UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

 For the fiscal year ended December 31, 2024

 or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

 For
the transition period from ____________ to ____________

 Commission
file number 000-55619

VALUE PLUS REIT III, INC.

 (Exact
Name of Registrant as Specified in Its Charter)

 Maryland

 46-1140492

 (State or other jurisdiction

 (I.R.S. Employer

 of incorporation or organization)

 Identification No.)

 1985 Cedar Bridge Avenue, Suite 1, Lakewood, NJ

 08701

 (Address of principal executive offices)

 (Zip code)

 Registrant's
telephone number, including area code: 732 - 367-0129

 Securities
registered under Section 12(b) of the Exchange Act:

 Title of Each Class

 Name of Each Exchange on Which Registered

 None

 None

 Securities
registered under Section 12(g) of the Exchange Act:

Stock, $0.01 par value per share

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

 Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer,"
"smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 There
is no established market for the Registrant's common shares. As of June 30, 2024, the last business day of the most recently completed
second quarter, there were 12.7 million shares of the registrant's common stock held by non-affiliates of the registrant. On March
21, 2025, the board of directors of the Registrant approved an estimated value per share of the Registrant's common stock of $10.48
per share derived from the estimated value of the Registrant's assets less the estimated value of the Registrant's liabilities
divided by the number of shares outstanding, all as of December 31, 2024. For a full description of the methodologies used to value the
Registrant's assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, "Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information."
As of March 15, 2025, there were 12.5 million shares of common stock held by non-affiliates of the registrant.

 DOCUMENTS
INCORPORATED BY REFERENCE

 None.

VALUE PLUS REIT III, INC.

 Table
of Contents

 Page

 Item 1.

 Business

 Item 1B.

 Unresolved
 Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal
 Proceedings

 Item 4.

 Mine
 Safety Disclosures

 Item 5.

 Market
 for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's
 Discussion and Analysis of Financial Condition and Results of Operations

 Item 8.

 Financial
 Statements and Supplementary Data

 Item 9.

 Changes
 in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls
 and Procedures

 Item 9B.

 Other
 Information

 Item 9C.

 Disclosure
 Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10.

 Directors
 and Executive Officers of the Registrant

 Item 11.

 Executive
 Compensation

 Item 12.

 Security
 Ownership of Certain Beneficial Owners and Management

 Item 13.

 Certain
 Relationships and Related Transactions

 Item 14.

 Accounting Fees and Services

 Item 15.

 Exhibits
 and Financial Statement Schedules

 Item 16.

 Form
 10-K Summary

 Signatures

 i

 Special
Note Regarding Forward-Looking Statements

 This
annual report on Form 10-K (the "Annual Report"), together with other statements and information publicly disseminated by
Lightstone Value Plus REIT III, Inc., contains certain 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"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with
these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies
and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project" or similar expressions. You should not rely on forward-looking statements since they involve
known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect
actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include,
but are not limited to (i) changes in market factors that could impact our rental rates and operating costs, (ii) financing risks,
such as the inability to obtain equity, debt, or other sources of financing on favorable terms, (iii) changes in governmental laws,
ordinance and regulations, (iv) the level and volatility of interest rates and (v) the availability of suitable acquisition opportunities.
Accordingly, there is no assurance that our expectations will be realized.

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

 ii

 PART I.

 Dollar
amounts are presented in thousands, except per share/unit data, revenue per available room ("RevPAR"), average daily rate
("ADR") and where indicated in millions.

 ITEM
1. BUSINESS:

Description of Business and Structure

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.

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 December 31, 2024, Lightstone REIT III had a 99% general partnership interest in the Operating Partnership's common units.

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 December 31, 2024, 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 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.

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, from inception through December 31,
2024, there have been no distributions declared 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.

 Primary
Business Objectives

 Our
primary objective is to achieve capital appreciation with a secondary objective of income without subjecting principal to undue risk.
We expect to achieve these objectives primarily through investments in real estate properties.

 Investment
Strategy and Policies

 We
have and expect to continue to principally invest in commercial properties (including limited-service hotels, full-service hotels and
extended-stay hotels), as well as various other real estate-related investments primarily located in the U.S. Our acquisitions may include
both portfolios and individual properties. Limited-service hotels generally provide minimal guest amenities. Full-service hotels generally
provide a full complement of guest amenities including restaurants, concierge and room service, porter service or valet parking. Extended-stay
hotels offer upscale, high-quality, residential style lodging with a comprehensive package of guest services and amenities for extended-stay
business and leisure travelers. We have no limitation as to the brand of franchise or license with which our hotels may be associated.
We generally intend to hold each of our real estate properties until its investment objectives are met or it is likely they will not
be met.

 Even
though we have historically acquired hotels, we have and may continue to purchase other types of real estate. Assets other than hotels
may include, without limitation, office buildings, shopping centers, business and industrial parks, manufacturing facilities, single-tenant
properties, multifamily residential properties, student housing properties, warehouses and distribution facilities and medical/life sciences
office properties. We have and expect to continue to invest mainly in direct real estate investments and other equity interests; however,
we may also invest in debt interests, which may include bridge or mezzanine loans, including in furtherance of a loan-to-own strategy.
We have not established any limits on the percentage of our portfolio that may be comprised of various categories of assets which present
differing levels of risk.

 We
have and expect to continue to enter into joint ventures, tenant-in-common investments or other co-ownership arrangements for the acquisition,
development or improvement of properties with third parties or certain affiliates of our Sponsor, including its other sponsored REITs.

 Financing
Strategy and Policies

 There
is no limitation on the amount we may invest or borrow for the purchase of any single asset. Our charter allows us to incur leverage
up to 300% of our total "net assets" (as defined in Section I.B. of the NASAA REIT Guidelines) as of the date of any borrowing,
which is generally expected to be approximately 75% of the cost of our investments. We may only exceed this 300% limit if a majority
of our independent directors approves each borrowing in excess of this limit and we disclose such borrowing to our stockholders in our
next quarterly report along with a justification for the excess borrowing. In all events, we expect that our secured and unsecured borrowings
will be reasonable in relation to the net value of our assets and will be reviewed by the Board of Directors at least quarterly.

 We
do not currently intend to exceed the leverage limit in our charter. Careful use of debt will help us to achieve our diversification
goals because we will have more funds available for investment. However, high levels of debt could cause us to incur higher interest
charges and higher debt service payments, which would decrease the amount of cash available for distribution to our investors.

 Tax
Status and Income Taxes

 We
elected to be taxed and qualify as a REIT commencing with the taxable year ended December 31, 2015. As a REIT, we generally will not
be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT
qualification under the Internal Revenue Code of 1986, as amended, we must meet a number of organizational and operational requirements,
including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal
net income, as calculated in accordance with accounting principles generally accepted in the United States of America, or GAAP), determined
without regard to the deduction for dividends paid and excluding any net capital gain. If we fail to remain qualified for taxation as
a REIT in any subsequent year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular
corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify
as a REIT. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders
if any. Additionally, even if we continue to qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some
U.S. federal, state and local taxes on our taxable income and property and to U.S. federal income taxes and excise taxes on our undistributed
taxable income, if any.

 To
maintain our qualification as a REIT, we engage in certain activities through a taxable REIT subsidiary ("TRS"), including
when we acquire a hotel, we usually establish a new TRS and enter into an operating lease agreement for the hotel. As such, we are subject
to U.S. federal and state income taxes and franchise taxes from these activities.

 As
of December 31, 2024 and 2023, we had no material uncertain income tax positions.

 Concentration
of Credit Risk

 As
of December 31, 2024 and 2023, 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 and recession.

 Our
overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening
economic conditions, increases in costs due to inflation, higher interest rates, labor and supply chain challenges and other changes
in economic conditions could adversely affect our future results from operations and our financial condition.

 Competition

 Hotel
markets are highly competitive. This competition could reduce the occupancy levels and revenues for our hotels, which would adversely
affect our operations. We face competition from many sources. We face competition from other hotels both in the immediate vicinity and
the geographic market where our hotels are located. Overbuilding in the hotel industry may increase the number of rooms available leading
to decreases in the occupancy and room rates for our hotels. In addition, increases in our operating costs due to inflation and other
factors may not be fully or partially offset by increased room rates. We also face competition from nationally recognized hotel brands
with which we are not currently associated.

 In
addition, we compete with other entities engaged in real estate investment activities to locate suitable properties to acquire and to
locate tenants and purchasers for our properties. These competitors include other REITs, specialty finance companies, savings and loan
associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders,
governmental bodies and other entities. There are also other REITs with asset acquisition objectives similar to ours and others that
may be organized in the future. Some of these competitors, including larger REITs, have substantially greater marketing and financial
resources than we have and generally may be able to accept more risk than we can prudently manage, including risks with respect to the
creditworthiness of tenants. In addition, these same entities seek financing through similar channels to those sought by us. Therefore,
we may compete for institutional investors in a market where funds for real estate investment may decrease.

 Competition
from these and other third-party real estate investors may limit the number of suitable investment opportunities available to us. It
may also result in higher prices, lower yields and a narrower spread of yields over our borrowing costs, making it more difficult for
us to acquire new investments on attractive terms.

 Because
we are organized as an UPREIT, we believe we are well positioned within the industries in which we operate to potentially offer existing
property owners the opportunity to contribute properties to us in tax-deferred transactions using our Operating Partnership common units
as transactional currency. As a result, we believe we may have a competitive advantage over certain of our competitors that are structured
as traditional REITs and non-REITs in pursuing acquisitions with tax-sensitive sellers.

 Regulations

 Our
investments are subject to various U.S. federal, state and local laws, ordinances, and regulations, including, among other things, zoning
regulations, land use controls, and environmental matters. We believe that we have or will obtain all permits and approvals necessary
under current law to operate our investments.

 Environmental

 As
an owner of real estate, we are subject to various environmental laws of U.S. federal, state and local governments. Compliance with existing
laws has not had a material adverse effect on our financial condition or results of operations, and management does not currently believe
it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or
changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly
in the future.

 Available
Information

 We
electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports, and proxy statements, with the U.S. Securities and Exchange Commission (the
"SEC"). Stockholders may obtain copies of our filings with the SEC, free of charge, from the website maintained by the SEC
at  or at the SEC's Public Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our office is located at 1985 Cedar Bridge
Avenue, Lakewood, New Jersey 08701. Our telephone number is (732) 367-0129. Our website is www.lightstonecapitalmarkets.com.

 ITEM
1B. UNRESOLVED STAFF COMMENTS:

 None
applicable.

 ITEM
1C. CYBERSECURITY:

 Risk
Management and Strategy

 We
have no employees. Our business is externally managed by the Advisor, an affiliate of the Sponsor. We are dependent on the Advisor and
affiliates of our Sponsor (collectively, the "Advisor and its affiliates") for performing a full range of services that are
essential to us, including asset management, property management (excluding our hospitality properties, each of which are managed by
an unrelated third party property manager) and acquisition, disposition and financing activities, and other general administrative responsibilities;
such as tax, accounting, legal, information technology ("IT") and investor relations services. As
an externally managed REIT, our risk management function, including cybersecurity, is governed by the cybersecurity policies and procedures
of the Advisor and its affiliates, which determine and implement appropriate risk management
processes and strategies as it relates to cybersecurity for both us and the other entities they advise, own and/or manage, and we rely
on the them for assessing, identifying and managing material risks to our business from cybersecurity threats.

 The
 Advisor and its affiliates take a risk-based approach to cybersecurity and have implemented
cybersecurity policies throughout their operations that are designed to address cybersecurity threats and incidents. The Advisor and
its affiliates regularly assess risks from cybersecurity threats, monitor their information systems for potential vulnerabilities,
and test those systems according to their cybersecurity policies, standards, processes, and practices, which are integrated into their
overall approach to enterprise risk management. To protect their information systems from cybersecurity threats, the Advisor and
its affiliates use various security tools that help them identify, escalate, investigate, resolve, and recover from security incidents
in a timely manner.

 The
Advisor and its affiliates have a technology team, under the leadership of the Director
of Information Technology, who has over 20 years of technology management experience, which defines a work plan designed to maintain
strong cybersecurity maturity, sets improvement objectives of key controls and systems, including feedback from third-party assessments,
and identifies and implements on-going investments to replace or upgrade systems or technologies and proactively maintain strong security.
As part of this planning, management conducts regular testing of our incident response plan to increase awareness, establishes key decision-making
criteria, ensures effective communication among key stakeholders, and complies with our disclosure obligations.

 The
Advisor and its affiliates also partner with independent third-party experts to provide
a comprehensive cybersecurity solution that safeguards organizations against a broad spectrum of cyber threats. This comprehensive cybersecurity
solution offers advanced threat detection, prevention, and response capabilities, including real-time monitoring, threat intelligence,
behavioral analysis, endpoint detection and response, malware prevention, and automated response actions. Additionally, the comprehensive
cybersecurity solution also provides access to cybersecurity experts, who provide proactive threat monitoring and incident response support
to effectively detect, investigate, and remediate security incidents.

 The
Advisor and its affiliates engage vendors to enhance cybersecurity safeguards and improve
incident response and update or replace systems and applications as appropriate to improve data processing and storage management and
enhance security. These cybersecurity safeguards include multi-tiered backup protocols, which incorporate immutable backups, embody an
innovative approach to data security, providing an additional barrier against ransomware and other cyber threats. Immutable backups ensure
that data remains unmodifiable and immune to deletion for a predefined duration, thereby shielding it from unauthorized tampering or
access. This technology utilizes sophisticated methods, including immutable storage repositories and ransomware-resistant backup architectures,
to uphold the integrity and accessibility of vital data. Through the enforcement of stringent access controls and encryption measures,
the resilience and availability of backup data is ensured, empowering an organization to swiftly and securely recover from cyber incidents.

 To
further protect their information systems, the Advisor and its affiliates structure and
monitor relationships with various third-party service providers and periodically conduct due diligence on their cybersecurity architecture
and process design.

 To
date, cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected us, our business
strategy, results of operations, or financial condition.

 Governance

 The
 Board of Directors oversees our risk management process, including cybersecurity risks. The Audit Committee oversees our enterprise risk
assessment. The Audit Committee's meetings include discussions of specific risk areas, including, among others, those relating
to cybersecurity. Our management team, including our Chief Financial Officer, is responsible for assessing and managing our material
risks from cybersecurity threats. The Chief Financial Officer has primary responsibility for our overall cybersecurity risk management
program.

 The
Director of Information Technology is responsible for leading the assessment and management of cybersecurity threats. We have implemented
a governance program for our cybersecurity efforts. This includes regularly updating privacy notices, terms of use, and lease documents.
The Advisor and its affiliates have developed and implemented policies to identify and mitigate
cybersecurity risks and provide training to their employees at onboarding and thereafter as necessary. Such updates are communicated
to all their employees, and actionable guidance is provided when new risks arise.

 ITEM
2. PROPERTIES:

 As
of December 31, 2024, 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 the
Hilton Garden Inn Joint Venture, which owns one limited-service hotel, and (iii) held an unconsolidated 25% membership interest in the
Williamsburg Moxy Hotel Joint Venture, which owns 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 the Hilton Garden Inn – Long Island City, a 183-room, limited-service hotel 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
REIT II, a related party REIT, which is sponsored by 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 the Williamsburg Moxy Hotel,
a 216-room Marriott branded hotel located in the Williamsburg neighborhood in the Brooklyn borough of New York City, which opened on
March 7, 2023. We and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.

 Wholly-Owned
and Consolidated Properties:

 Hospitality
 - Limited-Service Hotel

 Location

 Year

 Built

 Date

 Acquired

 Rooms

 Year
 to
 Date
 Available
 Rooms

 Percentage

 Occupied
 2024

 RevPAR
 2024

 ADR
 2024

 Hampton
 Inn – Des Moines

 Des Moines,
 Iowa

 1987

 February 4, 2015

 43,920

 70.2
 %

 $
 80.74

 $
 114.98

 Courtyard
 - Durham

 Durham, North Carolina

 1996

 May 15, 2015

 53,436

 58.9
 %

 $
 67.08

 $
 113.84

 Hampton
 Inn – Lansing

 Lansing, Michigan

 2013

 March 10, 2016

 31,476

 70.9
 %

 $
 89.66

 $
 126.42

 Courtyard
 - Warwick

 Warwick, Rhode Island

 2003

 March 23, 2016

 33,672

 72.1
 %

 $
 105.11

 $
 145.80

 Home2
 Suites – Salt Lake

 Salt Lake City, Utah

 2013

 August 2, 2016

 45,750

 68.6
 %

 $
 79.64

 $
 116.15

 Home2
 Suites – Tukwila

 Tukwila, Washington

 2015

 August 2, 2016

 50,874

 88.8
 %

 $
 149.28

 $
 168.11

 Fairfield
 Inn – Austin

 Austin, Texas

 2014

 September 13, 2016

 30,744

 63.3
 %

 $
 61.53

 $
 97.15

 Staybridge
 Suites – Austin

 Austin,
 Texas

 2009

 October
 7, 2016

 29,280

 74.9
 %

 $
 78.22

 $
 104.40

 Total

 319,152

 71.1
 %

 $
 90.59

 $
 127.43

 Unconsolidated
Affiliated Real Estate Entities:

 Hospitality

 Location

 Year
 Built

 Date
 Acquired

 Rooms

 Year
 to
 Date

 Available
 Rooms

 Percentage

 Occupied

 2024

 RevPAR
 2024

 ADR

 2024

 Limited-Service
 Hotel

 Garden Inn - Long Island City

 Long Island
 City, New York

 2014

 March 27, 2018

 66,978

 86.7
 %

 $
 190.26

 $
 219.34

 Full-Service
 Hotel

 Moxy Hotel (1)

 Williamsburg, New York

 2023

 March 7, 2023

 79,056

 89.5
 %

 $
 255.25

 $
 285.30

 (1)
 Construction
 of the Moxy Williamsburg Hotel was substantially completed and it opened on March 7, 2023.

 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.

 ITEM
3. LEGAL PROCEEDINGS:

 From
time to time in the ordinary course of business, we may become subject to legal proceedings, claims or disputes.

 As
of the date hereof, we are not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible
to have a material adverse effect on our results of operations or financial condition, which would require accrual or disclosure of the
contingency and possible range of loss.

 ITEM
4. MINE SAFETY DISCLOSURES

 Not
applicable.

 PART II.

 Dollar
amounts are presented in thousands, except per share/unit data, Revenue per Available Room ("RevPAR"), Average Daily Rate
("ADR") and where indicated in millions.

 ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES:

 As
of March 15, 2025, we had 12.8 million shares of our common stock ("Common Shares") outstanding, held by a total of 3,736
stockholders. The number of stockholders is based on the records of DST Systems Inc., which serves as our registrar and transfer agent.

 Market
Information

 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.

 Estimated
 Net Asset Value ("NAV") and NAV per
Share

 On
March 21, 2025, our Board of Directors determined and approved our estimated net asset value ("NAV") of $134.5 million
and resulting NAV per share of common stock ("NAV per Share") of $10.48, both as of December 31, 2024. Our estimated NAV
and resulting NAV per Share are based upon the estimated fair values of our assets and liabilities as of December 31, 2024 and are effective
as of March 21, 2025. In the calculation of our NAV, no allocation of value was made to the Special Limited Partner's Subordinated
Participation Interests because the NAV per Share did not exceed an aggregate $10.00 price per share plus a cumulative, pre-tax non-compounded
annual return of 6.0% as of December 31, 2024. In connection with our Offering, the Special Limited Partner purchased 242 Subordinated
Participation Interests from the Operating Participation at a cost of $50,000 per unit, with an aggregate value of $12.1 million.

 Our
estimated NAV and resulting NAV per Share was calculated as of a particular point in time. Accordingly, our estimated NAV and resulting
NAV per Share will fluctuate over time in response to developments related to individual assets in the portfolio and the management of
those assets and in response to the real estate and finance markets. There is no assurance of the extent to which the current estimated
valuation should be relied upon for any purpose after its effective date regardless that it may be published on any statement issued
by us or otherwise.

 Process
and Methodology

 Our
business is externally managed by our Advisor which provides advisory services to us and we have no employees. Our Advisor, along with
any necessary material assistance or confirmation of a third-party valuation expert or service, is responsible for calculating our estimated
NAV and resulting NAV per Share, which we currently expect will be done on at least an annual basis unless and until our Common Shares
are approved for listing on a national securities exchange. Our Board of Directors have and will continue to review and approve each
estimate of NAV and resulting NAV per Share.

 Our
estimated NAV and resulting NAV per Share as of December 31, 2024 were calculated with both the assistance of our Advisor and Capright
Property Advisors, LLC ("Capright"), an independent third-party valuation firm engaged to assist with the valuation of our
assets and liabilities. Our Advisor recommended and our Board of Directors established the estimated NAV per Share based upon the analyses
and reports provided by our Advisor and Capright. The process of estimating the value of our assets and liabilities is performed in accordance
with our Estimated Valuation Policy and the provisions of the Investment Program Association's (the "IPA") Practice
Guideline 2013-01, "Valuation of Publicly Registered Non-Listed REITs." We believe our valuations were developed in a manner
reasonably designed to ensure their reliability.

 In
arriving at an estimated NAV and resulting NAV per Share, our Board of Directors reviewed and considered the valuation analyses prepared
by our Advisor and Capright. Our Advisor presented a report to the Board of Directors with an estimated NAV and resulting NAV per Share.
Capright provided our Board of Directors an opinion that the resulting "as-is" market value for the Company's investment
properties, as calculated by our Advisor, and its remaining assets and liabilities, as valued by our Advisor, along with the corresponding
NAV valuation methodologies and assumptions used by our Advisor to arrive at a recommended NAV per Share of $10.48 as of December 31,
2024 were appropriate and reasonable. Our Board of Directors reviewed the methodologies and assumptions used to reach Capright's
and our Advisor's respective conclusions. Our Board of Directors, which is responsible for determining our estimated per share
value, considered all information provided in light of their own familiarity with our assets and liabilities and unanimously approved
a NAV per Share of $10.48 as of December 31, 2024.

 The
engagement of Capright with respect to our estimated NAV and resulting NAV per Share as of December 31, 2024 was approved by our Board
of Directors, including all of our independent directors. Capright has extensive experience in conducting asset valuations, including
valuations of commercial real estate, debt, properties and real estate-related investments.

 Capright's
opinion was subject to various limitations. In forming its opinion, Capright relied on certain information provided by our Advisor and
third parties without independent verification. Our Advisor provided Capright with certain information regarding lease terms and the
physical condition and capital expenditure requirements of each of our investment properties. Capright did not perform engineering or
structural studies or environmental studies of any of the properties, nor did they perform an independent appraisal of our other assets
and liabilities included in our estimated NAV and resulting NAV per Share.

 The
following is a summary of the valuation methodologies used to value our assets and liabilities by key component:

 Investment
property, net. Our current ownership interests in real estate properties consist of limited service and full service hospitality
properties. Accordingly, Capright utilized a variety of valuation methodologies, each deemed appropriate for the asset type under consideration
to assign an estimated value to each asset.

 As of December 31, 2024, we have ownership interests in 10 investment
properties, consisting of (i) 8 consolidated properties (the "Consolidated Properties") and (ii) two unconsolidated
equity method properties held in joint ventures (the "Equity Method Properties" and collectively, the ''Investment
Properties"). With respect to the Consolidated Properties as of December 31, 2024, we wholly owned and consolidated the operating
results and financial condition of eight hospitality properties, or limited service hotels, containing a total of 872 rooms, referred
to as the Hotel Portfolio. With respect to our Equity Method Properties as of December 31, 2024, we held a (i) 50% joint venture
ownership interest in the Hilton Garden Inn Joint Venture, an affiliated real estate entity, which owns the Hilton Garden Inn –
Long Island City, a 183-room, limited service hotel located in Long Island City and (ii) a 25% joint venture ownership interest in the
Williamsburg Moxy Hotel Joint Venture, an affiliated real estate entity, which owns the Williamsburg Moxy Hotel, a 216- room Marriott
branded hotel located in the Williamsburg neighborhood in the Brooklyn borough of New York City, which opened on March 7, 2023. We do
not consolidate our joint venture ownership interests in the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture
but rather account for them under the equity method of accounting.

 In
forming their conclusion as to the "as-is" value of the Investment Properties as of December 31, 2024, Capright's opinion
was subject to various limitations. In connection with their engagement, Capright completed appraisals of nine of the 10 investment properties
in which we had ownership interests as of December 31, 2024. The Williamsburg Moxy Hotel was appraised by another independent third party
valuation firm. With respect to the appraisals performed by Capright and the other independent third party valuation firm, the scope
of their work included:

 of property level information provided by our Advisor;

 of the historical performance of our investment properties and business plans related to
 operations of these investments;

 of the data models prepared by the Advisor for each investment; and

 of the applicable markets by means of publications and other resources to measure current
 market conditions, supply and demand factors, and growth patterns.

 The
values of our Investment Properties were generally estimated by Capright and the other independent third party valuation firm utilizing
multiple valuation methods, as appropriate for each asset, including an income approach using discounted cash flow analysis ("DCF
Analysis") and a sales comparable analysis. The key assumptions used in the income approach are specific to each property type,
market location, and quality of each property and were based on similar investors' return expectations and market assessments.
The key assumptions are reflected in the table included under "Allocation of Estimated NAV per Share" below. In calculating
values for our assets, both balance sheet and estimates of future cash flows as of December 31, 2024 were used.

 In
forming its opinion, Capright and the other independent third party valuation firm prepared appraisals on each of the Investment Properties.
The appraisals estimated values by using a DCF Analysis, a comparable sales approach, or a weighting of these approaches in determining
each property's value. The appraisals employed a range of terminal capitalization rates, discount rates, growth rates, and other
variables that fell within ranges that Capright believed would be used by similar investors to value the properties we own. The assumptions
used in developing these estimates were specific to each property (including holding periods) and were determined based upon a number
of factors including the market in which the property is located, the specific location of the property within the market, property and
market vacancy, tenant demand for space, and investor demand and return requirements.

 While
we and our Advisor believe that the approaches used by Capright and the other independent third party valuation firm in valuing our investment
properties, including an income approach using a DCF Analysis and a comparable sales analysis, are standard in the real estate industry,
the estimated fair values for our investment properties may or may not represent current market values or fair values determined in accordance
with GAAP. Our consolidated investment properties are carried at their amortized cost basis, subject to any adjustments applicable under
GAAP, in our consolidated financial statements. Our unconsolidated investments in real estate are accounted for under the equity method
of accounting in our consolidated financial statements.

 The
following are the key assumptions used in the DCF Analysis utilized by Capright and the other independent third party valuation firm
under the income approach to estimate the fair value of the indicated properties as of December 31, 2024:

 Consolidated

 Properties

 Equity
 Method

 Properties

 Hotel

 Portfolio

 (8 properties)

 Garden

 Inn - Long

 Island City

 Moxy Hotel

 (weighted
 average)

 Exit capitalization rate

 8.15
 %

 8.00
 %

 7.00
 %

 Discount rate

 10.15
 %

 10.00
 %

 9.00
 %

 Annual market rent growth

 3.45
 %

 4.79
 %

 5.64
 %

 Average holding period (in years)

 10.0

 10.0

 10.0

 As
of December 31, 2024, the aggregate estimated fair value of our ownership interests in the Consolidated Properties was $138.5 million
and the aggregate carrying value of our Consolidated Properties was $91.9 million, which equates to an overall increase in value of 50.7%.

 As
of December 31, 2024, the estimated fair value of our 50% membership interest in the Hilton Garden Inn Joint Venture of $21.7 million
was calculated based on the gross appraised value of the Hilton Garden Inn – Long Island City of $74.7 million less the fair value
of the outstanding indebtedness of $32.3 million plus all other non-real estate assets and liabilities, net of $1.0 million. The estimated
fair value of our 50% membership interest in the Hilton Garden Inn Joint Venture of $21.7 million compared to our carrying value of $7.6
million, both as of December 31, 2024, equates to an increase in value of 185.2%.

 As
of December 31, 2024, the estimated fair value of our 25% membership interest in the Williamsburg Moxy Hotel Joint Venture of $22.7 million
was calculated based on the gross appraised value of the Williamsburg Moxy Hotel of $177.5 million less the fair value of the outstanding
indebtedness of $92.4 million plus all other non-real estate assets and liabilities, net of $5.6 million. The estimated fair value of
our 25% membership interest in the Williamsburg Moxy Hotel Joint Venture of $22.7 million compared to our carrying value of $9.2 million,
both as of December 31, 2024, equates to an increase in value of 147.2%.

 While
we believe that Capright's and the other independent third party valuation firm's assumptions utilized for estimating the
fair values for the Investment Properties are reasonable, any changes in these assumptions would affect the calculations of the estimated
fair values of the Investment Properties. The table below presents the estimated increase or decrease to our estimated NAV per Share
as of December 31, 2024 resulting from a 25 basis point increase and decrease in the discount rates and capitalization rates for the
Investment Properties. The table is presented to provide a hypothetical illustration of possible results if only one change in assumptions
was made, with all other factors remaining constant. Further, each of these assumptions could change by more or less than 25 basis points
or not at all.

 Change
 in NAV per Share

 Increase of

 Decrease of

 basis

 points

 basis

 points

 Capitalization rate

 $
 (0.27
)

 $
 0.28

 Discount rate

 $
 (0.30
)

 $
 0.30

 In
addition to their appraisals of nine of the Investment Properties, Capright also evaluated the following information to arrive at their
opinion of our other assets and liabilities:

 of property level information provided by our Advisor;

 of the historical performance of our investment properties and business plans related to
 operations of these investments;

 of the data models prepared by the Advisor supporting the valuation for each investment;
 and Review of the applicable markets by means of publications
 and other resources to measure current market conditions, supply and demand factors, and
 growth patterns.

 Capright
has acted as a valuation advisor to us in connection with this assignment. The compensation paid to Capright in connection with this
assignment was not contingent upon the successful completion of any transaction or conclusion reached by Capright. Capright may be engaged
to provide financial advisory services to us, our Advisor, or other Lightstone-sponsored investment programs or their affiliates in the
future.

 Cash
and cash equivalents: The estimated values of our cash and cash equivalents approximate their carrying values due
to their short maturities.

securities, available for sale: The estimated values of our marketable securities,
available for sale, are based on Level 1 and Level 2 inputs. Level 1 inputs are inputs that are observable, either directly or indirectly,
such as quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs that are observable, either directly
or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. All
of our marketable securities measured using Level 2 inputs were valued based on a market approach using readily available quoted market
prices for similar assets.

 Other
assets: Our other assets consist of tenant accounts receivable and prepaid expenses and other assets. The estimated values
of these items approximate their carrying values due to their short maturities. Certain other items, primarily straight-line rent receivable,
intangibles and deferred costs, have been eliminated for the purpose of the valuation because those items were already considered in
our valuation of the respective investments in real estate properties or financial instruments.

 Mortgages
payable: Our mortgage loans bear interest at a variable rates. Accordingly, the estimated fair values of our variable-rate
mortgage loans were deemed to approximate their carrying values because their interest rates moves in conjunction with changes to market
interest rates.

 Other
liabilities: Our other liabilities consist of our accounts payable and accrued expenses, amounts due to related parties,
deposits payable and deferred rental income. The carrying values of these items were considered to equal their fair value due to their
short maturities.

 Allocations
of Value to Subordinated Participation Interests: The Subordinated Participation Interests held by the Special Limited Partner,
an affiliate of our Advisor, are classified in noncontrolling interests on our consolidated balance sheet. However, for purposes of our
NAV, we do not estimate their fair value in accordance with GAAP. Rather, the IPA's Practice Guideline 2013—01 provides for
adjustments to the NAV for preferred securities, special interests and incentive fees based on the aggregate NAV of the company and payable
to the sponsor in a hypothetical liquidation of the company as of the valuation date in accordance with the provisions of the partnership
or advisory agreements and the terms of the preferred securities. Because certain distributions related to our Subordinated Participation
Interests are only payable to their holder in a liquidation event, we believe they should be valued for our NAV in accordance with these
provisions.

 Accordingly,
pursuant to the terms of our operating agreement, no allocations are made to the holder of the Subordinated Participation Interests unless
the NAV per Share exceeds $10.00 per share plus a cumulative, pre-tax non-compounded annual return of 6.0% as of the indicated valuation
date. In connection with our Offering, Lightstone SLP III LLC acquired an aggregate of $12.1 million of Subordinated Participation Interests.
In the calculation of our NAV, no allocation of value was made to the holder of the Subordinated Participation Interests because the
NAV per Share did not exceed an aggregate $10.00 price per share plus a cumulative, pre-tax non-compounded annual return of 6.0% as of
December 31, 2024.

 Our
estimated NAV per Share was calculated by aggregating the estimated fair values of our assets, subtracting the estimated fair values
of our liabilities, and dividing the resulting estimated net asset value by our shares of common stock outstanding, all as of December
31, 2024.

 Allocation
of Estimated NAV per Share

 The table below sets forth the key components of
the calculation of our NAV and resulting NAV per Share as of December 31, 2024 as well as the comparable calculation as of December 31,
2023. The estimated NAV per Share of $10.48 as of December 31, 2024, represents an increase of $0.55 per share, or 5.2%, from the
estimated NAV per Share of $9.93 as of December 31, 2023.

 As
 of December 31, 2024

 As
 of December 31, 2023

 Value

 Per
 Share

 Value

 Per
 Share

 Net Assets:

 Investment properties,
 net

 $
 182,847

 $
 14.25

 $
 176,867

 $
 13.68

 Non-Real
 Estate Assets:

 Cash and cash equivalents

 6,175

 3,848

 Marketable securities

 5,858

 7,196

 Other assets

 1,450

 Total
 non-real estate assets

 12,799

 1.00

 12,494

 0.97

 Total Assets

 195,646

 15.25

 189,361

 14.65

 Liabilities:

 Mortgages payable

 (56,674
)

 (57,161
)

 Other liabilities

 (4,479
)

 (3,843
)

 Total
 Liabilities

 (61,153
)

 (4.77
)

 (61,004
)

 (4.72
)

 Net
 Asset Value before Allocations to Subordinated Participation Interests

 134,493

 $
 10.48

 128,357

 $
 9.93

 Allocations to Subordinated
 Participation Interests

 -

 -

 -

 -

 Net Asset Value

 $
 134,493

 $
 10.48

 $
 128,357

 $
 9.93

 Shares of Common Stock
 Outstanding

 12,832

 12,931

 Historical
Estimated NAV per Share

 More
information regarding our historical reported estimated NAV per Share as of December 31, 2023 may be found in our Annual Report on Form
10-K for the Year Ended December 31, 2023, filed on March 27, 2024.

 Limitations
and Risks

 As
with any valuation methodology, the methodology used to determine our estimated NAV and resulting NAV per Share is based upon a number
of estimates and assumptions that may prove later not to be accurate or complete. Further, different participants with different
property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different
estimated NAV per Share, which could be significantly different from the estimated NAV per Share approved by our Board of Directors.
The estimated NAV per Share approved by our Board of Directors does not represents the fair value of our assets and liabilities in accordance
with GAAP, and such estimated NAV per Share is not a representation, warranty or guarantee that:

 A
 stockholder would be able to resell his or her shares at the estimated NAV per Share;

 A
 stockholder would ultimately realize distributions per share of common stock equal to the
 estimated NAV per Share upon liquidation of our assets and settlement of our liabilities
 or a sale of the Company;

 Our
 shares of common stock would trade at the estimated NAV per Share on a national securities
 exchange,

 An
 independent third-party appraiser or other third-party valuation firm would agree with the
 estimated NAV per Share; or

 The
 methodology used to estimate our NAV per Share would be acceptable to FINRA or under the
 Employee Retirement Income Security Act with respect to their respective requirements.

 The
Internal Revenue Service and the Department of Labor do not provide any guidance on the methodology an issuer must use to determine its
estimated NAV per share. FINRA guidance provides that NAV valuations be derived from a methodology that conforms to standard industry
practice.

 As
with any valuation methodology, our methodology is based upon a number of estimates and assumptions that may not be accurate or complete.
Different parties with different assumptions and estimates could derive different estimated NAVs and resulting NAVs per share, and these
differences could be significant. The estimated NAV per Share is not audited and does not represent the fair value of our assets less
our liabilities in accordance GAAP, nor do they represent an actual liquidation value of our assets and liabilities or the amount shares
of our common stock would trade at on a national securities exchange. Our estimated NAV per Share is based on the estimated value of
our assets less the estimated value of our liabilities and other non-controlling interests divided by the number of our diluted shares
of common stock outstanding, all as of the date indicated. Our estimated NAV per Share does not reflect a discount for the fact we are
externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. Our
estimated NAV per Share does not take into account estimated disposition costs or fees or penalties, if any, that may apply upon the
prepayment of certain of our debt obligations or the impact of restrictions on the assumption of certain debt. Our estimated NAV per
Share will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets, developments related
to individual assets and the management of those assets and changes in the real estate and capital markets. Different parties using different
assumptions and estimates could derive different NAVs and resulting estimated NAVs per share, and these differences could be significant.
Markets for real estate and real estate-related investments can fluctuate and values are expected to change in the future. Our Estimated
Valuation Policy requires us to update our estimated NAV per Share value on an annual basis. Our Board of Directors will review and approve
each estimate of NAV and resulting estimated NAV per Share.

 SRP

 Our
share repurchase program, as amended from time to time (the "SRP") 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 hardship 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. Additionally, 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.

 For
the year ended December 31, 2024, we repurchased 99,067 Common Shares at a weighted average price per share of $9.94. For the year ended
December 31, 2023, we repurchased 111,434 Common Shares at a weighted average price per share of $10.09.

Shares

 Total
distributions declared by our Board of Directors on our Common Shares at the pro rata equivalent of an annual distribution of $0.30 per
share, or an annualized rate of 3% assuming a purchase price of $10.00 per share, during the year ended December 31, 2023 were $3.9 million.

 On
March 18, 2024, the Board of Directors determined to suspend regular quarterly distributions.

 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 Internal Revenue Service'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.

 Subordinated
Participation Interests

 In
connection with our Offering, the Special Limited Partner purchased 242 Subordinated Participation Interests in the Operating Partnership
at a cost of $50,000 per unit, with an aggregate value of $12.1 million.

 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, from our inception through December
31, 2024, there have been no distributions declared 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.

 Recent
Sales of Unregistered Securities

the period covered by this Form 10-K, we did not sell any equity securities that were not registered under the Securities Act.

 ITEM
6. [RESERVED ]

 ITEM 7.
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

 You
should read the following discussion and analysis together with our consolidated financial statements and notes thereto included in this
Annual Report on Form 10-K (the "Annual Report"). The following information contains forward-looking statements, which are
subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially
from those expressed or implied by the forward-looking statements. Please see "Special Note Regarding Forward-Looking Statements"
before Item 1 of this Annual Report for a description of these risks and uncertainties. Dollar amounts are presented in thousands, except
per share/unit data, RevPAR, ADR and where indicated in millions.

 Overview

REIT III, together with the Operating Partnership and
its subsidiaries are collectively referred to as "the Company" and the use of "we", "our" or "us"
or similar pronouns in this Annual Report refers to Lightstone REIT III, its Operating Partnership or the Company as required in which
such pronoun is used.

 Through
our 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. 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 December 31, 2024, 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 the
Hilton Garden Inn Joint Venture, which owns one limited-service hotel, and (iii) held an unconsolidated 25% membership interest in the
Williamsburg Moxy Hotel Joint Venture, which owns 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 the Hilton Garden Inn – Long Island City,
a 183-room, limited-service hotel 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 REIT II, a related party REIT, which is sponsored
by 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 the Williamsburg Moxy Hotel, a 216-room Marriott branded
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 REIT IV, a related party REIT, which is sponsored by the Sponsor. We and Lightstone
REIT IV have 25% and 75% membership interests in the Williamsburg Moxy Hotel Joint Venture, respectively.

 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, each of which are managed by an unrelated third-party property
manager) 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 other
parties.

 To
maintain our qualification as a real estate investment trust ("REIT"), we engage in certain activities through a taxable
REIT subsidiary ("TRS"), including when we acquire a hotel, we usually establish a TRS and enter into an operating lease
agreement for the hotel. As such, we are subject to U.S. federal and state income and franchise taxes from these activities.

 Investment
Strategy and Policies

 We
have and expect to continue to invest in commercial properties (such as full-service hotels, limited-service hotels, and extended-stay
hotels) and multifamily residential properties, as well as various other real estate-related investments principally located in the U.S.
Our acquisitions may include both portfolios and individual properties. Full-service hotels generally provide a full complement of guest
amenities including restaurants, concierge and room service, porter service or valet parking. Limited-service hotels typically do not
include these amenities. Extended-stay hotels offer upscale, high-quality, residential style lodging with a comprehensive package of
guest services and amenities for extended-stay business and leisure travelers. We have no limitation as to the brand of franchise or
license with which our hotels may be associated. We generally intend to hold each of our real estate properties until its investment
objectives are met or it is likely they will not be met.

 Even
though we have primarily invested in hotels, we have and may continue to purchase other types of real estate. Assets other than hotels
may include, without limitation, office buildings, shopping centers, business and industrial parks, manufacturing facilities, single-tenant
properties, multifamily residential properties, student housing properties, warehouses and distribution facilities and medical/life sciences
office properties. We expect to continue to invest mainly in direct real estate investments and other equity interests; however, we may
also invest in debt interests, which may include bridge or mezzanine loans, including in furtherance of a loan-to-own strategy. We have
not established any limits on the percentage of our portfolio that may be comprised of various categories of assets which present differing
levels of risk.

 We
have and expect to continue to enter into joint ventures, tenant-in-common investments or other co-ownership arrangements for the acquisition,
development or improvement of properties with third parties or certain affiliates of our Advisor, including its other sponsored REITs
and real estate limited partnerships sponsored by affiliates of our Advisor.

 Concentration
of Credit Risk

 As
of December 31, 2024 and 2023, 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 and recession.

 Our
overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening
economic conditions, increases in costs due to inflation, higher interest rates, 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 Annual Report.

 Critical
Accounting Estimates and Policies

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

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

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

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

in Real Estate

 Impairment
Evaluation

 We
evaluate our investments in real estate assets for potential impairment whenever events or changes in circumstances indicate that the
undiscounted projected cash flows are less than the carrying amount for a particular property. We evaluate the recoverability of our
investments in real estate assets at the lowest identifiable level, which is primarily at the individual property level. No single indicator
would necessarily result in us preparing an estimate to determine if an individual property's future undiscounted cash flows are
less than its carrying value. We use judgment to determine if the severity of any single indicator, or the fact that there are a number
of indicators of less severity that when combined, would result in an indication that a property requires an estimate of the undiscounted
cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant underperformance
relative to historical or projected future operating results and significant negative industry, geographic or economic trends. The
undiscounted projected cash flows used for the impairment analysis are subjective and require us to use our judgment and the determination
of estimated fair value are based on our plans for the respective assets and our views of market and economic conditions. The estimates
consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand,
competition, and recent sales data for comparable properties. An impairment loss is recognized only if the carrying amount of a property
is not recoverable and exceeds its fair value.

and Amortization

 Depreciation expense is computed based on the straight-line
method over the estimated useful life of the applicable real estate asset. We generally use estimated useful lives of up to 39 years for
buildings, 15 years for land improvements and building improvements and 5 to 10 years for furniture and fixtures. Maintenance and
repairs are charged to expense as incurred.

in Unconsolidated Entities

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

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

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

 Treatment
of Management Compensation, Expense Reimbursements

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

 Expense
reimbursements made to both our Advisor and certain affiliates of our Sponsor are expensed or capitalized to the basis of acquired assets,
as appropriate.

 Tax
Status and Income Taxes

 We
elected to be taxed and qualify as a REIT commencing with the taxable year ended December 31, 2015. As a REIT, we generally will not
be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT
qualification under the Internal Revenue Code of 1986, as amended, we must meet a number of organizational and operational requirements,
including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal
net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net
capital gain. If we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify for certain statutory relief
provisions, our income for that year will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment
as a REIT for the four-year period following our failure to qualify as a REIT. Such an event could materially adversely affect our net
income and net cash available for distribution to our stockholders, if any. Additionally, even if we continue to qualify as a REIT for
U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our taxable income and property
and to U.S. federal income taxes and excise taxes on our undistributed taxable income, if any.

 To
maintain our qualification as a REIT, we engage in certain activities through a TRS including when we acquire a hotel we usually establish
a new TRS and enter into an operating lease agreement for the hotel. As such, we are subject to U.S. federal and state income taxes and
franchise taxes from these activities.

 As
of December 31, 2024 and 2023, we had no material uncertain income tax positions.

 Results
of Operations

 Comparison
of the year ended December 31, 2024 vs. December 31, 2023

 Consolidated

 Our
consolidated revenues, property operating expenses, real estate taxes, general and administrative costs and depreciation and amortization
for the years ended December 31, 2024 and 2023 are attributable to our consolidated limited-service hotels, all of which were owned by
us during the entire periods presented.

the year ended December 31, 2024 compared to same period in 2023, our consolidated limited-service hotel portfolio experienced increases
in the percentage of rooms occupied to 71% from 70% and RevPAR to $90.59 from $88.59 and a slight decrease in ADR to $127.43 from $127.52.

 Revenues increased by $0.8 million to $29.9 million during the year
ended December 31, 2024 compared to $29.1 million for the same period in 2023. The increase in revenue during the 2024 period is primarily
attributable to the impact of higher occupancy and RevPAR.

operating expenses

operating expenses increased by $0.4 million to $20.4 million during the year ended December 31, 2024 compared to $20.0 million for the
same period in 2023. This increase reflects the slightly higher occupancy during the 2024 period
as well as higher labor costs resulting from wage inflation and increased property management fees and franchise fees, which are generally
based on the increase in revenues.

 Real
estate taxes

 Real
estate taxes increased by $0.2 million to $1.4 million during the year ended December 31, 2024
 compared to $1.2 million for the same period in 2023.

and administrative expense

and administrative expenses increased by $0.3 million to $2.9 million during the year ended December
31, 2024 compared to $2.6 million for the same period in 2023.

and amortization

and amortization expense decreased by $0.8 million to $3.3 million during the year ended December
31, 2024 compared to $4.1 million for the same period in 2023.

 Interest
expense

 Interest
expense decreased slightly by $0.1 million to $5.3 million during the year ended December 31, 2024
 compared to $5.4 million for the same period in 2023. Interest expense is attributable to
the mortgage financings associated with our limited-service hotels, all of which bear interest at variable rates, and reflects lower
market interest rates during the 2024 period as well as the changes in the weighted average outstanding principal during the periods.

 Loss
from investments in unconsolidated affiliated real estate entities

 Our
loss from investments in unconsolidated affiliated real estate entities was $2.1 million and $3.3 million during the years ended December
31, 2024 and 2023, 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 December 31, 2024, we had $6.2 million of cash on hand and $5.9 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 twelve months from the date of filing this Annual Report, which primarily consist of our anticipated operating expenses,
scheduled debt service (excluding balloon payments due at maturity), capital expenditures (excluding non-recurring capital expenditures),
capital contributions to our unconsolidated affiliated real estate entities, 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, proceeds received from the sale of marketable securities,
joint venture arrangements, new borrowings and refinancing of existing borrowings.

 As of December 31, 2024, we had mortgage indebtedness totaling $57.3
million. 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. As of December 31, 2024, our total borrowings were $57.3 million which represented 57% of our 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 are
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.

 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 periods indicated:

 For

 2024

 2023

 Asset management fees (general
 and administrative costs)

 $
 1,462

 $
 1,401

 Finance fees (1)

 -

 Total

 $
 1,640

 $
 1,401

 (1)
 Finances
 fees were capitalized and are included in the carrying value of our investment in the Williamsburg
 Moxy Hotel Joint Venture.

 Summary
of Cash Flows

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

 Year
 Ended

 2024

 Year
 Ended

 2023

 Net cash provided by/(used in)
 operating activities

 $
 2,550

 $
 (9
)

 Net cash provided by/(used in) investing activities

 2,498

 (6,564
)

 Net cash used in financing
 activities

 (2,726
)

 (7,965
)

 Change in cash, cash equivalents and restricted
 cash

 2,322

 (14,538
)

 Cash, cash equivalents
 and restricted cash, beginning of year

 3,853

 18,391

 Cash, cash equivalents
 and restricted cash, end of year

 $
 6,175

 $
 3,853

 Operating
activities

 The
net cash provided by operating activities of $2.6 million during the year ended December 31, 2024 consisted
of our net loss of $5.2 million adjusted for the changes in operating assets and liabilities
of $1.9 million, depreciation and amortization, loss from investments in unconsolidated affiliated real estate entities and other non-cash
items aggregating $5.8 million.

 Investing
activities

 The
net cash provided by investing activities of $2.5 million during the year ended December 31, 2024 consisted
of net proceeds from the sale of marketable securities of $1.4 million and distributions from the Hilton Garden Inn Joint Venture of
$1.7 million offset by purchases of investment property of $0.5 million and capital contributions of $0.2 million made to the Williamsburg
Moxy Hotel Joint Venture and Hilton Garden Inn Joint Venture.

 Financing
activities

 The
net cash used in financing activities of $2.7 million during the year ended December 31, 2024 consisted
of debt principal payments of $31.2 million, loan fees and expenses of $0.5 million, distributions to common stockholders of $1.0 million
and redemptions of Common Shares of $1.0 million offset by proceeds from mortgage financing of $30.8 million.

 SRP

 Our
SRP 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 hardship 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. Additionally, 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.

 For
the year ended December 31, 2024, we repurchased 99,067 Common Shares at a weighted average price per share of $9.94. For the year ended
December 31, 2023, we repurchased 111,434 Common Shares at a weighted average price per share of $10.09.

Shares

 Beginning
on March 22, 2023, our Board of Directors began declaring regular quarterly distributions on our Common Shares at the pro rata equivalent
of an annual distribution of $0.30 per share, or an annualized rate of 3% assuming a purchase price of $10.00 per share. Total distributions
declared during the year ended December 31, 2023 were $3.9 million.

 On
March 18, 2024, the Board of Directors determined to suspend regular quarterly distributions.

 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 Internal Revenue Service'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.

 Subordinated
Participation Interests

 In
connection with our Offering, the Special Limited Partner purchased 242 Subordinated Participation Interests in the Operating Partnership
at a cost of $50,000 per unit, with an aggregate value of $12.1 million.

 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 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.

 Contractual
Mortgage Obligations

 The
following is a summary of our estimated contractual mortgage obligations outstanding over the next 5 years and thereafter as of December
31, 2024.

 Contractual
 Mortgage Obligations

 2025

 2026

 2027

 2028

 2029

 Thereafter

 Total

 maturities

 $

 $
 26,032

 $

 $
 -

 $
 -

 $
 -

 $
 57,285

 Interest
 payments (1)

 4,549

 4,550

 1,422

 -

 -

 -

 10,521

 Total
 Contractual Mortgage Obligations

 $
 4,958

 $
 30,582

 $
 32,266

 $
 -

 $
 -

 $
 -

 $
 67,806

 (1)
 These
 amounts represent future interest payments related to mortgage payable obligations based
 on the interest rates specified in the associated debt agreement. Our mortgage debt outstanding
 as of December 31, 2024 bears interest based either
 on one-month AMERIBOR or one-month SOFR both 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 December 31,
 2024 were used.

 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 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 prescribed minimum debt service coverage and debt yield ratios, which if not met may also be achieved through principal paydowns
on the outstanding balance.

 We
used the initial advance from the Revolving Credit Facility to repay in full the outstanding principal balance of $30.8 million under
our nonrecourse revolving loan up to $60 million (the "Revolving Loan") with the same financial institution, which was also
secured by the same six wholly owned and consolidated limited-service hotels. The scheduled maturity of the Revolving Loan had previously
been extended from July 13, 2024 until July 31, 2024.

 As
of December 31, 2024, the outstanding principal balance of the Revolving Credit Facility was $30.8 million and its interest rate was
7.83%. Additionally, the same six wholly owned and consolidated limited-service hotels remained pledged as collateral and no additional
borrowings were available as of December 31, 2024.

 On
December 1, 2023, we entered into an interest rate cap contract at a cost of $44 with an unrelated financial institution in order to
reduce the effect of increases to the interest rate associated with the Revolving Loan. The interest rate cap contract had a notional
amount of $30.8 million, matured on July 13, 2024 and effectively capped AMERIBOR at 5.34%.

 In
connection with the Revolving Credit Facility, we simultaneously entered into an interest rate cap contract at a cost of $85 with an
unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving Credit
Facility. The interest rate cap contract has a notional amount of $30.8 million, matures on July 31, 2025 and effectively caps SOFR at
5.34%.

 Home2
Suites Mortgage Financings

 On
December 6, 2021 we entered into two cross-collateralized 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 bore interest at a rate of LIBOR plus 3.50%, subject to a floor of 3.75%, through June 30, 2023 at which time they
converted to an interest rate of AMERIBOR plus 3.50%, with a floor of 3.75%. As of December 31, 2024 the interest rate on the Home2 Suites
Mortgage Financings was 7.89%.

 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 provided for monthly interest-only
payments through December 31, 2023 and monthly payments of principal and interest of $0.1 million thereafter through its scheduled maturity
date of December 6, 2026. As of December 31, 2024, the outstanding principal balance of the Home2 Suites – Tukwila Loan was $16.0
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 provided for monthly interest-only
payments through December 31, 2023 and monthly payments of principal and interest of $0.1 million thereafter through its scheduled maturity
date of December 6, 2026. As of December 31, 2024, the outstanding principal balance of the Home2 Suites – Salt Lake City Loan
was $10.4 million.

 Certain
of our mortgage debt agreements also contain clauses providing for prepayment penalties. As of December 31, 2024, we were in compliance
with all of our financial covenants.

in Unconsolidated Affiliated Entities

Garden Inn Joint Venture

 On March 27, 2018, we and
Lightstone REIT II, 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 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 required to fund an aggregate of $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 December 31, 2024, the Hilton Garden Inn Joint Venture was in compliance with all of its financial covenants.

the years ended December 31, 2024 and 2023, we made aggregate capital contributions to the Hilton Garden Inn Joint Venture of $0.1 million
and $0.4 million, respectively. During the years ended December 31, 2024 and 2023, we received aggregate distributions from the
Hilton Garden Inn Joint Venture of $1.7 million and $0.3 million, respectively.

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.

 On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a development agreement (the "Development Agreement")
with an affiliate of the Advisor (the "Williamsburg Moxy Developer") pursuant to which the Williamsburg Moxy Developer was
paid a development fee equal to 3% of hard and soft costs, as defined in the Development Agreement, incurred in connection with the development
and construction of the Williamsburg Moxy Hotel. Additionally, on August 5, 2021, the Williamsburg Moxy Hotel Joint Venture obtained
construction financing for the Williamsburg Moxy Hotel as discussed below. Furthermore, the Advisor and its affiliates were reimbursed
for certain development-related costs attributable to the Williamsburg Moxy Hotel.

 The
Williamsburg Moxy Hotel was substantially completed and opened for business on March 7, 2023. In connection with the opening of
the hotel, including its food and beverage venues, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $2.3 million
during the year ended December 31, 2023. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.

the years ended December 31, 2024 and 2023, we made capital contributions to the Williamsburg Moxy Joint Venture of $0.1 million
and $1.6 million, respectively.

 Casualty
Loss, Net

 On
December 11, 2024, the Williamsburg Moxy Hotel suffered damage from a fire to one of its food and beverage venues located in an outdoor
garden area. As a result of the fire, the Williamsburg Moxy Hotel Joint Venture recognized a gross casualty loss of $1.0 million, consisting
of (i) the write-off of the carrying value of the damaged assets of $0.8 million plus associated remediation costs of $0.2 million. However,
the Williamsburg Moxy Hotel Joint Venture maintains property, general liability and business interruption insurance coverage under which
it has filed an insurance claim related to the damaged assets. While this insurance claim has not been finalized, the Williamsburg Moxy
Hotel Joint Venture did receive an initial advance of $0.5 million of insurance proceeds related to the claim for the damaged assets
during the first quarter of 2025, and therefore, reduced the gross casualty loss of $1.0 million by that amount resulting in the recognition
of a casualty loss, net of $0.5 million during the year ended December 31, 2024.

 As
noted above, the Williamsburg Moxy Hotel Joint Venture is still in the process of settling this insurance claim and it currently expects
to receive additional insurance recoveries associated with the damaged assets. Furthermore, the Williamsburg Moxy Hotel Joint Venture
currently intends to file another insurance claim related to the interruption of the operations for this food and beverage venue. However,
there can be no assurance that the Williamsburg Moxy Hotel Joint Venture will receive any additional recoveries from either of these
insurance claims.

 Moxy
Construction Loan

 On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility with a financial institution
for up to $77.0 million (the "Moxy Construction Loan") to fund certain of the development, construction and certain pre-opening
costs associated with the Williamsburg Moxy Hotel. The Moxy Construction Loan, which was scheduled to initially mature on February 5,
2024, was further extended to May 4, 2024. The Moxy Construction Loan was collateralized by the Williamsburg Moxy Hotel. The Moxy
Construction Loan provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective after June 30,
2023, the Moxy Construction Loan's interest rate converted from LIBOR plus 9.00%, with a floor of 9.50%, to SOFR plus 9.11%, with
a floor of 9.61%. The Moxy Construction Loan required monthly interest-only payments based on a rate of 7.50% and the excess was added
to the outstanding loan balance due at maturity. SOFR as of December 31, 2023 was 5.35%.

 For
the period from January 1, 2023 through March 7, 2023, $2.0 million of interest attributable to the Moxy Construction Loan
was capitalized to the carrying value of the Williamsburg Moxy Hotel while it was under construction.

 As
of December 31, 2023, the outstanding principal balance of the Moxy Construction Loan was $83.8 million (including $6.9 million
of excess interest added to principal) which was presented, net of deferred financing fees of $0.1 million on the condensed balance sheets
and was classified as mortgages payable, net.

 In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of loan fees and expenses and
accrued $0.8 million of loan exit fees, which were included in other liabilities on the condensed balance sheets as of December 31,
2023.

 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. SOFR as of December 31, 2024 was 4.53%. 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 aggregate proceeds from the Moxy Mortgage
Loans in connection with the payoff of the Moxy Construction Loan consisting of the outstanding indebtedness (principal and interest)
of $86.0 million and the aforementioned loan exit fees of $0.8 million, net of restricted escrows of $1.0 million.

 As
of December 31, 2024, the outstanding principal balance of the Moxy Mortgage Loans was $95.0 million, which is presented net of deferred
financing fees of $2.6 million on the condensed balance sheet and is classified as mortgages payable, net.

 In
connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture has provided certain interest and carry costs guarantees.
Furthermore, in connection with the Moxy Mortgage Loans, $3.2 million of the initial proceeds advanced at closing were used to fund reserves
for interest, real estate taxes and insurance. Additionally, in connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel
Joint Venture paid an aggregate of $2.8 million of loan fees and expenses and accrued $0.5 million of loan exit fees which are included
in other liabilities on the condensed balance sheet as of December 31, 2024.

 See
Note 3 of the Notes to Consolidated Financial Statements for additional information.

 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 (which are adjusted in order
to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), accretion of discounts
and amortization of premiums on debt investments and borrowings, mark-to-market adjustments included in net income (including gains or
losses incurred on assets held for sale), gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign
exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized
gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and
unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Certain of the
above adjustments are also made to reconcile net income (loss) to net cash provided by (used in) operating activities, such as for the
amortization of a premium and accretion of a discount on debt and securities investments, amortization of fees, any unrealized gains
(losses) on derivatives, securities or other investments, as well as other adjustments.

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

 We
believe that, because MFFO excludes costs that we consider more reflective of 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 loss in the calculation of FFO and MFFO. Items are presented net of noncontrolling
interest portions where applicable.

 For

 2024

 2023

 $
 (5,235
)

 $
 (6,838
)

 FFO adjustments:

 Adjustments to equity
 earnings from unconsolidated entities, net

 2,164

 1,940

 and amortization of real estate assets

 3,320

 4,105

 FFO

 (793
)

 MFFO adjustments:

 (Gain)/loss
 on sale of marketable securities (1)

 (54
)

 loss/(gain) on marketable equity securities (2)

 (60
)

 Adjustments to equity
 earnings from unconsolidated affiliated real estate entities

 -

 Mark-to-market
 adjustments (2)

 -

 MFFO – IPA
 recommended format

 $

 $
 (813
)

 $
 (5,235
)

 $
 (6,838
)

 Less: net loss attributable
 to noncontrolling interests

 -

 -

 Net loss applicable
 to Company's common shares

 $
 (5,235
)

 $
 (6,838
)

 Net loss per common
 share, basic and diluted

 $
 (0.41
)

 $
 (0.53
)

 FFO

 $

 $
 (793
)

 Less: FFO attributable
 to noncontrolling interests

 -

 -

 FFO attributable to
 Company's common shares

 $

 $
 (793
)

 FFO per common share,
 basic and diluted

 $
 0.02

 $
 (0.06
)

 MFFO – IPA recommended
 format

 $

 $
 (813
)

 Less: MFFO attributable
 to noncontrolling interests

 -

 -

 MFFO attributable to
 Company's common shares

 $

 $
 (813
)

 Weighted average number
 of common shares outstanding, basic and diluted

 12,886

 12,967

 (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:

 For the period

 October 5,

 2012

 (date of inception)

 through

 2024

 FFO attributable
 to Company's Common Shares

 $
 20,574

 Cumulative distributions
 declared

 $
 29,764

 FFO
attributable to our Common Shares for the year ended December 31, 2024 was $0.2 million and cash flow provided by operations was $2.6
million. FFO attributable to our Common Shares for the year ended December 31, 2023 was negative $0.8 million and cash flow used in operations
was $9.

 New
Accounting Pronouncements

 See
Note 2 of the Notes to Consolidated Financial Statements for further information.

 ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Value Plus REIT III, Inc. and Subsidiaries

 (a Maryland
corporation)

 Page

 Report of Independent
 Registered Public Accounting Firm

 Financial Statements:

 Consolidated Balance Sheets
 as of December 31, 2024 and 2023

 Consolidated Statements
 of Operations for the years ended December 31, 2024 and 2023

 Consolidated Statements
 of Comprehensive Loss for the years ended December 31, 2024 and 2023

 Consolidated Statements
 of Stockholders' Equity for the years ended December 31, 2024 and 2023

 Consolidated Statements
 of Cash Flows for the years ended December 31, 2024 and 2023

 Notes to Consolidated
 Financial Statements

 F- 1

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Directors and Stockholders of

Value Plus REIT III, Inc.

 Opinion
on the Financial Statements

 We have audited the accompanying consolidated balance sheets of Lightstone
Value Plus REIT III, Inc. and Subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated
statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the years then ended, and the related
notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results
of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted
in the United States of America.

 Basis for Opinion

 These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matter

 The critical audit matter communicated below is a matter arising from the
current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:
(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective,
or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.

 Investment Property and
Investments in Unconsolidated Affiliated Real Estate Entities – Impairment Evaluation

 As of December 31, 2024, the Company had investment property, net of accumulated
depreciation, of approximately $91.9 million and investments in unconsolidated affiliated real estate entities of approximately $16.8
million. As disclosed in Note 2 to the financial statements, the Company evaluates the recoverability of investment property at the lowest
identifiable level, the individual property level, and the recoverability of the investments in unconsolidated affiliated real estate
entities for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment property or the
investments in unconsolidated affiliated real estate entities may not be recoverable. The Company utilizes judgment to determine if the
severity of any single indicator, or the fact that there are a number of indicators of less severity that when combined, would result
in an indication that the individual property or an investment in an unconsolidated affiliated real estate entity may not be recoverable.

 F- 2

 The Company considers relevant facts and circumstances which may include
the significant underperformance of an investment property relative to historical or projected future operating results, as well as significant
negative industry, geographic, or economic trends. When such events or changes in circumstances are present, the Company assesses potential
impairment by comparing estimated undiscounted future operating cash flows expected to be generated over the holding period of the investment
property and from its eventual disposition to the carrying amount. The estimates include significant assumptions such as future operating
income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for
comparable properties. An investment property is impaired only if management's estimate of the fair value of the investment property
is less than the carrying value and not recoverable. The ultimate realization of the Company's investments in unconsolidated
affiliated real estate entities is dependent on a number of factors including the performance of that entity, including the underlying
investment property, and market conditions. If the Company determines that a decline in the value of the investments in unconsolidated
affiliated real estate entities is other than temporary, it will record an impairment charge.

 We identified the impairment evaluation as a critical
audit matter due to significant judgment made by management in identifying indicators of impairment and in determining the estimated recoverability
of investment property and the investments in unconsolidated affiliated real estate entities. This in turn led to a high degree of auditor
judgment, subjectivity, and audit effort in performing procedures to evaluate the reasonableness of management's significant estimates
and assumptions related to the impairment evaluation including identifying events and circumstances that exist that would indicate the
carrying amounts of investment property and investments in unconsolidated affiliated real estate entities may not be recoverable, as well
as future operating income, holding period, capitalization rates, residual values, entity performance and market conditions.

 Addressing the matter involved performing procedures and evaluating
audit evidence, in connection with forming our overall opinion on the financial statements. These procedures included assessing the design
of controls over the Company's impairment evaluation process. Our procedures also included, among others: (i) assessing the methodologies
applied; (ii) identifying the existence of any triggering events; (iii) comparing the estimated undiscounted cash flows to historical
operating results by property; and (iv) evaluating the reasonableness of significant estimates and assumptions utilized in determining
future operating income, the holding period, capitalization rates, and residual values and determining if they were reasonable considering
the past and current performance of the property and if consistent with evidence obtained in other areas of the audit. In addition, we
performed sensitivity analyses over significant estimates and assumptions including future operating income and residual values. We tested
the completeness and accuracy of the underlying data used by management in its evaluation. We held discussions with management about the
current status of certain properties to understand how management's significant estimates and assumptions are developed considering
potential future market conditions. In addition, we evaluated the mathematical accuracy of the calculations included in the Company's
evaluation.

 /s/
 EisnerAmper LLP

 We
have served as the Company's auditor since 2012.

 EISNERAMPER
LLP

 Iselin,
NJ

 March
26, 2025

 F- 3

BALANCE SHEETS

in thousands, except per share data)

 2024

 2023

 Assets

 Investment property:

 Land
 and improvements

 $
 21,753

 $
 21,722

 Building
 and improvements

 92,803

 92,493

 Furniture
 and fixtures

 17,083

 16,960

 Construction
 in progress

 Gross
 investment property

 131,662

 131,202

 Less:
 accumulated depreciation

 ( 39,735
)

 ( 36,479
)

 Net
 investment property

 91,927

 94,723

 in unconsolidated affiliated real estate entities

 16,770

 20,240

 Cash
 and cash equivalents

 6,175

 3,848

 securities, available for sale

 5,858

 7,196

 Accounts
 receivable and other assets

 1,222

 1,971

 Total
 Assets

 $
 121,952

 $
 127,978

 Liabilities
 and Stockholders' Equity

 Accounts
 payable and other accrued expenses

 $
 2,476

 $
 2,511

 Mortgages
 payable, net

 56,674

 57,161

 payable

 -

 Due
 to related parties

 2,003

 Total
 Liabilities

 61,153

 61,005

 Commitments
 and Contingencies

 Stockholders'
 Equity:

 Company's
 stockholders' equity:

 Preferred stock, $ 0.01 par value; 50.0 million shares authorized, none issued and outstanding

 -

 -

 Common stock, $ 0.01 par value; 200.0 million shares authorized, 12.8 million and 12.9 million shares issued and outstanding, respectively

 Additional
 paid-in-capital

 109,478

 110,462

 Accumulated
 other comprehensive loss

 ( 120
)

 ( 166
)

 Accumulated
 deficit

 ( 60,779
)

 ( 55,544
)

 Total
 Company stockholders' equity

 48,707

 54,881

 interests

 Total
 Stockholders' Equity

 60,799

 66,973

 Total
 Liabilities and Stockholders' Equity

 $
 121,952

 $
 127,978

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

 F- 4

STATEMENTS OF OPERATIONS

in thousands, except per share data)

 For
 the Years Ended

 2024

 2023

 $
 29,880

 $
 29,088

 Expenses:

 Property operating expenses

 20,439

 20,015

 Real estate taxes

 1,352

 1,172

 General and administrative
 costs

 2,884

 2,606

 Depreciation and amortization

 3,320

 4,105

 Total expenses

 27,995

 27,898

 Interest expense

 ( 5,252
)

 ( 5,361
)

 Loss from investments in unconsolidated affiliated
 real estate entities

 ( 2,124
)

 ( 3,308
)

 Other income, net

)

)

 Less: net loss attributable to noncontrolling
 interests

 -

 -

 Net loss applicable
 to Company's common shares

 $
)

 $
)

 Net loss per Company's
 common share, basic and diluted

 $
 ( 0.41
)

 $
 ( 0.53
)

 Weighted average number
 of common shares outstanding, basic and diluted

 12,886

 12,967

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

 F- 5

STATEMENTS OF COMPREHENSIVE LOSS

in thousands)

 For
 the Years Ended

 2024

 2023

 $
)

 $
)

 Other comprehensive income:

 Holding
 gain on marketable securities, available for sale

 Other comprehensive income

 Comprehensive loss

 ( 5,189
)

 ( 6,754
)

 Less: Comprehensive loss
 attributable to noncontrolling interests

 -

 -

 Comprehensive loss attributable
 to the Company's common shares

 $
 ( 5,189
)

 $
 ( 6,754
)

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

 F- 6

STATEMENTS OF STOCKHOLDERS' EQUITY

in thousands)

 Stock

 Additional
 Paid-In

 Accumulated

 Other Comprehensive

 Accumulated

 Total

 Total

 Shares

 Capital

 Loss

 Deficit

 Interests

 Equity

 BALANCE,
 December 31, 2022

 13,043

 $

 $
 111,585

 $
)

 $
 ( 44,818
)

 $

 $
 78,739

 Net
 loss

 -

 -

 -

 -

)

 -

)

 Other
 comprehensive income

 -

 -

 -

 -

 -

 declared (a)

 -

 -

 -

 -

 ( 3,888
)

 -

 ( 3,888
)

 Redemption
 and cancellation of common shares

 ( 111
)

 ( 1
)

 ( 1,123
)

 -

 -

 -

 ( 1,124
)

 BALANCE,
 December 31, 2023

 12,932

 110,462

 ( 166
)

 ( 55,544
)

 66,973

 (a) Distributions
 per shares were $0.30

 Net
 loss

 -

 -

 -

 -

)

 -

)

 Other
 comprehensive income

 -

 -

 -

 -

 -

 Redemption
 and cancellation of common shares

 ( 99
)

 ( 1
)

 ( 984
)

 -

 -

 -

 ( 985
)

 BALANCE,
 December 31, 2024

 12,833

 $

 $
 109,478

 $
 ( 120
)

 $
 ( 60,779
)

 $

 $
 60,799

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

 F- 7

STATEMENTS OF CASH FLOWS

in thousands)

 For
 the Years Ended

 2024

 2023

 CASH FLOWS FROM OPERATING ACTIVITIES:

 $
)

 $
)

 Adjustments to reconcile
 net loss to net cash provided by/(used in) operating activities:

 Loss from investments
 in unconsolidated affiliated real estate entities

 2,124

 3,308

 Depreciation and amortization

 3,320

 4,105

 Amortization of deferred
 financing costs

 Other non-cash adjustments

 Changes in assets and
 liabilities:

 Decrease/(increase)
 in accounts receivable and other assets

 ( 570
)

 Increase in accounts
 payable and other accrued expenses

 ( 35
)

 ( 450
)

 Increase
 in due to related parties

 1,462

 Net
 cash provided by/(used in) operating activities

 2,550

 ( 9
)

 CASH FLOWS FROM INVESTING
 ACTIVITIES:

 Purchase of investment
 property

 ( 460
)

 ( 994
)

 Proceeds from sale of
 marketable securities

 5,030

 7,828

 Purchase of marketable
 securities

 ( 3,596
)

 ( 11,606
)

 Investments in unconsolidated
 affiliated real estate entities

 ( 197
)

 ( 2,090
)

 from unconsolidated affiliated real estate entities

 1,721

 Net
 cash provided by/(used in) investing activities

 2,498

 ( 6,564
)

 CASH FLOWS FROM FINANCING
 ACTIVITIES:

 Proceeds from mortgage
 financing

 -

 Payments on mortgages
 payable

 ( 31,152
)

 ( 3,729
)

 Payment of loan fees
 and expenses

 ( 463
)

 ( 194
)

 Distributions paid to
 Company's common stockholders

 ( 970
)

 ( 2,918
)

 Redemption
 and cancellation of common shares

 ( 985
)

 ( 1,124
)

 Net
 cash used in financing activities

 ( 2,726
)

 ( 7,965
)

 Change in cash, cash equivalents
 and restricted cash

 2,322

 ( 14,538
)

 Cash,
 cash equivalents and restricted cash, beginning of year

 3,853

 18,391

 Cash,
 cash equivalents and restricted cash, end of year

 $
 6,175

 $
 3,853

 Supplemental cash flow information
 for the periods indicated is as follows:

 Cash
 paid for interest

 $
 5,033

 $
 5,041

 Cash
 paid for taxes

 $

 $

 declared, but not paid

 $
 -

 $

 in unconsolidated affiliated real estate entities in due to related parties

 $

 $
 -

 Holding
 gain on marketable securities, available for sale

 $

 $

 The
 following is a summary of the Company's cash, cash equivalents, and restricted cash total as presented in our statements of
 cash flows for the periods presented:

 Cash and cash equivalents

 $
 6,175

 $
 3,848

 Restricted
 cash (included in accounts receivable and other assets)

 -

 Total
 cash, cash equivalents and restricted cash

 $
 6,175

 $
 3,853

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

 F- 8

 NOTES

 For

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

 1.
Organization and Structure

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 (the "U.S.") federal income tax purposes
beginning with the taxable year ended December 31, 2015.

REIT III is structured as an umbrella partnership REIT, or UPREIT, and substantially all of its current and future business will be conducted
through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the "Operating Partnership"). As of December 31,
2024, Lightstone REIT III had a 99 % general partnership interest in the Operating Partnership's common units.

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 these consolidated financial statements 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, the Company owns, operates and develops commercial properties and makes real estate-related investments. Since
its inception, the Company has 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. Although the Company has historically acquired hotels, it has
and may continue to purchase other types of real estate. Assets other than hotels may include, without limitation, office buildings,
shopping centers, business and industrial parks, manufacturing facilities, single-tenant properties, multifamily residential properties,
student housing properties, warehouses and distribution facilities and medical/life sciences office buildings. The Company's real
estate investments are held by it alone or jointly with other parties. In addition, the Company may invest up to 20 % of its 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 it may acquire directly. Although most of its investments are these types, the Company may invest
in whatever types of real estate or real estate-related investments that it believes are in its best interests. The Company evaluates
all of its real estate investments as one operating segment. The Company currently intends to hold its investments until such time as
it determines that a sale or other disposition appears to be advantageous to achieve its investment objectives or until it appears that
the objectives will not be met.

 As
of December 31, 2024, the Company (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"), which owns one limited-service hotel, and (iii) held an unconsolidated 25 % membership interest in Bedford
Avenue Holdings LLC (the "Williamsburg Moxy Hotel Joint Venture"), which owns one full-service hotel. The Company accounts
for its 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 the Company and Lightstone Value Plus REIT II, Inc. (Lightstone REIT
II), a related party REIT, which is sponsored by The Lightstone Group LLC (the "Sponsor"). The Company 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 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 the Company and Lightstone Value Plus REIT IV, Inc. ("Lightstone
REIT IV"), a related party REIT, which is sponsored by the Sponsor. The Company and Lightstone REIT IV have 25 % and 75 % membership
interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.

 The
Company's 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. The 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 a majority
owner of the equity interests of the Sponsor, which served as the Company's sponsor during its 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 the Company's
board of directors (the "Board of Directors"), the Advisor has primary responsibility for making investment decisions on
behalf of the Company and managing its 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 an aggregate consideration of $ 12.1 million in connection with the Offering.
Mr. Lichtenstein also acts as the Company's Chairman and Chief Executive Officer. As a result, he exerts influence over but
does not control Lightstone REIT III or the Operating Partnership.

 F- 9

 NOTES

 For

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

 The
Company has no employees. The Company is dependent on the Advisor and certain affiliates of the Sponsor for performing a full range of
services that are essential to it, including asset management, property management (excluding its 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 its affiliates are unable
to provide these services to the Company, it would be required to provide the services itself or obtain the services from other parties.

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

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 in the Operating Partnership.
The Advisor has the right to convert its Common Units into cash or, at the Company's option, an equal number of its Common Shares.

 Special
Limited Partner

 In
connection with the Company's Offering, the Special Limited Partner purchased from the Operating Partnership an aggregate of 242
Subordinated Participation Interests at a cost of $ 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 will thus receive 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 the Company
makes to its stockholders, but only after its stockholders have received a stated preferred return. However, from inception through December
31, 2024, there have been no distributions declared 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 the Company's
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

 The
Company's Advisor and certain affiliates of the Sponsor, including the Special Limited Partner, are related parties of the Company
as well as the other public REITs also sponsored and/or advised by these entities. Pursuant to the terms of various agreements, these
entities are entitled to compensation and reimbursement for services and costs incurred for services related to the investment, development,
management and disposition of the Company's 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. See Note 7 – Related Party Transactions for additional information.

 2.
Summary of Significant Accounting Policies

 Principles
of Consolidation and Basis of Presentation

 The
consolidated financial statements include the accounts of Lightstone REIT III and the Operating Partnership and its subsidiaries (over
which Lightstone REIT III exercises financial and operating control). As of December 31, 2024, the Company had a 99 % general partnership
interest in the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation.

 F- 10

 NOTES

 For

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

 The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America ("GAAP"). GAAP requires the Company's management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses
during a reporting period. The most significant assumptions and estimates relate to the valuation of investment property and investments
in other unconsolidated affiliated real estate entities. Application of these assumptions requires the exercise of judgment as to future
uncertainties and, as a result, actual results could differ from these estimates.

in other unconsolidated affiliated real estate entities where the Company has the ability to exercise significant influence, but does
not exercise financial and operating control and is not considered to be the primary beneficiary are accounted for using the equity method.

 Cash,
Cash Equivalents and Restricted Cash

 The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

 As
required by the Company's lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate
taxes, debt service payments and other reserves for certain of our consolidated properties. Capital reserves are typically utilized for
non-operating expenses such as major capital expenditures. Alternatively, a lender may require its own formula for an escrow of capital
reserves.

 Derivative
Financial Instruments

 The
Company utilizes derivative financial instruments to reduce interest rate risk. The Company does not hold or issue derivative financial
instruments for trading purposes. The Company recognizes all derivatives as either assets or liabilities in the consolidated balance
sheets and measures those instruments at fair value. Changes in fair value of those instruments are recorded in other income, net on
the consolidated statements of operations.

Securities

securities consist of equity and debt securities that are designated as available-for-sale. The Company's marketable equity securities
are recorded at fair value and unrealized holding gains and losses are recognized on the consolidated statements of operations.

 The
Company may be exposed to credit losses through its available-for-sale debt securities. Unrealized losses or impairments resulting from
the amortized cost basis of any available-for-sale debt security exceeding its fair value are evaluated for identification of credit
and non-credit related factors. Any difference between the fair value of the debt security and the amortized cost basis not attributable
to credit related factors are reported in other comprehensive income. A credit-related impairment is recognized as an allowance on the
balance sheet with a corresponding adjustment to earnings. When evaluating the investments for impairment at each reporting period, the
Company reviews factors such as the extent of the unrealized loss, current and future economic market conditions and the economic and
financial condition of the issuer and any changes thereto.

 Realized
gains or losses resulting from the sale of these securities are determined based on the specific identification of the securities sold.

 Revenue
Recognition

consist of amounts derived from hotel operations, including occupied hotel rooms and sales of food, beverage and other ancillary services
and are presented on a disaggregated basis below. Revenues are recorded net of any sales or occupancy tax collected from our guests.

 Room
revenue is generated through contracts with customers whereby the customers agree to pay a daily rate for the right to use a hotel room.
The Company's contractual performance obligations are fulfilled at the end of the day that the customer is provided the room and
revenue is recognized daily at the contract rate. Payment from the customer is secured at the end of the contract upon check-out by the
customer from our hotels. The Company participates in frequent guest programs sponsored by the brand owners of our hotels whereby the
brand owner allows guests to earn loyalty points during their hotel stay. The Company recognizes revenue at the amount earned that it
will receive from the brand owner when a guest redeems their loyalty points by staying at one of the Company's hotels.

 F- 11

 NOTES

 For

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

 Revenue
from food, beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a
hotel room and revenue is recognized when these goods or services are provided to the customer and the Company's contractual performance
obligations have been fulfilled.

 Some
contracts for rooms, food, beverage or other services require an upfront deposit which is recorded as deferred revenues (or contract
liabilities) and recognized once the performance obligations are satisfied. The contractual liabilities are not significant.

 The
Company notes no significant judgments regarding the recognition of room, food and beverage or other revenues.

 For

 2024

 2023

 Room

 $
 28,912

 $
 28,197

 Food, beverage and other

 Total revenues

 $
 29,880

 $
 29,088

 Accounts
Receivable

 Accounts
receivable primarily represents receivables from hotel guests who occupy hotel rooms and utilize hotel services. The Company maintains
an allowance for credit losses sufficient to cover estimated potential credit losses.

in Real Estate

 Accounting
for Asset Acquisitions

 When
the Company makes an investment in real estate assets, the cost of real estate assets acquired in an asset acquisition are allocated
to the acquired tangible assets, consisting of land, building and improvements, furniture and fixtures and identified intangible assets
and liabilities, consisting of the value of above-market and below-market leases, acquired in-place leases, and the value of tenant relationships,
based in each case on their relative fair values, at the date of acquisition, based on evaluation of information including independent
appraisals that may be obtained in connection with the acquisition or financing of the respective property and other relevant market
data. Fees incurred related to asset acquisitions are capitalized as part of the cost of the investment.

 Impairment
Evaluation

 The
Company evaluates its investments in real estate assets for potential impairment whenever events or changes in circumstances indicate
that the undiscounted projected cash flows are less than the carrying amount for a particular property. The Company evaluates the recoverability
of its investments in real estate assets at the lowest identifiable level, which is primarily at the individual property level. No single
indicator would necessarily result in the Company preparing an estimate to determine if an individual property's future undiscounted
cash flows are less than its carrying value. The Company uses judgment to determine if the severity of any single indicator, or the fact
there are a number of indicators of less severity that when combined, would result in an indication that a property requires an estimate
of the undiscounted cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant
underperformance relative to historical or projected future operating results and significant negative industry, geographic or economic
trends. The undiscounted projected cash flows used for the impairment analysis are subjective and require the Company to use its
judgment and the determination of estimated fair value are based on the Company's plans for the respective assets and the Company's
views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable
trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. An impairment
loss is recognized only if the carrying amount of a property is not recoverable and exceeds its fair value. No impairment losses were
recorded during the years ended December 31, 2024 and 2023.

and Amortization

 Depreciation expense is computed based on the straight-line
method over the estimated useful life of the applicable real estate asset. The Company generally uses estimated useful lives of up to
 39 years for buildings, 15 years for land improvements and building improvements and 5 to 10 years for furniture and fixtures. Maintenance
and repairs are charged to expense as incurred.

 Deferred
Costs

 The
Company capitalizes initial direct costs associated with financing activities. The costs are capitalized upon the execution of the loan,
presented in the consolidated balance sheets as a direct deduction from the carrying value of the corresponding loan and amortized over
the initial term of the corresponding loan. Amortization of deferred loan costs will begin in the period during which the loan is originated
using the effective interest method over the term of the loan.

 F- 12

 NOTES

 For

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

in Unconsolidated Entities

 The
Company evaluates all investments in other entities for consolidation. The Company considers its percentage interest in the joint venture,
evaluation of control and whether a variable interest entity ("VIE") exists when determining whether or not the investment
qualifies for consolidation or if it should be accounted for as an unconsolidated investment under the equity method of accounting.

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

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

 Tax
Status and Income Taxes

 The
Company elected to be taxed and qualify as a REIT commencing with the taxable year ended December 31, 2015. As a REIT, the Company generally
will not be subject to U.S. federal income tax on its net taxable income that it distributes currently to its stockholders. To maintain
its REIT qualification under the Internal Revenue Code of 1986, as amended, the Company must meet a number of organizational and operational
requirements, including a requirement that it annually distribute to its stockholders at least 90 % of its REIT taxable income (which
does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and
excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify
for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from
qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially
adversely affect the Company's net income and net cash available for distribution to stockholders if any. Additionally, even if
the Company continues to qualify as a REIT for U.S. federal income tax purposes, it may still be subject to some U.S. federal, state
and local taxes on its taxable income and property and to U.S. federal income taxes and excise taxes on its undistributed taxable income,
if any.

 To
maintain its qualification as a REIT, the Company engages in certain activities through a taxable REIT subsidiary ("TRS"),
including when it acquires a hotel, it usually establishes a new TRS and enters into an operating lease agreement for the hotel. As such,
the Company is subject to U.S. federal and state income taxes and franchise taxes from these activities.

 As
of December 31, 2024 and 2023, the Company had no material uncertain income tax positions.

 Fair
Value of Financial Instruments

 The
carrying amounts of cash and cash equivalents, accounts receivable and other assets, accounts payable and other accrued expenses, distributions
payable and due to related parties approximate their fair values because of the short maturity of these instruments.

 The
estimated fair value of the Company's mortgages payable as of both December 31, 2024 and 2023 approximated their carrying values because
they bear interest at floating rates.

 Concentration
of Risk

 As
of December 31, 2024 and 2023,
 the Company had cash deposited in certain financial institutions in excess of U.S. federally insured levels. The Company regularly
monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in
cash and cash equivalents.

 F- 13

 NOTES

 For

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

 Basic
and Diluted Net Earnings per Common Share

 Net
earnings per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding.

 Current
Environment

 The
Company's 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, its 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 and recession.

 The
Company's overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior.
Worsening economic conditions, increases in costs due to inflation, higher interest rates, labor and supply chain challenges and other
changes in economic conditions could adversely affect the Company's future results from operations and its financial condition.

 Segment
Disclosure

 The
Company's operations are reported within one reportable segment and constitutes all of the consolidated entities which are reported
in the consolidated financial statements. Through the Company's Operating Partnership, it owns and operates commercial properties
and makes other real estate-related investments, principally in the U.S.

 The
Company's chief operating decision maker ("CODM") is the Chief Executive Officer. The CODM assesses entity-wide operating
results and performance and decides how to allocate resources based on consolidated net income/(loss) which is reported on the consolidated
statements of operations. Additionally, the measure of segment assets is reported on the consolidated balance sheets as total assets.

 The
accounting policies for the reportable segment are the same as those described above. The CODM uses net income/(loss) to evaluate income
generated from assets to assess performance and make decisions about allocating resources. The CODM also uses net income/(loss) to monitor
the budget versus actual results, which is used in assessing the Company's entity-wide operating results and performance.

 The
revenue, costs and expenses, and net income/(loss) for the reportable segment are the same as those presented on the consolidated statements
of operations.

 Significant
expense categories, including property operating expenses, general and administrative costs, depreciation and amortization and interest,
are included on the Company's consolidated statements of operations.

 New
Accounting Pronouncements

 In
November 2023, the Financial Accounting Standards Board (the "FASB") issued an accounting standards update which is intended
to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments
will require entities to disclose significant segment expenses that are regularly provided to the CODM and included within segment profit
and loss, as well as the title and position of the CODM. The Company adopted this standard effective January 1, 2024, noting that
it did not have a material impact on its consolidated financial statements.

 In
December 2023, the FASB issued an accounting standards update which includes amendments that further enhance income tax disclosures,
primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update
is effective for annual periods beginning after December 15, 2024. The adoption of this standard will not have a material impact on the
Company's consolidated financial statements.

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

 F- 14

 NOTES

 For

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

 3.
Investments in Unconsolidated Affiliated Real Estate Entities

 The
entities below are partially owned by the Company. The Company accounts for these investments under the equity method of accounting as
the Company exercises significant influence, but does not exercise financial and operating control over these entities. A summary of
the Company's investments in unconsolidated affiliated real estate entities is as follows:

 As of

 Entity

 Date of
 Ownership

 Ownership %

 2024

 2023

 Hilton Garden Inn Joint Venture

 March 27, 2018

 %

 $
 7,601

 $
 9,405

 Williamsburg Moxy Hotel Joint Venture

 August 5, 2021

 %

 9,169

 10,835

 Total investments in unconsolidated affiliated real estate entities

 $
 16,770

 $
 20,240

Garden Inn Joint Venture

 On
March 27, 2018, the Company and Lightstone REIT II, a related party REIT also sponsored by the Company's 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. The Company 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 will fund $ 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.

 The
Company and Lightstone REIT II each have a 50 % co-managing membership interest in the Hilton Garden Inn Joint Venture. The
Company accounts for its membership interest in the Hilton Garden Inn Joint Venture in accordance with the equity method of accounting
because it exerts significant influence over but does 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 December 31, 2024, the Hilton Garden Inn Joint Venture is in compliance with respect to all of its financial covenants.

the years ended December 31, 2024 and 2023, the Company made aggregate capital contributions to the Hilton Garden Inn Joint Venture of
$ 0.1 million and $ 0.4 million, respectively. During the years ended December 31, 2024 and 2023, the Company received aggregate
distributions from the Hilton Garden Inn Joint Venture of $ 1.7 million and $ 0.3 million, respectively.

Garden Inn Joint Venture Financial Information

 The
following table represents the condensed statements of operations for the Hilton Garden Inn Joint Venture:

 For

 2024

 For

 2023

 $
 13,426

 $
 12,417

 Property operating expenses

 8,225

 7,571

 General and administrative costs

 Depreciation and amortization

 2,404

 2,429

 Operating income

 2,727

 2,278

 Interest expense and other,
 net

 ( 3,041
)

 ( 2,972
)

 $
 ( 314
)

 $
 ( 694
)

 Company's share of net loss (50%)

 $
 ( 157
)

 $
 ( 347
)

 F- 15

 NOTES

 For

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

 The
following table represents the condensed balance sheets for the Hilton Garden Inn Joint Venture:

 As of

 As of

 2024

 2023

 Investment property, net

 $
 45,833

 $
 48,001

 Cash

 1,107

 1,741

 Other assets

 1,334

 1,816

 Total assets

 $
 48,274

 $
 51,558

 Mortgage payable, net

 $
 32,308

 $
 32,273

 Other liabilities

 1,364

 1,075

 Members' capital

 14,602

 18,210

 Total liabilities and
 members' capital

 $
 48,274

 $
 51,558

Moxy Hotel Joint Venture

 On
August 5, 2021, the Company formed a joint venture with Lightstone REIT IV, a related party REIT also sponsored by the Company's
Sponsor, pursuant to which the Company acquired 25 % of Lightstone REIT IV's membership interest in 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, the Company and Lightstone REIT IV have 25 % and 75 % membership interests, respectively, in the Williamsburg Moxy Hotel Joint
Venture. The Company has determined that the Williamsburg Moxy Hotel Joint Venture is a VIE and the Company is not the primary beneficiary,
as it was determined that Lightstone REIT IV is the primary beneficiary. Therefore, the Company accounts for its membership interest
in the Williamsburg Moxy Hotel Joint Venture in accordance with the equity method because it exerts significant influence over but does
not control the Williamsburg Moxy Hotel Joint Venture. Earnings, capital contributions and distributions of earnings from the Williamsburg
Moxy Hotel Joint Venture are made on a pro rata basis in proportion to each member's equity interest percentage pursuant to the
terms of the Williamsburg Moxy Hotel Joint Venture's operating agreement.

 The
Williamsburg Moxy Hotel was substantially completed and opened for business on March 7, 2023. In connection with the opening of
the hotel, including its food and beverage venues, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $ 2.3
million during the year ended December 31, 2023. Pre-opening costs generally consist of non-recurring personnel, marketing
and other costs.

the years ended December 31, 2024 and 2023, the Company made capital contributions to the Williamsburg Moxy Joint Venture of $ 0.1 million
and $ 1.6 million, respectively.

 Casualty
Loss, Net

 On
December 11, 2024, the Williamsburg Moxy Hotel suffered damage from a fire to one of its food and beverage venues located in an outdoor
garden area. As a result of the fire, the Williamsburg Moxy Hotel Joint Venture recognized
a gross casualty loss of $ 1.0 million, consisting of (i) the write-off of the carrying value of the damaged assets of $ 0.8 million plus
associated remediation costs of $ 0.2 million. However, the Williamsburg Moxy Hotel Joint Venture maintains property, general liability
and business interruption insurance coverage under which it has filed an insurance claim related to the damaged assets. While this insurance
claim has not been finalized, the Williamsburg Moxy Hotel Joint Venture did receive an initial advance of $ 0.5 million of insurance proceeds
related to the claim for the damaged assets during the first quarter of 2025, and therefore, reduced the gross casualty loss of $ 1.0
million by that amount resulting in the recognition of a casualty loss, net of $ 0.5 million during the year ended December 31, 2024.

 As
noted above, the Williamsburg Moxy Hotel Joint Venture is
still in the process of settling this insurance claim and it currently expects to receive additional insurance recoveries associated
with the damaged assets. Furthermore, the Williamsburg Moxy Hotel Joint Venture currently intends to file another insurance claim related
to the interruption of the operations for this food and beverage venue. However, there can be no assurance that the Williamsburg Moxy
Hotel Joint Venture will receive any additional recoveries from either of these insurance claims.

 F- 16

 NOTES

 For

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

 Moxy
Construction Loan

 On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility with a financial institution
for up to $ 77.0 million (the "Moxy Construction Loan") to fund certain of the development, construction and certain pre-opening
costs associated with the Williamsburg Moxy Hotel. The Moxy Construction Loan, which was scheduled to initially mature on February 5,
2024, was further extended to May 4, 2024. The Moxy Construction Loan was collateralized by the Williamsburg Moxy Hotel. The Moxy
Construction Loan provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective after June 30,
2023, the Moxy Construction Loan's interest rate converted from LIBOR plus 9.00%, with a floor of 9.50%, to SOFR plus 9.11%, with
a floor of 9.61%. The Moxy Construction Loan required monthly interest-only payments based on a rate of 7.50 % and the excess added
to the outstanding loan balance due at maturity. SOFR as of December 31, 2024 and 2023 was 4.53 % and 5.35 %, respectively.

 As
of December 31, 2023, the outstanding principal balance of the Moxy Construction Loan was $ 83.8 million (including $ 6.9 million
of excess interest added to principal) which was presented, net of deferred financing fees of $ 0.1 million, on the condensed balance
sheets and was classified as mortgages payable, net.

 For
the period from January 1, 2023 through March 7, 2023, $ 2.0 million of interest attributable to the Moxy Construction
Loan was capitalized to the carrying value of the Williamsburg Moxy Hotel while it was under construction.

 In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $ 3.7 million of loan fees and expenses
and accrued $ 0.8 million of loan exit fees which were included in other liabilities on the condensed balance sheet as of December 31,
2023.

 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 ( 9.63 % as of December 31, 2024). 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 aggregate proceeds from the Moxy Mortgage
Loans in connection with the payoff of the Moxy Construction Loan consisting of the outstanding indebtedness (principal and interest)
of $ 86.0 million and the aforementioned accrued loan exit fees of $ 0.8 million, net of restricted escrows of $ 1.0 million.

 As
of December 31, 2024, the outstanding principal balance of the Moxy Mortgage Loans was $ 95.0 million which is presented net of deferred
financing fees of $ 2.6 million on the condensed balance sheet and is classified as mortgages payable, net.

 In
connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture has provided certain interest and carry costs guarantees.
Furthermore, in connection with the Moxy Mortgage Loans, $ 3.2 million of the initial proceeds advanced at closing were used to fund reserves
for interest, real estate taxes and insurance. Additionally, in connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel
Joint Venture paid an aggregate of $ 2.8 million of loan fees and expenses and accrued $ 0.5 million of loan exit fees which are included
in other liabilities on the condensed balance sheet as of December 31, 2024.

 F- 17

 NOTES

 For

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

Moxy Hotel Joint Venture Financial Information

 The
following table represents the condensed statements of operations for the Williamsburg Moxy Joint Venture:

 For
 the

 2024

 For
 the

 2023

 $
 29,697

 $
 23,336

 Property operating expenses

 21,574

 18,820

 Pre-opening costs

 -

 2,339

 General and administrative costs

 Casualty loss, net

 -

 Depreciation and amortization

 3,693

 2,905

 Operating income/(loss)

 3,716

 ( 981
)

 Interest expense

 ( 11,426
)

 ( 10,860
)

 $
 ( 7,710
)

 $
 ( 11,841
)

 Company's share of net loss (25%)

 $
 ( 1,927
)

 $
 ( 2,961
)

 Additional
 depreciation and amortization expense (1)

 ( 40
)

 -

 Company's net
 loss from investment

 $
 ( 1,967
)

 $
 ( 2,961
)

 (1)
 Additional depreciation and amortization expense relates to the amortization of the difference between the cost of the interest in the Williamsburg Moxy Hotel Joint Venture and the amount of the underlying equity in net assets of the Williamsburg Moxy Hotel Joint Venture

 The
following table represents the condensed balance sheets for the Williamsburg Moxy Hotel Joint Venture:

 As of

 As of

 2024

 2023

 Investment property, net

 $
 122,370

 $
 126,603

 Cash

 6,222

 3,453

 Other assets

 6,131

 2,385

 Total assets

 $
 134,723

 $
 132,441

 Mortgages payable, net

 $
 92,416

 $
 83,666

 Other liabilities

 6,773

 6,023

 Members' capital

 35,534

 42,752

 Total liabilities and
 members' capital

 $
 134,723

 $
 132,441

 4.
Marketable Securities and Fair Value Measurements

Securities

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

 As
 of December 31, 2024

 Adjusted

 Cost

 Gross

 Gains

 Gross

 Losses

 Fair
 Value

 Marketable Securities:

 Equity securities:

 Preferred Equity Securities

 $

 $

 $
 -

 $

 Mutual Funds

 4,715

 -

 -

 4,715

 5,225

 -

 5,232

 Debt
 securities:

 Corporate Bonds

 -

 ( 120
)

 Total

 $
 5,971

 $

 $
 ( 120
)

 $
 5,858

 F- 18

 NOTES

 For

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

 As
 of December 31, 2023

 Adjusted

 Cost

 Gross

 Gains

 Gross

 Losses

 Fair
 Value

 Marketable Securities:

 Equity securities:

 Preferred Equity Securities

 $
 3,456

 $

 $
 ( 4
)

 $
 3,466

 Mutual Funds

 3,150

 -

 -

 3,150

 6,606

 ( 4
)

 6,616

 Debt
 securities:

 Corporate Bonds

 -

 ( 166
)

 Total

 $
 7,352

 $

 $
 ( 170
)

 $
 7,196

 As
of December 31, 2024, the Company has not recognized an allowance for expected credit losses related to available-for-sale debt securities
as the Company has not identified any unrealized losses for these investments attributable to credit factors. The Company's unrealized
loss on investments in corporate bonds was primarily caused by recent rising interest rates. The Company does not intend to sell the
investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized
cost basis.

 The
Company may sell certain of its investments in marketable debt securities prior to their stated maturities for strategic purposes, in
anticipation of credit deterioration, or for duration management.

 Fair
Value Measurements

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

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

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

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

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

 The
Company's mutual funds were classified as Level 1 assets and the Company's preferred equity securities, corporate bonds and
interest rate cap contract were classified as Level 2 assets. There were no transfers between the level classifications during the years
ended December 31, 2024 and 2023.

 The
fair values of the Company's investments in mutual funds are measured using quoted prices in active markets for identical assets
and its preferred equity securities and corporate bonds are measured using readily available quoted prices for these securities; however,
the markets for these securities are not active. The fair value of the Company's interest rate cap contract is measured using other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

 F- 19

 NOTES

 For

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

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

 As
 of

 2024

 Due in 1 year

 $
 -

 Due in 1 year through 5 years

 -

 Due in 5 year through 10 years

 -

 Due after
 10 years

 Total

 $

 The
Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized
at fair value.

 5.
Mortgages Payable, Net

 Mortgages
payable, net consisted of the following:

 Description

 Interest Rate

 Weighted
 Average
 Interest Rate
 2024

 Maturity
 Date

 Due at
 Maturity

 As of
 2024

 As of
 2023

 Revolving Loan

 AMERIBOR + 3.15% (floor of 4.00%)

 8.66
 %

 Repaid in full

 $
 -

 $
 -

 $

 Revolving Credit Facility

 SOFR + 3.30% (floor of 6.64%)

 8.36
 %

 July 2027

 -

 Home2 Suites Tukwila Loan

 AMERIBOR + 3.50% (floor of 3.75%)

 8.87
 %

 December 2026

 15,549

 16,023

 16,210

 Home2 Suites Salt Lake City Loan

 AMERIBOR + 3.50% (floor of 3.75%)

 8.87
 %

 December 2026

 10,110

 10,418

 10,540

 Total mortgages payable

 8.59
 %

 $
 56,503

 57,285

 57,594

 Less: Deferred financing costs

 ( 611
)

 ( 433
)

 Total mortgages payable, net

 $
 56,674

 $
 57,161

 SOFR
as of December 31, 2024 was 4.53 %. AMERIBOR as
of December 31, 2024 and 2023 was 4.39 % and 5.43 %.

 Revolving
Credit Facility

 On
July 31, 2024, the Company 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, the Company received an initial advance of $ 30.8
million under the Revolving Credit Facility and designated six of its 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 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 prescribed minimum debt service coverage and debt yield ratios, which if not met may also be achieved
through principal paydowns on the outstanding balance.

 The
Company used the initial advance from the Revolving Credit Facility to repay in full the outstanding principal balance of $ 30.8 million
under its nonrecourse revolving loan up to $ 60 million (the "Revolving Loan") with the same financial institution, which
was also secured by the same six wholly owned and consolidated limited-service hotels. The scheduled maturity of the Revolving Loan had
previously been extended from July 13, 2024 until July 31, 2024.

 F- 20

 NOTES

 For

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

 As
of December 31, 2024, the outstanding principal balance of the Revolving Credit Facility was $ 30.8 million and its interest rate
was 7.83 %. Additionally, the same six wholly owned and consolidated limited-service hotels remained pledged as collateral and no
additional borrowings were available as of December 31, 2024.

 On
December 1, 2023, the Company entered into an interest rate cap contract at a cost of $ 44 with an unrelated financial institution in
order to reduce the effect of increases to the interest rate associated with the Revolving Loan. The interest rate cap contract had a
notional amount of $ 30.8 million, matured on July 13, 2024 and effectively capped AMERIBOR at 5.34 %.

 In
connection with the Revolving Credit Facility, the Company simultaneously entered into an interest rate cap contract at a cost of $ 85
with an unrelated financial institution in order to reduce the effect of increases to the interest rate associated with the Revolving
Credit Facility. The interest rate cap contract has a notional amount of $ 30.8 million, matures on July 31, 2025 and effectively
caps SOFR at 5.34 %.

 Home2
Suites Mortgage Financings

 On
December 6, 2021 the Company entered into two cross-collateralized 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 the Company's 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 the Company's
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 bore interest at a rate of LIBOR plus 3.50 %, subject to a floor of 3.75 %, through
June 30, 2023 at which time they converted to an interest rate of AMERIBOR plus 3.50 %, with a floor of 3.75 %. As of December 31, 2024
the interest rate on the Home2 Suites Mortgage Financings was 7.89 %.

 At
closing, the Company 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 provided for monthly interest-only
payments through December 31, 2023 and monthly payments of principal and interest of $ 0.1 million thereafter through its scheduled maturity
date of December 6, 2026. As of December 31, 2024, the outstanding principal balance of the Home2 Suites – Tukwila Loan was $ 16.0
million.

 At
closing, the Company 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 provided for monthly
interest-only payments through December 31, 2023 and monthly payments of principal and interest of $ 0.1 million thereafter through its
scheduled maturity date of December 6, 2026. As of December 31, 2024, the outstanding principal balance of the Home2 Suites – Salt
Lake City Loan was $ 10.4 million.

Mortgage Maturities

 The
following table, based on the initial terms of the mortgage, sets forth their aggregate estimated contractual principal maturities, including
balloon payments due at maturity, as of December 31, 2024:

 2025

 2026

 2027

 2028

 2029

 Thereafter

 Total

 maturities

 $

 $
 26,032

 $

 $
 -

 $
 -

 $
 -

 $
 57,285

 Less:
 Deferred financing costs

 ( 611
)

 Total
 principal maturities, net

 $
 56,674

 Debt
Compliance

 Certain
of the Company's debt agreements also contain clauses providing for prepayment penalties. The Company is currently in compliance
with respect to all of its financial covenants.

 F- 21

 NOTES

 For

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

 6.
Stockholder's Equity

 Preferred
Stock

 The
Company's charter authorizes its board of directors to designate and issue one or more classes or series of preferred stock without
approval of the stockholders of Common Shares. On July 11, 2014, the Company amended and restated its charter to authorize the issuance
of 50,000,000 shares of preferred stock. Prior to the issuance of shares of each class or series, the Company's Board of Directors
is required by Maryland law and by the Company's charter to set, subject to the Company's charter restrictions on ownership
and transfer of stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms and conditions of redemption of each class or series of preferred stock so issued, which
may be more beneficial than the rights, preferences and privileges attributable to Common Shares. The issuance of preferred stock could
have the effect of delaying, deferring or preventing a change in control of the Company. As of December 31, 2024 and 2023, the Company
had no outstanding shares of preferred stock.

Shares

 On
July 11, 2014, the Company amended and restated its charter to authorize the issuance of 200,000,000 Common Shares. Under its charter,
the Company cannot make certain material changes to its business form or operations without the approval of stockholders holding at least
a majority of the Common Shares entitled to vote on the matter. These include (1) amendment of its charter, (2) its liquidation or dissolution,
and (3) to the extent required under Maryland law, its merger, consolidation or the sale or other disposition of all or substantially
all of its assets.

 All
of the Common Shares offered by the Company will be duly authorized, fully paid and nonassessable. Subject to the restrictions on ownership
and transfer of Common Shares contained in the Company's charter and except as may otherwise be specified in the charter, the holders
of Common Shares are entitled to one vote per Common Share on all matters submitted to a stockholder vote, including the election of
the Company's directors. There is no cumulative voting in the election of directors. Therefore, the holders of a majority of outstanding
Common Shares can elect the Company's entire Board of Directors. Except as the Company's charter may provide with respect
to any series of preferred stock that the Company may issue in the future, the holders of Common Shares will possess exclusive voting
power.

 Holders of the Company's Common Shares are entitled to receive
such distributions as authorized from time to time by the Company's Board of Directors and declared out of legally available funds,
subject to any preferential rights of any preferred stock that the Company issues in the future. In any liquidation, each outstanding
Common Share entitles its holder to share (based on the percentage of Common Shares held) in the assets that remain after the Company
pays its liabilities and any preferential distributions owed to preferred stockholders. Holders of Common Shares do not have pre-emptive
rights, which means that there is no automatic option to purchase any new Common Shares that the Company issues, nor do holders of Common
Shares have any preference, conversion, exchange, sinking fund or redemption rights. Holders of Common Shares do not have appraisal rights
unless the Board of Directors determines that appraisal rights apply, with respect to all or any classes or series of stock, to a particular
transaction or all transactions occurring after the date of such determination in connection with which holders of such Common Shares
would otherwise be entitled to exercise appraisal rights. Common Shares are nonassessable by the Company upon its receipt of the consideration
for which the Board of Directors authorized its issuance.

on Common Shares

 Beginning
on March 22, 2023, the Board of Directors began declaring regular quarterly distributions on our Common Shares at the pro rata equivalent
of an annual distribution of $ 0.30 per share, or an annualized rate of 3 % assuming a purchase price of $ 10.00 per share. Total distributions
declared during the year ended December 31, 2023 were $ 3.9 million.

 On
March 18, 2024, the Board of Directors determined to suspend regular quarterly distributions.

 Future
distributions declared, if any, will be at the discretion of the Board of Directors based on their analysis of the Company's 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 the Company's ability to refinance near-term debt as well as the Internal Revenue Service's annual
distribution requirement that REITs distribute no less than 90 % of their taxable income. The Company cannot assure that any future distributions
will be made or that it will maintain any particular level of distributions that it has previously established or may establish.

 F- 22

 NOTES

 For

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

 SRP

 The
Company's share repurchase program, as amended from time to time (the "SRP") by the Board of Directors, may provide
eligible stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to the Company, subject to various
restrictions.

 The
Company's SRP currently provides for redemption requests to be submitted in connection with either a stockholder's death
or hardship and the price for all such purchases has been set at our estimated net asset value per Common Share ("NAV per Share")
as of the date of actual redemption. The Company's estimated NAV per Share is determined by the Board of Directors and reported
by it from time to time. Requests for redemptions in connection with a stockholder's death must be submitted and received by the
Company within one year of the stockholder's date of death to be eligible for consideration.

 Additionally,
the Board of Directors has established that on an annual basis the Company 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. Additionally, 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 the Board of Directors. Furthermore, the Board of Directors may, at their sole discretion,
amend or suspend the SRP at any time without any notice to stockholders.

 For
the year ended December 31, 2024, the Company repurchased 99,067 Common Shares at a weighted average price per share of $ 9.94. For the
year ended December 31, 2023, the Company repurchased 111,434 Common Shares at a weighted average price per share of $ 10.09.

Interests

 See
Notes 1 and 7 for additional information on Noncontrolling Interests and the distribution rights related to the Subordinated Participation
Interests, respectively.

 7.
Related Party and Other Transactions

 The
Company's Sponsor, Advisor and their affiliates, including the Special Limited Partner, are related parties of the Company 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.

 The
following table summarizes all the compensation and fees the Company paid or may pay to these related parties, including amounts to reimburse
their costs in providing services. Additionally, the Special Limited Partner has made contributions to the Operating Partnership in exchange
for issuing Subordinated Participation Interests in the Operating Partnership to the Special Limited Partners that may entitle it to
subordinated distributions as described in the table below.

 Operational
and Development Stages

 Fees

 Acquisition Fee

 The Company pays to the Advisor or its affiliates 1.0 % of the contractual purchase price of each property acquired (including its pro rata share (direct or indirect) of debt attributable to such property) or 1.0 % of the amount advanced for a loan or other investment (including its pro rata share (direct or indirect) of debt attributable to such investment), as applicable.

 "Contractual purchase price'' or the "amount advanced for a loan or other investment'' means the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property, the amount of funds advanced with respect to a mortgage, or the amount actually paid or allocated in respect of the purchase of other real estate-related assets, in each case inclusive of any indebtedness assumed or incurred in respect of such asset but exclusive of acquisition fees and acquisition expenses.

 F- 23

 NOTES

 For

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

 Operational
and Development Stages

 Fees

 Acquisition Expenses

 The Company reimburses the Advisor for expenses actually incurred related to selecting or acquiring assets on the Company's behalf, regardless of whether or not the Company acquires the related assets. In addition, the Company pays third parties, or reimburses the Advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to legal fees and expenses, travel and communications expenses, cost of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses and title insurance premiums, regardless of whether or not the Company acquires the related assets. In no event will the total of all acquisition fees, financing coordination fees and acquisition expenses (including those paid to third parties, as described above) payable with respect to a particular investment be unreasonable or exceed 5 % of the contractual purchase price of each property including its pro rata share (direct or indirect) of debt attributable to such property) or 5 % of the amount advanced for a loan or other investment (including its pro rata share (direct or indirect) of debt attributable to attributable to such investment), as applicable.

 Construction Management Fee

 The Company may engage affiliates of the Advisor to provide construction management services for some of its properties. The Company will pay a construction management fee in an amount of up to 5 % of the cost of any improvements that the affiliates of the Advisor may undertake. The affiliates of the Advisor may subcontract the performance of their duties to third parties.

 Asset Management Fee

 The Company pays the Advisor or its assignees a monthly asset management fee equal to one-twelfth (1 12) of 0.75 % of the Company's average invested assets. Average invested assets means, for a specified period, the average of the aggregate book value of its assets invested, directly or indirectly, in equity interests in and loans secured by real estate, before deducting depreciation, bad debts or other non- cash reserves, computed by taking the average of such values at the end of each month during such period.

 F- 24

 NOTES

 For

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

 Operational
and Development Stages

 Fees

 Property Management Fees

 Property management fees with respect to properties managed by affiliates of the Advisor are payable monthly in an amount not to exceed the fee customarily charged in arm's-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of property managers in such area. The affiliates of the Advisor may subcontract the performance of their duties to third parties. The Company reimburses the affiliates of the Advisor for costs and expenses, which may include personnel costs for on-site personnel providing direct services for the properties and for maintenance personnel to the extent needed at the properties from time to time, and the cost of travel and entertainment, printing and stationery, advertising, marketing, signage, long distance phone calls and other expenses that are directly related to the management of specific properties. Notwithstanding the foregoing, the Company will not reimburse the affiliates of the Advisor for their general overhead costs or, other than as set forth above, for the wages and salaries and other employee-related expenses of their employees.

 In addition, the Company pays the affiliates of the Advisor a separate fee for the one- time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm's-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area.

 From the Company's inception through December 31, 2024, no property management fees or separate fees have been incurred.

 Operating Expenses

 The Company may reimburse the Advisor's costs of providing administrative services at the end of each fiscal quarter, subject to the limitation that the Company will not reimburse the Advisor (except in limited circumstances) for any amount by which the total operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (i) 2 % of average invested assets (as defined above under ''— Asset Management Fee'') for that fiscal year, and (ii) 25 % of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of assets for that period. From the Company's inception through December 31, 2024, the Company has not reimbursed the Advisor for providing any administrative services.

 Additionally, the Company reimburses the Advisor or its affiliates for personnel costs in connection with other services; however, the Company will not reimburse the Advisor for (a) services for which the Advisor or its affiliates are entitled to compensation in the form of a separate fee, or (b) the salaries and benefits of the named executive officers.

 Financing Coordination Fee

 If the Advisor provides services in connection with the financing of an asset, assumption of a loan in connection with the acquisition of an asset or origination or refinancing of any loan on an asset, the Company may pay the Advisor or its assignees a financing coordination fee equal to 0.75 % of the amount available or outstanding under such financing. The Advisor may reallow some of or all this financing coordination fee to reimburse third parties with whom it may subcontract to procure such financing.

 F- 25

 NOTES

 For

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

 Liquidation/Listing
Stage

 Fees

 Real Estate Disposition Commissions

 For substantial services in connection with the sale of a property, the Company will pay to the Advisor or any of its affiliates a real estate disposition commission in an amount equal to the lesser of (a) one-half of a real estate commission that is reasonable, customary and competitive in light of the size, type and location of the property and (b) 2.0 % of the contractual sales price of the property; provided, however, that in no event may the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of 6.0 % of the contractual sales price or a real estate commission that is reasonable, customary and competitive in light of the size, type and location of the property. The Company's independent directors will determine whether the Advisor or its affiliates have provided a substantial amount of services to the Company in connection with the sale of a property. A substantial amount of services in connection with the sale of a property includes the preparation by the Advisor or its affiliates of an investment package for the property (including an investment analysis, an asset description and other due diligence information) or such other substantial services performed by the Advisor or its affiliates in connection with a sale.

 Annual Subordinated Performance Fee

 The Company may pay the Advisor an annual subordinated performance fee
 calculated on the basis of the annual return to holders of Common Shares, payable annually in arrears, such that for any year in which holders of Common Shares receive payment of a 6.0 % annual cumulative, pre-tax, non-compounded return on their respective net investments, the Advisor will be entitled to 15.0 % of the total return in excess of such 6.0% per annum; provided, that the amount paid to the Advisor will not exceed 10.0 % of the aggregate return for such year, and provided, further, that the amount paid to the Advisor will not be paid unless holders of Common Shares receive a return of their respective net investments. This fee will be payable only from realized appreciation in the Company's assets upon their sale, other disposition or refinancing, which results in the return on stockholders' respective net investments exceeding 6.0% per annum.

 For purposes of the annual subordinated performance fee, "net investment" means $ 10.00 per Common Share, less a pro rata share of any proceeds received from the sale, other disposition or refinancing of assets.

 From the Company's inception through December 31, 2024, no annual subordinated performance fees have been incurred.

 F- 26

 NOTES

 For

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

 Liquidation/Listing
Stage

 Fees

 Liquidation Distributions to the Special Limited Partner

 Distributions from the Operating Partnership in connection with its liquidation initially will be made to the Company (which the Company will distribute to holders of Common Shares), until holders of Common Shares have received liquidation distributions from the Operating Partnership equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return of 6.0 % on their respective net investments.

 Thereafter, the Special Limited Partner will be entitled to receive liquidation distributions from the Operating Partnership until it has received liquidation distributions from the Operating Partnership equal to its net investment plus cumulative, pre-tax, non-compounded annual return of 6.0 % on its net investment.

 Thereafter, 85.0 % of the aggregate amount of any additional liquidation distributions by the Operating Partnership will be payable to the Company (which the Company will distribute to holders of Common Shares), and the remaining 15.0 % will be payable to the Special Limited Partner.

 With respect to holders of Common Shares, "net investment" means $ 10.00 per Common Share, less a pro rata share of any proceeds received from the sale, other disposition or refinancing of assets. With respect to the Special Limited Partner, "net investment" means the value of all contributions of cash or property the Special Limited Partner has made to the Operating Partnership in consideration for its subordinated participation interests, measured as of the respective times of contribution, less a pro rata share of any proceeds received from the sale, other disposition or refinancing of assets.

 From the Company's inception through December 31, 2024, no liquidating distributions have been made.

 Subordinated
Participation Interests

 In
connection with the Company's Offering, the Special Limited Partner purchased 242 Subordinated Participation Interests in the Operating
Partnership at a cost of $ 50,000 per unit, with an aggregate value of $ 12.1 million.

 These
Subordinated Participation Interests may entitle the Special Limited Partner to a portion of any regular distributions that the Company
makes to its stockholders, but only after its stockholders have received a stated preferred return. However, since the Company's
inception there have been no distributions declared 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 the Company's
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.

 Due
to Related Parties and Other Transactions

 Amounts the Company owes to the Advisor and its affiliated
entities are principally for asset management fees are non-interest bearing, due on demand and are classified as due to related parties
on the consolidated balance sheets.

 Certain
affiliates of the Company's Sponsor may also perform fee-based construction management services for both its development and redevelopment
activities and tenant construction projects. These fees will be considered incremental to the construction effort and will be capitalized
to the associated real estate project as incurred. Costs related to development and redevelopment activities will be depreciated
over the estimated useful life of the associated project.

 F- 27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

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

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

 For

 2024

 2023

 Asset management fees (general
 and administrative costs)

 $
 1,462

 $
 1,401

 Finance fees (1)

 -

 Total

 $
 1,640

 $
 1,401

 (1)
 Finances fees were capitalized and are included in the carrying value of the Company's investment in the Williamsburg Moxy Hotel Joint Venture.

 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 the Company's independent directors. Payments to the Advisor or certain affiliates of the Sponsor may include
asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related
costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company
may also reimburse the Advisor and certain affiliates of the Sponsor for actual expenses it incurs for administrative and other services
provided for it. Upon the liquidation of the Company's assets, it may pay the Advisor or certain affiliates of the Sponsor a disposition
commission.

 8.
Commitments and Contingencies

 Management
Agreements

 The
Company's limited-service hotels operate pursuant to management agreements (the "Management Agreements") with various
third-party management companies. The management companies perform management functions including,
but not limited to, hiring and supervising employees, establishing room prices, establishing administrative policies and procedures,
managing expenditures and arranging and supervising public relations and advertising. The Management Agreements are for initial
terms ranging from one year to 10 years however, the agreements can be cancelled for any reason by the Company after giving 60 days'
notice after the one-year anniversary of the commencement of the respective agreement.

 The
Management Agreements provide for the payment of a base management fee equal to 3 % to 3.5 % of gross revenues, as defined, and an incentive
management fee based on the operating results of the hotel, as defined. The
base management fee and incentive management fee, if any, are recorded as a component of property operating expenses in the consolidated
statements of operations.

 Franchise
Agreements

 As
of December 31, 2024, the Company's limited-service hotels operated pursuant to various franchise agreements. Under the franchise
agreements, the Company generally pays a fee equal to 3 % to 5.5 % of gross room sales, as defined,
and a marketing fund charge from 2.0 % to 2.5 % of gross room sales. The franchise fee and marketing
fund charge are recorded as a component of property operating expenses in the consolidated statements of operations.

 The
franchise agreements are generally for initial terms ranging from 15 years to 20 years, expiring between 2028 and 2034.

 Legal
Proceedings

 From
time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.

 F- 28

 PART II.
CONTINUED:

 ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:

 None.

 Item 9A.
CONTROLS AND PROCEDURES

 Disclosure
Controls and Procedures. As of December 31, 2024, we conducted an evaluation under the supervision and with the participation
of the Advisor's management, including our Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures," as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and
other procedures of a company that are designed to ensure that information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated
to the Company's management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chairman and Chief
Executive Officer and Chief Financial Officer concluded as of December 31, 2024 that our disclosure controls and procedures were adequate
and effective.

 Management's
Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control
system is a process designed by, or under the supervision of, our Chairman and Chief Executive Officer and Chief Financial Officer and
effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting
principles.

 Our
internal control over financial reporting includes policies and procedures that:

 pertain
 to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions
 and disposition of assets;

 provide
 reasonable assurance that transactions are recorded as necessary to permit preparation of
 financial statements in accordance with generally accepted accounting principles, and that
 receipts and expenditures are being made only in accordance with the authorization of our
 management and directors; and

 provide
 reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
 use or disposition of our assets that could have a material effect on our financial statements.

 Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

 Management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, they
used the control criteria framework of the Committee of Sponsoring Organizations of the Treadway Commission published in its report entitled Internal
Control—Integrated Framework (2013). Based on this evaluation, our management has concluded that our internal control over
financial reporting was effective as of December 31, 2024.

 This
annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to attestation by the Company's independent registered
public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's
report in this annual report.

 Changes
in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the
quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

 ITEM
9B. OTHER INFORMATION:

 None.

 Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

 None.

 PART
III.

 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT

 Directors

 The
following table presents certain information as of March 15, 2025 concerning each of our directors serving in such capacity:

 Name

 Age

 Occupation and Positions Held

 Year
 Term of

 Office Will

 Expire

 Served
 as a

 Since

 David
 Lichtenstein

 Chief Executive Officer and Chairman of the Board of
 Directors

 2025

 2014

 George
 R. Whittemore

 2025

 2014

 Yehuda "Judah"
 L. Angster

 2025

 2021

 David
Lichtenstein is our Chief Executive Officer and Chairman of our board of directors. Mr. Lichtenstein founded both American Shelter
Corporation and The Lightstone Group. From 1988 to the present, Mr. Lichtenstein has served as Chairman of the Board of Directors and
Chief Executive Officer of The Lightstone Group, directing all aspects of the acquisition, financing and management of a diverse portfolio
of multifamily, lodging, retail and industrial properties located in 20 states and Puerto Rico. From June 2004 to the present, Mr. Lichtenstein
has served as the Chairman of the Board of Directors and Chief Executive Officer of Lightstone Value Plus REIT I, Inc. ("Lightstone
REIT I") and Chief Executive Officer of Lightstone Value Plus REIT LLC, its advisor. From April 2008 to the present, Mr. Lichtenstein
has served as the Chairman of the Board of Directors and Chief Executive Offer of Lightstone Value Plus REIT II, Inc. ("Lightstone
REIT II") and Lightstone Value Plus REIT II LLC, its advisor. From September 2014 to the present, Mr. Lichtenstein has served as
Chairman of the Board of Directors and Chief Executive Officer of Lightstone REIT IV Inc., ("Lightstone REIT IV"), and as
Chief Executive Officer of Lightstone Real Estate Income LLC, its advisor. From October 2014 to the present, Mr. Lichtenstein has served
as Chairman of the Board of Directors and Chief Executive Officer of Lightstone Enterprises Limited ("Lightstone Enterprises").
 On December 19, 2023, Mr. Lichtenstein was
appointed to the Board of Directors of Lightstone Value Plus REIT V, Inc. ("Lightstone V") and is Chairman and Chief
Executive Officer of its advisor. Mr. Lichtenstein previously served as Chairman of the Board of Directors of Lightstone V from
September 28, 2017 through August 30, 2021, when he was appointed Chairman Emeritus. From July 2015 to the present, Mr. Lichtenstein
has served as a member of the Board of Directors of the New York City Economic Development Corporation. Mr. Lichtenstein is also a member
of the International Council of Shopping Centers and the National Association of Real Estate Investment Trusts, Inc., an industry trade
group, as well as a member of the Board of Directors of Touro College and New York Medical College. Mr. Lichtenstein has been selected
to serve as a director due to his experience and networking relationships in the real estate industry, along with his experience in acquiring
and financing real estate properties.

 George
R. Whittemore is one of our independent directors. From July 2006 to the present, Mr. Whittemore has served as a member of the
board of directors of Lightstone REIT I, and from April 2008 to the present has served as a member of the board of directors of Lightstone
REIT II. Previously, Mr. Whittemore served as a Director and member of the Audit Committee of Village Bank Financial Corporation in Richmond,
Virginia, a publicly traded company, through May 2023. Mr. Whittemore previously served as a director of Condor Hospitality, Inc. in
Norfolk, Nebraska, a publicly traded company, from November 1994 to March 2016. Mr. Whittemore previously served as a director and chairman
of the audit committee of Prime Group Realty Trust from July 2005 until December 2012. Mr. Whittemore previously served as President
and Chief Executive Officer of Condor Hospitality Trust, Inc. from November 2001 until August 2004 and as Senior Vice President and Director
of both Anderson & Strudwick, Incorporated, a brokerage firm based in Richmond, Virginia, and Anderson & Strudwick Investment
Corporation, from October 1996 until October 2001. Mr. Whittemore has also served as Director, President and Managing Officer of Pioneer
Federal Savings Bank and its parent, Pioneer Financial Corporation, from September 1982 until August 1994, and as President of Mills
Value Adviser, Inc., a registered investment advisor. Mr. Whittemore is a graduate of the University of Richmond. Mr. Whittemore has
been selected to serve as an independent director due to his experience in accounting, banking, finance and real estate.

 Yehuda
"Judah" L. Angster is one of our independent directors. From August 2021 to the present, Mr. Angster has served
as a member of the board of directors of Lightstone REIT II and from November 2015 through August 2021, Mr. Angster served
as a member of the board of directors of Lightstone REIT I. Mr. Angster is currently the Chief Executive Officer of CastleRock Equity
Group in Florham Park, NJ. Before joining CastleRock Equity Group in June of 2015, Mr. Angster was the Vice President of Global Development
for PCS Wireless, LLC in Florham Park NJ beginning in September 2012. Mr. Angster was the Internal Counsel for Empire Bank from June
2009 to September 2012. Mr. Angster earned his J.D. from the Pace University School of Law in May 2009. Mr. Angster earned a Bachelor
of Talmudic Law from Tanenbaum Educational Center, Rockland, NY. Mr. Angster is licensed to practice law in New Jersey and New York.
Mr. Angster has been selected to serve as an independent director due to his extensive experience in global business development and
real estate transactions.

 Executive
Officers:

 The
following table presents certain information as of March 15, 2025 concerning each of our executive officers serving in such capacities:

 Name

 Age

 Occupation and Positions Held

 David Lichtenstein

 Chief Executive Officer and Chairman of the Board of Directors

 Mitchell Hochberg

 President and Chief Operating Officer

 Joseph Teichman

 General Counsel and Secretary

 Seth Molod

 Chief Financial Officer and Treasurer

 David
Lichtenstein for biographical information about Mr. Lichtenstein, see ''Management — Directors."

 Mitchell
Hochberg is our President and Chief Operating Officer and also serves as President and Chief Operating Officer of Lightstone
REIT I, Lightstone REIT II and Lightstone REIT IV and their advisors. Mr. Hochberg also serves as the President of our sponsor and as
the President and Chief Operating Officer of our advisor. From October 2014 to the present, Mr. Hochberg has served as President of Lightstone.
Mr. Hochberg was appointed Chief Executive Officer of Behringer Harvard Opportunity REIT I, Inc. ("OP 1") and Lightstone
REIT V effective as of September 28, 2017. Additionally, on August 31, 2021, Mr. Hochberg was appointed as a director
and Chairman of the Board of Directors of Lightstone REIT V and will continue to serve as the Lightstone V's Chief Executive Officer.
Prior to joining The Lightstone Group in August 2012, Mr. Hochberg served as principal of Madden Real Estate Ventures from 2007 to August
2012 when it combined with our sponsor. Mr. Hochberg held the position of President and Chief Operating Officer of Ian Schrager Company,
a developer and manager of innovative luxury hotels and residential projects in the United States from early 2006 to early 2007 and prior
to that Mr. Hochberg founded Spectrum Communities, a developer of luxury neighborhoods in the northeast of the United States, in 1985
where for 20 years he served as its President and Chief Executive Officer. Mr. Hochberg served on the board of directors of Belmond Ltd
 from 2009 to April 2019. Additionally, through October 2014 Mr. Hochberg served on the board
of directors and as Chairman of the board of directors of Orleans Homebuilders, Inc. Mr. Hochberg received his law degree as a Harlan
Fiske Stone Scholar from Columbia University School of Law and graduated magna cum laude from New York University College of Business
and Public Administration with a Bachelor of Science degree in accounting and finance.

 Joseph
E. Teichman is our General Counsel and Secretary and also serves as General Counsel of Lightstone REIT I, Lightstone REIT II
and Lightstone REIT IV and their respective advisors. Mr. Teichman also serves as Executive Vice President and General Counsel of our
sponsor and as General Counsel of our advisor. From October 2014 to the present, Mr. Teichman has served as Secretary and a Director
of Lightstone. Prior to joining The Lightstone Group in January 2007, Mr. Teichman practiced law at the law firm of Paul, Weiss, Rifkind,
Wharton & Garrison LLP in New York, NY from September 2001 to January 2007. Mr. Teichman earned a J.D. from the University of Pennsylvania
Law School and a B.A. from Beth Medrash Govoha, Lakewood, New Jersey. Mr. Teichman is licensed to practice law in New York and New Jersey.
Mr. Teichman is also a member of the Board of Directors of Yeshiva Orchos Chaim, Lakewood, New Jersey and was appointed to the Ocean
County College Board of Trustees in February 2016.

 Seth
Molod is our Chief Financial Officer and Treasurer and also serves as the Chief Financial Officer and Treasurer of Lightstone
REIT I, Lightstone REIT II, Lightstone REIT IV and Lightstone V. Mr. Molod also serves as the Executive Vice President and Chief
Financial Officer of our Sponsor and as the Chief Financial Officer of our Advisor and the advisors of Lightstone REIT I, Lightstone
REIT II, Lightstone REIT IV and Lightstone V. Prior to joining The Lightstone Group in August of 2018, Mr. Molod, served as an Audit
Partner, Chair of Real Estate Services and on the Executive Committee of Berdon LLP, a full service accounting, tax, financial and management
advisory firm ("Berdon"). Mr. Molod joined Berdon in 1989. He has extensive experience advising some of the nation's
most prominent real estate owners, developers, managers, and investors in both commercial and residential projects. Mr. Molod has
worked with many privately held real estate companies as well as institutional investors, REITs, and other public companies. Mr. Molod
is a licensed certified public accountant in New Jersey and New York and a member of the American Institute of Certified Public Accountants.
Mr. Molod holds a Bachelor of Business Administration degree in Accounting from Muhlenberg College.

 Section
16 (a) Beneficial Ownership Reporting Compliance

 Section 16(a)
of the Exchange Act, as amended, requires each director, officer and individual beneficially owning more than 10% of our common stock
to file initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership (Forms 4 and
5) of our common stock with the Securities Exchange Commission ("SEC"). Officers, directors and greater than 10% beneficial
owners are required by Securities and Exchange Commission rules to furnish us with copies of all such forms they file. Based solely on
a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2024, or written representations
that no additional forms were required, we believe that all of our officers and directors and persons that beneficially own more than
10% of the outstanding shares of our common stock complied with these filing requirements in 2024.

 Information
Regarding Audit Committee

 Our
Board established an audit committee in June 2014. The charter of audit committee is available at www.lightstonecapitalmarkets.com/sec-filings
or in print to any stockholder who requests it c/o Lightstone Value Plus REIT III, Inc., 1985 Cedar Bridge Avenue, Lakewood, NJ 08701.
Our audit committee consists of George R. Whittemore and Yehuda "Judah" L. Angster each of whom is "independent"
within the meaning of the NYSE listing standards. The Board determined that Mr. Whittemore is qualified as an audit committee financial
experts as defined in Item 401 (h) of Regulation S-K. For more information regarding the relevant professional experience of Mr. Whittemore
and Mr. Angster see "Directors".

 Code
of Conduct and Ethics

 We
have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to,
our principal executive officer and principal financial officer. Our Code of Conduct and Ethics can be found at www.lightstonecapitalmarkets.com/sec-filings

 ITEM
11. EXECUTIVE COMPENSATION

 Compensation
of Executive Officers

 Our
officers will not receive any cash compensation from us for their services as our officers. Our board of directors (including a majority
of our independent directors) will determine if and when any of our officers will receive restricted shares of our common stock. Additionally,
our officers are officers of one or more of our affiliates and are compensated by those entities (including our sponsor), in part, for
their services rendered to us. From our inception through December 31, 2024, the Company has not compensated the officers.

 Compensation
of Board of Directors

 We
pay our independent directors an annual fee of $40,000 (payable in quarterly installments) and are responsible for reimbursement of their
out-of-pocket expenses, as incurred. We also pay our audit committee chair an additional aggregate annual fee of $10,000 (payable in
quarterly installments).

 ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 Executive
Officers:

 The
following table presents certain information as of March 15, 2025 concerning each of our directors and executive officers serving in
such capacities:

 Name
 and Address of Beneficial Owner

 Number
 of

 Shares of

 Stock of the

 REIT III

 Beneficially

 Owned

 Percent
 of

 All Common

 Shares of the

 REIT III

 David Lichtenstein (1)

 242,222

 1.9
 %

 George R. Whittemore

 -

 -

 Yehuda "Judah" L. Angster

 -

 -

 Mitchell Hochberg

 -

 -

 Seth Molod

 -

 -

 Joseph Teichman

 -

 -

 Our directors and
 executive officers as a group (6 persons)

 242,222

 1.9
 %

 (1)
 Includes
 20,000 shares owned by our Advisor and 222,222 shares owned by an entity 100% owned by David
 Lichtenstein. Our Advisor is wholly owned by the Sponsor, which is majority owned by David
 Lichtenstein. The beneficial owner's business address is 1985 Cedar Bridge Avenue,
 Lakewood, New Jersey 08701.

 ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 David
Lichtenstein serves as the Chairman of our Board of Directors and our Chief Executive Officer. Our Advisor, Sponsor and its affiliates,
including the Special Limited Partner, are majority owned and controlled by Mr. Lichtenstein. We have or may enter into agreements with
our Advisor and certain affiliates of the Sponsor to pay certain fees, as described below, in exchange for services performed or consideration
given by these and other affiliated entities. As a majority owner of those entities, Mr. Lichtenstein benefits from fees and other compensation
that they receive pursuant to these agreements.

Managers

 Our
Sponsor has certain affiliates which may manage the properties we acquire. We also use other unaffiliated third-party property managers,
principally for the management of our hospitality properties.

 We
have agreed to pay our property managers a monthly management fee in an amount not to exceed the fee customarily charged, in arm's-length
transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of property
managers in such area. We will reimburse our property managers for certain costs and expenses. We may also pay our property managers
a separate fee for the one-time initial rent-up or leasing-up of newly constructed property in an amount not to exceed the fee customarily
charged in arm's length transactions by others rendering similar services in the same geographic area for similar properties as
determined by a survey of brokers and agents in such area.

 We
may also engage our property managers to provide construction management services for some of our properties. We will pay a construction
management fee in an amount of up to 5% of the cost of any improvements that our property managers undertake.

 Advisor

 We
pay our Advisor an acquisition fee equal to 1.0% of the gross contractual purchase price (including any mortgage assumed) of each property
purchased and reimburse our Advisor for expenses that it incurs in connection with the purchase of a property. Acquisition fees and expenses
are capped at 5% of the gross contractual purchase price of a property.

 The
Advisor is paid an advisor asset management fee of one-twelfth (1/12) of 0.75% of our average invested assets and we will reimburse some
expenses of the Advisor relating to asset management.

 If
our Advisor provides services in connection with the financing of an asset, assumption of a loan in connection with the acquisition of
an asset or origination or refinancing of any loan on an asset, we may pay our Advisor a financing coordination fee equal to 0.75% of
the amount available or outstanding under such financing.

 For
substantial services in connection with the sale of a property, we will pay to our Advisor a commission in an amount equal to the lesser
of (a) one-half of a real estate commission that is reasonable, customary and competitive in light of the size, type and location of
the property and (b) 2.0% of the contractual sales price of the property. The commission will not exceed the lesser of 6.0% of the contractual
sales price or commission that is reasonable, customary and competitive in light of the size, type and location of the property

 We
may pay our Advisor an annual subordinated performance fee calculated on the basis of our annual return to holders of our Common Shares,
payable annually in arrears, such that for any year in which holders of our Common Shares receive payment of a 6.0% annual cumulative,
pre-tax, non-compounded return on their respective net investments, our Advisor will be entitled to 15.0% of the amount in excess of
such 6.0% per annum return, provided, that the amount paid to the Advisor will not exceed 10.0% of the aggregate return for such
year, and provided, further, that the annual subordinated performance fee will not be paid unless holders of our Common Shares
receive a return of their respective net investments. From our inception through December 31, 2024, no annual subordinated performance
fees were incurred.

 We
have various agreements with the Advisor and certain affiliates of the Sponsor to pay certain fees and reimburse certain costs incurred
for services performed by these entities. Additionally, our ability to secure financing and our real estate operations are dependent
upon these entities to perform such services as provided in these agreements.

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

 For

 2024

 2023

 Asset management fees (general
 and administrative costs)

 $
 1,462

 $
 1,401

 Finance fees (1)

 -

 Total

 $
 1,640

 $
 1,401

 (1)
 Finances
 fees were capitalized and are included in the carrying value of our investment in the Williamsburg
 Moxy Hotel Joint Venture.

 Special
Limited Partner

 In
connection with our Offering, the Special Limited Partner purchased 242 Subordinated Participation Interests in the Operating Partnership
at a cost of $50,000 per unit, with an aggregate value of $12.1 million.

 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 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.

Garden Inn Joint Venture

 On
March 27, 2018, we and Lightstone REIT II, 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 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 required to fund an aggregate of $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 December 31, 2024, the Hilton Garden Inn Joint Venture was in compliance with all of its financial covenants.

the years ended December 31, 2024 and 2023, we made aggregate capital contributions to the Hilton Garden Inn Joint Venture of $0.1 million
and $0.4 million, respectively. During the years ended December 31, 2024 and 2023, we received aggregate distributions from the
Hilton Garden Inn Joint Venture of $1.7 million and $0.3 million, respectively.

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. All capital contributions and distributions of earnings from the Williamsburg Moxy Hotel Joint Venture are made
on a pro rata basis in proportion to each member's equity interest percentage pursuant to the terms of the Williamsburg Moxy Hotel
Joint Venture's operating agreement.

 On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into the Development Agreement with the Williamsburg Moxy Developer
pursuant to which the Williamsburg Moxy Developer was paid a development fee equal to 3% of hard and soft costs, as defined in the Development
Agreement, incurred in connection with the development and construction of the Williamsburg Moxy Hotel. Additionally, on August 5,
2021, the Williamsburg Moxy Hotel Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. Furthermore,
the Advisor and its affiliates were reimbursed for certain development-related costs attributable to the Williamsburg Moxy Hotel.

 The
Williamsburg Moxy Hotel was substantially completed and opened for business on March 7, 2023. In connection with the opening of
the hotel, including its food and beverage venues, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $2.3 million
during the year ended December 31, 2023. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.

the years ended December 31, 2024 and 2023, we made capital contributions to the Williamsburg Moxy Joint Venture of $0.1 million
and $1.6 million, respectively.

 Casualty
Loss, Net

 On
December 11, 2024, the Williamsburg Moxy Hotel suffered damage from a fire to one of its food and beverage venues located in an outdoor
garden area. As a result of the fire, the Williamsburg Moxy Hotel Joint Venture recognized a gross casualty loss of $1.0 million, consisting
of (i) the write-off of the carrying value of the damaged assets of $0.8 million plus associated remediation costs of $0.2 million. However,
the Williamsburg Moxy Hotel Joint Venture maintains property, general liability and business interruption insurance coverage under which
it has filed an insurance claim related to the damaged assets. While this insurance claim has not been finalized, the Williamsburg Moxy
Hotel Joint Venture did receive an initial advance of $0.5 million of insurance proceeds related to the claim for the damaged assets
during the first quarter of 2025, and therefore, reduced the gross casualty loss of $1.0 million by that amount resulting in the recognition
of a casualty loss, net of $0.5 million during the year ended December 31, 2024.

 As
noted above, the Williamsburg Moxy Hotel Joint Venture is still in the process of settling this insurance claim and it currently expects
to receive additional insurance recoveries associated with the damaged assets. Furthermore, the Williamsburg Moxy Hotel Joint Venture
currently intends to file another insurance claim related to the interruption of the operations for this food and beverage venue. However,
there can be no assurance that the Williamsburg Moxy Hotel Joint Venture will receive any additional recoveries from either of these
insurance claims.

 Moxy
Construction Loan

 On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility with a financial institution
for up to $77.0 million (the "Moxy Construction Loan") to fund certain of the development, construction and certain pre-opening
costs associated with the Williamsburg Moxy Hotel. The Moxy Construction Loan, which was scheduled to initially mature on February 5,
2024, was further extended to May 4, 2024. The Moxy Construction Loan was collateralized by the Williamsburg Moxy Hotel. The Moxy
Construction Loan provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective after June 30,
2023, the Moxy Construction Loan's interest rate converted from LIBOR plus 9.00%, with a floor of 9.50%, to SOFR plus 9.11%, with
a floor of 9.61%. The Moxy Construction Loan required monthly interest-only payments based on a rate of 7.50% and the excess was added
to the outstanding loan balance due at maturity. SOFR as of December 31, 2023 was 5.35%.

 For
the period from January 1, 2023 through March 7, 2023, $2.0 million of interest attributable to the Moxy Construction Loan
was capitalized to the carrying value of the Williamsburg Moxy Hotel while it was under construction.

 As
of December 31, 2023, the outstanding principal balance of the Moxy Construction Loan was $83.8 million (including $6.9 million
of excess interest added to principal) which was presented, net of deferred financing fees of $0.1 million on the condensed balance sheets
and was classified as mortgages payable, net.

 In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of loan fees and expenses and
accrued $0.8 million of loan exit fees, which were included in other liabilities on the condensed balance sheets as of December 31,
2023.

 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. SOFR as of December 31, 2024 was 4.53%. 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 aggregate proceeds from the Moxy Mortgage
Loans in connection with the payoff of the Moxy Construction Loan consisting of the outstanding indebtedness (principal and interest)
of $86.0 million and the aforementioned loan exit fees of $0.8 million, net of restricted escrows of $1.0 million.

 As
of December 31, 2024, the outstanding principal balance of the Moxy Mortgage Loans was $95.0 million which is presented net of deferred
financing fees of $2.6 million on the condensed balance sheet and is classified as mortgages payable, net.

 In
connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel Joint Venture has provided certain interest and carry costs guarantees.
Furthermore, in connection with the Moxy Mortgage Loans, $3.2 million of the initial proceeds advanced at closing were used to fund reserves
for interest, real estate taxes and insurance. Additionally, in connection with the Moxy Mortgage Loans, the Williamsburg Moxy Hotel
Joint Venture paid an aggregate of $2.8 million of loan fees and expenses and accrued $0.5 million of loan exit fees which are included
in other liabilities on the condensed balance sheet as of December 31, 2024.

 See
Note 3 of the Notes to Consolidated Financial Statements for additional information.

 ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 Independent
Registered Public Accounting Firm

 Our
independent public accounting firm is EisnerAmper LLP, Iselin, NJ, Auditor ID 274.

 Audit
and Non-Audit Fees

 The
following table presents the aggregate fees billed to us for the years presented by our principal accounting firm:

 (amounts
in thousands)

 2024

 2023

 Audit Fees (a)

 $

 $

 Tax Fees (b)

 Total Fees

 $

 $

 (a)
 Fees
 for audit services consisted of the audit of the Lightstone REIT III's annual financial
 statements and interim reviews, including services normally provided in connection with statutory
 and regulatory filings and including registration statements and consents.

 (b)
 Fees
 for tax services.

 In
considering the nature of the services provided by the independent auditor, the audit committee determined that such services are compatible
with the provision of independent audit services. The audit committee discussed these services with the independent auditor and Lightstone
REIT III management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated
by the Securities and Exchange Commission to implement the related requirements of the Sarbanes-Oxley Act of 2002, as well as the American
Institute of Certified Public Accountants.

 AUDIT
COMMITTEE REPORT

 To
the Directors of Lightstone Value Plus REIT III, Inc.:

 We
have reviewed and discussed with management Lightstone Value Plus REIT III, Inc.'s audited financial statements as of and for the
year ended December 31, 2024.

 We
have discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 16, "Communication
with Audit Committees," as amended, as adopted by the Public Company Accounting Oversight Board.

 We
have received and reviewed the written disclosures and the letter from the independent auditors required by Public Company Accounting
Oversight Board Rule 3526, Communication with Audit Committees Concerning Independence and have discussed with the auditors the auditors'
independence.

 Based
on the reviews and discussions referred to above, we recommend to the board of directors that the financial statements referred to above
be included in Lightstone Value Plus REIT III, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2024.

 Audit
Committee

 George
R. Whittemore

 Yehuda
"Judah" L. Angster

 INDEPENDENT
DIRECTORS' REPORT

 To
the Stockholders of Lightstone Value Plus REIT III, Inc.:

 We
have reviewed the Company's policies and determined that they are in the best interest of the Company's stockholders. Set
forth below is a discussion of the basis for that determination.

 The
Company has and expects to continue to invest in commercial properties (including limited-service hotels, full-service hotels and extended-stay
hotels), as well as various other real estate-related investments primarily located in the U.S. The Company's acquisitions may
include both portfolios and individual properties. The Company generally intends to hold each of its real estate properties until its
investment objectives are met or it is likely they will not be met.

 Even
though the Company has historically acquired hotels, it has and may continue to purchase other types of real estate. Assets other than
hotels may include, without limitation, office buildings, shopping centers, business and industrial parks, manufacturing facilities,
single-tenant properties, multifamily residential properties, student housing properties, warehouses and distribution facilities and
medical/life sciences office properties. We have and expect to continue to invest mainly in direct real estate investments and other
equity interests; however, we may also invest in debt interests, which may include bridge or mezzanine loans, including in furtherance
of a loan-to-own strategy. We have not established any limits on the percentage of our portfolio that may be comprised of various categories
of assets which present differing levels of risk.

 We
have and expect to continue to enter into joint ventures, tenant-in-common investments or other co-ownership arrangements for the acquisition,
development or improvement of properties with third parties or certain affiliates of our Sponsor, including its other sponsored REITs.

 The
Company intends for its portfolio to provide consistent current income and also to provide capital appreciation resulting from its expectation
that in certain circumstances it has or will be able to acquire properties at a discount to replacement cost or otherwise at less than
what it perceives as the market value or to reposition or redevelop a property so as to increase its value over the amount of capital
it deployed to acquire and rehabilitate the property. The Company has and may continue to acquire properties that it believes would benefit
from a change in management strategy, or that have incurred substantial deferred maintenance. The Company has and plans to continue to
diversify its portfolio by geographic region, investment size and investment risk with the goal of owning a portfolio of hotels and other
income-producing real estate properties and real estate-related assets that provide attractive returns for its investors.

 Financing
Policies

 The
Company has and expects to continue to utilize leverage for its properties. The number of different properties the Company will acquire
may be affected by numerous factors, including, the amount of funds available to it. When interest rates on mortgage loans are high or
financing is otherwise unavailable on terms that are satisfactory to the Company, the Company may purchase certain properties for cash
with the intention of obtaining a mortgage loan for a portion of the purchase price at a later time. There is no limitation on the amount
the Company may invest in any single property or on the amount the Company can borrow for the purchase of any property.

 The
Company has and expects to continue to limit its 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 the Company's
stockholders. The Company may also incur short-term indebtedness, having a maturity of two years or less. By operating on a leveraged
basis, the Company may have more funds available for investment in properties. This may allow the Company to make more investments than
would otherwise be possible, resulting in a more diversified portfolio. Although the Company's liability for the repayment of indebtedness
is expected to be limited to the value of the property securing the liability and the rents or profits derived therefrom, the Company's
use of leveraging increases the risk of default on the mortgage payments and a resulting foreclosure of a particular property. To the
extent that the Company does not obtain mortgage loans on the Company's properties, the Company's ability to acquire additional
properties will be restricted. The Company will endeavor to obtain financing on the most favorable terms available.

 Policy
on Sale or Disposition of Properties

 The
Company's Board of Directors will determine whether a particular property should be sold or otherwise disposed of after considering
the relevant factors, including performance or projected performance of the property and market conditions, with a view toward achieving
its principal investment objectives.

 The
Company currently intends to hold its properties until its investment objectives are met or it is likely they will not be met. At a future
date, the Company's Board of Directors may decide to liquidate the Company, list its shares on a national stock exchange, sell
its properties individually or merge or otherwise consolidate the Company with a publicly-traded REIT. Alternatively, the Company may
merge with, or otherwise be acquired by, the Sponsor or its affiliates. The Company may, however, sell properties prior to such time
and if so, may invest the proceeds from any sale, financing, refinancing or other disposition of its properties into additional properties.
Alternatively, the Company may use these proceeds to fund maintenance or repair of existing properties or to increase reserves for such
purposes. The Company may choose to reinvest the proceeds from the sale, financing and refinancing of its properties to increase its
real estate assets and its net income. Notwithstanding this policy, the Board of Directors, in its discretion, may distribute all or
part of the proceeds from the sale, financing, refinancing or other disposition of all or any of the Company's properties to the
Company's stockholders. In determining whether to distribute these proceeds to stockholders, the Board of Directors will consider,
among other factors, the desirability of properties available for purchase, real estate market conditions, the likelihood of the listing
of the Company's shares on a national securities exchange and compliance with the applicable requirements under U.S. federal income
tax laws.

 When
the Company sells a property, it intends to obtain an all-cash sale price. However, the Company may take a purchase money obligation
secured by a mortgage on the property as partial payment, and there are no limitations or restrictions on the Company's ability
to take such purchase money obligations. The terms of payment to the Company will be affected by customs in the area in which the property
being sold is located and the then prevailing economic conditions. If the Company receives notes and other property instead of cash from
sales, these proceeds, other than any interest payable on these proceeds, will not be available for distributions until and to the extent
the notes or other property are actually paid, sold, refinanced or otherwise disposed. Therefore, the distribution of the proceeds of
a sale to the stockholders may be delayed until that time. In these cases, the Company will receive payments in cash and other property
in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years.

 Independent
Directors

 George
R. Whittemore

Yehuda "Judah" L. Angster

 PART
IV.

 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:

VALUE PLUS REIT III, INC.

 Annual
Report on Form 10-K

 For
the fiscal year ended December 31, 2024

 EXHIBIT

 The
following exhibits are included, or incorporated by reference, as part of this Annual Report on Form 10-K (and are numbered in accordance
with Item 601 of Regulation S-K):

 EXHIBIT NO.

 DESCRIPTION

 3.1 (1)

 Second
 Articles of Amendment and Restatement of Lightstone Value Plus REIT III, Inc.

 3.2 (2)

 Bylaws
 of Lightstone Value Plus REIT III, Inc.

 4.1 (3)

 Agreement
 of Limited Partnership of Lightstone Value Plus REIT III LP

 4.2 (6)

 Distribution Reinvestment Program, included as Appendix C to prospectus

 4.3 (6)

 Description of Shares

 4.4 (4)

 Second
 Amended and Restated Contribution Agreement between Lightstone Value Plus REIT III LP and Lightstone SLP III LLC

 10.1 (3)

 Advisory
 Agreement by and among Lightstone Value Plus REIT III, Inc., Lightstone Value Plus REIT III LP and Lightstone Value Plus REIT III
 LLC

 10.2 (3)

 Management Agreement by and among Lightstone Value Plus REIT III, Inc., Lightstone Value Plus REIT III LP and Beacon Property

 10.3 (4)

 Management Agreement by and among Lightstone Value Plus REIT III, Inc., Lightstone Value Plus REIT III LP and Paragon Retail Property
 Management LLC

 10.4 (5)

 Contribution
 Agreement Termination between Lightstone Value Plus REIT III LP and Lightstone SLP III LLC

 21.1*

 Subsidiaries of the Registrant

 31.1*

 Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 31.2*

 Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 32.1*

 Certification Pursuant to Rule 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 32.2*

 Certification Pursuant to Rule 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 Inline
 Value Plus REIT III, Inc. on Form 10-K for the year ended December 31, 2024, filed with the SEC on
 of Operations, (3) Consolidated Statements of Comprehensive Loss, (4) Consolidated Statements of
 Stockholders' Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes
 to the Consolidated Financial Statement.

 104*

 Cover

 *
 As
 filed herewith

 (1)
 Filed
 as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission
 on January 30, 2023.

 (2)
 Included
 as Exhibit 3.2 to our Registration Statement on Form S-11 (Reg. No. 333-195292) submitted
 confidentially to the Securities and Exchange Commission on April 24, 2013.

 (3)
 Included
 as an exhibit to our Post-Effective Amendment No. 2 to our Registration Statement on Form
 S-11 (Reg. No. 333-195292) filed with the Securities and Exchange Commission on September
 11, 2015.

 (4)
 Filed
 as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission
 on December 29, 2015.

 (5)
 Filed
 as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission
 on April 5, 2017.

 (6)
 Previously filed as an exhibit to the Annual Report on Form 10-K that
we filed with the Securities and Exchange Commission on March 30, 2021

 Item
16. Form 10-K Summary

 None.

 SIGNATURES

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

 LIGHTSTONE VALUE PLUS REIT III, INC.

 Date: March 26, 2025

 By:

 /s/ David Lichtenstein

 David Lichtenstein

 Chief Executive Officer and Chairman of the Board of Directors

 (Principal Executive Officer)

 Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

 NAME

 CAPACITY

 DATE

 /s/ David Lichtenstein

 Chief Executive Officer and Chairman of the Board of Directors

 March 26, 2025

 David Lichtenstein

 (Principal Executive Officer)

 /s/ Seth Molod

 Chief Financial Officer and Treasurer

 March 26, 2025

 Seth Molod

 (Principal Financial Officer and Principal Accounting Officer)

 /s/ George R. Whittemore

 March 26, 2025

 George R. Whittemore

 /s/ Yehuda "Judah"
 L. Angster

 March 26, 2025

 Yehuda "Judah" L. Angster

 Distributions per shares were $0.30
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