See Notes to Consolidated Financial Statements.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Consolidated Statements of Stockholders’ Equity

(dollars and shares in thousands)

(Unaudited)

See Notes to Consolidated Financial Statements.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

See Notes to Consolidated Financial Statements.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Lightstone Value Plus Real Estate Investment Trust V, Inc., which was previously named Behringer Harvard Opportunity REIT II, Inc. prior to July 20, 2017, (which may be referred to as the “Company,” “we,” “us,” or “our”), was organized as a Maryland corporation on January 9, 2007 and has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes.

We were formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic and value-add basis. In particular, we have focused generally on acquiring commercial properties with significant possibilities for capital appreciation, such as those requiring development, redevelopment, or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who are distressed or face time-sensitive deadlines.  We have acquired a wide variety of commercial properties, including office, industrial, retail, hospitality, and multifamily.  We have purchased existing, income-producing properties, and newly-constructed properties. We have also invested in other real estate-related investments such as mortgage and mezzanine loans. We intend to hold the various real properties in which we have invested until such time as our board of directors determines 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. We currently have one operating segment. As of June 30, 2019,March 31, 2020, we had eight real estate investments (four(five wholly owned properties and fourthree properties consolidated through investments in joint ventures) and one real estate-related investment (mezzanine loan).

Substantially all of our business is conducted through Lightstone REIT V OP LP, which was previously named Behringer Harvard Opportunity OP II LP prior to November 1, 2017, a limited partnership organized in Delaware (the “Operating Partnership”).  As of June 30, 2019,March 31, 2020, our wholly ownedwholly-owned subsidiary, BHO II, Inc., a Delaware corporation, owned a 0.1% partnership interest in the Operating Partnership as its sole general partner.  As of June 30, 2019,March 31, 2020, our wholly ownedwholly-owned subsidiary, BHO Business Trust II, a Maryland business trust, was the sole limited partner of the Operating Partnership and owned the remaining 99.9% interest in the Operating Partnership.Partnership

Our business is managed by an external advisor and we have no employees. Effective February 10, 2017, we engaged affiliates of theThe Lightstone Group (“Lightstone”), LSG-BH II Advisor LLC and LSG Development Advisor LLC (collectively, the “Advisor”), to provide advisory services to us. Lightstone is majority owned by the chairman of our board of directors, David Lichtenstein. Subject to the oversight of our board of directors, our external advisor is responsible for managing our day-to-day affairs and for services related to the management of our assets.

Organization

In connection with our initial capitalization, we issued 22.5 thousand22,500 shares of our common stock and 1.0 thousand1,000 shares of our convertible stock to our previous advisor on January 19, 2007.  TheseThe 1,000 shares of convertible stock were transferred to an affiliate of Lightstone on February 10, 2017. As2017 and remain outstanding as of June 30, 2019, we had 22.8 million shares of common stock outstanding and 1.0 thousand shares of convertible stock outstanding held by an affiliate of Lightstone.March 31, 2020.

Our common stock is not currently listed on a national securities exchange. The timing of a liquidity event for our stockholders will depend upon then prevailing market conditions. WeOur board of directors previously targeted June 30, 2023 as the commencement of a liquidity event, within six years after the termination of our initial public offering, which occurredhowever, on July 3, 2011. On June 29, 2017,January 9, 2020, our board of directors elected to extend the targeted timeline an additional six years until June 30, 20232028 based on their assessment of our investment objectives and liquidity options for our stockholders. However, weWe can provide no assurances as to the actual timing of the commencement of a liquidity event for our stockholders or the ultimate liquidation of the Company. We will seek stockholder approval prior to liquidating our entire portfolio.

Noncontrolling Interests

Noncontrolling interests represents the noncontrolling ownership interest’s proportionate share of the equity in our consolidated real estate investments.  Income and losses are allocated to noncontrolling interest holders based generally on their ownership percentage.   If a property reaches a defined return threshold, then it will result in distributions to noncontrolling interests which is different from the standard pro-rata allocation percentage. In certain instances, our joint venture agreements provide for liquidating distributions based on achieving certain return metrics (“promoted interest”).metrics.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Interim Unaudited Financial Information

The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, which was filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2019.March 30, 2020.  The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus Real Estate Investment Trust V, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control. All inter-company transactions, balances, and profits have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable GAAP, and entities deemed to be variable interest entities (“VIE”) in which we are the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which we have control, substantive participating rights or both under the respective ownership agreement. For entities in which we have less than a controlling interest or entities which we are not deemed to be the primary beneficiary, we account for the investment using the equity method of accounting.

The consolidated balance sheet as of December 31, 20182019 included herein has been derived from the consolidated balance sheet included in the Company's Annual Report on Form 10-K.

The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

Reclassifications  

Certain prior period amounts may have been reclassified to conform to the current year presentation.

Earnings per Share

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

COVID-19 Pandemic

Recently Adopted Accounting PronouncementsThe 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, many countries, including the United States, have reacted by instituting quarantines and restrictions on travel. In addition, all the states where we operate properties and have real-estate related investments have reacted to the COVID-19 pandemic by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate and/or restrictions on types of construction projects that may continue. Many states have recently announced guidelines to reduce certain of these restrictions.

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) that amends the existing lease accounting guidance and requires lessees to recognize a lease liability and a right-of-use asset for all leases on their balance sheets. Lessees of operating leases will continue to recognize lease expense in a manner similar to current accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods, but eliminates current real estate- specific provisions and changes the treatment of initial direct costs. The standard became effective for the Company on January 1, 2019.

The Company elected the following package of practical expedients provided by the standard: (i) an entity need not reassess whether any expired or existing contract is a lease or contains a lease, (ii) an entity need not reassess the lease classification of any expired or existing leases, and (iii) an entity need not reassess initial direct costs for any existing leases. The Company also elected the short-term lease exception provided for in the standard and therefore will only recognize right-of-use assets and lease liabilities for leases with a term greater than one year.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

The Company didCompany’s consolidated portfolio of properties currently consists of seven multi-family apartment complexes and one student housing complex. Despite current restrictions and mitigation strategies, the Company’s multi-family properties have not recognizeyet seen any right-of-use assets or lease liabilities upon adoptionsignificant impact from the COVID-19 pandemic. However, the Company’s student housing complex, which consists of the standard. The Company does notRiver Club Apartments and the Townhomes at River Club, are located in Athens, Georgia and principally serve as “off-campus” lodging for students attending the University of Georgia, which has transitioned to online instruction for the remainder of its Spring 2020 semester and its other course offerings throughout the summer. Leases for the River Club Apartments and Townhomes at River Club generally have any material leases such as ground leases or building leases or any material leases with a term greater thanof one year. From timeyear from August through July. The Company’s student housing complex is located “off-campus” and its tenants have not been forced to timevacate. However, if the Company will enter into immaterial leasescurrent COVID-19 pandemic and related mitigation strategies extend beyond the summer, the University of Georgia may decide to continue offering only online instruction to its students in lieu of “on-campus” classes which could adversely impact leasing demand, occupancy levels and operating results of the Company’s student housing complex for office equipment such as copiers.  The resulting right-of-use assets or lease liabilities would be immaterial infuture periods. Additionally, the aggregateCompany’s note receivable relates to a development project which is subject to similar restrictions and are recognized in the period they are incurred as lease expense.risks.

The ASU provides a practical expedient which allows lessorsextent to not separate lease and non-lease components in a contract and allocate the consideration in the contract to the separate components if both: (i) the timing and pattern of revenue recognition for the non-lease component and the related lease component are the same and (ii) the combined single lease component would be classified as an operating lease. The Company elected the practical expedient to account for lease and non-lease components as a single component in lease contracts where we are the lessor. The ASU also provides a transition option that permits entities to not recast the comparative periods presented when transitioning to the standard, which the Company also elected.Company’s business may be affected by the current 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.

The adoptionIf the Company’s properties and real estate-related investments are negatively impacted in future periods for an extended period because (i) tenants are unable to pay their rent, (ii) demand for its student housing complex declines, and (iii) its borrower is unable to pay scheduled debt service on the outstanding note receivable; the Company’s business and financial results could be materially and adversely impacted. While the Company has implemented various cost reduction strategies, including the deferral of this standard did not have a material effect on our consolidated financial position or our resultscertain non-critical capital expenditures, there can be no assurance that these cost savings will fully mitigate the potential adverse impact of operations.any lost revenue and income.

COVID-19 Lease Modification Accounting Relief

Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from the COVID-19 pandemic and restrictions intended to prevent its spread.

In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing GAAP, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances.The Company is evaluating the impact of this policy election and has not yet concluded on whether it will apply the election.

New Accounting Pronouncements

In June 2016, the FASB issued new guidance which replaces the incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The new guidance is effective for fiscal years beginning after December 15, 2019,2022, including interim periods within those fiscal years.  The Company is currently in the process of evaluating the impact the adoption of this standard will have 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.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Autumn Breeze Apartments

On February 14, 2019,March 17, 2020, the Company completed the acquisition of a 384-unit280-unit multifamily property located in Ann Arbor, MichiganNoblesville, Indiana (the “Valley Ranch“Autumn Breeze Apartments”) from an unrelated third party, for an aggregate purchase price of approximately $70.3$43.0 million, excluding closing and other related transaction costs. In connection with the acquisition, ourthe Company paid the Advisor received an aggregate of approximately $1.3$0.8 million in acquisition fees and acquisition expense reimbursements.

In connection with the acquisition of the Valley Ranch Apartments, the Company simultaneously entered into a $43.4 million non-recourse mortgage loan (the “Valley Ranch Apartments Loan”) collateralized by the Valley Ranch Apartments (see Note 7).

The Company determined this acquisition was an asset acquisition and allocated the total purchase price, including acquisition fees and expenses, to the assets acquired based on their relative fair value. Approximately $24.1$7.2 million was allocated to land and improvements, $46.3$36.0 million was allocated to building and improvements, and $1.1$0.6 million was allocated to in-place lease intangibles.

The capitalization rate for the acquisition of the Valley RanchAutumn Breeze Apartments was approximately 5.35%4.86%. The Company calculates the capitalization rate for a real property by dividing the net operating income (“NOI”) of the property by the purchase price of the property, excluding costs. For purposes of this calculation, NOI was based upon the year ended November 30, 2018.February 29, 2020. Additionally, NOI is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation.

500 West 22nd Street Mezzanine Loan

On February 28, 2019, the Company, as the lender, and an unrelated third party (the “500 West 22nd Street Mezzanine Loan Borrower”), as the borrower, entered into a $12.0 million mezzanine loan promissory note (the “500 West 22nd Street Mezzanine Loan”) with an unaffiliated third party (the “500 West 22nd Street Mezzanine Loan Borrower”).pursuant to which the Company would fund up to $12.0 million of mezzanine financing. On the same date, the Company initially funded $8.0 million of the 500 West 22nd Street Mezzanine Loan. During the three months ended June 30, 2019,Subsequently through March 31, 2020, the Company funded an additional $1.0$4.0 million of the 500 West 22nd Street Mezzanine Loan. Through June 30, 2019, the Company has funded an aggregate of $9.0 million ofand as a result, the 500 West 22nd Street Mezzanine Loan and as of June 30, 2019, $3.0 million remained unfunded.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(Dollar and share amounts in thousands, except per share/unit data and where indicated in millions)has been fully funded.

The 500 West 22nd Street Mezzanine Loan is recorded in note receivable, net on the consolidated balance sheet. In connection with the fundings made for the 500 West 22nd Street Mezzanine Loan, our Advisor has received an aggregate of approximately $0.2 million in acquisition fees from the Company during the six months ended June 30, 2019.Company. The acquisition fees are accounted for as an addition tothe carrying value of the500 West 22^nd22nd Street Mezzanine Loanand are being amortized as a reduction to interest income over the initial term of the500 West 22^nd22nd Street Mezzanine Loan using a straight-line method that approximates the effective interest method.

The 500 West 22^nd22nd Street Mezzanine Loan is due August 31, 2021 and is collateralized by the ownership interests of the 500 West 22^nd22nd Street Mezzanine Loan Borrower. The 500 West 22nd Street Mezzanine Loan Borrower owns a parcel of land located at 500 West 22^nd22nd Street, New York, New York. The 500 West 22^nd22nd Street Mezzanine Loan bears interest at a rate of LIBOR + 11.0% per annum with a floor of 13.493% (13.493% as of June 30, 2019)March 31, 2020). The Company received an origination fee of 1.0% of the loan balance, or approximately $0.1 million, which ispresented in the consolidated balance sheets as a direct deduction from the carrying value of the500 West 22^nd22nd Street Mezzanine Loanand is being amortizedto interest income, using a straight-line method that approximates the effective interest method,over the initial term of the500 West 22nd Street Mezzanine Loan. The 500 West 22^nd22nd Street Mezzanine Loan may be extended two additional six- monthsix-month periods by the 500 West 22^nd22nd Street Mezzanine Loan Borrower provided certain conditions are met, including the establishment of an additional reserve for interest and the payment of an extension fee equal to 0.25% of the outstanding loan balance.

In connection with the initial funding under the 500 West 22^nd22nd Street Mezzanine Loan, the Company retained approximately $2.1 million of the proceeds to establish a reserve for interest and other items, which ispresented in the consolidated balance sheets as a direct deduction from the carrying value of the500 West 22^nd22nd Street Mezzanine Loanand are beingapplied against the first 8.0% of monthly interest due during the initial term of the 500 West 22nd Street Mezzanine Loan. Through March 31, 2020, approximately $0.9 million of the reserve has been recognized as interest income and the remaining balance of the reserve was approximately $1.2 million as of March 31, 2020. The additional monthly interest due above the 8.0% threshold is added to the balance of the 500 West 22nd Street Mezzanine Loan and payable at maturity. As of March 31, 2020, approximately $0.6 million of additional interest due is included in the balance of the 500 West 22nd Street Mezzanine Loan.

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

During the three and six months ended June 30,March 31, 2020 and 2019, the Company recorded approximately $0.4 million and $0.1 million, and $0.2 millionrespectively, of interest income respectively, related to the note receivable and as of June 30, 2019,March 31, 2020, the outstanding principal balance of the 500 West 22nd Street Mezzanine Loan was $9.2 million and the remaining reserves for interest and other items aggregated $1.8approximately $12.0 million.

We determined the following disclosure of estimated fair values using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop the related estimates of fair value. The use of different market assumptions or only estimation methodologies may have a material effect on the estimated fair value amounts.

As of June 30, 2019March 31, 2020 and December 31, 2018,2019, management estimated that the carrying value of cash and cash equivalents, restricted cash, prepaid expenses and other assets, advance from advisor, accounts payable, accrued and other liabilities, accrued property tax and payables to related parties were at amounts that reasonably approximated their fair value based on their highly-liquid nature and short-term maturities. The carrying amount of the note receivable approximates fair value because the interest rate is variable and reflective of the market rate. The fair value of the notes payable is categorized as a Level 2 in the fair value hierarchy. The fair value was estimated using a discounted cash flow analysis valuation on the borrowing rates currently available for loans with similar terms and maturities. The fair value of the notes payable was determined by discounting the future contractual interest and principal payments by a market rate. Disclosure about fair value of financial instruments is based on pertinent information available to management as of June 30, 2019March 31, 2020 and December 31, 2018.2019. Carrying amounts of our notes payable and the related estimated fair value is summarized as follows:

Marketable Securities

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

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Marketable Securities

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

When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis. As of June 30, 2019,March 31, 2020, the Company did not recognize any impairment charges.

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:

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

The fair values of the Company’s investments in debt securities are measured using quoted prices for these investments; however, the markets for these assets are not active. As of June 30, 2019,March 31, 2020, all of the Company’s debt securities were classified as Level 2 assets and there were no transfers between the level classifications during the sixthree months ended June 30, 2019.March 31, 2020.

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:

Lightstone Value Plus Real Estate Investment Trust V, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Gardens Medical Pavilion

On December 23, 2019, the Company and CPI/AHP Garden Medical Pavilion Mob Owner, L.L.C. (the “Gardens Medical Pavilion Buyer”), an unaffiliated third party, entered into a purchase and sale agreement (the “Gardens Medical Pavilion Agreement”) pursuant to which the Company would dispose of the Gardens Medical Pavilion to the Gardens Medical Pavilion Buyer for an aggregate contractual sales price of $24.3 million.

As of December 31, 2019, the Gardens Medical Pavilion met the criteria to be classified as held for sale and therefore, its associated assets and liabilities are classified as held for sale in the consolidated balance sheet as of December 31, 2019.

On January 15, 2020, the Company completed the disposition of the Gardens Medical Pavilion for a contractual sales price of $24.3 million.  In connection with the disposition of the Gardens Medical Pavilion, the Company recognized a gain on the sale of investment property of approximately $5.5 million during the first quarter of 2020. Approximately $12.6 million of the proceeds were used towards the repayment in full of a mortgage loan secured by the Gardens Medical Pavilion.

Lakes of Margate

Beginning with the fourth quarter of 2019, Lakes of Margate met the criteria to be classified as held for sale and therefore, its associated assets and liabilities are classified as held for sale in the consolidated balance sheet as of March 31, 2020 and December 31, 2019.

The following summary presents the major components of assets and liabilities held for sale, of as the date indicated. (amounts as of December 31, 2019 include Lakes of Margate and Gardens Medical Pavilion and amounts as of March 31, 2020 only include Lakes of Margate)

Notes payable consists of the following: