City, from
unaffiliated third parties for aggregate consideration of $56.5 million,
excluding closing and other acquisition related costs. Additionally, in
December 2018, we, though a subsidiary of the Operating Partnership, acquired
certain air rights located at 329 Broome Street, also in the Lower East Side
neighborhood, from an unaffiliated third party for $2.4 million, excluding
closing and other acquisition related costs. The land and air rights were
acquired for the development and construction of the Lower East Side Moxy Hotel.
On June 3, 2021,we entered into a development agreement (the "Development
Agreement") with an affiliate of the Advisor (the "Moxy Lower East Side
Developer") pursuant to which the Lower East Side Moxy Developer is being paid a
development fee equal to 3% of hard and soft costs incurred in connection with
the development and construction of the Lower East Side Moxy Hotel. The Advisor
and its affiliates are also reimbursed for certain development-related costs
attributable to the Lower East Side Moxy Hotel. Additionally on June 3, 2021, we
obtained construction financing for the Lower East Side Moxy Hotel. The Lower
East Side Moxy Hotel opened on October 27, 2022 and all four of its food and
beverage venues opened during the fourth quarter of 2022.


                                       30

In connection with the opening of the Lower East Side Moxy Hotel on October 27,
2022, its aggregate development costs ($203.8 million), which were previously
included in development projects on the consolidated balance sheets, were placed
in service and reclassified to land and improvements ($71.5 million), buildings
and improvements ($117.1 million), and furniture and fixtures ($15.2 million) on
the consolidated balance sheets.

In preparation for the opening of the Lower East Side Moxy Hotel, we incurred
pre-opening costs of $4.5 million during the year ended December 31, 2022. No
pre-opening costs were incurred in 2021. Pre-opening costs generally consist of
non-recurring personnel, marketing and other costs.

Hotel Franchise Agreement

The Lower East Side Moxy Hotel operates pursuant to a 30-year franchise
agreement (the "Hotel Franchise Agreement") with Marriott. The Hotel Franchise
Agreement provides for us to pay franchise fees and marketing fund charges equal
to certain prescribed percentages of gross room sales, as defined. Additionally,
pursuant to the terms of the Hotel Franchise Agreement, we received a key money
payment of $4.7 million from Marriott during the fourth quarter of 2022, which
is included in accounts payable, accrued expenses and other liabilities on the
consolidated balance sheet as of December 31, 2022, and is being amortized as a
reduction to franchise fees over the term of the Hotel Franchise Agreement.
Pursuant to the terms of the Hotel Franchise Agreement, we may be obligated to
return the unamortized portion of the key money back to Marriott upon the
occurrence of certain events. The franchise fees and marketing fund charges are
recorded as a component of hotel operating expenses in the consolidated
statements of operations.

Hotel Management Agreements

With respect to the Lower East Side Moxy Hotel, we have entered into a hotel
management agreement, food and beverage operations management agreement and an
asset management agreement (collectively, the "Hotel Management Agreements")
with various third-party management companies pursuant to which they provide
oversight and management over the operation of the Lower East Side Moxy Hotel
and its food and beverage venues and receive payment of certain prescribed
management fees, generally based on a percentage of revenues and certain
incentives for exceeding targeted earnings thresholds. The management fees are
recorded as a component of hotel operating expenses on the consolidated
statements of operations. The Hotel Management Agreements have initial terms
ranging from five to 20 years.

Moxy Construction Loans

On June 3, 2021, we, through a wholly owned subsidiary, closed on a recourse
construction loan facility (the "Moxy Senior Loan") providing for up to $90.0
million of funds for the development, construction and certain pre-opening costs
associated with the Lower East Side Moxy Hotel. At closing, $35.6 million of
proceeds were initially advanced under the Moxy Senior Loan, which were used to
repay in full a then outstanding mortgage loan. The Moxy Senior Loan bears
interest at LIBOR plus 7.50%, subject to an 7.75% floor, and initially matures
on June 3, 2024, with two one-year extension options, subject to the
satisfaction of certain conditions. Additionally, the Moxy Senior Loan provides
for a replacement benchmark rate in connection with the phase-out of LIBOR,
which is expected to be for periods after June 30, 2023. The Moxy Senior Loan is
collateralized by the Lower East Side Moxy Hotel. As of December 31, 2022, the
outstanding principal balance of the Moxy Senior Loan was $82.8 million, the
interest rate was 11.89% and the remaining availability under the facility was
up to $7.2 million, which is expected to be used to fund the remaining
construction costs for the project. Additionally, we were required by the lender
to deposit the $4.7 million of key money received from Marriott into an escrow
account (included in restricted cash on the consolidated balance sheet as of
December 31, 2022) which may also be used to fund the remaining construction
costs for the project.

Simultaneously on June 3, 2021, we, through the same wholly owned subsidiary,
also entered into a mezzanine construction loan facility (the "Moxy Junior Loan"
and together with the Moxy Senior Loan, the "Moxy Construction Loans") providing
for up to $40.0 million of additional funds for the development, construction
and certain pre-opening costs associated with the Lower East Side Moxy Hotel.
The Moxy Junior Loan bears interest at LIBOR plus 13.50%, subject to a 14.00%
floor, and initially matures on June 3, 2024, with two one-year extension
options, subject to the satisfaction of certain conditions. Additionally, the
Moxy Junior Loan provides for a replacement benchmark rate in connection with
the phase-out of LIBOR, which is expected to be for periods after June 30, 2023.
The Moxy Junior Loan is subordinate to the Moxy Senior Loan but also
collateralized by the Lower East Side Moxy Hotel. We provided a principal
guarantee of up to $7.0 million with respect to the Moxy Junior Loan. As of
December 31, 2022, the outstanding principal balance of the Moxy Junior Loan was
$40.0 million and its interest rate was 17.89%.


                                       31




In connection with the Moxy Construction Loans, we provided certain completion
and carry cost guarantees. We also entered into two interest rate cap agreements
with notional amounts of $90.0 million and $40.0 million pursuant to which LIBOR
through June 30, 2023 and its replacement rate thereafter is capped at 3.00%
through June 3, 2024. Furthermore, in connection with the Moxy Construction
Loans, we paid $5.3 million of loan fees and expenses and accrued $1.1 million
of loan exit fees which are due at the initial maturity date and are included in
accounts payable, accrued expenses and other liabilities on the consolidated
balance sheets as of both December 31, 2022 and 2021.

Preferred Investments

We entered into several agreements with various related party entities that
provide for us to make preferred contributions pursuant to certain instruments
(the "Preferred Investments") that entitle us to certain prescribed monthly
preferred distributions. During the year ended December 31, 2022, we redeemed
the remaining $8.5 million of the East 11th Street Preferred Investment, which
is now fully redeemed. As a result, as of December 31, 2022, we only have one
remaining Preferred Investment, which is the 40 East End Avenue Preferred
Investment with an outstanding balance of $6.0 million. The fair value of our
remaining Preferred Investment approximates its carrying value based on market
rates for similar instruments. See Note 5 of the Notes to Consolidated Financial
Statements for additional information.

The Preferred Investments are summarized as follows:

                                                  Preferred Investment Balance            Investment Income(1)
                                                   As of                As of              For the Year Ended
                                  Dividend     December 31,         December 31,              December 31,
Preferred Investments               Rate           2022                 2021              2022             2021
40 East End Avenue                  12%        $       6,000       $         6,000     $       730       $     730
East 11th Street                    12%                    -                 8,500             593           1,034

Total Preferred Investments                    $       6,000       $       

14,500     $     1,323       $   1,764



Note:

(1) - Included in interest and dividend income on the consolidated statements of

     operations.



Notes Receivable

We formed certain joint ventures (collectively, the "NR Joint Ventures") between
wholly owned subsidiaries of the Operating Partnership (collectively, the "NR
Subsidiaries") and affiliates of the Sponsor (the "NR Affiliates") which have
originated nonrecourse loans (collectively, the "Joint Venture Promissory
Notes") to unaffiliated third-party borrowers (collectively, the "Joint Venture
Borrowers").

We determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are
the primary beneficiaries. Since the NR Subsidiaries are the primary
beneficiaries, beginning on the applicable date of formation, we consolidated
the operating results and financial condition of the NR Joint Ventures and
accounted for the respective ownership interests of the NR Affiliates as
noncontrolling interests.

The Joint Venture Promissory Notes generally provide for monthly interest at a
prescribed variable rate, subject to a floor. In connection with the initial
funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive
origination fees (ranging from 1.00% to 1.50%) based on the principal commitment
under the loan and retain a portion of the loan proceeds to establish a reserve
for interest and other items (the "Loan Reserves"). The Joint Venture Promissory
Notes are recorded in notes receivable, net on the consolidated balance sheets.

The Joint Venture Promissory Notes generally have an initial term of one or two
years and may provide for additional one-year extension options subject to
satisfaction of certain conditions, including the funding of additional Loan
Reserves and payment of extension fees. The Joint Venture Promissory Notes are
collateralized by either the membership interests of the Joint Venture Borrowers
in the borrowing entity or the underlying real property being developed by

the
Joint Venture Borrower.


                                       32

The Joint Venture Promissory Notes are recorded in notes receivable, net on the
consolidated balance sheets. The origination fees received are presented in the
consolidated balance sheets as a direct deduction from the carrying value of the
Joint Venture Promissory Notes and are amortized into interest income, using a
straight-line method that approximates the effective interest method, over the
initial term of the Joint Venture Promissory Notes. The Loan Reserves are
presented in the consolidated balance sheets as a direct deduction from the
carrying value of the Joint Venture Promissory Notes and are applied against the
monthly interest due over the initial term.

The Notes Receivable are summarized as follows:

                                                                                                                                         As of December 31, 2022
                          Company's       Loan                                                        Contractual                               Unamortized
                          Ownership    Commitment   Origination    Origination       Maturity           Interest       Outstanding              Origination   Carrying    Unfunded

Joint Venture/Lender      Percentage     Amount         Fee           Date             Date               Rate          Principal    Reserves       Fee 

Value Commitment

                                                                                                    SOFR plus 7.00%
LSC 1543 7th LLC             50%        $49,000        1.00%      March 2, 2022   August 31, 2023   (Floor of 7.15%)     $49,000      $(614)      $(327)      $48,059        $-

The following summarizes the interest earned (included in interest and dividend
income on the consolidated statements of operations) for each of the Joint
Venture Promissory Notes during the periods indicated:

                              For the           For the
                            Year Ended        Year Ended
                           December 31,      December 31,
Joint Venture/Lender           2022              2021
LSC 1543 7th LLC           $       4,400     $       1,802

LSC 11640 Mayfield LLC               455             1,875

LSC 162nd Capital I LLC                -               491

LSC 162nd Capital II LLC               -             1,063

LSC 1650 Lincoln LLC                   -             2,317

LSC 87 Newkirk LLC                     -             1,585

Total                      $       4,855     $       9,133



LSC 1543 7th LLC Loan

On June 30, 2022, LSC 1543 7th LLC obtained a loan of up to $33.1 million (the
"LSC 1543 7th LLC Loan") which bears interest at SOFR + 3.50% (7.86% as of
December 31, 2022). The LSC 1543 7th LLC Loan is initially scheduled to mature
on December 30, 2023, but may be further extended through December 30, 2024 and
September 20, 2025, through the exercise of two extension options. The LSC 1543
7th LLC Loan requires monthly interest-only payments with the outstanding
principal balance due at its maturity date and is collateralized by a
nonrecourse loan originated by LSC 1543 7th LLC (the "LSC 1543 7th LLC Note
Receivable"). As of December 31, 2022, the outstanding principal balance of the
LSC 1543 7th LLC Loan was $32.2 million.

Exterior Street Project

In February 2019, we, through subsidiaries of the Operating Partnership,
acquired two adjacent parcels of land located at 355 and 399 Exterior Street in
the Mott Haven neighborhood in the Bronx borough of New York City from
unaffiliated third parties for an aggregate purchase price of $59.0 million,
excluding closing and other acquisition related costs. In September 2021, we
subsequently acquired an additional adjacent parcel of land at cost from an
affiliate of the Advisor for $1.0 million in order to achieve certain zoning
compliance. On these three land parcels we plan to construct a proposed
mixed-use multifamily residential and commercial retail property (the "Exterior
Street Project"). Through December 31, 2022, we have incurred and capitalized
$93.6 million of costs related to the development of the Exterior Street
Project.


                                       33

On March 29, 2019, the Company obtained a $35.0 million loan (the "Exterior
Street Loan") from a financial institution which, commencing on October 10,
2020, bore interest at LIBOR plus 2.25% through November 24, 2022. On
December 21, 2021, the loan agreement was amended to provide an additional $7.0
million loan (the "Exterior Street Supplemental Loan" and collectively with the
Exterior Street Loan, the "Exterior Street Loans") which bore interest at LIBOR
plus 2.50% through November 24, 2002. The Exterior Street Loans require monthly
interest-only payments with the outstanding principal balances due in full at
their maturity date. The Exterior Street Loans are collateralized by the
Exterior Street Project. On November 22, 2022, we and the financial institution
entered into an additional amendment to the Exterior Street Loans pursuant to
which the interest rate on the Exterior Street Loans were adjusted to SOFR plus
2.60% (6.96% as of December 31, 2022) and their maturity dates were extended to
November 24, 2023.

The Exterior Street Loan requires monthly interest-only payments with the
outstanding balance due in full at its maturity date. The Exterior Street Loan
is collateralized by the Exterior Street Project.

Our Exterior Street Project is currently under development, we expect to seek
construction financing and/or a joint venture arrangement to fund a substantial
portion of its future development and construction costs. The ongoing COVID-19
pandemic as well as other economic conditions and uncertainties may (i) affect
our ability to obtain construction financing, and/or (ii) cause delays or
increase costs associated with building materials or construction services
necessary for construction, which could adversely impact our ability to either
ultimately commence and/or complete construction as planned, on budget or at all
for the Exterior Street Project.

SRP

Our share repurchase program (the "SRP") may provide our stockholders with
limited, interim liquidity by enabling them to sell their shares of common stock
back to us, subject to restrictions.

On March 25, 2020, the Board of Directors amended the SRP to remove stockholder
notice requirements and also approved the suspension of all redemptions
effective immediately.

Effective March 15, 2021 and May 14, 2021, the Board of Directors partially
reopened the SRP to allow, subject to various conditions as set forth below, for
redemptions submitted in connection with a stockholder's death and hardship,
respectively, and set the price for all such purchases to our current estimated
net asset value per share of common stock, as determined by the Board of
Directors and reported by us from time to time. Deaths that occurred subsequent
to January 1, 2020 were eligible for consideration, subject to certain
conditions. Beginning January 1, 2022, requests for redemptions in connection
with a stockholder's death must be submitted and received by us within one year
of the stockholder's date of death for consideration. On March 18, 2022, the
Board of Directors approved an increase to the annual threshold for death
redemptions from up to 0.5% to 1.0%.

At the above noted dates, the Board of Directors established that on an annual
basis, we would not redeem in excess of 1.0% and 0.5% of the number of shares
outstanding as of the end of the preceding year for either death or hardship
redemptions, respectively. Additionally, redemption requests are expected to be
processed on a quarterly basis and would be subject to pro ration if either type
of redemption requests exceeded the annual limitation.

For the year ended December 31, 2022, we repurchased 371,318 Common Shares at a
weighted average price per share of $11.75. For the year ended December 31,
2021, we repurchased 143,918 Common Shares at a weighted average price per

share
of $11.18.

DRIP

Our distribution reinvestment program ("DRIP") provides our shareholders with an
opportunity to purchase additional shares of our common stock at a discount by
reinvesting distributions. Under our distribution reinvestment program, a
shareholder may acquire, from time to time, additional shares of our common
stock by reinvesting cash distributions payable by us to such shareholder,
without incurring any brokerage commission, fees or service charges.

The DRIP had been suspended since 2015 until our DRIP Registration Statement on
Form S-3D was filed and became effective as amended and restated, under the
Securities Act of 1933 on October 25, 2018.

                                       34

Pursuant to the DRIP following its reactivation, our stockholders who elect to
participate may invest all or a portion of the cash distributions that we pay
them on shares of our common stock in additional shares of our common stock
without paying any fees or commissions. The purchase price for shares under the
DRIP will be equal to 95% of our current NAV per Share, as determined by the
Board of Directors and reported by us from time to time. Effective on
December 8, 2022, the Board of Directors determined our NAV per Share of $12.19,
as of September 30, 2022, which resulted in a purchase price for shares under
the DRIP of $11.58 per share. As of December 31, 2022, 9.9 million shares remain
available for issuance under our DRIP.

The Board of Directors reserves the right to terminate the DRIP for any reason
without cause by providing written notice of termination of the DRIP to all
participants.

Distributions

Common Shares

During the years ended December 31, 2022 and 2021, distributions on our Common
Shares were declared quarterly, for each calendar quarter end, at the pro rata
equivalent of an annual distribution of $0.70 per share, or an annualized rate
of 7.0% assuming a purchase price of $10.00 per share, to stockholders of record
at the close of business on the last day of the quarter-end. All distributions
were paid on or about the 15th day of the month following the quarter-end.

Total distributions declared during the years ended December 31, 2022 and 2021
were $15.4 million and $15.6 million, respectively. On March 15, 2023, the Board
of Directors authorized and declared a Common Share distribution of $0.175 per
share for the quarterly period ending March 31, 2023. The quarterly distribution
is the pro rata equivalent of an annual distribution of $0.70 per share, or an
annualized rate of 7.0% assuming a purchase price of $10.00 per share. The
distribution will be paid on or about the 15th day of the month following the
quarter-end to stockholders of record at the close of business on the last day
of the quarter-end. The stockholders have an option to elect the receipt of
shares under our DRIP.

SLP Units

For both of the years ended December 31, 2022 and 2021, total distributions
declared and paid on the SLP Units were $2.1 million. Additionally, on March 15,
2023, the Operating Partnership declared a quarterly distribution for the
quarterly period ending March 31, 2023 on the SLP Units at an annualized rate of
7.0%. Any future distributions on the SLP Units will always be subordinated
until stockholders receive a stated preferred return.

Contractual Obligations

The following is a summary of our contractual obligations outstanding over the
next five years and thereafter as of December 31, 2022. All amounts are based on
the initial scheduled maturity date of the related debt.

Contractual Obligations           2023          2024          2025         2026         2027       Thereafter        Total
Mortgage Payable                $  75,606     $ 189,508     $      -     $      -     $      -     $         -     $ 265,114
Interest Payments1                 25,628        11,703            -            -            -               -        37,331
Total Contractual Obligations   $ 101,234     $ 201,211     $      -     $      -     $      -     $         -     $ 302,445

1) These amounts represent future interest payments related to mortgage payable

obligations based on the fixed and variable interest rates specified in the

associated debt agreement. All variable rate debt agreements are based on the

one month LIBOR rate or SOFR rate, as applicable. For purposes of calculating

future interest amounts on variable interest rate debt the one-month LIBOR

    rate or SOFR rate, as applicable as of December 31, 2022 was used.




                                       35




Notes Payable

Margin Loan

We have access to a margin loan (the "Margin Loan") from a financial institution
that holds custody of certain of our marketable securities. The Margin Loan,
which is due on demand, bears interest at LIBOR plus 0.85% (5.24% as of
December 31, 2022) and is collateralized by the marketable securities in our
account. The amounts available to us under the Margin Loan are at the discretion
of the financial institution and not limited to the amount of collateral in our
account. There were no amounts outstanding under the Margin Loan as of
December 31, 2022 and 2021.

Line of Credit

We have a non-revolving credit facility (the "Line of Credit") with a financial
institution that provides for borrowings up to a maximum of $20.0 million,
subject to a 55% loan-to-value ratio based on the fair value of the underlying
collateral, which matures on November 30, 2024 and bears interest at LIBOR plus
1.35% (5.74% as of December 31, 2022). Additionally, the Line of Credit provides
for a replacement benchmark rate in connection with the phase-out of LIBOR,
which is expected to be for periods after June 30, 2023. The Line of Credit is
collateralized by an aggregate of 209,243 of Marco OP Units and Marco II OP
Units and was guaranteed by PRO. As of December 31, 2022, the amount of
borrowings available to be drawn under the Line of Credit was $13.5 million. No
amounts were outstanding under the Line of Credit as of both December 31, 2022
and 2021.

Debt Maturities

The Exterior Street Loans (outstanding aggregate principal balance of $42.0
million as of December 31, 2022) mature on November 24, 2023. We currently
intend to seek to extend or refinance the Exterior Street Loans on or before
their maturity date.

The LSC 1543 7th LLC Loan (outstanding principal balance of $32.2 million as of
December 31, 2022) is scheduled to initially mature on December 30, 2023, but
may be further extended through December 30, 2024 and September 20, 2025,
through the exercise of two extension options. We currently intend to repay the
LSC 1543 7th LLC Loan with the proceeds from the expected repayment of the LSC
1543 7th LLC Note Receivable, which has an outstanding principal balance of
$49.0 million, or to seek to extend the LSC 1543 7th LLC Loan pursuant to its
extension option on or before its maturity date.

However, if we are unable to extend or refinance any of our maturing
indebtedness at favorable terms, we will look to repay the then outstanding
balance with available cash and/or proceeds from selective asset sales. We have
no additional significant maturities of mortgage debt over the next 12 months.

Funds from Operations and Modified Funds from Operations

The historical accounting convention used for real estate assets requires
straight-line depreciation of buildings, 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.

We calculate FFO, a non-GAAP measure, consistent with the standards established
over time by the Board of Governors of NAREIT, as restated in a White Paper
approved by the Board of Governors of NAREIT effective in December 2018 (the
"White Paper"). The White Paper defines FFO as net income or loss computed in
accordance with GAAP, excluding depreciation and amortization related to real
estate, gains and losses from the sale of certain real estate assets, gains and
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.


                                       36

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. Certain of the above adjustments
are also made to reconcile net income (loss) to net cash provided by (used in)
operating activities, such as for the amortization of a premium and accretion of
a discount on debt and securities investments, amortization of fees, any
unrealized gains (losses) on derivatives, securities or other investments, as
well as other adjustments.

MFFO excludes non-recurring impairment of real estate-related investments. We
assess the credit quality of our investments and adequacy of reserves on a
quarterly basis, or more frequently as necessary. Significant judgment is
required in this analysis. We consider the estimated net recoverable value of a
loan as well as other factors, including but not limited to the fair value of
any collateral, the amount and the status of any senior debt, the prospects for
the borrower and the competitive situation of the region where the borrower does
business.

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.


                                       37

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.

The below table illustrates the items deducted in the calculation of FFO and
MFFO. Items are presented net of non-controlling interest portions where
applicable.

                                                                      For the Years Ended
                                                                December 31,        December 31,
                                                                    2022                2021
Net (loss)/income                                              $       (26,024 )   $       23,963
FFO adjustments:
Depreciation and amortization                                            3,226              5,523
Adjustments to equity earnings from unconsolidated
affiliated entity                                                          308                  -
Gain on disposal of investment property                                 (1,154 )           (3,947 )
Loss on demolition                                                      16,602                  -
Impairment charge                                                            -             11,341
FFO                                                                     (7,042 )           36,880
MFFO adjustments:
Noncash adjustments:
Amortization of above or below market leases and
liabilities(1)                                                               -                  -
Mark to market adjustments(2)                                           10,327            (16,650 )
Loss on debt extinguishment(3)                                               -                103
Gain on sale of marketable securities(3)                                  (566 )           (5,882 )
MFFO                                                                     2,719             14,451
Straight-line rent(4)                                                       29                  5
MFFO - IPA recommended format                                  $         2,748     $       14,456

Net (loss)/income                                              $       (26,024 )   $       23,963
Less: income attributable to noncontrolling interests                   (1,690 )           (4,880 )

Net (loss)/income applicable to Company's common shares $ (27,714 ) $ 19,083
Net (loss)/income per common share, basic and diluted $ (1.26 ) $ 0.86

FFO                                                            $        (7,042 )   $       36,880
Less: FFO attributable to noncontrolling interests                      (2,752 )           (5,799 )
FFO attributable to Company's common shares                    $        (9,794 )   $       31,081
FFO per common share, basic and diluted                        $         

(0.45 ) $ 1.40

MFFO - IPA recommended format                                  $         2,748     $       14,456
Less: MFFO attributable to noncontrolling interests                     (3,344 )           (4,755 )
MFFO attributable to Company's common shares                   $          

(596 ) $ 9,701

Weighted average number of common shares outstanding, basic
and diluted                                                             21,959             22,254




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Notes:

(1) 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.

(2) 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. 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.

(3) 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.

(4) 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.



The table below presents our cumulative distributions paid and cumulative FFO:

                                               From inception through
                                                    December 31,
                                                        2022
FFO attributable to Company's common shares   $                256,939
Distributions paid                            $                278,737



For the year ended December 31, 2022, we paid cash distributions of $15.1
million. Cash flow from operations was $3.3 million and FFO attributable to our
common shares for the year ended December 31, 2022 was negative $9.8 million.
For the year ended December 31, 2021, we paid cash distributions of $15.3
million. Cash flow from operations was $10.0 million and FFO attributable to our
common shares for the year ended December 31, 2021 was $31.1 million.

New Accounting Pronouncements

See Note 2 to the Notes to Consolidated Financial Statements for further
information concerning accounting standards that we have not yet been required
to adopt and may be applicable to our future operations.

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