The Cove Joint Venture

On January 31, 2017, the Company, through its wholly owned subsidiary, REIT IV COVE LLC along with LSG Cove LLC, an affiliate of the Sponsor and a related party, REIT III COVE LLC, a subsidiary of the operating partnership of Lightstone Value Plus Real Estate Investment Trust III, Inc., a real estate investment trust also sponsored by the Company’s Sponsor and a related party and Maximus Cove Investor LLC (“Maximus”), an unrelated third party, completed the acquisition of all of RP Cove, L.L.C’s membership interest in RP Maximus Cove, L.L.C. (the “Cove Joint Venture”) for aggregate consideration of approximately $255.0 million (the “Cove Transaction”). The Cove Joint Venture owns and operates The Cove at Tiburon (the “Cove”), a 281-unit, luxury waterfront multifamily residential property located in Tiburon, California. Prior to entering into the Cove Transaction, Maximus previously owned a separate noncontrolling interest in the Cove Joint Venture.

The Company paid approximately $20.0 million for a 22.5% membership interest in the Cove Joint Venture. The Company’s ownership interest in the Cove Joint Venture was a non-managing interest. The Company determined that the Cove Joint Venture was a variable interest entity but the Company was not the primary beneficiary. The Company accounted for its ownership interest in the Cove Joint Venture in accordance with the equity method of accounting because it exerted significant influence over but did not control the Cove Joint Venture. All capital contributions and distributions of earnings from the Cove Joint Venture were made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the Cove Joint Venture are made to the members pursuant to the terms of the Cove Joint Venture’s operating agreement. An affiliate of Maximus is the asset manager of the Cove and receives certain fees as defined in the Property Management Agreement for the management of the Cove. The Company commenced recording its allocated portion of profit/loss and cash distributions beginning as of January 31, 2017 with respect to its 22.5% membership interest in the Cove Joint Venture.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)

Subsequent to the Company’s acquisition of its 22.5% membership interest in the Cove Joint Venture, it made an aggregate of $2.6 million of additional capital contributions and received aggregate distributions of $0.9 million. All of these additional capital contributions were made and distributions received in periods prior to 2020.

On December 17, 2019, REIT IV Cove LLC, REIT III Cove LLC, LSG Cove LLC (collectively, the “Redeemers”), Maximus and the Cove Joint Venture entered into a redemption agreement (the “Redemption Agreement”), pursuant to which the Cove Joint Venture would redeem the membership interests of the Redeemers for an aggregate redemption price of approximately $87.6 million.

On February 12, 2020, the Cove Joint Venture completed the redemption of the Redeemers’ membership interests in the Cove Joint Venture pursuant to the terms of the Redemption Agreement for an aggregate redemption price of approximately $87.6 million. In connection, with the redemption of its 22.5% membership interest in the Cove Joint Venture, the Company received proceeds of approximately $21.9 million which resulted in a gain on the disposition of investment in unconsolidated affiliated real estate entity of approximately $8.2 million, which is included on the consolidated statements of operations for the three months ended March 31, 2020. As a result of the redemption of its 22.5% membership interest in the Cove Joint Venture, the Company no longer has an ownership interest in the Cove Joint Venture.

The Cove Joint Venture Financial Information

The Company’s carrying value of its interest in the Cove Joint Venture differed from its share of member’s equity reported in the condensed balance sheet of the Cove Joint Venture because the Company’s basis of its investment was in excess of the historical net book value of the Cove Joint Venture. The Company’s additional basis was allocated to depreciable assets was recognized on a straight-line basis over the lives of the appropriate assets.

The following table represents the condensed income statements for the Cove Joint Venture:

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)

The following table represents the condensed balance sheet for the Cove Joint Venture:

40 East End Ave. Joint Venture

On March 31, 2017, the Company entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Company’s Sponsor, and a related party, (the “40 East End Seller”), providing for the Company to acquire approximately 33.3% of the 40 East End Seller’s approximate 100% membership interest in the 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint VentureVenture”) for aggregate consideration of approximately $10.3 million.

The Company’s ownership interest in the 40 East End Ave. Joint Venture is a non-managing interest. Because the Company exerts significant influence over but does not control the 40 East End Ave. Joint Venture, it accounts for its ownership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting. All contributions to and distributions of earnings from the 40 East End Ave. Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the 40 East End Ave. Joint Venture are made to the members pursuant to the terms of its operating agreement. The Company commenced recording its allocated portion of earnings and cash distributions, if any, from the 40 East End Ave. Joint Venture beginning as of March 31, 2017 with respect to its membership interest of approximately 33.3% in the 40 East End Ave. Joint Venture. Additionally, Lightstone Value Plus Real Estate Investment Trust, Inc. (“Lightstone I”), a real estate investment trust also sponsored by ourthe Company’s Sponsor, made $30.0 million of preferred equity contributions (the “Preferred Contributions”) to a subsidiary of the 40 East End Ave. Joint Venture, pursuant to an instrument that entitles Lightstone I to monthly preferred distributions at a rate of 12% per annum. No distributions may be paid to the members until the Preferred Contributions are redeemed in full.

The 40 East End Ave. Joint Venture, through affiliates, is developingowns the 40 East End Avenue Project, a substantially completed luxury residential 29-unit condominium project located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final TCO in March 2020.2020 and through March 31, 2021, eight of the condominium units have been sold.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

On March 21, 2017, the 40 East End Ave. Joint Venture obtained financing from a financial institution of up to $85.3 million (the “40 East End Ave. Mortgage”) for the land acquisition and construction of the 40 East End Ave. Project. On December 19, 2019, the 40 East End Ave. Joint Venture entered intorefinanced the 40 East End Ave. Mortgage with a loan (the “Condo Loan”) with afrom another financial institution of up to $95.2 million, of which approximately $90.2 million was initially funded at closing and the remaining availability of $5.0 million will bewas subsequently advanced upon satisfaction of certain conditions, including obtaining final TCO for the 40 East End Ave. Project, which was obtained in MarchApril 2020. The Condo Loan matures in two years andis scheduled to mature on December 19, 2021, bears interest at LiborLIBOR plus 2.45%, which is payable monthly, and requires principal payments are required to be made at certain prescribed amounts from proceeds from the sales of condominium units with any remaining outstanding balance due in full at maturity.

Pursuant to the terms of the Condo Loan, the 40 East End Ave. Joint Venture was required to make a principal paydown on December 19, 2020 if the then outstanding principal balance of the Condo Loan had not been paid down to at least $81.0 million as of that date. However, in lieu of a required principal paydown of $11.7 million, the lender agreed to accept an immediate principal paydown of $2.0 million, of which the Company’s proportionate share was approximately $0.7 million, which was paid on December 18, 2020, and allow for the remaining required principal paydown of $9.7 million to be paid during the first quarter of 2021.

During the first quarter of 2021, the 40 East End Ave. Joint Venture made aggregate principal payments of $9.7 million on the Condo Loan reducing its outstanding principal balance to $81.0 million ($80.3 million, net of deferred financing costs) as of March 31, 2021. The 40 East End Ave. Joint Venture used proceeds from the sales proceeds. Ifof condominium units which closed in the first quarter of 2021 to make the remaining required principal paydown. The 40 East End Ave. Joint Venture will be required to make another principal paydown on June 19, 2021 if principal paydowns from additional condominium sales proceeds do not reduce the outstanding principal balance of the Condo Loan to at least $81.0 million and $73.0 million as of that date. Based on the outstanding principal balance of the Condo Loan as of March 31, 2021, the 40 East End Ave. Joint Venture would be required to make a principal paydown of $8.0 million, of which the Company’s proportionate share would be $2.6 million, no later than June 19, 2021.

The Condo Loan is scheduled to mature on December 19, 2020 and June 19, 2021, respectively, then2021. Because of the impact of the COVID-19 pandemic on the pace of condominium unit sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extend the maturity date of the Condo Loan. However, there can be no assurance that the 40 East End Ave. Joint Venture will be required to make balloon paymentssuccessful in the amounts necessary to reach these thresholds. At closing, the 40 East End Ave. Joint Venture used a portion of the proceeds from the Condo Loan to (i) fully repay the then outstanding principal balance of $80.3 million plus accrued and unpaid interest of $0.2 million for the 40 East End Ave. Mortgage and (ii) redeem $9.5 million of Lightstone I’s Preferred Contributions.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)

In connection with the refinancing, the 40 East End Ave. Joint Venture recognized a loss on the early extinguishment of debt of approximately $0.8 million during the fourth quarter of 2019, of which the Company’s proportionate share was approximately $0.3 million.such endeavors.

The Company’s Sponsor and its affiliates (collectively, the “40 East End Guarantors”) have provided certain guarantees with respect to the Condo Loan and the members have agreed to reimburse the 40 East End Guarantors for any balance that may become due under the guarantees (the “40 East End Guarantee”), of which the Company’s share is approximately 33.3%. The Company has determined that the fair value of its share of the 40 East End Guarantee is immaterial.

On December 26, 2019,In connection with the closing of the Condo Loan , the 40 East End Ave. Joint Venture redeemed an additional $3.5used a portion of the initial loan proceeds to (i) fully repay the then outstanding principal balance of $80.3 million plus accrued and unpaid interest of $0.2 million for the 40 East End Ave. Mortgage and (ii) redeem $9.5 million of Lightstone I’s Preferred Contributions. As a result, Lightstone I’s remaining outstanding Preferred Contributions were $17.0

The 40 East End Ave. Joint Venture subsequently redeemed an additional $3.5 million as of December 31, 2019. Subsequently, an additionaland $11.0 million of Lightstone I’s Preferred Contributions were redeemed on December 26, 2019 and February 13, 2020, respectively, reducing Lightstone I’s Preferred Contributions to $6.0 million, which remains outstanding as of March 31, 2020.2021.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

Subsequent to the Company’s acquisition through March 31, 2020,2021, it has made an aggregate of $4.6$5.7 million of additional capital contributions to the 40 East End Ave. Joint Venture.Venture, of which none were made during the three months ended March 31, 2021. The Company’s investment in the 40 East Ave. Joint Venture was $10,529,775 and $10,988,023 as of March 31, 2021 and December 31, 2020, respectively.

The 40 East End Ave. Joint Venture Financial Information

The following table represents the condensed income statements for the 40 East End Ave. Joint Venture:

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

The following table represents the condensed balance sheets for the 40 East End Ave. Joint Venture:

The Cove Joint Venture

On January 31, 2017, the Company, through its wholly owned subsidiary, REIT IV COVE LLC along with LSG Cove LLC, an affiliate of the Sponsor and a related party, REIT III COVE LLC, a subsidiary of the operating partnership of Lightstone Value Plus Real Estate Investment Trust III, Inc., a real estate investment trust also sponsored by the Company’s Sponsor and a related party and Maximus Cove Investor LLC (“Maximus”), an unrelated third party, completed the acquisition of all of RP Cove, L.L.C’s membership interest in RP Maximus Cove, L.L.C. (the “Cove Joint Venture”) for aggregate consideration of approximately $255.0 million (the “Cove Transaction”). Excluding mortgage financing obtained by the Cove Joint Venture in connection with the Cove Transaction, the Company paid $20.0 million for a 22.5% non-managing membership interest in the Cove Joint Venture.

The Cove Joint Venture owned and operated The Cove at Tiburon (the “Cove”), a 281-unit, luxury waterfront multifamily residential property located in Tiburon, California from January 31, 2017 through February 12, 2020, As discussed below, the Company disposed of its 22.5% membership interest in the Cove Joint Venture on February 12, 2020.

The Company accounted for its 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting because it exercised significant influence, but did not exercise financial and operating control over this entity. For the period from January 1, 2020 through February 12, 2020, the Company’s share of the Cove Joint Venture’s loss of approximately $0.7 million was $0.2 million which is recorded as a loss from investments in unconsolidated affiliated real estate entities on the consolidated statements of operations.

On February 12, 2020, REIT IV Cove LLC, LSG Cove LLC and REIT III COVE LLC each redeemed their respective membership interests in the Cove Joint Venture for an aggregate redemption price of $87.6 million. In connection, with the redemption of the Company’s 22.5% membership interest in the Cove Joint Venture, it received proceeds of $21.9 million which resulted in the recognition of a gain on the disposition of unconsolidated affiliated real estate entity of $8.2 million during the first quarter of 2020.

As a result of the redemption of the Company’s 22.5% membership interest in the Cove Joint Venture on February 12, 2020, it no longer had an ownership interest in the Cove Joint Venture. During August 2020, the Company received $0.1 million of additional proceeds related to the redemption of its membership interest in the Cove Joint Venture and recognized a gain on the disposition of investment in unconsolidated affiliated real estate entity of $0.1 million during the third quarter of 2020. As a result, the Company recognized an aggregate gain on the disposition of investment in unconsolidated affiliated real estate entity of $8.3 million during the year ended December 31, 2020.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

Marketable SecuritiesDistributions

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

During 2019, the Company acquired unsecured corporate bonds that are publicly traded on the Tel Aviv Stock Exchange (the “Israeli Bonds”) and are denominated in ILS. The fair value of the Israeli Bonds was translated using period-end exchange rates. Gains and losses resulting from the changes in exchange rates and market prices from period to period were reported as a component of  accumulated other comprehensive income. As of December 31, 2019, the Company did not recognize any impairment charges. During the three months ended March 31, 2020, the Company sold all of the Israeli Bonds and recognized a gain on the sale of marketable securities of $0.3 million.

The fair value of the Company’s investments in debt securities were measured using quoted prices in markets that were not active. As of December 31, 2019, all of the Company’s debt securities were classified as Level 2 assets and there were no transfers between the level classifications during the year ended December 31, 2019.

6. Stockholders’ Equity

Earnings per Share

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

Share Repurchase Program

The Company’s share repurchase program may provide its stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to us, subject to restrictions. From the Company’s date of inception through December 31, 2019, it repurchased 395,941 shares of common stock pursuant to its share repurchase program at an average price of $9.48 per share. For the three months ended March 31, 2020, the Company repurchased 57,800 shares of common stock pursuant to its share repurchase program at an average price of $9.53 per share.

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

Distributions

On January 15, 2020, February 15, 2020 and March 15, 2020, the Company paid distributions to its stockholders for the months ended December 31, 2019, January 31, 2020 and February 29, 2020, respectively, totaling $0.9 million. On April 29, 2020, the Company paid a distribution to its stockholders for the month ended March 31, 2020 totaling $0.3 million. These distributions were all paid in cash.

On March 25, 2020, the Board of Directors determined to suspend regular monthly distributions for months ending after March 2020.

Future distributions, if any, declared will be at the discretion of the Company’s 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, operating and interest expenses, and the Company’s ability to refinance near-term debt. In addition,debt, as well as the Company currently intends to continue to comply with the REITIRS’s annual distribution requirement that it annuallyREITs distribute no less than 90% of itstheir 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.

2020 Special Distribution

On December 21, 2020, the Board of Directors authorized a special distribution of $0.37 per common share payable to stockholders of record as of December 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution of $3.2 million, which represented a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.

Share Repurchase Program

The Company’s share repurchase program may provide its stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to the Company, subject to restrictions.

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

Effective May 14, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s death or hardship and set the price for all such purchases to 100% of the NAV per Share ($8.50 as of December 31, 2020).

Deaths that occurred subsequent to January 1, 2020 are eligible for consideration. Beginning January 1, 2022, 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 for consideration.

On an annual basis, the Company will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Redemption requests are expected to be processed on a quarterly basis and may be subject to pro ration if either type of redemption requests exceed the annual limitation.

Net Earnings per Common Share

Net earnings per Common Share on a basic and fully diluted basis is earnings divided by the weighted average number of shares of common stock outstanding. The Company does not have any potentially dilutive securities.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(Unaudited)(unaudited)

7. Related Party Transaction and Other Arrangements

The Company has various agreements, including an advisory agreement, with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated entities. As of March 31, 2021 and December 31, 2020, the Advisor and its affiliated entities owe the Company $53,961 and $122, respectively, which is classified as restricted cash and other assets on the consolidated balance sheets.

The following table represents the fees incurred associated with the payments to the Company’s Advisor for the periods indicated:

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 its affiliates 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 its affiliates 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 its affiliates a disposition commission.

Subordinated Advances – Related Party

On March 18, 2016, the Company and its Sponsor entered into the Subordinated Agreement, a subordinated unsecured loan agreement, pursuant to which the Sponsor made aggregate principal advances of $12.6 million through March 31, 2017 (the termination date of the Offering). The outstanding principal advances bear interest at a rate of 1.48%, but no interest or principal is due or payable to the Sponsor until holders of the Company’s Common Shares have received liquidation distributions equal to their respective net investments (defined as $10.00 per Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments.

LIGHTSTONE REAL ESTATE INCOME TRUST INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

Distributions in connection with a liquidation of the Company initially will be made to holders of its Common Shares until holders of its Common Shares have received liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments. Thereafter, only if additional liquidating distributions are available, the Company will be obligated to repay the outstanding principal advances and related accrued interest to the Sponsor, as described in the Subordinated Agreement. In the event that additional liquidation distributions are available after the Company repays its holders of common stock their respective net investments plus their 8% return on investment and then the outstanding principal advances under the Subordinated Agreement and accrued interest to its Sponsor, such additional distributions will be paid to holders of its Common Shares and its Sponsor: 85.0% of the aggregate amount will be payable to holders of the Company’s Common Shares and the remaining 15.0% will be payable to the Sponsor.

The principal advances and the related interest are subordinate to all of the Company’s obligations as well as to the holders of its Common Shares in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0% and only potentially payable in the event of a liquidation of the Company.

In connection with the termination of the Offering, on March 31, 2017, the Company and the Sponsor simultaneously terminated the Subordinated Agreement. As a result of the termination, the Sponsor is no longer obligated to make any additional principal advances to the Company. Interest will continue to accrue on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will be made according to the terms of the Subordinated Agreement disclosed above.

As of both March 31, 20202021 and December 31, 2019,2020, an aggregate of approximately $12.6 million of principal advances have been funded, which along with the related accrued interest of $679,208$865,777 and $632,725,$819,679, respectively, are classified as Subordinated Advances – Related Party, a liability on the consolidated balance sheets. During the three months ended March 31, 20202021 and 2019,2020, the Company accrued $46,483$46,098 and $46,098,$46,483, respectively, of interest on the principal advances.

8. Commitments and Contingencies

Legal Proceedings

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

As of the date hereof, the Company is 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 its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Lightstone Real Estate Income Trust Inc. and Subsidiaries(‘ (‘‘Lightstone Income Trust’’),and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Lightstone Real Estate Income Trust Inc., a Maryland corporation, andits subsidiaries.subsidiaries.

Forward-Looking Statements

Certain information included in this Quarterly Report on Form 10-Q contains, and other materials filed or to be filed by us with the Securities and Exchange Commission (the “SEC”), contain or will contain, forward-looking statements. All statements, other than statements of historical facts, including, among others, statements regarding our possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Lightstone Real Estate Income Trust Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements.

Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements.

Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, economic and market conditions, competition, tenant or joint venture partner(s) bankruptcies, our lack of operating history, the availability of cash flows from operations to pay distributions, changes in governmental, tax, real estate and zoning laws and regulations, failure to increase tenant occupancy and operating income, rejection of leases by tenants in bankruptcy, financing and development risks, construction and lease-up delays, cost overruns, the level and volatility of interest rates, the rate of revenue increases versus expense increases, the financial stability of various tenants and industries, theour failure of the Company to make additional investments in real estate properties, the failure to upgrade our tenant mix, restrictions in current financing arrangements, the failure to fully recover tenant obligations for common area maintenance, insurance, taxes and other property expenses, theour failure of the Company to continue to qualify as a real estate investment trust (“REIT”), the failure to refinance debt at favorable terms and conditions, an increase in impairment charges, loss of key personnel, failure to achieve earnings/funds from operations targets or estimates, conflicts of interest with the Advisor and the Sponsor and their affiliates, failure of joint venture relationships, significant costs related to environmental issues and uncertainties regarding the impact of the current COVID-19 pandemic, and restrictions intended to prevent its spread on our business and the economy generally, as well as other risks listed from time to time in this Form 10-Q, our Form 10-K and in the Company’sour other reports filed with the SEC.

We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and 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 over time unless required by law.

Overview

Lightstone Real Estate Income Trust Inc. (‘(’‘Lightstone Income Trust’Trust’’), is a Maryland corporation, formed on September 9, 2014, which elected to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2016.

Lightstone Income Trust, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to Lightstone Income Trust or the Company as required by the context in which any such pronoun is used.

We have and willintend to continue to seek opportunities to originate, acquire and manage a diverse portfolio ofinvest in real estate and real estate-related investments, including investments ininvestments. Our real estate-related investment may include mezzanine loans, first lien mortgage loans, second lien mortgage loans, bridge loans and preferred equity interests, with a focus on developmentdevelopment-related investments, andincluding investments intended to finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets. A substantial portion of our investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly owned by The Lightstone Group, LLC (the “Sponsor”), its affiliates or its other sponsored real estate investment programs.programs it sponsors. Although we expect that most of our investments will be of these various types, we may also invest in whatever types of real estate-related investments that we believe are in our best interests.

We currently have one operating segment. As of March 31, 2020,2021, we wholly owned and consolidated the operating results of one development project, the Williamsburg Moxy Hotel, and held an unconsolidated approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”). We account for our unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

Our advisor is Lightstone Real Estate Income LLC, a Delaware limited liability company (the ‘‘’‘Advisor’’), which is majority owned by David Lichtenstein. On September 12, 2014, the Advisor contributed $200,000 to Lightstone Income Trust in exchange for 20,000 shares of common stock (“Common Shares”), or $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC 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 June 15, 2015 for $2.0 million, or $9.00 per share. Subject to the oversight of our board of directors (the “Board of Directors”), and pursuant to the terms of an advisory agreement, the Advisor has the primary responsibility for making investment decisions on our behalf and managing our day-to-day operations. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone Income Trust.

We do not have any employees. The Advisor receives compensation and fees for services related to the investment and management of our assets. The Advisor has certain affiliates which may manage the properties we acquire. However, we may also contract with other unaffiliated third-party property managers.

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 would be in the best interest of our stockholders. We do not intend to list our Common Shares at this time. We do not anticipate that there would be any market for our Common Shares until they are listed for trading. In the event we do not begin the process of achieving a liquidity event prior to March 31, 2022, which is the fifth anniversary of the termination of our Offering, our charter requires either (a) an amendment to our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio.

Current Environment

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

COVID-19 Pandemic

TheOn March 11, 2020, the World Health Organization declared COVID-19 a global impact of the COVID-19 pandemic has been rapidly evolving and, as cases of the illness caused by the virus have continued to be identified in additional countries,leading many countries, including the United States, have reacted by instituting quarantinesparticularly at the individual state level, to subsequently impose various degrees of restrictions and restrictionsother measures, including, but not limited to, mandatory temporary closures, quarantine guidelines, limitations on travel. In addition, all the states where we operate propertiestravel, and have development projects have reacted to the COVID-19 pandemic by instituting quarantines, restrictions on travel, “shelter in place” rules in an effort to reduce its duration and the severity of its spread. Although the COVID-19 pandemic has continued to evolve, most of these previously imposed restrictions and other measures have now been reduced and/or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent is likely dependent on typesnumerous developments such as the regulatory approval, mass production, administration and ultimate effectiveness of business thatvaccines, as well as the timeline to achieve a level of sufficient herd immunity amongst the general population. Accordingly, the COVID-19 pandemic may continue to operate and/or restrictionshave negative effects on typesthe overall health of construction projects that may continue. Many states have recently announced guidelines to reduce certain of these restrictions.the U.S. economy for the foreseeable future.

BecauseTo-date, the COVID-19 pandemic has not had any significant impact on our Williamsburg Moxy Hotel development project is in its pre-development stage, the COVID-19 pandemic has not currently affected our associated pre-development activities.project. Our other investment is our approximately 33.3% membership interest in the 40 East End Ave. Joint Venture, which is developingowns a substantially completedluxury residential condominium project (the “40 East End Avenue Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final temporary certificates of occupancy, or TCO, in March 2020.2020 and through March 31, 2021, eight of the condominium units had been sold. The 40 East End Ave. Joint Venture has an outstanding loan on the 40 East End Project (the “Condo Loan”) which is currently scheduled to mature on December 19, 2021. Because of the impact of the COVID-19 pandemic on the pace of condominium unit sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extend the maturity date of the Condo Loan. However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors. See Note 4 of the Notes to Consolidated Financial Statements for additional information.

The extent to which our business may be affected by the currentongoing COVID-19 pandemic will largely depend on both current and future developments, including its duration, spread and treatment, and related travel advisories and restrictions, all of which are highly uncertain and cannot be reasonably predicted.

If our Williamsburg Moxy Hotel development project and/or investment in the 40 East End Ave. Joint Venture are negatively impacted for an extended period because development activities and/or sales of condominium units are delayed, our business and financial results could be materially and adversely impacted.

We are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred to above or throughout this Form 10-Q. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”(‘‘GAAP’’) requires the Company’sour 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.

OperatingCurrent Portfolio Summary –

On July 17, 2019 we acquired four adjacent parcels of land located at 353-361 Bedford Avenue in Brooklyn, New York on which we intend to developare developing and constructconstructing the Williamsburg Moxy Hotel, a 210-room branded hotel. As of March 31, 2020,2021, the Williamsburg Moxy Hotel, which we wholly own and consolidate, was under development.

As of March 31, 2020,2021, we held an unconsolidated approximate 33.3% membership interest in the 40 East End Ave. Joint Venture, an affiliated real estate entity which owns the 40 East End Project, a substantially complete luxury residential condominium project consisting of 29 units located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City.We account for our unconsolidated membership interests in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

Critical Accounting Policies and Estimates

There were no material changes during the three months ended March 31, 20202021 to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Results of Operations

Through March 31, 2020,For the periods presented, we have madehad ownership interests in the following real estate and real estate-related investments:

105-109 W. 28^th Street Preferred Investment

We previously entered into an agreement, as amended, with various related party entities that provided for us to make aggregate preferred equity contributions (the “105-109 W. 28^th Street Preferred Investment”) of up to $37.0 million in an affiliate of our Sponsor (the “Moxy Developer”), which owns a parcel of land located at 105-109 W. 28^thStreet, New York, New York, on which it constructed a 343-room Marriott Moxy hotel, which opened during February 2019. The 105-109 W. 28^th Street Preferred Investment was made pursuant to an instrument that entitled us to monthly preferred distributions at a rate of 12% per annum.

We received aggregate repayments of $26.5 million during March 2019 and subsequently received the remaining outstanding balance of $10.5 million on August 26, 2019 and as a result, have fully redeemed the 105-109 W. 28th Street Preferred Investment.

The Cove Joint Venture

On January 31, 2017 we along with LSG Cove LLC, an affiliate of our Sponsor, our Sponsor’s other public program, Lightstone Value Plus Real Estate Investment Trust III, Inc. (“Lightstone III”) and Maximus Cove Investor LLC (“Maximus”), an unrelated third party acquired the membership interests in RP Maximus Cove L.L.C. (the “Cove Joint Venture”) from an unrelated third party. We, LSG Cove LLC, Lightstone III and Maximus had 22.5%, 45.0%, 22.5% and 10.0% membership interests in the Cove Joint Venture, respectively. The Cove Joint Venture owns and operates The Cove at Tiburon (the “Cove”), a multi-family complex consisting of 281-units, or 289,690 square feet, contained within 32 apartment buildings over 20.1 acres, located in Tiburon, California.

We accountaccounted for our 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting.

On February 12, 2020, we, LSG Cove LLC and Lightstone III subsequently redeemed our respective membership interests in the Cove Joint Venture for an aggregate redemption price of approximately $87.6 million. In connection, with the redemption of our 22.5% membership interest in the Cove Joint Venture, we received proceeds of approximately $21.9 millionwhich resulted in the recognition of a gain on the disposition of unconsolidated affiliated real estate entity of $8.2 million during the first quarter of 2020. As a result of the redemption of our 22.5% membership interest in the Cove Joint Venture on February 12, 2020, we no longer have an ownership interest in the Cove Joint Venture. During August 2020, we received $0.1 million of additional proceeds related to the redemption of our membership interest in the Cove Joint Venture and recognized a gain on the disposition of investment in unconsolidated affiliated real estate entity of $0.1 million during the third quarter of 2020. As a result, we have recognized an aggregate gain on the disposition of investment in unconsolidated affiliated real estate entity of approximately $8.3 million during the year ended December 31, 2020.

40 East End Ave. Joint Venture

On March 31, 2017, we entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, and a related party, (the “40 East End Seller”), providing for us to acquire an approximate 33.3% of the 40 East End Seller’s approximate 100% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”).

The 40 East End Ave. Joint Venture, through affiliates, is developingowns the 40 East End Avenue Project, a substantially completed luxury residential 29-unit condominium project located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final TCO in March 2020.2020 and through March 31, 2021, eight of the condominium units have been sold.

We account for our approximate 33.3% membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

Williamsburg Moxy Hotel

On July 17, 2019, we acquired four adjacent parcels of land located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Williamsburg Land”) on which we intend to developare developing and constructconstructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). As of March 31, 2020, the Williamsburg Moxy Hotel was under development.

Additionally,during 2019, we acquiredcorporate bonds that are publicly traded on the Tel Aviv Stock Exchange (the “Israeli Bonds”) and denominated in New Israeli Shekel (“ILS”) that we subsequently sold during the three months ended March 31,first quarter of 2020.

The operating results of ourthese investments arehave been reflected in our consolidated statements of operations commencing from their respective dates of acquisition through their respective dates of disposition.

For the Three Months Ended March 31, 2021 vs. March 31, 2020

Investment income

Our investment income was approximately $0.1 million$11,683 and $1.1 million$118,164 for the three months ended March 31, 2021 and 2020, respectively.  and 2019, respectively.During the three months ended March 31, 2020,2021, our investment income consisted solely of interest income on our cash and cash equivalents and the Israeli Bonds.equivalents. Our investment income during the three months ended March 31, 20192020 primarily consisted of preferred distributions related to our 105-109 W. 28^th Street Preferred Investment and also included interest income on the Israeli Bonds and our cash and cash equivalents and the Israeli Bonds.equivalents.

Gain from disposition of investment in unconsolidated affiliated real estate entity

OnFebruary 12, 2020, we completed the disposition of anour unconsolidated 22.5% membership interest in the Cove Joint Venture which resulted in the recognition of a gain on the disposition of unconsolidated affiliated real estate entity of $8.2 million during the first quarter of three months ended March 31, 2020.

Gain on sale of marketable securities

During the three months ended March 31, 2020, the Companywe sold all of itsour Israeli Bonds and recognized a gain on the sale of marketable securities of $0.3 million.

Loss from investment in unconsolidated affiliated real estate entities

Our loss from investments in unconsolidated affiliated real estate entities during the three months ended March 31, 2021 was $0.5 million compared to $0.4 million for the same period in 2020. For the three months ended March 31, 2021, our loss from investments in unconsolidated affiliated real estate entities is attributable to our ownership interest in the 40 East End Ave. Joint Venture. We account for our investments in unconsolidated affiliated real estate entities in accordance with the equity method of accounting. For the three months ended March 31, 2020 was $0.4 million compared to $1.0 million for the same period in 2019. Our, our loss from investments in unconsolidated affiliated real estate entities is attributable to our ownership interests in the 40 East End Ave. Joint Venture and the Cove Joint Venture through the date of redemption of our membership interest on February 12, 2020.We account for our ownership in the Cove Joint Venture and the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

General and administrative expenses

General and administrativeexpenses were $0.2 million during both of thethree months ended March 31, 2020 was $0.2 million compared to $0.3 million for the same period in 2019.2021and 2020.

Foreign currency transaction loss

We previously maintained funds in a bank account that iswas denominated in ILS and arewas re-measured into U.S. Dollars at the current exchange rate at the end of each reporting period. AsDuring the first quarter of December 31, 2019, we maintained approximately 4,455 ILS in a bank account, which was re-measured to $1,291, and is included in cash and cash equivalents on our consolidated balance sheet. As of March 31, 2020, we hadconverted all of our ILS to U.S. Dollars and as a result, no longer have any ILS in the bank account. For the three months ended March 31, 2020 and 2019,, our foreign currency transaction lossgain was $47,648 and $26,848, respectively.$47,648.

Interest expense

Interest expense, which is attributable to the outstanding principal advances of $12.6 million included in Subordinated Advances – Related Party, was $46,483$46,098 and $46,098$46,483 for thethree months ended March 31, 2021 and 2020, and 2019, respectively.respectively. Additionally, during the three months ended March 31, 2021 and 2020, $0.1 million and $0.3 million of interest was capitalized to construction in progress for our Williamsburg Moxy Hotel development project.

Financial Condition, Liquidity and Capital Resources

For thethree months ended March 31, 2020 our primary source of funds were proceeds received in connection with the redemption of our membership interest in the Cove Joint Venture of $21.9 million and proceeds from the disposition of marketable securities (Israeli Bonds) of $4.1 million. As of March 31, 2020,2021, we had cash and cash equivalents of $36.2$24.9 million.

We currently believe that our current available cash on hand will be sufficient to satisfy our expected cash requirements (primarily primarily consisting of our anticipated operating expenses, scheduled debt service, and any necessary capital contributions for our investment in unconsolidated affiliated real estate entity and distributions to our shareholders, if any, required to maintain our qualification as a REIT and our pre-development activities and certain constructionfor the foreseeable future. However, a substantial amount of the remaining costs associated with the Williamsburg Moxy Hotel) for the foreseeable future,development and we do not anticipate a need to raise funds from other than these sources within the next twelve months. However, we ultimately expect to obtain financing to fund a substantial portionconstruction of our construction costs for the Williamsburg Moxy Hotel. However,Hotel are expected to be funded through a combination of financings and/or joint venture arrangements and there can be no assurance we will be successful in obtaining construction financingsuch funds at favorable terms, if at all.

We intend 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 satisfactory showing that a higher level is appropriate, the approval of our Board of Directors and disclosure to stockholders. Net assets means our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders, along with justification for such excess. Market conditions will dictate our overall leverage limit; as such our aggregate borrowings may be less than 300% of net assets.

Our future borrowings may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not exclusively, we intend to seek to encumber our properties with 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.

In general the type of future financing executed by us to a large extent will be dictated by the nature of the investment and current market conditions. For long-term real estate investments, it is our intent to finance future acquisitions using long-term fixed rate debt. However there may be certain types of investments and market circumstances which may result in variable rate debt being the more appropriate choice of financing. To the extent floating rate debt is used to finance the purchase of real estate, management will evaluate a number of protections against significant increases in interest rates, including the purchase of interest rate cap instruments.

We may also obtain lines of credit to be used to acquire real estate and/or real estate related investments. If obtained, these lines of credit will be at prevailing market terms and will be repaid from offering proceeds, proceeds from the sale or refinancing of real estate and/or real estate related investments, 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.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our Advisor. We have agreements with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated entities. As of March 31, 2021 and December 31, 2020, the Advisor and its affiliated entities owe us $53,961 and $122, respectively, which is included in restricted cash and other assets on the consolidated balance sheets.

The following table represents the fees incurred associated with the payments to the Company’sour Advisor for the periods indicated: