Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Lightstone Value Plus REIT III, Inc. and Subsidiaries and the notes thereto. As used herein, the terms "we," "our" and "us" refer to Lightstone Value Plus REIT III, Inc., a Maryland corporation, and, as required by context, Lightstone Value Plus REIT III, L.P., which we collectively refer to as the "Operating Partnership". Dollar amounts are presented in thousands, except per share data, revenue per available room ("RevPAR"), average daily rate ("ADR"), annualized revenue per square foot and where indicated in millions.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements include discussion and analysis of the financial condition of Lightstone Value Plus REIT III, Inc. and our subsidiaries (which may be referred to herein as the "Company," "we," "us" or "our"), including our ability to make accretive real estate or real estate-related investments, to rent space on favorable terms, to address our debt maturities and to fund our liquidity requirements, to sell our assets when we believe advantageous to achieve our investment objectives, to fund our anticipated capital expenditures, to meet the amount and timing of anticipated future cash distributions to our stockholders, to grow the estimated net asset value per share of our common stock ("NAV per Share"), and other matters. Words such as "may," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "would," "could," "should" and variations of these words and similar expressions are intended to identify forward-looking statements.

These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors described below:

	●	market and economic challenges experienced by the United States ("U.S.") and global economies or real estate industry as a whole and the local economic conditions in the markets in which our investments are located. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; such as inflation, tariffs, recession, political upheaval or uncertainty, terrorism and acts of war, natural and man-made disasters, cybercrime, and outbreaks of contagious diseases;
	●	the availability of cash flow from operating activities for distributions, if required to maintain our status as a real estate investment trust ("REIT");
	●	conflicts of interest arising out of our relationships with our advisor and its affiliates;
	●	our ability to retain our executive officers and other key individuals who provide advisory and property management services to us;
	●	our level of debt and the terms and limitations imposed on us by our debt agreements;
	●	the availability of credit generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions and requirements of that debt;
	●	our ability to make accretive investments;
	●	our ability to diversify our portfolio of assets;
	●	our ability to sell our assets at a price and on a timeline consistent with our investment objectives;
	●	impairment charges;
	●	our ability to maintain and/or upgrade our hotels pursuant to the requirements of their respective franchise agreements;
	●	our ability to extend or replace expiring franchise agreements for our hotels;
	●	unfavorable changes in laws or regulations impacting our business, our assets or our key relationships; and
	●	factors that could affect our ability to qualify as a REIT.

Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management's view only as of the date of this Quarterly Report on Form 10-Q, and may ultimately prove to be incorrect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.

Cautionary Note

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

Business and Structure

Lightstone Value Plus REIT III, Inc. ("Lightstone REIT III"), is a Maryland corporation formed on October 5, 2012, which elected to qualify as a real estate investment trust ("REIT") for United States ("U.S.") federal income tax purposes beginning with the taxable year ending December 31, 2015.

Lightstone REIT III is structured as an umbrella partnership REIT ("UPREIT"), and substantially all of its current and future business is and will be conducted through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the "Operating Partnership"). As of March 31, 2026, Lightstone REIT III had a 99% general partnership interest in the Operating Partnership's common units.

Lightstone REIT III and the Operating Partnership and its subsidiaries are collectively referred to as the "Company" and the use of "we," "our," "us" or similar pronouns in this Annual Report on Form 10-K (the "Annual Report") refers to Lightstone REIT III, its Operating Partnership or the Company as required by the context in which such pronoun is used.

Through the Operating Partnership, we own, operate and develop commercial hospitality properties and make real estate-related investments. Since our inception, we have primarily acquired, developed and operated commercial hospitality properties, principally consisting of limited-service hotels and one full-service hotel all located in the U.S. However, our commercial holdings may also to a lesser extent, consist of retail (primarily multi-tenanted shopping centers), industrial and office properties. Our real estate investments are held by us alone or jointly with other parties. In addition, we may invest up to 20% of our net assets in collateralized debt obligations, commercial mortgage-backed securities and mortgage and mezzanine loans secured, directly or indirectly, by the same types of properties which we may acquire directly. Although most of our investments are these types, we may invest in whatever types of real estate or real estate-related investments that we believe are in our best interests. We evaluate all of our real estate investments as one operating segment. We currently intend to hold our investments until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that the objectives will not be met.

As of March 31, 2026, we (i) wholly owned and consolidated the operating results and financial condition of eight limited-service hotels containing a total of 872 rooms, (ii) held an unconsolidated 50% membership interest in LVP LIC Hotel JV LLC (the "Hilton Garden Inn Joint Venture"), an affiliated real estate entity that owns and operates one limited-service hotel, and (iii) held an unconsolidated 25% membership interest in Bedford Avenue Holdings LLC (the "Williamsburg Moxy Hotel Joint Venture"), an affiliated real estate entity that owns and operates one full-service hotel. We account for our unconsolidated membership interests in the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture under the equity method of accounting.

The Hilton Garden Inn Joint Venture owns a 183-room, limited-service hotel (the "Hilton Garden Inn - Long Island City") located in the Long Island City neighborhood in the Queens borough of New York City. The Hilton Garden Inn Joint Venture is between us and Lightstone Value Plus REIT II, Inc. ("Lightstone REIT II"), a related party REIT, which is sponsored by The Lightstone Group LLC (the "Sponsor"). We and Lightstone REIT II each have a 50% membership interest in the Hilton Garden Inn Joint Venture. The Williamsburg Moxy Hotel Joint Venture developed, constructed and owns a 216-room Marriott branded hotel (the "Williamsburg Moxy Hotel") located in the Williamsburg neighborhood in the Brooklyn borough of New York City, which opened on March 7, 2023. The Williamsburg Moxy Hotel Joint Venture is between us and Lightstone Value Plus REIT IV, Inc. ("Lightstone REIT IV"), a related party REIT, which is sponsored by the Sponsor. We and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.

Our advisor is Lightstone Value Plus REIT III LLC (the "Advisor"), which is majority owned by David Lichtenstein. On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 limited partner units ("Common Units") in the Operating Partnership. Our Advisor also owns 20,000 shares of our common stock ("Common Shares") which were issued on December 24, 2012 for $200, or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of the Sponsor, which served as our sponsor during our initial public offering (the "Offering") which terminated on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on December 11, 2014 for $2.0 million, or $9.00 per share. Pursuant to the terms of an advisory agreement and subject to the oversight of our board of directors (the "Board of Directors"), the Advisor has primary responsibility for making investment decisions on our behalf and managing our day-to-day operations. Through his ownership and control of the Sponsor, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP III LLC, a Delaware limited liability company (the "Special Limited Partner"), which owns 242 subordinated participation interests ("Subordinated Participation Interests") in the Operating Partnership which were acquired at a cost of $50,000 per unit, or for aggregate consideration of $12.1 million in connection with our Offering. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone REIT III or the Operating Partnership.

We have no employees. We are dependent on the Advisor and certain affiliates of the Sponsor for services that are essential to us, including asset management, property management (excluding our hospitality properties, which are managed by unrelated third-party property managers) and acquisition, disposition, development and financing activities, and other general administrative responsibilities; such as tax, accounting, legal, information technology and investor relations services. If the Advisor and certain affiliates of the Sponsor are unable to provide these services to us, we would be required to provide the services ourselves or obtain the services from another party or other parties.

Our Common Shares are not currently listed on a national securities exchange. We may seek to list our Common Shares for trading on a national securities exchange only if a majority of our independent directors believe listing them would be in the best interest of our stockholders. However, we do not intend to list our Common Shares at this time. We do not anticipate that there would be any active market for our Common Shares until they are listed for trading.

Noncontrolling Interests - Partners of the Operating Partnership

Limited Partner

On July 16, 2014, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units. The Advisor has the right to convert its Common Units into cash or, at our option, an equal number of our Common Shares.

Special Limited Partner

In connection with our Offering, the Special Limited Partner purchased from the Operating Partnership an aggregate of 242 Subordinated Participation Interests for $50,000 per unit, or aggregate consideration of $12.1 million.

As the indirect majority owner of the Special Limited Partner, Mr. Lichtenstein is the beneficial owner of a 99% interest in such Subordinated Participation Interests and thus receives an indirect benefit from any distributions made in respect thereof.

These Subordinated Participation Interests may entitle the Special Limited Partner to a portion of any regular distributions that we make to our stockholders, but only after our stockholders have received a stated preferred return. However, since our inception there have been no distributions declared or paid on the Subordinated Participation Interests. Any future distributions on the Subordinated Participation Interests will always be subordinated until stockholders receive a stated preferred return.

The Subordinated Participation Interests may also entitle the Special Limited Partner to a portion of any liquidating distributions made by the Operating Partnership. The value of such distributions will depend upon the net proceeds available for distribution upon our liquidation and, therefore, cannot be determined at the present time. Liquidating distributions to the Special Limited Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.

Related Parties

Our Advisor and certain affiliates of the Sponsor, including the Special Limited Partner, are related parties of ours as well as other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, certain of these entities are entitled to compensation and reimbursement of costs incurred for services related to the investment, development, management and disposition of our assets. The compensation is generally based on the cost of acquired properties/investments from such properties/investments and other such fees and expense reimbursements as outlined in each of the respective agreements.

Concentration of Credit Risk

As of March 31, 2026 and December 31, 2025, we had cash deposited in certain financial institutions in excess of U.S. federally insured levels. We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk for our cash and cash equivalents or restricted cash.

Current Environment

Our operating results and financial condition 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, new and existing competition, inflation, the impact of tariffs and global trade disruptions, recessionary pressures, supply chain disruptions, wars and acts of war, geopolitical tensions, political upheaval or uncertainty, potential violence, civil unrest, criminal activity or terrorism, the availability and cost of comprehensive insurance coverage, the effects of climate change, environmental liabilities, natural and other disasters, security breaches and cybercrime, any disruptions in the financial markets that may adversely affect the availability or terms of financings, unfavorable changes in laws, ordinances and regulations, technological advances and challenges, such as the use and impact of artificial intelligence and machine learning, and loss of key relationships.

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 or tariffs, higher interest rates, labor and supply chain challenges, and other changes in economic conditions, could adversely affect our future results of operations and financial condition.

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-Q. The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. ("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.

Portfolio Summary -

Wholly-Owned and Consolidated Properties:

Hospitality - Limited-Service Hotel		Location		Year Built		Date Acquired		Rooms				Year to Date March 31, 2026 Available Rooms				Percentage Occupied for the Three Months Ended March 31, 2026				RevPAR for the Three Months Ended March 31, 2026				ADR for the Three Months Ended March 31, 2026
Hampton Inn - Des Moines		Des Moines, Iowa		1987		February 4, 2015			120				10,800				54	%		$	57.27			$	106.08
Courtyard - Durham		Durham, North Carolina		1996		May 15, 2015			146				13,139				57	%		$	60.48			$	106.88
Hampton Inn - Lansing		Lansing, Michigan		2013		March 10, 2016			86				7,740				61	%		$	69.98			$	113.91
Courtyard - Warwick		Warwick, Rhode Island		2003		March 23, 2016			92				8,280				52	%		$	65.36			$	124.69
Home2 Suites - Salt Lake		Salt Lake City, Utah		2013		August 2, 2016			125				11,250				73	%		$	86.45			$	118.55
Home2 Suites - Tukwila		Tukwila, Washington		2015		August 2, 2016			139				12,510				79	%		$	107.88			$	136.04
Fairfield Inn - Austin		Austin, Texas		2014		September 13, 2016			84				7,560				66	%		$	55.73			$	84.86
Staybridge Suites - Austin		Austin, Texas		2009		October 7, 2016			80				7,200				75	%		$	70.71			$	94.19
						Total			872				78,479				65	%		$	73.25			$	113.04

Unconsolidated Affiliated Real Estate Entities:

Hospitality		Location		Year Built		Date Acquired		Rooms				Year to Date Available Rooms				Percentage Occupied for the Three Months Ended March 31, 2026				RevPAR for the Three Months Ended March 31, 2026				ADR for the Three Months Ended March 31, 2026
Limited-Service Hotel
Hilton Garden Inn - Long Island City		Long Island City, New York		2014		March 27, 2018			183				16,470				88	%		$	143.31			$	161.95
Full-Service Hotel
Williamsburg Moxy Hotel		Williamsburg, New York		2023		March 7, 2023			216				19,440				87	%		$	168.59			$	193.15

The following information generally applies to our investments in our real estate properties:

	●	we believe our real estate properties are adequately covered by insurance and suitable for their intended purpose;
	●	our real estate properties are located in markets where we are subject to competition; and
	●	depreciation is provided on a straight-line basis over the estimated useful life of the applicable improvements.

Critical Accounting Policies and Estimates

There were no material changes during the three months ended March 31, 2026 to our critical accounting policies as reported in our Annual Report on Form 10-K, for the year ended December 31, 2025.

Results of Operations

Comparison of the three months ended March 31, 2026 vs. March 31, 2025

Consolidated

Our consolidated revenues, property operating expenses, real estate taxes, general and administrative expense and depreciation and amortization for the three months ended March 31, 2026 and 2025 are attributable to our consolidated hospitality properties, all eight of which were owned by us during both of the periods presented.

During the three months ended March 31, 2026 compared to same period in 2025, our consolidated hospitality portfolio experienced decreases in the percentage of rooms occupied to 65% from 67%, RevPAR to $73.25 from $75.27 and ADR to $113.04 from $113.05.

Revenues

Revenues decreased slightly by $0.1 million to $6.0 million during the three months ended March 31, 2026 compared to $6.1 million for the same period in 2025. The decrease in revenues during the 2026 period was primarily the result of lower occupancy.

Property operating expenses

Property operating expenses increased by $0.2 million to $5.1 million during the three months ended March 31, 2026 compared to $4.9 million for the same period in 2025.

Real estate taxes

Real estate taxes were relatively unchanged at $0.3 million during both the three months ended March 31, 2026 and 2025.

General and administrative expense

General and administrative expenses were relatively unchanged at $0.8 million during both the three months ended March 31, 2026 and 2025.

Depreciation and amortization

Depreciation and amortization expense was relatively unchanged at $0.8 million during both the three months ended March 31, 2026 and 2025.

Interest expense and other income, net

Interest expense and other income, net decreased slightly by $0.1 million to $1.0 million during the three months ended March 31, 2026 compared to $1.1 million for the same period in 2025. Interest expense is attributable to the financings associated with our hotels and reflects changes in the weighted average principal outstanding and the market interest rates on our mortgage debt, all of which bear interest at variable rates.

Loss from investments in unconsolidated affiliated real estate entities

Our loss from investments in unconsolidated affiliated real estate entities was $1.0 million and $1.3 million during the three months ended March 31, 2026 and 2025, respectively. Our earnings from investments in unconsolidated affiliated real estate entities are attributable to our unconsolidated 50% membership interest in the Hilton Garden Inn Joint Venture and our unconsolidated 25% membership interest Williamsburg Moxy Hotel Joint Venture.

Financial Condition, Liquidity and Capital Resources

Overview

As of March 31, 2026, we had $4.3 million of cash on hand and $6.1 million of marketable securities. We currently believe that these items along with revenues generated from our properties, interest and dividend income earned on our marketable securities and distributions received from our unconsolidated affiliated real estate entities, if any, will be sufficient to satisfy our expected cash requirements for at least 12 months from the date of filing this Quarterly Report on Form 10-Q, which primarily consist of our anticipated operating expenses (excluding the temporarily deferred payment of asset management fees and financing fees payable to our Advisor), scheduled debt service (excluding any balloon payments due before or at maturity) and including our current expectation that we will successfully extend or refinance the Home2 Suites Mortgage Financings on or before their scheduled maturity (see "Home2 Suites Mortgage Financings"), capital expenditures (excluding non-recurring capital expenditures), capital contributions to our unconsolidated affiliated real estate entities, if any, redemptions and cancellations of Common Shares, if approved, 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, if necessary, through selective asset dispositions, joint venture arrangements, new borrowings and refinancing of existing borrowings.

As of March 31, 2026, we had mortgage indebtedness totaling $56.7 million which represented 60% of our net assets. We have and intend to continue to limit our aggregate long-term permanent borrowings to 75% of the aggregate fair market value of all properties unless any excess borrowing is approved by a majority of the independent directors and is disclosed to our stockholders. Market conditions will dictate our overall leverage limit; as such our aggregate long-term permanent borrowings may be less than 75% of aggregate fair market value of all properties. We may also incur short-term indebtedness, having a maturity of two years or less.

Our charter provides that the aggregate amount of our 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 our Board of Directors and disclosure to stockholders. Net assets mean 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. Market conditions will dictate our overall leverage limit; as such our aggregate borrowings may be less than 300% of net assets.

Any future properties that we may acquire or develop may be funded through a combination of borrowings and the proceeds received from the disposition of certain of our assets. These borrowing 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 non-recourse debt. 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. If obtained, 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 and/or permanent financing. Our Sponsor and/or its affiliates may guarantee our lines of credit although they are not 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 an advisory agreement with the Advisor and various agreements with certain affiliates of our Sponsor which provide for us to pay certain fees in exchange for services performed by them on our behalf. Additionally, our ability to secure financing and our real estate operations are dependent upon our Advisor and certain affiliates of our Sponsor to perform such services as specified in these agreements.

In addition to meeting working capital needs and making distributions, if any, to maintain our status as a REIT, our capital resources may also be used to make various payments to our Advisor and certain affiliates of the Sponsor, such as payments of fees related to asset acquisition, development and leasing commissions, asset management fees, and property management (excluding our hospitality properties, each of which is managed by an unrelated third party property manager), as well as the reimbursement of acquisition related expenses and actual expenses it incurred for administrative and other services provided to us. Additionally, in the event of a liquidation of our assets, we may pay our Advisor or certain affiliates of our Sponsor, disposition fees. Furthermore, the Operating Partnership may be required to make distributions to the Special Limited Partner provided stockholders receive a distribution equal to their initial investment plus a stated preferred return. During the first quarter of 2024, the Advisor agreed to allow us to temporarily defer the payment of asset management and finance fees. As of March 31, 2026 and December 31, 2025, the Advisor agreed to defer $3.8 million and $3.5 million of asset management and finance fees, respectively, which is included in due to related parties in on the consolidated balance sheets.

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.

The following table represents the fees incurred associated with the services provided by the Advisor:

		For the Three Months Ended March 31,
		2026				2025
Asset management fees (general and administrative costs)		$	367			$	366

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:

		For the Three Months Ended March 31,
		2026				2025
Net cash used in operating activities		$	(442	)		$	(327	)
Net cash provided by/(used in) investing activities			400				(143	)
Net cash used in financing activities			(460	)			(438	)
Change in cash and cash equivalents			(502	)			(908	)
Cash and cash equivalents, beginning of year			4,772				6,175
Cash and cash equivalents, end of the period		$	4,270			$	5,267

Operating activities

The net cash used in operating activities of $0.4 million during the three months ended March 31, 2026 consisted of our net loss of $3.0 million which was offset by the changes in our operating assets and liabilities of $0.7 million, depreciation and amortization, and our loss from investments in unconsolidated affiliated real estate entities and other non-cash items aggregating $1.8 million.

Investing activities

The net cash provided by investing activities of $0.4 million during the three months ended March 31, 2026 consisted of distributions from the Hilton Garden Inn Joint Venture of $0.5 million offset by purchases of investment property $0.1 million.

Financing activities

The cash used in financing activities of $0.5 million during the three months ended March 31, 2026 consisted of debt principal payments of $0.1 million and redemptions of Common Shares of $0.3 million.

Revolving Credit Facility

On July 31, 2024, we entered into a loan agreement with a financial institution providing for a non-recourse revolving credit facility (the "Revolving Credit Facility") of up to $40.0 million. At closing, we received an initial advance of $30.8 million under the Revolving Credit Facility and designated six of our wholly owned and consolidated limited-service hotels as collateral. The Revolving Credit Facility bears interest at SOFR plus 3.30%, subject to a 6.64% floor, with an initial scheduled maturity of July 31, 2027, subject to two, one-year extension options at the sole discretion of the lender, and provides for monthly interest-only payments with the unpaid principal balance due at the initial maturity. The Revolving Credit Facility provides for borrowings up to 65% of the loan-to-value ratio of properties designated as collateral and also requires the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum debt service coverage ratio ("DSCR") and debt yield ratio ("DYR"), which if not met may also be achieved through principal paydowns on the outstanding balance.

As of March 31, 2026, the outstanding principal balance of the Revolving Credit Facility was $30.8 million. Additionally, the same six wholly owned and consolidated limited-service hotels remained pledged as collateral and no additional borrowings were available as of March 31, 2026.

As of March 31, 2026, we did not meet the required minimum prescribed DSCR and DYR with respect to the Revolving Credit Facility. However, the lender has provided a waiver for these financial debt covenants.

Home2 Suites Mortgage Financings

On December 6, 2021 we entered into two cross-collateralized five-year non-recourse mortgage loan facilities (collectively, the "Home2 Suites Mortgage Financings"), both with the same financial institution. The Home2 Suites Mortgage Financings consist of (i) a facility providing up to $19.1 million (the "Home2 Suites - Tukwila Loan") collateralized by our wholly owned and consolidated 139-room limited-service hotel located in Tukwila, Washington (the "Home2 Suites - Tukwila") and (ii) a facility providing up to $12.5 million (the "Home2 Suites - Salt Lake City Loan") collateralized by our wholly owned and consolidated 125-room limited-service hotel located in Salt Lake City, Utah (the "Home2 Suites - Salt Lake City"). The Home2 Suites Mortgage Financings bear interest at a rate of AMERIBOR plus 3.50%, with a floor of 3.75%.

At closing, we received $16.2 million under the Home2 Suites - Tukwila Loan and the remaining unfunded amount of $2.9 million may be only be drawn subject to the satisfaction of certain conditions. The Home2 Suites - Tukwila Loan requires monthly payments of principal and interest of $0.1 million with the unpaid principal balance due at maturity on December 6, 2026. As of March 31, 2026, the outstanding principal balance of the Home2 Suites - Tukwila Loan was $15.7 million.

At closing, we received $10.4 million under the Home2 Suites - Salt Lake City Loan and the remaining unfunded amount of $2.0 million may only be drawn subject to satisfaction of certain conditions. The Home2 Suites - Salt Lake City Loan requires monthly payments of principal and interest of $0.1 million with the outstanding unpaid principal balance due at maturity on December 6, 2026. As of March 31, 2026, the outstanding principal balance of the Home2 Suites - Salt Lake City Loan was $10.2 million.

The Home2 Suites Mortgage Financings require the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum DSCR and DYR, which if not met may also be achieved through principal paydowns on the outstanding balance. As of March 31, 2026, we were in compliance with the financial debt covenants with respect to the Home2 Suites Mortgage Financings. We expect to extend the maturity or refinance the Home2 Suites Mortgage Financings on or before their maturity date; however, there can be no assurances that we will be successful in such endeavors.

Contractual Mortgage Obligations

The following is a summary of the estimated contractual obligations related to our mortgage payable over the next five years and thereafter as of March 31, 2026.

Contractual Mortgage Obligations		2026				2027				2028				2029				2030				Thereafter				Total
Principal maturities		$	25,846			$	30,844			$				$	-			$	-			$	-			$	56,690
Interest payments(1)			3,273				1,268								-				-				-				4,541
Total Contractual Mortgage Obligations		$	29,119			$	32,112			$	-			$	-			$	-			$	-			$	61,231

(1)

These amounts represent future interest payments related to mortgage payable obligations based on the interest rate specified in the associated debt agreement. Our mortgage debt outstanding as of March 31, 2026 bears interest based either on one-month AMERIBOR or one-month SOFR plus a specified spread, subject to a floor. For purposes of calculating future interest amounts on our variable interest rate debt, the one-month SOFR and the one-month AMERIBOR rates as of March 31, 2026 were used.

Certain of our debt agreements also contain clauses providing for prepayment penalties.

SRP

Our SRP, as amended from time to time by our board of directors, may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to us, subject to various restrictions.

Our SRP currently provides for redemption requests to be submitted in connection with either a stockholder's death or certain hardships and the price for all such purchases has been set at our estimated NAV per Share as of the date of actual redemption. Our estimated NAV per Share is determined by our Board of Directors and reported by us from time to time. 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 to be eligible for consideration.

Additionally, our Board of Directors has established that on an annual basis we will not redeem in excess of 0.5% of the number of Common Shares outstanding as of the end of the preceding year for both death redemptions and hardship redemptions. Additionally, eligible redemption requests have been and are generally expected to be processed on a quarterly basis and will be subject to proration if either type of redemption requests exceeds the annual limitations (subject to a quarterly factor) as established by our Board of Directors. Furthermore, our Board of Directors may, at their sole discretion, amend or suspend the SRP at any time without any notice to stockholders.

For the three months ended March 31, 2026, the Company repurchased 32,029 Common Shares at a weighted average price of $10.48. For the three months ended March 31, 2025, the Company repurchased 32,276 Common Shares at a weighted average price of $9.93.

Investments in Unconsolidated Affiliated Entities

Hilton Garden Inn Joint Venture

On March 27, 2018, we and Lightstone REIT II, a related party REIT also sponsored by our Sponsor, acquired, through the Hilton Garden Inn Joint Venture, the Hilton Garden Inn - Long Island City from an unrelated third party, for aggregate consideration of $60.0 million, which consisted of $25.0 million of cash and $35.0 million of proceeds from a five-year term non-recourse mortgage loan from a financial institution (the "Hilton Garden Inn Mortgage"), excluding closing and other related transaction costs. We paid $12.9 million for a 50% membership interest in the Hilton Garden Inn Joint Venture.

On May 31, 2023, the Hilton Garden Inn Mortgage was amended to provide for (i) an extension of the maturity date for an additional five years, (ii) the interest rate to be adjusted to SOFR plus 3.25%, subject to a 6.41% floor, (iii) interest-only payments for the first two years of its extended term with principal and interest payments pursuant to a 300-month amortization schedule thereafter and the remaining unpaid balance due in full at its maturity date of May 31, 2028, (iv) the ability to draw up to an additional $3.0 million of principal, subject to the satisfaction of certain conditions, and (v) certain changes to its financial covenants. Additionally, the Hilton Garden Inn Joint Venture is funding $1.3 million, through monthly payments of $37 from May 31, 2023 through June 1, 2026, into a cash collateral reserve account which may be drawn upon for specified capital expenditures.

We and Lightstone REIT II each have a 50% co-managing membership interest in the Hilton Garden Inn Joint Venture. We account for our membership interest in the Hilton Garden Inn Joint Venture in accordance with the equity method of accounting because we exert significant influence over but do not control the Hilton Garden Inn Joint Venture. All capital contributions and distributions of earnings from the Hilton Garden Inn Joint Venture are made on a pro rata basis in proportion to each member's equity interest percentage pursuant to the terms of the Hilton Garden Inn Joint Venture's operating agreement.

As of March 31, 2026, the Hilton Garden Inn Joint Venture was in compliance with all of its financial debt covenants.

During the three months ended March 31, 2026, we received distributions from the Hilton Garden Joint Venture of $0.5 million.

Williamsburg Moxy Hotel Joint Venture

On August 5, 2021, we formed a joint venture with Lightstone REIT IV, a related party REIT also sponsored by the Sponsor, pursuant to which we acquired 25% of Lightstone REIT IV's membership interest in the Bedford Avenue Holdings LLC, which effective on that date became the Williamsburg Moxy Hotel Joint Venture, for aggregate consideration of $7.9 million. In July 2019, Lightstone REIT IV, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC, previously acquired four adjacent parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood in the Brooklyn borough of New York City, from unrelated third parties, for the development of the Williamsburg Moxy Hotel.

As a result, we and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. We have determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and we are not the primary beneficiary, as it was determined that Lightstone REIT IV is the primary beneficiary. Therefore, we account for our membership interest in the Williamsburg Moxy Hotel Joint Venture in accordance with the equity method because we exert significant influence over but do not control the Williamsburg Moxy Hotel Joint Venture. Earnings, capital contributions and distributions are allocated in accordance with each investor's ownership percentage.

Moxy Mortgage Loans

On April 19, 2024, the Williamsburg Moxy Joint Venture entered into an $86.0 million senior mortgage loan facility (the "Moxy Senior Loan") and a $9.0 million junior mortgage loan facility (the "Moxy Junior Loan" and together with the Moxy Senior Loan, the "Moxy Mortgage Loans") with unrelated third parties.

The Moxy Mortgage Loans bear interest at SOFR plus 5.10%, subject to an 8.75% floor (8.76% and 8.89% as of March 31, 2026 and December 31, 2025, respectively). The Moxy Mortgage Loans initially mature on April 19, 2027, but may be further extended through the exercise of two six-month extension options, subject to the satisfaction of certain conditions. The Moxy Mortgage Loans require monthly interest-only payments with their outstanding principal due in full at maturity and are collateralized by the Williamsburg Moxy Hotel, however, the Moxy Junior Loan is subordinate to the Moxy Senior Loan. The Williamsburg Moxy Hotel Joint Venture used $85.8 million of the proceeds from the Moxy Mortgage Loans in connection with the payoff of all obligations due under a construction loan previously used in connection with the funding of the development of the Williamsburg Moxy Hotel.

As of both March 31, 2026 and December 31, 2025, the outstanding principal balance of the Moxy Mortgage Loans was $95.0 million.

In connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture paid $2.8 million of loan fees and expenses and accrued $0.5 million of loan exit fees.

The Moxy Mortgage Loans require the maintenance of certain financial covenants measured at the end of each calendar quarter, including a prescribed minimum debt service coverage ratio ("DSCR"), which if not met, provide the senior lender with an option to retain any excess cash flow from the property until such time as the prescribed minimum DSCR is met for two consecutive calendar quarters. As of March 31, 2026, the Williamsburg Moxy Hotel Joint Venture was in compliance with all of the financial covenants under the Williamsburg Moxy Mortgage Loans.

Although the Moxy Mortgage Loans are scheduled to mature on April 19, 2027, the Williamsburg Moxy Hotel Joint Venture currently intend to exercise the first of two six-month extension options, subject to the satisfaction of certain conditions, to extend the maturity of the Moxy Mortgage Loans to October 19, 2027.

Funds from Operations and Modified Funds from Operations

We believe that the historical cost accounting convention used for real estate assets in accordance with GAAP implicitly assumes that the value of a real estate asset diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe the presentation of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be insufficient by themselves.

The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has published a standardized non-GAAP 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. However, FFO is not equivalent to our net income or loss as determined under GAAP.

We calculate FFO in accordance with the current NAREIT definition. FFO represents 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, income taxes attributable to gains 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 computation of FFO may not be comparable to other REITs that do not compute FFO in accordance with the current NAREIT definition. We believe that the use of FFO provides a more complete understanding of our performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

Changes in the accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, As a result, the Investment Program Association (the "IPA"), another industry trade group, published a standardized non-GAAP 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 another supplemental measure of operating performance because we believe that 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 or loss. However, MFFO is also not equivalent to our net income or loss as determined under GAAP.

We compute MFFO in accordance with the definition included in 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 as interpreted by management. The Practice Guideline defines MFFO as FFO further adjusted for acquisition and transaction-related fees and expenses and other items.

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 or loss or income or 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, if any, 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 loss or in its applicability in evaluating our operating performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.

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

Our calculations of FFO and MFFO are presented below. Items are presented net of non-controlling interest portions where applicable.

		For the Three Months Ended March 31,
		2026				2025
Net loss		$	(2,968	)		$	(3,038	)
FFO adjustments:
Depreciation and amortization of real estate assets			791				830
Adjustments to equity earnings from unconsolidated affiliated real estate entities			486				566
FFO			(1,691	)			(1,642	)
MFFO adjustments:
Loss on sale of marketable securities (1)			-				-
Unrealized (gain)/loss on marketable equity securities (2)			8				3
Mark-to-market adjustments (2)			-				2
MFFO			(1,683	)			(1,637	)
Straight-line rent			-				-
MFFO - IPA recommended format		$	(1,683	)		$	(1,637	)
Net loss		$	(2,968	)		$	(3,038	)
Less: net loss attributable to noncontrolling interests			-				-
Net loss applicable to Company's common shares		$	(2,968	)		$	(3,038	)
Net loss per common share, basic and diluted		$	(0.23	)		$	(0.24	)
FFO		$	(1,691	)		$	(1,642	)
Less: FFO attributable to noncontrolling interests			-				-
FFO attributable to Company's common shares		$	(1,691	)		$	(1,642	)
FFO per common share, basic and diluted		$	(0.13	)		$	(0.13	)
MFFO - IPA recommended format		$	(1,683	)		$	(1,637	)
Less: MFFO attributable to noncontrolling interests			-				-
MFFO attributable to Company's common shares		$	(1,683	)		$	(1,637	)
Weighted average number of common shares outstanding, basic and diluted			12,681				12,809

(1)

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.

(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. Mark-to-market adjustments are made for items such as ineffective derivative instruments, certain marketable securities and any other items that GAAP requires we make a mark-to-market adjustment for. The need to reflect mark-to-market adjustments is a continuous process and is analyzed on a quarterly and/or annual basis in accordance with GAAP.

The table below presents our cumulative distributions paid and FFO attributable to our common shares:

		For the period October 5, 2012 (date of inception) through March 31, 2026
FFO attributable to Company's common shares		$	19,287
Distributions paid		$	29,764