Quarterly Report for Quarter Ending September 30, 2025 (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 II, Inc. and Subsidiaries and the notes thereto. As used herein, the terms "we," "our" and "us" refer to Lightstone Value Plus REIT II, Inc., a Maryland corporation, and, as required by context, Lightstone Value Plus REIT II LP and its wholly owned subsidiaries, 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 II, 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:

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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;

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the availability of cash flow from operating activities for distributions, if required to maintain our status as a real estate investment trust ("REIT");

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

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

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

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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;

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our ability to make accretive investments;

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our ability to diversify our portfolio of assets;

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changes in market factors that could impact our rental rates and operating costs;

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our ability to secure leases at favorable rental rates;

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

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impairment charges;

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our ability to maintain and/or upgrade our hotels pursuant to the requirements of their respective franchise agreements;

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our ability to extend or replace expiring franchise agreements for our hotels;

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

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

Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management's view only as of the date of this 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 II, Inc. ("Lightstone REIT II"), is a Maryland corporation formed on April 28, 2008, 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, 2009.

Lightstone REIT II 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 II LP (the "Operating Partnership"), a Delaware limited partnership formed on April 30, 2008. As of September 30, 2025, Lightstone REIT II held a 99% general partnership interest in our Operating Partnership's common units.

Lightstone REIT II 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 Quarterly Report on Form 10-Q refers to Lightstone REIT II, its Operating Partnership or the Company as required by the context in which such pronoun is used.

Through the Operating Partnership, we own and operate commercial properties and make real estate-related investments. Since our inception, we have primarily acquired and operated commercial hospitality properties, principally consisting of limited-service hotels all located in the U.S. However, our commercial holdings may also consist of full-service hotels, and to a lesser extent, 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 ("CMBS") 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 September 30, 2025, we (i) majority owned and consolidated the operating results and financial condition of 10 limited-service hotels containing a total of 1,352 rooms, (ii) held an unconsolidated 48.6% membership interest in Brownmill, LLC (the "Brownmill Joint Venture"), an affiliated real estate entity that owns two retail properties, and (iii) 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. We account for our membership interests in the Brownmill Joint Venture and the Hilton Garden Inn Joint Venture under the equity method of accounting.

The Brownmill Joint Venture owns Browntown Shopping Center, located in Old Bridge, New Jersey, and Millburn Mall, located in Vauxhall, New Jersey. The Browntown Joint Venture is between us and Lightstone Holdings LLC ("LGH"), a wholly-owned subsidiary of the Lightstone Group LLC (the "Sponsor"), and a related party. We and LGH have 48.6% and 51.4% membership interests in the Brownmill Joint Venture, respectively. 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 III, Inc. ("Lightstone REIT III"), a related party REIT, which is sponsored by the Sponsor. We and Lightstone REIT III each have a 50% membership interest in the Hilton Garden Inn Joint Venture.

As of September 30, 2025, five of our consolidated limited-service hotels are held in LVP Holdco JV LLC (the "Hotel Joint Venture"), a joint venture formed between us and Lightstone Value Plus REIT I, Inc. ("Lightstone REIT I"), a related party REIT which is sponsored by the Sponsor. We and Lightstone REIT I have 97.5% and 2.5% membership interests in the Hotel Joint Venture, respectively. Additionally, as of September 30, 2025, one of our consolidated limited-service hotels also has ownership interests held by unrelated minority owners. The membership interests of Lightstone REIT I and the unrelated minority owners are accounted for as noncontrolling interests in our consolidated financial statements.

Our advisor is Lightstone Value Plus REIT II LLC (the "Advisor"), which is majority owned by David Lichtenstein. On May 20, 2008, 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 common stock ("Common Shares") which were issued on May 20, 2008 for $200, or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of the Sponsor, which also served as our sponsor during our initial public offering and follow-on offering (collectively, the "Offerings"), which terminated on August 15, 2012 and September 27, 2014, respectively. Our Advisor, pursuant to the terms of an advisory agreement, together with our board of directors (the "Board of Directors"), is primarily responsible 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 II LLC, a Delaware limited liability company (the "Associate General Partner"), which owns 177 subordinated profits interests ("Subordinated Profits Interests") in the Operating Partnership, which were acquired at a cost of $100,000 per unit, or aggregate consideration of $17.7 million in connection with our Offerings. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone REIT II or the Operating Partnership.

We have no employees. We are dependent on the Advisor and certain affiliates of our Sponsor for performing a full range of 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 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 our Sponsor are unable to provide these services to us, we would be required to provide the services ourselves or obtain the services from 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 May 20, 2008, our 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.

Associate General Partner

In connection with our Offerings, the Sponsor and LGH contributed (i) cash of $12.9 million and (ii) equity interests totaling 48.6% in the Brownmill Joint Venture, which were valued at $4.8 million, respectively, to the Operating Partnership in exchange for it issuing 177 Subordinated Profits Interests to the Associate General Partner at a cost of $100,000 per unit, with an aggregate value of $17.7 million.

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

These Subordinated Profits Interests may entitle the Associate General 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, there have been no distributions declared on the Subordinated Profits Interests for any periods after December 31, 2019. Since our inception through September 30, 2025, the cumulative distributions declared and paid on the Subordinated Profits Interests were $7.9 million. Any future distributions on the Subordinated Profits Interests will always be subordinated until stockholders receive a stated preferred return.

The Subordinated Profits Interests may also entitle the Associate General 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 Associate General Partner will always be subordinated until stockholders receive a distribution equal to their initial investment plus a stated preferred return.

Other Noncontrolling Interests in Consolidated Subsidiaries

Other noncontrolling interests consist of the (i) membership interest in the Hotel Joint Venture held by Lightstone REIT I and (ii) membership interests held by minority owners in one of our limited-service hotels.

Related Parties

Our Sponsor, Advisor and their affiliates, including the Associate General Partner and LGH, 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 and the annual revenue earned 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 September 30, 2025 and December 31, 2024, 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 with respect to 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, availability or terms of financings, financial markets volatility and banking failures, political upheaval or uncertainty, natural and man-made disasters, terrorism and acts of war, unfavorable changes in laws, ordinances and regulations, outbreaks of contagious diseases, cybercrime, technological advances and challenges, such as the use and impact of artificial intelligence and machine learning, loss of key relationships, inflation, tariffs 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, tariffs, higher interest rates, labor and supply chain challenges and other changes in economic conditions could adversely affect our future results from operations and our 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 Quarterly Report on 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 -

Consolidated Properties:

										Year to Date September 30, 2025				Percentage Occupied for the Nine Months Ended				RevPAR for the Nine Months Ended				ADR for the Nine Months Ended
Hospitality - Limited-Service Hotel		Location		Year Built		Rooms				Available Rooms				September 30, 2025				September 30, 2025				September 30, 2025
Fairfield Inn - East Rutherford		East Rutherford, New Jersey		1990			141				38,493				72	%		$	106.84			$	147.46
Aloft - Tucson		Tucson, Arizona		1971			154				42,042				60	%		$	94.86			$	158.86
Aloft - Philadelphia		Philadelphia, Pennsylvania		2008			136				37,128				67	%		$	76.90			$	114.74
Four Points by Sheraton - Philadelphia		Philadelphia, Pennsylvania		1985			177				48,321				51	%		$	58.20			$	114.64
Courtyard - Willoughby		Willoughby, Ohio		1999			90				24,570				73	%		$	100.73			$	137.46
Fairfield Inn - DesMoines		West Des Moines, Iowa		1997			102				27,846				59	%		$	66.90			$	114.19
SpringHill Suites - DesMoines		West Des Moines, Iowa		1999			97				26,481				61	%		$	71.63			$	116.74
Courtyard - Parsippany		Parsippany, New Jersey		2001			151				41,223				61	%		$	86.48			$	140.87
Hyatt Place - New Orleans		New Orleans, Louisiana		1996			172				46,956				60	%		$	106.07			$	176.27
Residence Inn - Needham		Needham, Massachusetts		2013			132				36,036				80	%		$	142.56			$	177.59
				Total			1,352				369,096				64	%		$	91.27			$	143.06

Unconsolidated Affiliated Entities:

Retail		Location		Year Built		Leasable Square Feet				Percentage Occupied as of September 30, 2025				Annualized Revenue Based on Rents as of September 30, 2025				Annualized Revenue per Square Foot as of September 30, 2025
Browntown Shopping Center and Millburn Mall		Old Bridge and Vauxhall, New Jersey		1962			156,028				92	%		$	3.1 million			$	20.10

Hospitality - Limited-Service Hotel		Location		Year Built		Rooms				Year to Date Available Rooms				Percentage Occupied for the Nine Months Ended September 30, 2025				RevPAR for the Nine Months Ended September 30, 2025				ADR for the Nine Months Ended September 30, 2025
Hilton Garden Inn - Long Island City		Long Island City, New York		2014			183				49,959				83	%		$	177.36			$	213.33

Annualized base rent is defined as the minimum monthly base rent due as of September 30, 2025 annualized, excluding periodic contractual fixed increases and rents calculated based on a percentage of tenants' sales. The annualized base rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants.

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

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we believe our real estate properties are adequately covered by insurance and suitable for their intended purpose;

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our real estate properties are located in markets where we are subject to competition; and

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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 nine months ended September 30, 2025 to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Results of Operations

Comparison of the three months ended September 30, 2025 vs. September 30, 2024

Consolidated

Our consolidated revenues, property operating expenses, real estate taxes, general and administrative costs and depreciation and amortization for the three months ended September 30, 2025 and 2024 are attributable to our 10 majority-owned and consolidated limited-service hotels.

During the three months ended September 30, 2025 compared to same period in 2024, our consolidated hospitality portfolio experienced decreases in its percentage of rooms occupied to 65% from 66%, ADR to $139.70 from $139.89 and in RevPAR to $90.51 from $92.07.

Revenues

Revenues were relatively unchanged at $12.1 million during both the three months ended September 30, 2025 and 2024.

Property operating expenses

Property operating expenses increased by $0.2 million to $8.9 million during the three months ended September 30, 2025 compared to $8.7 million for the same period in 2024. The increase reflects higher room and other operating expenses resulting from increased labor and utility costs during the 2025 period.

Real estate taxes

Real estate taxes were relatively unchanged at $0.6 million during both the three months ended September 30, 2025 and 2024.

General and administrative costs

General and administrative costs increased slightly by $0.1 million to $1.0 million during the three months ended September 30, 2025 compared to $0.9 million for the same period in 2024.

Depreciation and amortization

Depreciation and amortization expense decreased by $0.2 million to $1.3 million during the three months ended September 30, 2025 compared to $1.5 million for the same period in 2024.

Casualty gain

On January 9, 2025, the Fairfield Inn - East Rutherford suffered damage to numerous rooms caused by a small fire and flooding resulting from activation of the emergency sprinklers. Subsequently during the third quarter of 2025, we recognized a casualty gain of $0.8 million related to insurance recoveries. See Note 7 of the Notes to Consolidated Financial Statements for additional information.

Interest expense

Interest expense decreased by $0.4 million to $2.0 million during the three months ended September 30, 2025 compared to $2.4 million for the same period in 2024. Our interest expense is attributable to the mortgage financing associated with our limited-service hotels and reflects lower market interest rates on our variable rate indebtedness during the 2025 period as well as changes in the weighted average principal outstanding during the respective periods.

Other income, net

Other income, net increased by $0.2 million to $0.7 million during the three months ended September 30, 2025 compared to $0.5 million for the same period in 2024. The increase primarily reflects an increase in income tax benefit of $0.4 million and a decrease in interest income of $0.2 million.

Earnings from investments in unconsolidated affiliated entities

Our earnings from investments in unconsolidated affiliated entities was income of $0.4 million during the three months ended September 30, 2025 compared to income of $0.2 million for the same period in 2024. Our earnings from investments in unconsolidated affiliated entities are attributable to our ownership interests in the Brownmill Joint Venture and the Hilton Garden Inn Joint Venture, both which we account for under the equity method of accounting.

Noncontrolling interests

The income or loss allocated to noncontrolling interests relates to the interest in our Operating Partnership held by our Advisor, the membership interest held by Lightstone REIT I in the Hotel Joint Venture, and the ownership interests held by unrelated minority owners in one of our limited-service hotels.

Comparison of the nine months ended September 30, 2025 vs. September 30, 2024

Consolidated

Our consolidated revenues, property operating expenses, real estate taxes, general and administrative costs and depreciation and amortization for the nine months ended September 30, 2025 and 2024 are attributable to our 10 majority-owned and consolidated limited-service hotels.

During the nine months ended September 30, 2025 compared to same period in 2024, our consolidated hospitality portfolio experienced decreases in its percentage of rooms occupied to 64% from 66% and in RevPAR to $91.27 from $93.19 while its ADR increased to $143.06 from $140.73.

Revenues

Revenues decreased by $0.5 million to $36.2 million during the nine months ended September 30, 2025 compared to $36.7 million for the same period in 2024. The decrease in revenues during the 2025 period reflects the lower percentage of rooms occupied partially offset by the higher ADR during the 2025 period.

Property operating expenses

Property operating expenses increased by $0.7 million to $26.2 million during the nine months ended September 30, 2025 compared to $25.5 million for the same period in 2024. The increase reflects higher room and other operating expenses resulting from increased labor and utility costs during the 2025 period.

Real estate taxes

Real estate taxes were relatively unchanged at $1.8 million during both the nine months ended September 30, 2025 and 2024.

General and administrative costs

General and administrative costs increased slightly by $0.1 million to $3.1 million during the three months ended September 30, 2025 compared to $3.0 million for the same period in 2024.

Depreciation and amortization

Depreciation and amortization expense decreased by $0.5 million to $3.9 million during the nine months ended September 30, 2025 compared to $4.4 million for the same period in 2024.

Casualty (gain)/loss, net

On January 9, 2025, the Fairfield Inn - East Rutherford suffered damage to numerous rooms caused by a small fire and flooding resulting from activation of the emergency sprinklers. During the first quarter of 2025, we recognized a net casualty loss of $1.0 million representing the write-off of the damaged assets of $0.9 million plus remediation costs incurred of $0.4 million, partially offset by an initial insurance recovery of $0.3 million. Subsequently during the third quarter of 2025, we recognized a casualty gain of $0.8 million related to additional insurance recoveries. Accordingly, during the nine months ended September 30, 2025, we have recognized a casualty loss, net of $0.2 million. See Note 7 of the Notes to Consolidated Financial Statements for additional information.

Other income, net

Other income, net decreased by $1.0 million to $0.8 million during the nine months ended September 30, 2025 compared to $1.8 million for the same period in 2024. The decrease primarily reflects an increase in income tax expense of $0.2 million and a decrease in interest income of $0.6 million.

Interest expense

Interest expense decreased by $0.9 million to $6.2 million during the nine months ended September 30, 2025 compared to $7.1 million for the same period in 2024. Interest expense is attributable to the mortgage financing associated with our limited-service hotels and reflects lower market interest rates on our variable rate indebtedness during the 2025 period as well as changes in the weighted average principal outstanding during the respective periods.

Earnings from investments in unconsolidated affiliated entities

Our earnings from investments in unconsolidated affiliated entities was income of $217 during the nine months ended September 30, 2025 compared to a loss of $52 for the same period in 2024. Our earnings from investments in unconsolidated affiliated entities are attributable to our ownership interests in the Brownmill Joint Venture and the Hilton Garden Inn Joint, both which we account for under the equity method of accounting.

Noncontrolling interests

The income or loss allocated to noncontrolling interests relates to the interest in our Operating Partnership held by our Advisor, the membership interest held by Lightstone REIT I in the Hotel Joint Venture, and the ownership interests held by unrelated minority owners in one of our limited-service hotels.

Financial Condition, Liquidity and Capital Resources

Overview

As of September 30, 2025, we had $24.8 million of cash on hand, $1.1 million of restricted cash and $10.0 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, proceeds from the potential sale of marketable securities, and potential distributions received from our investments in unconsolidated affiliated entities 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. Our expected cash requirements primarily consist of our anticipated operating expenses, scheduled debt service (excluding balloon payments due at maturity), capital expenditures (excluding non-recurring capital expenditures), contributions to our investments in unconsolidated affiliated entities, redemptions and cancellations of Common Shares, if approved, and distributions, 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 September 30, 2025, we had mortgage indebtedness totaling $97.8 million, which represented 69% 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 our independent directors and is disclosed to our stockholders. Market conditions will dictate the 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. 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 disclosure 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.

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. This margin loan is due on demand and any outstanding balance must be paid upon the liquidation of our securities.

Any future properties that we may acquire may be funded through a combination of borrowings and the proceeds received from the selective disposition of certain of our real estate assets. 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. 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 distributions, if any, made to maintain our status as a REIT, our capital resources are used to make various payments to our Advisor and certain affiliates of our Sponsor, such as payments of fees related to asset acquisitions, asset management, and property management (excluding our hospitality properties, which are managed by unrelated third party property managers) as well the reimbursement of acquisition-related expenses and actual expenses incurred for administrative and other services provided to us.

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 our Advisor for the periods indicated:

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2025				2024				2025				2024
Asset management fees (general and administrative costs)		$	559			$	564			$	1,680			$	1,691

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 Nine Months Ended September 30,
		2025				2024
Net cash (used in)/provided by operating activities		$	(1,215	)		$	378
Net cash provided by investing activities			4,184				482
Net cash used in financing activities			(9,112	)			(9,010	)
Change in cash, cash equivalents and restricted cash			(6,143	)			(8,150	)
Cash, cash equivalents and restricted cash, beginning of year			32,077				40,741
Cash, cash equivalents and restricted cash, end of the period		$	25,934			$	32,591

Operating activities

The net cash used in operating activities of $1.2 million for the nine months ended September 30, 2025 consisted of our net loss of $4.2 million adjusted by depreciation and amortization, amortization of deferred financing costs and all other non-cash items aggregating $3.9 million plus the net changes in our operating assets and liabilities of $0.9 million.

Investing activities

The net cash provided by investing activities of $4.2 million for the nine months ended September 30, 2025 consists primarily of the following:

●

capital expenditures of $0.6 million;

●

net proceeds from the sale of marketable securities of $0.2 million;

●

proceeds from insurance claim of $0.3 million;

●

distributions of $4.6 million received from the Brownmill Joint Venture; and

●

contributions of $0.2 million to the Hilton Garden Inn Joint Venture and $0.1 million to the BrownmillJoint Venture.

Financing activities

The net cash used in financing activities of $9.1 million for the nine months ended September 30, 2025 consists primarily of the following:

●

a principal payment on our mortgage payable of $4.0 million;

●

distributions paid to common stockholders of $3.6 million; and

●

redemption and cancellation of Common Shares of $1.5 million.

Distributions on Common Shares

On November 13, 2024, the Board of Directors authorized and we declared a Common Share distribution of $0.075 per share for the quarterly period ending December 31, 2024. The distribution was the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. The distribution of $1.2 million was paid on January 15, 2025 to stockholders of record at the close of business on December 31, 2024.

On March 21, 2025, the Board of Directors authorized and we declared a Common Share distribution of $0.075 per share for the calendar quarter ending March 31, 2025. The distribution was the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. The distribution of $1.2 million was paid on April 15, 2025 to stockholders of record at the close of business on March 31, 2025.

On May 12, 2025, the Board of Directors authorized and we declared a Common Share distribution of $0.075 per share for the quarterly period ending June 30, 2025. The distribution was the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. The distribution of $1.2 million was paid on July 15, 2025 to stockholders of record at the close of business on June 30, 2025.

On August 11, 2025, the Board of Directors authorized and we declared a Common Share distribution of $0.075 per share for the quarterly period ending September 30, 2025. The distribution is the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. The distribution of $1.2 million was paid on October 15, 2025 to stockholders of record at the close of business on September 30, 2025.

On November 10, 2025, the Board of Directors authorized and we declared a Common Share distribution of $0.075 per share for the quarterly period ending December 31, 2025. The distribution was the pro rata equivalent of an annual distribution of $0.30 per share, or an annualized rate of 3% based on a share price of $10.00. 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 t December 31, 2025.

Future distributions declared, if any, will be at the discretion of the Board of Directors based on their analysis of our performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, revenues and other sources of income, operating and interest expenses and our ability to refinance near-term debt as well as the IRS's annual distribution requirement that REITs distribute no less than 90% of their taxable income. We cannot assure that any future distributions will be made or that we will maintain any particular level of distributions that we have previously established or may establish.

Tender Offers

2024 Tender Offer

We commenced a tender offer on April 24, 2024, pursuant to which we offered to acquire up to 700,000 of our Common Shares at a purchase price of $6.00 per share, or $4.2 million in the aggregate (the "2024 Tender Offer"). Pursuant to the terms of the 2024 Tender Offer, which expired on June 14, 2024, we repurchased 264,233 Common Shares for an aggregate cost of $1.6 million on June 28, 2024.

2023 Tender Offer

We commenced a tender offer on November 28, 2023, pursuant to which we offered to acquire up to 860,000 of our Common Shares at a purchase price of $6.00 per share, or $5.2 million in the aggregate (the "2023 Tender Offer"). Pursuant to the terms of the 2023 Tender Offer, which expired on February 5, 2024, we repurchased 520,141 Common Shares for an aggregate cost of $3.1 million on February 16, 2024.

SRP

Our share repurchase program (the "SRP") may provide eligible stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to us, subject to restrictions and applicable law.

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 either death redemptions or hardship redemptions. Eligible redemption requests 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 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.

In connection with the approval of the 2023 Tender Offer, on November 13, 2023, the Board of Directors approved the suspension of the SRP effective November 20, 2023. Subsequent to the termination of the 2023 Tender Offer on February 5, 2024, the Board of Directors reinstated the SRP on March 18, 2024.

In connection with the approval of the 2024 Tender Offer, on April 17, 2024, the Board of Directors approved the suspension of the SRP effective April 17, 2024. Subsequent to the termination of the 2024 Tender Offer on June 14, 2024, the Board of Directors reinstated the SRP on August 9, 2024.

For the nine months ended September 30, 2025, we repurchased 140,340 Common Shares at a weighted average price per share of $10.43. For the nine months ended September 30, 2024, we repurchased 53,805 Common Shares at a weighted average price per share of $9.84.

Contractual Mortgage Obligations

The following is a summary of our estimated contractual mortgage obligations over the next five years and thereafter as of September 30, 2025.

Contractual Mortgage Obligations		2025				2026				2027				2028				2029				Thereafter				Total
Principal maturities		$	-			$	97,818			$	-			$	-			$	-			$	-			$	97,818
Interest payments(1)			1,918				6,092				-				-				-				-				8,010
Total Contractual Mortgage Obligations		$	1,918			$	103,910			$	-			$	-			$	-			$	-			$	105,828

(1)

These amounts represent future interest payments related to our mortgage payable obligations based on the interest rate specified in the associated debt agreement. Our variable rate debt agreement is based on the one-month SOFR rate. For purposes of calculating future interest amounts on our variable interest rate debt the one-month SOFR rate as of September 30, 2025 was used.

Revolving Credit Facility

On October 23, 2023, 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 $106.0 million. At closing, we received an initial advance of $101.8 million under the Revolving Credit Facility and designated all 10 of our majority-owned and consolidated limited-service hotels as collateral. We used the initial advance from the Revolving Credit Facility to repay in full a maturing revolving loan with the same financial institution, which was also secured by the same 10 hotel properties. The Revolving Credit Facility bears interest at SOFR plus 3.45%, subject to a 6.45% floor, with an initial scheduled maturity of September 15, 2026, 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 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, or DSCR, and a prescribed minimum debt yield ratio, which if not met may also be achieved through principal paydowns on the outstanding balance as discussed below. In connection with entering into the Revolving Credit Facility, we deposited $4.0 million into a cash collateral reserve account, which could be used for any future principal paydowns necessary in order to achieve financial debt covenant compliance.

Although we did not meet the prescribed minimum DSCR as of March 31, 2025, the lender provided a waiver for this financial debt covenant. However, during the second quarter of 2025, the lender and us agreed to make a principal paydown of $4.0 million on the Revolving Credit Facility using funds held in the cash collateral reserve account.

As of September 30, 2025 and December 31, 2024, the outstanding principal balance of the Revolving Credit Facility was $97.8 million and $101.8 million, respectively. Additionally, all 10 of our majority-owned and consolidated limited-service hotel properties were pledged as collateral and no additional borrowings were available under the Revolving Credit Facility as of September 30, 2025.

Pursuant to the terms of the Revolving Credit Facility aggregate escrows in the amount of $1.1 million and $4.9 million (including the $4.0 million previously held in the collateral account) were held in restricted cash accounts as of September 30, 2025 and December 31, 2024, respectively. Such escrows may be released in accordance with the terms of the Revolving Credit Facility for payments of real estate taxes, debt service payments, insurance and capital improvements.

As of September 30, 2025, we did not meet both the prescribed minimum debt yield ratio and DSCR. However, the lender has provided a waiver for both of these financial debt covenants.

Margin Loan

We have access to a margin loan from a financial institution that holds custody of certain of our marketable securities. The margin loan 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. No amounts were outstanding under this margin loan as of September 30, 2025 and December 31, 2024. Any borrowings under the margin loan bear interest at SOFR plus 0.85% (5.16% as of September 30, 2025).

Investments in Unconsolidated Affiliated Entities

Brownmill Joint Venture

During 2010 through 2012, we entered into various contribution agreements with LGH, a wholly owned subsidiary of the Sponsor and a related party, pursuant to which LGH contributed to our Operating Partnership an aggregate 48.6% membership interest in the Brownmill Joint Venture in exchange for it issuing an aggregate of 48 units of Subordinated Profits Interests to the Associate General Partner at $100,000 per unit, with an aggregate total value of $4.8 million. The Brownmill Joint Venture owns two retail properties known as Browntown Shopping Center, located in Old Bridge, New Jersey, and Millburn Mall, located in Vauxhall, New Jersey.

Our 48.6% membership interest in the Brownmill Joint Venture is a non-managing interest. LGH is the majority owner and manager of the Brownmill Joint Venture. We account for our membership interest in Brownmill Joint Venture in accordance with the equity method of accounting because we exert significant influence over but do not control the Brownmill Joint Venture. All capital contributions and distributions of earnings from the Brownmill Joint Venture are made on a pro rata basis in proportion to each member's equity interest percentage pursuant to the terms of the Brownmill Joint Venture's operating agreement. As of December 31, 2024, the carrying valueof our investment in the Brownmill Joint Venture was $3.6 million, which is included in investments in unconsolidated affiliated entities on the consolidated balance sheet.

During the nine months ended September 30, 2025, we received distributions from the Brownmill Joint Venture of $4.6 million and made contributions of $0.1 million to the Brownmill Joint Venture.

During the nine months ended September 30, 2024, we received distributions from the Brownmill Joint Venture of $0.6 million.

During the third quarter of 2025, the carrying valueof our investment in the Brownmill Joint Venture became negative as a result of our historical cumulative distributions received exceeding our cumulative equity earnings and cumulative capital contributions. Because we have historically funded and currently intend to continue to fund our pro rata share of any capital needs of the Brownmill Joint Venture, we will continue to record our pro rata share of the Brownmill Joint Venture's earnings, including any losses, as incurred. As of September 30, 2025, the carrying value of our investment in the Brownmill Joint Venture was negative $0.7 million, which is included in accounts payable, other accrued expenses and other liabilities on the consolidated balance sheet.

As of September 30, 2025, the Brownmill Joint Venture was in compliance with all of its financial debt covenants.

Hilton Garden Inn Joint Venture

On March 27, 2018, we and Lightstone REIT III, a related party REIT also sponsored by the 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 mortgage loan proceeds, excluding closing and other related transaction costs. We paid $12.9 million for a 50% membership interest in the Hilton Garden Inn Joint Venture.

We and Lightstone REIT III 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 September 30, 2025 and December 31, 2024, the carrying valueof the Company's investment in the Hilton Garden Inn Joint Venture was $7.7 million and $7.6 million, respectively, which is included in investments in unconsolidated affiliated entities on the consolidated balance sheets.

As of September 30, 2025, the Hilton Garden Inn Joint Venture was in compliance with all of its financial debt covenants.

During the nine months ended September 30, 2025, we made contributions of $0.2 million to the Hilton Garden Joint Venture.

During the nine months ended September 30, 2024, we received distributions from the Hilton Garden Joint Venture of $0.9 million and made contributions of $0.1 million to the Hilton Garden Joint Venture.

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.

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, 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 incurred for business combinations, amounts relating to deferred rent receivables and amortization of market lease and other intangibles, net, 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 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 once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.

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

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

The below table illustrates the items deducted from or added to net income/(loss) in the calculation of FFO and MFFO. Items are presented net of noncontrolling interest portions where applicable.

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2025				2024				2025				2024
Net income/(loss)		$	133			$	(1,264	)		$	(4,158	)		$	(3,406	)
FFO adjustments:
Depreciation and amortization of real estate assets			1,321				1,477				3,938				4,446
Gain on sale of investment property			-				-				-				(14	)
Casualty (gain)/loss, net			(786	)			-				203				-
Adjustments to equity in earnings from unconsolidated affiliated entities			324				409				1,063				1,234
FFO			992				622				1,046				2,260
MFFO adjustments:
Adjustments to equity in earnings from unconsolidated affiliated entities			25				20				56				74
Mark-to-market adjustments(2)			(4	)			(2	)			(158	)			(209	)
Non-recurring gains from extinguishment/sale of debt, derivatives or securities holdings(1)			-				(54	)			90				(26	)
MFFO - IPA recommended format		$	1,013			$	586			$	1,034			$	2,099
Net income/(loss)		$	133			$	(1,264	)		$	(4,158	)		$	(3,406	)
Less: (income)/loss attributable to noncontrolling interests			(148	)			(21	)			4				(15	)
Net loss applicable to Company's common shares		$	(15	)		$	(1,285	)		$	(4,154	)		$	(3,421	)
Net loss per common share, basic and diluted		$	(0.00	)		$	(0.08	)		$	(0.26	)		$	(0.21	)
FFO		$	992			$	622			$	1,046			$	2,260
Less: FFO attributable to noncontrolling interests			(76	)			(58	)			(114	)			(123	)
FFO attributable to Company's common shares		$	916			$	564			$	932			$	2,137
FFO per common share, basic and diluted		$	0.06			$	0.03			$	0.06			$	0.13
MFFO - IPA recommended format		$	1,013			$	586			$	1,034			$	2,099
Less: MFFO attributable to noncontrolling interests			(76	)			(58	)			(114	)			(123	)
MFFO attributable to Company's common shares		$	937			$	528			$	920			$	1,976
Weighted average number of common shares outstanding, basic and diluted			15,978				16,163				16,020				16,444

(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 declared and cumulative FFO attributable to our common shares:

		For the period April 28, 2008 (date of inception) through September 30, 2025
FFO attributable to Company's common shares		$	83,383
Distributions declared		$	98,630

New Accounting Pronouncements

See Note 2 of the Notes to Consolidated Financial Statements for further information of any accounting standards that have been adopted during 2025 and any accounting standards that we have not yet been required to implement and may be applicable to our future operations.