10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

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 333-151532

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	83-0511223
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1985 Cedar Bridge Avenue, Suite 1
Lakewood, New Jersey	08701
(Address of Principal Executive Offices)	(Zip Code)

(732) 367-0129

(Registrant’s Telephone Number, Including Area Code)

Indicate 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   þ

 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  

Yes  ¨      No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ¨ Accelerated filer   ¨ Non-accelerated filer    þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨  No þ

As of August 6, 2010, there were 2.8 million outstanding shares of common stock of Lightstone Value Plus Real Estate Investment Trust II, Inc., including shares issued pursuant to the distribution reinvestment plan.  

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC. AND SUBSIDIARIES

INDEX

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of  June 30, 2010 (unaudited) and December 31, 2009	3
	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2010 and 2009	4
	Consolidated Statement of Stockholders’ Equity and Comprehensive Loss (unaudited) for the Six Months Ended June 30, 2010	5
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2010 and 2009	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4T.	Controls and Procedures	20
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Removed and Reserved	21
Item 5.	Other Information	21
Item 6.	Exhibits	21

2

 PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30, 2010				December 31, 2009
Assets	(Unaudited)
Investments in unconsolidated real estate entity		$	2,448,045		$	-
Investments in unconsolidated real estate entity, at cost			1,690,000			1,690,000
Cash and cash equivalents			9,915,011			8,596,008
Restricted escrow			338,169			-
Mortgage loan receivable, net of discount of $10.8 million and zero, respectively			7,857,000
Prepaid expenses and other assets			400,577			109,447
Total Assets		$	22,648,802		$	10,395,455
Liabilities and Stockholders' Equity
Accounts payable and other accrued expenses		$	1,401,534		$	1,110,312
Due to sponsor			78,656			1,569,001
Distributions payable			-			157,177
Total liabilities			1,480,190			2,836,490
Commitments and contingencies (Note 9)
Stockholders' Equity:
Company's stockholders' equity:
Preferred shares, $0.01 par value, 10,000,000 shares authorized, none issued and outstanding			-			-
Common stock, $0.01 par value; 100,000,000 shares authorized, 2,576,121 and 1,236,037 shares issued and outstanding in 2010 and 2009, respectively			25,761			12,360
Additional paid-in-capital			19,939,781			8,616,032
Subscription receivable			(342,579	)		(665,882	)
Accumulated distributions in excess of net loss			(956,220	)		(405,503	)
Total Company stockholder’s equity			18,666,743			7,557,007
Noncontrolling interest			2,501,869			1,958
Total Stockholders' Equity			21,168,612			7,558,965
Total Liabilities and Stockholders' Equity		$	22,648,802		$	10,395,455

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

3

PART I. FINANCIAL INFORMATION, CONTINUED:  

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)  

	For the Three Months Ended							For the Six Months Ended
	June 30, 2010				June 30, 2009			June 30, 2010			June 30, 2009
Expenses:
General and administrative costs		$	242,320		$	25,001		$	393,572		$	77,572
Total operating expenses			242,320			25,001			393,572			77,572
Operating loss			(242,320	)		(25,001	)		(393,572	)		(77,572	)
Interest income			87,117			-			142,832			-
Loss from investment in unconsolidated affiliated real estate entity			(51,955	)		-			(51,955	)		-
Net loss			(207,158	)		(25,001	)		(302,695	)		(77,572	)
Less: net loss attributable to noncontrolling interest			14			-			24			-
Net loss attributable to Company's common shares		$	(207,144	)	$	(25,001	)	$	(302,671	)	$	(77,572	)
Net loss per Company's common share, basic and diluted		$	(0.09	)	$	(1.25	)	$	(0.15	)	$	(3.88	)
Weighted average number of common shares outstanding, basic and diluted			2,276,938			20,000			1,959,758			20,000

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

4

PART I. FINANCIAL INFORMATION:    

ITEM 1. FINANCIAL STATEMENTS.

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

(UNAUDITED)

															Accumulated			Total
	Preferred Shares				Common Shares				Additional						Distributions in			Company			Total
	Preferred				Common				Paid-In			Subscription			Excess of			Stockholders'			Noncontrolling			Total
	Shares		Amount		Shares		Amount		Capital			Receivable			Net Loss			Equity			Interests			Equity
BALANCE, December 31, 2009		-		-		1,236,037		12,360		8,616,032			(665,882	)		(405,503	)		7,557,007			1,958			7,558,965
Comprehensive loss:
Net loss		-		-		-		-		-			-			(302,671	)		(302,671	)		(24	)		(302,695	)
Total comprehensive loss		-		-		-		-		-			-			(302,671	)		(302,671	)		(24	)		(302,695	)
Distributions declared		-		-		-		-		-			-			(248,046	)		(248,046	)		-			(248,046	)
Distributions paid to noncontrolling interests																						(65	)		(65	)
Contribution by noncontrolling interest																						2,500,000			2,500,000
Proceeds from offering						1,319,136		13,192		13,159,967			323,303						13,496,462			-			13,496,462
Selling commissions and dealer manager fees										(1,233,682	)								(1,233,682	)					(1,233,682	)
Other offering costs										(801,329	)								(801,329	)					(801,329	)
Proceeds from distribution reinvestment program						20,948		209		198,793									199,002						199,002
BALANCE, June 30, 2010		-	$	-		2,576,121	$	25,761	$	19,939,781		$	(342,579	)	$	(956,220	)	$	18,666,743		$	2,501,869		$	21,168,612

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

5

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended
	June 30, 2010			June 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(302,695	)	$	(77,572	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in loss from investment in unconsolidated affiliated real estate entity		51,955
Changes in assets and liabilities:
Increase in prepaid expenses and other assets		(291,130	)		-
(Decrease)/increase in accounts payable and other accrued expenses		(103,591	)		46,360
(Decrease)/increase in due to sponsor		(18,731	)		27,825
Net cash used in operating activities		(664,192	)		(3,387	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mortgage loan receivable		(7,857,000	)		-
Net cash used in investing activities		(7,857,000	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease due from sponsor		180,953			-
Proceeds from issuance of common stock		13,496,462			-
Payment of commissions and offering costs		(3,630,937	)
Distributions to noncontrolling interests		(65	)		-
Distributions to common stockholders		(206,218	)		-
Net cash provided by financing activities		9,840,195			-
Net change in cash and cash equivalents		1,319,003			(3,387	)
Cash and cash equivalents, beginning of period		8,596,008			99,703
Cash and cash equivalents, end of period	$	9,915,011		$	96,316
Supplemental disclosure of cash flow information:
Distributions declared	$	248,046		$	-
Value of shares issued from distribution reinvestment program	$	199,002		$	-
Non cash commissions and other offering costs in accounts payable and other accrued expenses	$	1,006,279		$	-
Subscription receivable	$	323,303		$	-
Investment in affiliated real estate entity in exchange for issuance of subordinated profit interests	$	2,500,000		$	-
Restriced escrow deposits and related liability established related to mortgage loan receivable	$	338,169		$	-

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

6

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization

Lightstone Value Plus Real Estate Investment Trust II, Inc., a Maryland corporation (the “Company”) was formed on April 28, 2008. The Company was formed primarily for the purpose of engaging in the business of investing in and owning commercial and residential real estate properties located throughout North America, as well as real estate-related securities, such as 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.

The Company is structured as an umbrella partnership real estate investment trust, or UPREIT, and substantially all of the Company’s current and future business is and will be conducted through Lightstone Value Plus REIT II LP, a Delaware limited partnership formed on April 30, 2008 (the “Operating Partnership”).

The Company is offering to sell a maximum of 51,000,000 shares of common shares, at a price of $10 per share (exclusive of 6.5 million shares available pursuant to the Company’s distribution reinvestment plan, 75,000 shares that are reserved for issuance under the Company’s stock option plan and 255,000 shares reserved for issuance under the Company’s Employee and Director Incentive Restricted Share Plan). The Company’s Registration Statement on Form S-11 (the “Registration Statement”) was declared effective under the Securities Act of 1933 on February 17, 2009. Lightstone Securities, LLC (the “Dealer Manager”), an affiliate of The Lightstone Group (the “Sponsor”), is serving as the dealer manager of the Company’s public offering (the “Offering”).

The Company issued 20,000 shares to Lightstone Value Plus REIT II, LLC, “(the Advisor”) on May 20, 2008, for $10 per share.  In addition, as of September 30, 2009, the Company had reached its minimum offering by receiving subscriptions of its common shares, representing gross offering proceeds of approximately $6.5 million, and investors were admitted as stockholders on October 1, 2009. Through June 30, 2010, cumulative gross offering proceeds of $25.2 million were released to the Company.  The Company invested the proceeds from this sale and proceeds from the Advisor in the Operating Partnership, and as a result, held a 99.99% general partnership interest at June 30, 2010 in the Operating Partnership’s common units.  The Operating Partnership commenced operations as of October 1, 2009.

Noncontrolling Interest – Partners of Operating Partnership

On May 20, 2008, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. The limited partner has the right to convert operating partnership units into cash or, at the option of the Company, an equal number of common shares of the Company, as allowed by the limited partnership agreement.

Lightstone SLP II LLC, which is wholly owned and controlled by The Lightstone Group (our “Sponsor”) will purchase subordinated general partner participation units (“subordinated profits interests”) in the Operating Partnership at a cost of $100,000 per unit for each $1,000,000 in subscriptions up to ten percent of the offering proceeds on a semi-annual basis.  Lightstone SLP II LLC may elect to purchase the subordinated profits interests with either cash or an interest in real property of equivalent value.  The proceeds received from the cash sale of the subordinated profits interests will be used to offset payments made by Company from offering proceeds to pay the dealer manager fees and selling commissions and other offering costs.  On June 30, 2010, Lightstone SLP II LLC purchased 25 subordinated profits interests valued at $2.5 million by contributing a 26.25% interest in Brownmill LLC (see Note 3 for further discussion regarding Brownmill LLC).

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and the Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). As of June 30, 2010, the Company had a 99.99% general partnership interest in the common units of the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation.  

The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of  the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented.  The accompanying unaudited consolidated financial statements of Lightstone Value Plus Real Estate Investment Trust II, Inc. and its Subsidiaries (collectively, the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

7

LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”, which was primarily codified into Topic 810 in the ASC.  This standard requires ongoing assessments to determine whether an entity is a variable entity and requires qualitative analysis to determine whether an enterprise’s variable interest(s) give it a controlling financial interest in a variable interest entity. In addition, it requires enhanced disclosures about an enterprise’s involvement in a variable interest entity. This standard is effective for the fiscal year that begins after November 15, 2009. The Company adopted this standard on January 1, 2010 and the adoption did not have a material impact on the Company's consolidated financial statements.

In January 2010, the FASB issued FASB Accounting Standards Update (“ASU”) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”.  ASU No. 2010-06 amends ASC 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements. This ASU becomes effective for the Company on January 1, 2010. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

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

3. Investment in Unconsolidated Affiliated Real Estate Entity

The entity listed below is partially owned by the Company.  The Company accounts for this investment under the equity method of accounting as the Company exercises significant influence, but does not control this entity. A summary of the Company’s investment in unconsolidated affiliated real estate entity is as follows:

					As of
Real Estate Entity	Date of Ownership	Ownership %			June 30, 2010		December 31, 2009
Brownmill LLC ("Brownmill")	June 30, 2010		26.25	%	$	2,448,045		$	-
Total Investment in unconsolidated affiliated real estate entity					$	2,448,045		$	-

Brownmill

On June 30, 2010, the Company, through its Operating Partnership, entered into a Contribution Agreement between the Operating Partnership and Lightstone Holdings LLC (“LGH”), a wholly-owned subsidiary of our Sponsor, pursuant to which LGH contributed to the Operating Partnership a 26.25% equity interest in Brownmill (the “Brownmill Interest”) in order to fulfill the Sponsor’s commitment to purchase subordinated profit interests with cash or contributed property. In exchange, the Operating Partnership issued 25 units of subordinated profits interests, at $100,000 per unit (at total value of $2.5 million), to Lightstone SLP II LLC.  The preliminary fair value of the Brownmill Interest, as of April 1, 2010, as determined by the Company is approximately $8.4 million of which $2.5 million is in the form of equity and $5.9 million is in the form of mortgage indebtedness.

As a result of this contribution in exchange for subordinated profit interests, as of June 30, 2010, the Operating Partnership owns a 26.25% membership interest in Brownmill. The Brownmill Interest is a non-managing interest. An affiliate of the Company’s Sponsor, is the majority owner and manager of Brownmill.  Profit and cash distributions will be allocated in accordance with each investor’s ownership percentage.  The Company will allocate its portion of profit and cash distributions beginning as of April 1, 2010 based upon the original date Lightstone SLP II LLC was to purchase the subordinated profit interests.

As the Company has recorded this investment in accordance with the equity method of accounting, its portion of Brownmill’s total indebtedness of $22.2 million as of June 30, 2010 is not included in the investment.   In connection with the contribution of the Brownmill Interest, the Company did not incur any transactions fees.

Brownmill owns two retail properties known as Browntown Shopping Center (“Browntown”) and Millburn Mall (“Millburn”, and together with Browntown, (the “Brownmill Properties”), which are located in Old Bridge, NJ and Vauxhall, NJ, respectively.   The Brownmill Properties collectively represent 156,002 square feet of total gross leasable area, and were 76.7% occupied as of June 30, 2010. The Brownmill Properties are cross-collateralized, collateralizing a non-recourse loan maturing on October 8, 2015. The loan has a 10-year term and monthly principal and interest payments of $133,051 through its maturity date.  The loan bears a fixed interest rate of 5.36%. The aggregate outstanding balance of the Brownmill Loan was $22.2 million as of June 30, 2010, $19.8 million of which will be due upon maturity assuming no prior principal prepayment.

8

Brownmill Financial Information

The Company’s carrying value of its Brownmill Interest differs from its share of member’s equity reported in the condensed balance sheet of Brownmill LLC due to the Company’s basis of its investment in excess of the historical net book value of Brownmill. The Company’s additional basis allocated to depreciable assets is recognized on a straight-line basis over the lives of the appropriate assets.  The Company’s Brownmill Interest additional basis allocation to depreciable assets is a preliminary estimate and could change based upon the final fair value to net book value analysis, which is expected to be completed once all information is available.

The following table represents the unaudited condensed income statement for Brownmill LLC for the period April 1, 2010 through June 30, 2010.

	For the Period April 1, 2010 through June 30, 2010
Revenue	$	900,295
Property operating expenses		361,139
Depreciation and amortization		217,686
Operating income		321,470
Interest expense and other, net		(305,008	)
Net income	$	16,462
Company's share of net income	$	4,321
Additional depreciation and amortization expense (1)		(56,276	)
Company's loss from investment	$	(51,955	)

1)Additional depreciation and amortization expense relates to the amortization of the difference between the cost of the Brownmill Interest and the amount of the underlying equity in net assets of Brownmill.

The following table represents the unaudited condensed balance sheet for Brownmill as of June 30, 2010:

	As of
	June 30, 2010
Real estate, at cost (net)	$	18,075,945
Cash and restricted cash		567,867
Other assets		1,773,296
Total assets	$	20,417,108
Mortgage payable	$	22,196,256
Other liabilities		859,798
Member capital		(2,638,946	)
Total liabilities and members' capital	$	20,417,108

9

4. Mortgage Loan Receivable and Restricted Escrow

On June 29, 2010, the Company, through its Operating Partnership, entered into an Assignment and Assumption Agreement (the “Assignment”) with Citigroup Global Markets Realty Corp. (the “Seller”).  Under the terms of the Assignment, the Operating Partnership purchased from the Seller a fixed-rate of 5.916%, nonrecourse mortgage note (the “Loan”) for $7.9 million.  In addition, the Seller agreed to indemnify the Operating Partnership from all existing litigation. As a result of the Assignment, the Operating Partnership assumed all rights and obligations, with the exception of the existing litigation, in connection with the Loan, and became the lender under the Loan.  Total legal and other closing costs of the Assignment were approximately $88,407, including an acquisition fee equal to 0.95% of the purchase price, or approximately $74,600, payable to our advisor.  These fees were expensed during the three months ended June 30, 2010 within general and administrative costs on the consolidated statements of operations.

The Loan was originated by the Seller in August 2007 with an original principal balance of $18.7 million, and is collateralized by a 141-room limited service hotel located in East Rutherford, NJ.  The hotel is currently operating under a Marriott Franchise Agreement as a Fairfield Inn. The Loan was scheduled to mature in September 2017 under its original term, and has been in default since February 2009.

The Company has recorded the Loan as a mortgage loan receivable of $7.9 million, net of a discount of $10.8 million. The Company believes that the collateral on the Loan equals or exceeds $7.9 million as of June 30, 2010.   As the Loan is in default, the Company is not amortizing the discount as the Company intends to take ownership through foreclosure or negotiate a transfer of ownership with the existing borrower.  In addition, interest income on the Loan will be recorded on a cash basis.

The borrower under the loan agreement is required to transfer any excess cash to the Company on a monthly basis. The Company first will apply the excess cash to required funding for taxes and insurance and other escrow related disbursements and any remaining cash will be applied to principal due for the month and interest.  At the date of the acquisition of the loan, the escrow deposits held by the Seller and transferred to the Company were $0.3 million and are recorded on the consolidated balance sheet as restricted escrows.  The Company has recorded an offsetting liability for these disbursements in the consolidated balance sheet within accounts payable and other accrued expenses.

5. Selling Commission, Dealer Manager Fees and Other Offering Costs

Selling commissions and dealer manager fees paid to the Dealer Manager, and other third-party offering expenses such as registration fees, due diligence fees, marketing costs, and professional fees are accounted for as a reduction against additional paid-in capital (“APIC”) as costs are incurred.  Any organizational costs are accounted for as general and administrative costs. For the six months ended June 30, 2010, the Company has incurred approximately $1.2 million in selling commissions and dealer manager fees and $0.8 million of other offering costs.  Since commencement of its initial public offering through June 30, 2010, the Company has incurred approximately $2.3 million in selling commissions and dealer manager fees and $3.5 million of other offering costs.

6. Subscription Receivable

As of June 30, 2010 and December 31, 2009, the Company recorded a subscription receivable of $0.3 million and $0.7 million, respectively, as a reduction in the Company’s equity on the consolidated balance sheets.   The subscription receivable relates to shares issued to the Company’s shareholders for which the proceeds have not yet been received by the Company solely due to a fact of timing of transfers from the escrow agent holding the funds.

7. Related Party Transactions  

The Company has agreements with the Advisor and Lightstone Value Plus REIT Management LLC (the “Property Manager”) to pay certain fees in exchange for services performed by these entities and other affiliated entities. The Company’s ability to secure financing and subsequent real estate operations are dependent upon its Advisor, Property Manager and their affiliates to perform such services as provided in these agreements. 

10

The following table represents the fees incurred associated with the payments to the Company’s Advisor and Property Manager for the three and six months ended June 30, 2010:

	For the Three Months Ended June 30, 2010		For the Six Months Ended June 30, 2010
Acquisition fees	$	74,642	$	74,642
Asset management fees		4,014		8,028
Property management fees		-		-
Acquisition expenses reimbursed to Advisor		-		-
Development fees		-		-
Leasing commissions		-		-
Total	$	78,656	$	82,670

During the three and six months ended June 30, 2009, the Company did not incur any fees associated with payments to its Advisor or its Property Manager.

As of June 30, 2010, the Company owns a 26.25% membership interest in Brownmill.  Affiliates of the Company’s Sponsor, are the majority owners and manager of Brownmill.  See Note 3.

8. Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair values because of the short maturity of these instruments. The carrying amount of the mortgage loan receivable approximates the fair value based upon current market information that would have been used by a market participant to estimate the fair value of such loan.

9. 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, we are not a party to any material pending legal proceedings.

10. Subsequent Events

On July 9, 2010, the Company’s Board of Directors declared the quarterly distribution for the three-month period ended June 30, 2010 in the amount of $0.00178082191 per share per day which equals a daily amount, if paid each day for a 365-day period, of 6.5% annualized rate based on a share price of $10.00 payable to stockholders of record on the close of business each day during the quarter.  The distribution was paid in full on July 15, 2010 using a combination of cash ($0.2 million) and shares ($0.2 million) which represents 18,437 shares of the Company’s common stock issued pursuant to the Company’s Distribution Reinvestment Program, at a discounted price of $9.50 per share.  

The amount of distributions to be distributed to our stockholders in the future will be determined by our Board of Directors and are dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our status as a Real Estate Investment Trust under the Internal Revenue Code.

11

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 financial statements of Lightstone Value Plus Real Estate Investment Trust II, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Lightstone Value Plus Real Estate Investment Trust II, Inc., a Maryland corporation, and, as required by context, Lightstone Value Plus REIT, L.P. and its wholly owned subsidiaries, which we collectively refer to as the “Operating Partnership”.

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, or 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 Value Plus Real Estate Investment Trust II, 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, the 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 (“CAM”), insurance, taxes and other property expenses, the 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 as well as other risks listed from time to time in this Form 10-Q, our Form 10-K, our Registration Statement on Form S-11 (File No. 333-151532), as the same may be amended and supplemented from time to time, and in the Company’s other reports filed with the Securities and Exchange Commission (“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.

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  Overview

Lightstone Value Plus Real Estate Investment Trust II, Inc. (the “Company”) intends to acquire and operate commercial, residential and hospitality properties, principally in North America. Principally through the Lightstone Value Plus REIT II, LP, (the “Operating Partnership”), our acquisitions may include both portfolios and individual properties. We expect that our commercial holdings will consist of retail (primarily multi-tenanted shopping centers), lodging, industrial and office properties and that our residential properties located either in or near major metropolitan areas.

Capital required for the purchase of real estate and real estate related investments will be obtained from the public offering of up to 51,000,000 common shares for $10 per share, and from any indebtedness that we may incur in connection with the acquisition of any real estate and real estate related investments thereafter. A Registration Statement on Form S-11 covering our public offering was declared effectiveunder the Securities Act of 1933on February 17, 2009.  The offering commenced on April 24, 2009 and is ongoing. We are dependent upon the net proceeds from the offering to conduct our proposed activities.

We do not have employees. We entered into an advisory agreement dated February 17, 2009 with Lightstone Value Plus REIT II LLC, a Delaware limited liability company, which we refer to as the “Advisor,” pursuant to which the Advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments, subject to oversight by our board of directors. We pay the Advisor fees for services related to the investment and management of our assets, and we will reimburse the Advisor for certain expenses incurred on our behalf.

Current Environment

Our operating results as well as our investment opportunities are impacted primarily by the health of the North American economies.  Our business and financial performance may be adversely affected by current and future economic conditions, such as a reduction in the availability of credit, financial markets volatility, and recession.

 U.S. and global credit and equity markets have recently undergone significant disruption, making it difficult for many businesses to obtain financing on acceptable terms or at all. As a result of this disruption, in general there has been an increase in the costs associated with the borrowings and refinancing as well as limited availability of funds for refinancing.  If these conditions continue or worsen, our cost of borrowing may increase and it may be more difficult to finance investment opportunities in the short term.

We are not aware of any other material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting real estate generally, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from the acquisition and operation of real estate and real estate related investments, other than those referred to in this Form 10-Q.

Portfolio Summary –

	Location	Year Built	Leasable Square Feet		Percentage Occupied as of June 30, 2010			Annualized Revenues based on rents at June 30, 2010
Retail
Unconsolidated Affiliated Real Estate Entity:
Brownmill LLC (2 retail properties) (1)	Old Bridge and Vauxhall, New Jersey	1962		156,002		76.7	%	$2.6 million

(1) On June 30, 2010, the Company received a 26.25% interest in Brownmill LLC in exchange for issuance of subordinated profits interests.  See Note 3 of notes to consolidated financial statements.

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Critical Accounting Policies and Estimates

There were no material changes during the six months ended June 30, 2010 to our critical accounting policies as reported in our Annual Report on Form 10-K, for the year ended December 31, 2009.

Results of Operations

We commenced operations on October 1, 2009 upon the release of our offering proceeds from escrow.   In November 2009, we acquired an investment of a 32.42% Class D Member Interest in HG CMBS Finance, LLC, and a real estate limited liability company that invests in commercial mortgage-backed securities.  During the six months ended June 30, 2010, we acquired a mortgage loan which we believe to be fully collateralized by a limited service hotel (see Note 4 of the notes to consolidated financial statements) and obtained a 26.25% equity interest in Brownmill LLC which owns two retail properties (see Note 3 of the notes to consolidated financial statements).

The Company’s primary financial measure for evaluating each of its properties will be net operating income (“NOI”).  NOI represents rental income less property operating expenses, real estate taxes and general and administrative expenses.  The Company believes that NOI is helpful to investors as a supplemental measure of the operating performance of a real estate company because it will be a direct measure of the actual operating results of the Company’s properties.

For the Three Months Ended June 30, 2010 vs. June 30, 2009

Consolidated

General and administrative expenses

General and administrative costs increased by $0.2 million to $0.2 million primarily due to $0.1 million in acquisition fees associated with the purchase of a mortgage loan (see Note 4 of notes to consolidated financial statement), as well as insurance costs and consulting and accounting fees which did not occur during the three months ended June 30, 2009 as we did not commence operations until October 2009.

Interest Income

Interest income was $0.1 million for the three months ended June 30, 2010 compared to zero for the three months ended June 30, 2009.   The interest income primarily relates to interest earned on our investment in HG CMBS Finance LLC.  During the three months ended June 30, 2009, we did not own any investments.

Loss from Investment in Unconsolidated Affiliated Real Estate Entity

Our loss from investment in unconsolidated affiliated real estate entity for the three months ended June 30, 2010 was $0.1 million compared to zero during the three months ended June 30, 2009.   This account represents our portion of the net income/loss of our investment in Brownmill LLC (see Note 3 of notes to consolidated financial statement) which we obtained during the three months ended June 30, 2010. The majority of the loss represents the additional depreciation expense recorded associated with the difference in our cost of this investment in excess of its historical net book value during the three months ended June 30, 2010.

Noncontrolling interests

The loss allocated to Noncontrolling interests relates to the interest in the Operating Partnership held by our Sponsor.

For the Six Months Ended June 30, 2010 vs. June 30, 2009

Consolidated

General and administrative expenses

General and administrative costs increased by $0.3 million to $0.4 million primarily due to $0.1 million in acquisition fees associated with the purchase of a mortgage loan (see Note 4 of notes to consolidated financial statement), as well as insurance costs and consulting and accounting fees which did not occur during the six months ended June 30, 2009 as we did not commence operations until October 2009.

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Interest Income

Interest income was $0.1 million for the six months ended June 30, 2010 compared to zero for the six months ended June 30, 2009.   The interest income primarily relates to interest earned on our investment in HG CMBS Finance LLC.  During the six months ended June 30, 2009, we did not own any investments.

Loss from Investment in Unconsolidated Affiliated Real Estate Entity

Our loss from investment in unconsolidated affiliated real estate entity for the six months ended June 30, 2010 was $0.1 million compared to zero during the six months ended June 30, 2009.   This account represents our portion of the net income/loss of our investment in Brownmill LLC (see Note 3 of notes to consolidated financial statement) which we obtained during the three months ended June 30, 2010. The majority of the loss represents the additional depreciation expense recorded associated with the difference in our cost of this investment in excess of its historical net book value during the six months ended June 30, 2010.

Noncontrolling interests

The loss allocated to Noncontrolling interests relates to the interest in the Operating Partnership held by our Sponsor.

Financial Condition, Liquidity and Capital Resources   

Overview:

For the six months ended June 30, 2010, our primary source of funds was from $9.9 million proceeds from our public offering, net of commissions and offering costs paid during the period.  We are dependent upon the net proceeds to be received from our public offering to conduct our proposed activities. The capital required to purchase real estate investments will be obtained from our offering and from any indebtedness that we may incur in connection with the acquisition and operations of any real estate investments thereafter.

We intend to utilize leverage in acquiring our properties. The number of different properties we will acquire will be affected by numerous factors, including, the amount of funds available to us. When interest rates on mortgage loans are high or financing is otherwise unavailable on terms that are satisfactory to us, we 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.

Our sources of funds in the future will primarily be the net proceeds of our offering, operating cash flows and borrowings. We believe that these cash resources will be sufficient to satisfy our cash requirements for the foreseeable future, and we do not anticipate a need to raise funds from other than these sources within the next twelve months.

We currently have no outstanding debt under any financing facilities and have not identified any sources of debt financing. 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 the overall leverage limit; as such our aggregate long-term permanent borrowings may be less than 75% of aggregate fair market value of all properties. We may also incur short-term indebtedness, having a maturity of two years or less.

Our charter provides that the aggregate amount of 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 the overall leverage limit; as such our aggregate borrowings may be less than 300% of net assets.

Borrowings may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not exclusively, we intend to seek to encumber our properties with debt, which will be on a non-recourse basis. This means that a lender’s rights on default will generally be limited to foreclosing on the property. However, we may, at our discretion, secure recourse financing or provide a guarantee to lenders if we believe this may result in more favorable terms. When we give a guaranty for a property owning entity, we will be responsible to the lender for the satisfaction of the indebtedness if it is not paid by the property owning entity.

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 In general the type of 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 the acquisition using long-term fixed rate debt. However there may 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 caps instruments.     

We may also obtain lines of credit to be used to acquire properties. These lines of credit will be at prevailing market terms and will be repaid from offering proceeds, proceeds from the sale or refinancing of properties, working capital or permanent financing. Our Sponsor or its affiliates may guarantee the lines of credit although they will not be obligated to do so. We may draw upon the lines of credit to acquire properties pending our receipt of proceeds from our initial public offering. 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, our Dealer Manager, and our Property Manager during the various phases of our organization and operation. During our organizational and offering stage, these payments include payments to our Dealer Manager for selling commissions and the dealer manager fee, and payments to our Advisor for the reimbursement of organizational and offering costs. During the acquisition and development stage, these payments will include asset acquisition fees and asset management fees, and the reimbursement of acquisition related expenses to our Advisor.  During the operational stage, we will pay our Property Manager a property management fee and our Advisor an asset management fee. We will also reimburse our Advisor and its affiliates for actual expenses it incurs for administrative and other services provided to us. Additionally, the Operating Partnership may be required to make distributions to Lightstone SLP II LLC, an affiliate of the Advisor.

The following table represents the fees incurred associated with the payments to our Advisor and our Property Manager for the three and six months ended June 30, 2010:

	For the Three Months Ended June 30, 2010		For the Six Months Ended June 30, 2010
Acquisition fees	$	74,642	$	74,642
Asset management fees		4,014		8,028
Property management fees		-		-
Acquisition expenses reimbursed to Advisor		-		-
Development fees		-		-
Leasing commissions		-		-
Total	$	78,656	$	82,670

During the three and six months ended June 30, 2009, we did not incur any fees associated with payments to our Advisor or our Property Manager.

In addition, total selling commissions and dealer fees incurred during the three and six months ended June 30, 2010 was $0.5 million and $1.2 million, respectively.

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

	For the Six Months Ended
	June 30, 2010			June 30, 2009
Cash flows used in operating activities	$	(664,192	)	$	(3,387	)
Cash flows used in investing activities		(7,857,000	)		-
Cash flows provided by financing activities		9,840,195			-
Net change in cash and cash equivalents		1,319,003			(3,387	)
Cash and cash equivalents, beginning of the period		8,596,008			99,703
Cash and cash equivalents, end of the period	$	9,915,011		$	96,316

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Our principal source of cash flow was derived from the net offering proceeds received. In the future, we intend to acquire properties which will provide a relatively consistent stream of cash flow that provides us with resources to fund operating expenses, debt service and quarterly distributions.

Our principal demands for liquidity currently are acquisition and development activities as well as costs associated with our public offering.  The principal sources of funding for our operations are currently the issuance of equity securities.

Operating activities

During the six months ended June 30, 2010, cash flows used in operating activities was $0.7 million compared to $3,387 for six months ended June 30, 2009.  The cash used during 2010 related to net loss of $0.3 million plus the increase in prepaid expenses and other assets due to the upfront payment of insurance premiums during the period.

Investing activities

Cash used in investing activities during the six months ended June 30, 2010 of $7.9 million relates to the purchase of a mortgage loan in June 2010.  See Note 4 of notes to consolidated financial statements.

Financing activities

Cash provided by financing activities during the six months ended June 30, 2010 is primarily the proceeds from the issuance of common stock of $13.5 million offset by the payment of selling commissions, dealer manger fees and other offering costs of $3.6 million.

We believe that these cash resources will be sufficient to satisfy our cash requirements for the foreseeable future, and we do not anticipate a need to raise funds from other than these sources within the next twelve months.

Contractual Obligations  

None

Funds from Operations

In addition to measurements defined by accounting principles generally accepted in the United States of America (“GAAP”), our management also focuses on funds from operations (“FFO”) and modified funds from operations (“MFFO”) to measure our performance.   FFO is generally considered to be an appropriate supplemental non-GAAP measure of the performance of real estate investment trusts (“REITs”).  FFO is defined by the National Association of Real Estate Investment Trusts, Inc (“NAREIT”) as net earnings before depreciation and amortization of real estate assets, gains or losses on dispositions of real estate, (including such non-FFO items reported in discontinued operations).   Notwithstanding the widespread reporting of FFO, changes in accounting and reporting rules under GAAP that were adopted after NAREIT’s definition of FFO have prompted a significant increase in the magnitude of non-operating items included in FFO.  For example, acquisition expenses, acquisition fees and financing fees, which we intend to fund from the proceeds of this offering and which we do not view as an expense of operating a property, are now deducted as expenses in the determination of GAAP net income.  As a result, we intend to consider a modified FFO, or MFFO, when assessing our operating performance.  We intend to explain all modifications to FFO and to reconcile MFFO to FFO and FFO to GAAP net income when presenting MFFO information.

Our MFFO is FFO excluding straight-line rental revenue, the net amortization of above-market and below market leases, other than temporary impairment of marketable securities, gain/loss on sale of marketable securities, impairment charges on long-lived assets and acquisition-related costs expensed.  Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time.  Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient.

 Accordingly, we believe that FFO is helpful to stockholders and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which is not immediately apparent from net income.  We believe that MFFO is helpful to stockholders and our management as a measure of operating performance because it excludes charges that management considers more reflective of investing activities or non-operating valuation changes.  By providing FFO and MFFO, we present information that reflects how our management analyzes our long-term operating activities.  We believe fluctuations in MFFO are indicative of changes in operating activities and provide comparability in evaluating our performance over time and as compared to other real estate companies that may not be affected by impairments or acquisition activities. 

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Below is a reconciliation of net loss to FFO for the three and six months ended June 30, 2010 and 2009.

	For the Three Months Ended							For the Six Months Ended
	June 30, 2010				June 30, 2009			June 30, 2010			June 30, 2009
Net loss		$	(207,158	)	$	(25,001	)	$	(302,695	)	$	(77,572	)
Adjustments:
Equity in depreciation and amortization for unconsolidated affiliated real estate entity			113,419						113,419
FFO			(93,739	)		(25,001	)		(189,276	)		(77,572	)
Less: FFO attributable to noncontrolling interests			7			-			17			-
FFO  attributable to Company's common share		$	(93,732	)	$	(25,001	)	$	(189,259	)	$	(77,572	)
FFO per common share, basic and diluted		$	(0.04	)	$	(1.25	)	$	(0.10	)	$	(3.88	)
Weighted average number of common shares outstanding, basic and diluted			2,276,938			20,000			1,959,758			20,000

Below is the reconciliation of MFFO for the three and six months ended June 30, 2010 and 2009.

	For the Three Months Ended							For the Six Months Ended
	June 30, 2010				June 30, 2009			June 30, 2010			June 30, 2009
FFO		$	(93,739	)	$	(25,001	)	$	(189,276	)	$	(77,572	)
Adjustments:
Noncash Adjustments:
Amortization of above and below market leases			-			-			-			-
Straight-line rent adjustment (1)			(12,101	)					(12,101	)
Total non cash adjustments			(12,101	)		-			(12,101	)		-
Other adjustments:
Acquisition/divestiture costs expensed			88,449			-			88,449			-
MFFO		$	(17,391	)	$	(25,001	)	$	(112,928	)	$	(77,572	)
Less: MFFO attributable to noncontrolling interests			1						11			-
MFFO  attributable to Company's common share		$	(17,390	)	$	(25,001	)	$	(112,917	)	$	(77,572	)

1) Straight-line rent adjustment relates to straight-line rent from unconsolidated affiliated real estate entity.

 Sources of Distribution

 On July 9, 2010, the Company’s Board of Directors declared the quarterly distribution for the three-month period ended June 30, 2010 in the amount of $0.00178082191 per share per day which equals a daily amount that, if paid each day for a 365-day period, of 6.5% annualized rate based on a share price of $10.00 payable to stockholders of record on the close of business each day during the quarter.  The distribution was paid in full on July 15, 2010 using a combination of cash ($0.1 million) and shares ($0.1 million) which represents 18,437 shares of the Company’s common stock issued pursuant to the Company’s Distribution Reinvestment Program, at a discounted price of $9.50 per share.   We used proceeds from our offering of common stock to fund all of our cash distribution.

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The following table provides a summary of the quarterly distributions declared and the source of distribution based upon cash flows provided by operations for the three and six months ended June 30, 2010.  We did not declare a distribution for the three and six months ended June 30, 2009 as we did not begin operations until October 2009.

	Related to the Six Months Ended		Quarter ended		Quarter ended
	June 30, 2010		June 30, 2010		March 31,  2010
Distribution period:				Q2 2010		Q1 2010
Date distribution declared			July 9, 2010		March 23, 2010
Date distribution paid			July 15, 2010		April 15, 2010
Distributions Paid	$	314,927	$	192,562	$	122,365
Distributions Reinvested		301,517		175,152		126,365
Total Distributions	$	616,444	$	367,714	$	248,730
Source of distributions
Cash flows used from operations	$	-	$	-	$	-
Proceeds from issuance of common stock		616,444		367,714		248,730
Total Sources	$	616,444	$	367,714	$	248,730

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”, which was primarily codified into Topic 810 in the ASC.  This standard requires ongoing assessments to determine whether an entity is a variable entity and requires qualitative analysis to determine whether an enterprise’s variable interest(s) give it a controlling financial interest in a variable interest entity. In addition, it requires enhanced disclosures about an enterprise’s involvement in a variable interest entity. This standard is effective for the fiscal year that begins after November 15, 2009. The Company adopted this standard on January 1, 2010 and the adoption did not have a material impact on the Company's consolidated financial statements.

In January 2010, the FASB issued FASB Accounting Standards Update (“ASU”) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”.  ASU No. 2010-06 amends ASC 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements. This ASU becomes effective for the Company on January 1, 2010. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk.

We may be exposed to the effects of interest rate changes primarily as a result of borrowings used to maintain liquidity and fund the expansion and refinancing of our real estate investment portfolio and operations. Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk. To achieve our objectives, we may borrow at fixed rates or variable rates. We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. We will not enter into derivative or interest rate transactions for speculative purposes. As of June 30, 2010, we did not have any swap or derivative agreements outstanding.

In addition to changes in interest rates, the value of our real estate will be subject to fluctuations based on changes in the real estate capital markets, market rental rates for local, regional and national economic conditions and changes in the creditworthiness of tenants. All of these factors may also affect our ability to refinance our debt if necessary.

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ITEM 4 (T). CONTROLS AND PROCEDURES.

As of the end of the period covered by this report, management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no significant deficiencies or material weaknesses identified in the evaluation, and therefore, no corrective actions were taken.

PART II. OTHER INFORMATION:

ITEM 1. 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, we are not a party to any material pending legal proceedings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities  

During the period covered by this Form 10-Q, we did not sell any unregistered securities. Through June 30, 2010, we have not repurchased any of our securities.

Use of Initial Public Offering Proceeds  

On February 17, 2009, our Registration Statement on Form S-11 (File No. 333-151532), covering a public offering, which we refer to as the “Offering,” of up to 51,000,000 common shares for $10 per share (exclusive of 6,500,000 shares available pursuant to the Company’s distribution reinvestment plan, 75,000 shares that are reserved for issuance under the Company’s stock option plan and 255,000 shares reserved for issuance under the Company’s employee and director incentive restricted share plan) was declared effective under the Securities Act of 1933.

We issued 20,000 shares to the Advisor on May 20, 2008, for $10 per share.  In addition, as of September 30, 2009, we had reached its minimum offering by receiving subscriptions of its common shares, representing gross offering proceeds of approximately $6.5 million. Through June 30, 2010, cumulative gross offering proceeds of $25.5 million were released to the Company.  The Company invested the proceeds from this sale and proceeds from the Advisor in the Operating Partnership, and as a result, held a 99.99% general partnership interest at June 30, 2010 in the Operating Partnership’s common units.

Lightstone SLP II LLC will purchase subordinated profits interests in the Operating Partnership at a cost of $100,000 per unit for each $1,000,000 in subscriptions up to ten percent of the offering proceeds.  Lightstone SLP II LLC may elect to purchase the subordinated profits interests with either cash or an interest in real property of equivalent value.  The proceeds received from the cash sale of the subordinated profits interests will be used to offset payments made by us from offering proceeds to pay the dealer manager fees and selling commissions and other offering costs.    On June 30, 2010, Lightstone SLP II LLC purchased 25 subordinated profits interest valued at $2.5 million by contributing a 26.25% interest in Brownmill LLC (see Note 3 of notes to consolidated financial statements regarding Brownmill LLC).

We will utilize a portion of offering proceeds towards funding the dealer manager fees, selling commissions and other offering costs.

Below is a summary of the expenses we have incurred life to date in connection with the issuance and distribution of the registered securities.

Type of Expense Amount
Underwriting discounts and commissions	$	2,275,152
Other expenses incurred to be paid non-affiliates		3,471,624
Total  offering expenses  incurred through June 30, 2010	$	5,746,776

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As of June 30, 2010, the total costs of raising capital associated with our offering which we have funded, including fees paid to our Dealer Manager was approximately 23% of total proceeds compared to 31% as of December 31, 2009.  As a significant amount of offering costs associated with accounting, legal and marketing costs are incurred prior to the sale of shares, the percentage of proceeds utilized towards commissions, dealer manager fees and other offering costs is higher than our estimate of  approximately 10% of offering proceeds.  As we sell more shares, this percentage will decline over time.

Cumulatively, we have used the net offering proceeds received of $20.4 million, after deduction of offering expenses paid since inception of $4.7 million, as follows:

	At June 30, 2010
Construction of plant, building and facilities	$	-
Purchase of real estate interests		-
Purchase of mortgage loan		7,587,000
Investment in real estate securities		1,690,000
Cash and cash equivalents (as of June 30, 2010)		9,915,011
Subscriptions Receivable (as of June 30, 2010)		342,579
Fund cash distributions		206,218
Other uses (primarily timing of payables)		689,432
Total uses	$	20,430,240

As of August 6, 2010, we have sold 2,802,394 shares at an aggregate of price of approximately $28.0 million.  In addition, we have sold approximately 39,384 shares at an aggregate price of approximately $0.4 million under our Distribution Reinvestment Plan.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

Exhibit Number	Description
10.9	Assignment and Assumption Agreement between Citigroup Markets Corp and Lightstone Value Plus REIT II LP
10.10	Contribution Agreement between Lightstone Holdings, LLC and Lightstone Value Plus REIT II LP
10.11	Assignment of Membership Interest between Lightstone Holdings, LLC and Lightstone Value Plus REIT II LP
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”

*Filed herewith

21

SIGNATURES

Pursuant to the requirements 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 REAL ESTATE INVESTMENT TRUST II, INC.
Date: August 16, 2010	By:	/s/ David Lichtenstein
		David Lichtenstein
		Chairman and Chief Executive Officer (Principal Executive Officer)

Date: August 16, 2010	By:	/s/ Donna Brandin
		Donna Brandin
		Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial and Accounting Officer)

22

EX-10.9

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”) is made as of June ____, 2010, between CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation, as seller (“Seller”), and [LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation], as purchaser (“Purchaser”).

Seller, in consideration of the payment of $7,857,000 (the “Payment”) on the date hereof, the receipt and sufficiency of which are acknowledged, hereby sells, transfers, assigns, delivers, sets-over and conveys to Purchaser, without recourse and without representations, warranties or covenants, express or implied, except as set forth on Exhibit A attached hereto and made a part hereof, all right, title and interest of Seller in and to that certain mortgage loan in the original principal amount of $18,675,000 (the “Loan”) made by Seller, as lender, to the parties set forth on Exhibit C attached hereto, each as borrower (individually and collectively, as the context may require, “Borrower”), including, without limitation, any claims and causes of action with respect to the Loan.  The Loan is secured by, among other things, that certain Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of August 31, 2007, executed by Borrower to Seller (the “Security Instrument”), and recorded on September 17, 2007, in Mortgage Book 16984, Page 620 in the Official Records of Bergen County, New Jersey. Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Security Instrument.

The Loan and the Loan Documents are being sold, transferred and assigned to Purchaser “AS-IS, WHERE IS, AND WITH ALL FAULTS”, except as expressly provided herein (including Exhibit A).  Purchaser hereby acknowledges that neither Seller nor any other person or entity has made any representations or warranties with respect to the Loan or the Loan Documents (except as expressly provided herein (including Exhibit A), and that, except to the extent expressly provided herein (including Exhibit A) to the contrary, Seller shall not have any responsibility for (i) the collectability of the Loan, (ii) the validity, enforceability or legal effect of any of the Loan Documents or any due diligence materials furnished to Seller in connection with the origination and/or sale of the Loan, (iii) the validity, sufficiency, priority or effectiveness of any lien created by the Loan Documents, (iv) the financial condition of Borrower or any guarantor(s) or the ability of any such party to perform their respective obligations under the Loan Documents, (v) the existence or nonexistence of any default or Event of Default under the Loan Documents, (vi) rights of offset, deductions, negotiability or holder in due course status, or the accuracy or completeness of the matters disclosed, represented or warranted by any party in the Loan Documents, (vii) the condition of the Loan or the value or income potential of the Loan or any collateral for the Loan,  (viii) the adequacy of the collateral for the Loan or (ix) the state of title to the Property or any other collateral pledged in respect of the Loan, except to the extent of the representations and warranties provided herein (including Exhibit A).  Without in any way limiting the generality of the foregoing, except to the extent of the representations and warranties provided herein (including Exhibit A), Seller has not made, does not make or undertake, and expressly disclaims any representation, warranty or obligation, expressed or implied, as to any characteristic or other matter affecting or related to the Property, including the presence of any Hazardous Substance in the Property or any other environmental or other matters related to the physical condition of the Property (both surface and subsurface).  Except as expressly provided herein (including Exhibit A), Purchaser assumes all risk of loss in connection with the Loan from and after the date hereof.  Purchaser has been given reasonable opportunity to review and, to the extent Purchaser deemed necessary, has examined, and in any case, Purchaser hereby acknowledges (subject to the representation of Seller contained in subsection (a)(viii) of Exhibit A) that Seller has made available to Purchaser all of the Loan Documents and the terms of the Loan, and the terms and conditions of all other documents and agreements relating to the Loan entered into by Borrower, or any guarantor of the Loan.

Purchaser acknowledges that neither Seller nor its agents, employees, officers, representatives or attorneys have made any representation or warranty with respect to any tax matters relating to the transactions contemplated hereby, Purchaser shall be solely responsible for its own tax analysis and Seller shall have no liability or obligation whatsoever in connection with any tax consequences or treatment relating to or arising from the sale of the Loan by Seller to Purchaser.

Purchaser hereby accepts the foregoing assignment and hereby assumes and agrees to fulfill, perform and discharge, from and after the date hereof, all of the obligations of Seller with respect to the Loan under the Loan Documents accruing from and after the date hereof, to the same effect as if Purchaser had been Seller under the Loan.  From and after the date hereof, Seller shall be released of the foregoing commitments, obligations and liabilities accruing from and after the date hereof.

Each of Purchaser and Seller represents and warrants to the other that no broker or finder has been engaged by it and it has had no conversations or discussions with any broker or finder in connection with the Property, the Loan or any of the transactions contemplated by this Assignment and to its knowledge no broker or finder is in any way connected with any of such transactions.

Seller covenants and agrees with the Purchaser that, at any time, and from time to time hereafter, upon the reasonable request of the Purchaser, and without payment of further consideration to the Seller (except for the Seller’s reasonable verifiable third party costs and expenses incurred in connection with the Purchaser’s request, which costs and expenses shall be paid by the Purchaser), Seller shall do, execute, acknowledge and deliver, and shall cause to be done, executed, acknowledged and delivered, all such further acts, deeds, documents, instruments, assignments, transfers, conveyances and assurances as may be reasonably required in order to better assign, transfer, grant, convey and confirm to the Purchaser, the Loan sold by the Seller as provided for herein.  Furthermore, as soon as practicable after the date of this Assignment, Seller shall execute such documents as are required by applicable law so as to substitute Purchaser as the party plaintiff in any litigation, foreclosure or trustee’s sale, any of the preceding of which was commenced by Seller with respect to the Loan prior to the date hereof.

Purchaser covenants and agrees that at any time, and from time to time hereafter, upon the reasonable request of the Seller, and without payment of further consideration to the Purchaser (except for Purchaser’s reasonable verifiable third party costs and expenses incurred in connection with Seller’s request, which costs and expenses shall be paid by Seller), the Purchaser shall do, execute, acknowledge and deliver, and shall cause to be done, executed, acknowledged and delivered, all such further acts, deeds, documents, instruments, assignments, transfers, conveyances and assurances as may be reasonably required in order to reflect accurately the status of title to the Loan, and to execute the intent evidenced by this Assignment.  Furthermore, as soon as practicable after the date hereof, Purchaser shall execute such documents as are required by applicable law so as to substitute Purchaser as the party plaintiff in any litigation, foreclosure or trustee’s sale, any of the preceding of which was commenced by Seller with respect to the Loan prior to the date hereof.

2

The schedules and exhibits to this Assignment are incorporated and made a part hereof and are an integral part of this Assignment.

Each party hereto shall treat as confidential the transactions contemplated hereby, the parties hereto, the terms of this Assignment, the purchase price for the Loan (or any component thereof), the negotiations between each Seller and Purchaser and their respective affiliates who have engaged in such negotiations in connection with the transactions contemplated herein and/or any correspondence relating to such negotiations between each Seller and Purchaser and their respective affiliates who have sent or received such correspondence (such information, exclusive of any information expressly permitted to be contained in any Publicity Statement (as defined  below) in accordance with the immediately succeeding paragraph, collectively, the “Confidential Information”), except that neither Purchaser nor Seller shall be precluded from making such filings as may be required by law (including, without limitation, the Securities Act of 1933, the Securities Exchange Act of 1934 and the regulations promulgated thereunder) or the rules of any stock exchange.  Neither Purchaser nor Seller shall disclose the Confidential Information to any Person without the other party’s prior written consent, except each of Seller and Purchaser may disclose such Confidential Information (a) to its officers, directors, affiliates, members, employees, agents, accountants, auditors, attorneys and advisors (collectively, “Representatives”) who are directly involved in the consideration of the transactions contemplated herein or (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law.  In the event that Purchaser or Seller is required by a judicial or administrative proceeding or as otherwise required by law to disclose any Confidential Information, Purchaser or Seller, as applicable, will (unless prohibited by law or regulation from doing so) provide the other party hereto with prompt notice of such request or requirement so that such party may seek an appropriate protective order.  If, failing the entry of a protective order, Purchaser or Seller is, upon the advice of its counsel, compelled to disclose such Confidential Information, Purchaser or Seller, as applicable, may disclose that portion of the Confidential Information that its counsel advises that it is compelled to disclose and will cooperate with the other party hereto in its efforts to obtain a protective order or other reliable assurance that only the designated portion of the Confidential Information will be disclosed.  This Assignment shall not, and no memorandum or other document relating to this Assignment (other than with respect to any recorded Loan Documents) shall be recorded by Purchaser or Seller without the prior written consent of the other party hereto.  Notwithstanding anything to the contrary contained in this Assignment, this Assignment shall be subject to that certain Limited Disclosure Agreement dated as of April 21, 2010, between Seller and an affiliate of Purchaser (collectively, the “Existing Confidentiality Agreement”); provided, however that nothing contained in the Existing Confidentiality Agreement shall preclude Purchaser or Seller from making such filings as may be required by law (including, without limitation, the Securities Act of 1933, the Securities Exchange Act of 1934 and the regulations promulgated thereunder) or the rules of any stock exchange.  Except as set forth in the preceding sentence, in the event of any conflict or ambiguity between the terms of this paragraph and the terms of the Existing Confidentiality Agreement, the terms of the Existing Confidentiality Agreement shall govern.  The terms of this paragraph shall survive the closing of the transactions contemplated pursuant to this Assignment.

3

All news releases, publicity or advertising by Purchaser or Seller or their respective affiliates through any media intended to reach the general public referring to the transactions contemplated herein (a “Publicity Statement”) shall be subject to the prior written approval of the other party hereto, which approval shall not be unreasonably withheld; provided, however, that any Publicity Statement that only contains the names of Seller and Purchaser, the Property name and address, the fact that Seller sold the Loan to Purchaser and the closing date of such sale and otherwise does not contain any Confidential Information shall not require the consent of either party hereto.  Each party shall use commercially reasonable efforts to respond to any request for approval required under this paragraph within five (5) business days of request therefor, provided, however, failure to so respond in such five (5) business day period shall not limit or otherwise affect the non-responding party’s rights hereunder.

This Assignment shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to the choice of law rules and principles of said state.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New Jersey and the federal courts of the United States of America located within such state for the purpose of any action or proceeding relating to this Assignment.  SELLER AND PURCHASER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS ASSIGNMENT.

This Assignment contains the entire agreement between Seller and Purchaser relating to the transactions contemplated hereby and supersedes and replaces all prior discussions, representations, communications and agreements (oral and written), other than the Existing Confidentiality Agreement.

This Assignment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

4

IN WITNESS WHEREOF, Seller and Purchaser have executed this Assignment and Assumption Agreement as of the date first above written.

SELLER:
CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation
By:
	Name:
	Title:

		,
a
By:
	Name:
	Title:

5

EX-10.10

CONTRIBUTION AGREEMENT

This Contribution Agreement (this “Agreement”) is entered into as of June ___, 2010, and effective as of April 1, 2010, by and among LIGHTSTONE HOLDINGS, LLC, a Delaware limited liability company (the “Company”) and LIGHTSTONE VALUE PLUS REIT II LP, a Delaware limited partnership (the “REIT OP”).

W I T N E S S E T H :

WHEREAS, David Lichtenstein (“Lichtenstein”) is the sole member and managing member of the Company owning a 100% membership interest in the Company;

WHEREAS, Lichtenstein is the chief executive officer of Lightstone Value Plus Real Estate Investment Trust II, Inc., a Maryland corporation (the “REIT”), the general partner of REIT OP;

WHEREAS, the Company owns a 50.5% membership interest in Brownmill LLC, a New Jersey limited liability company, the owner (“Owner”) of those certain properties known as Browntown Shopping Center located in Old Bridge, New Jersey and Millburn Mall located in Union, New Jersey (the “Properties”);

WHEREAS, Lichtenstein, REIT OP and Lightstone SLP II LLC (“Lightstone SLP”) entered into that certain Third Amended and Restated Agreement, dated as of January, 30, 2010, in which Lichtenstein is required on a semi-annual basis to fund the purchase of subordinated profits interests in the REIT OP with (i) cash or (ii) contributions of interests in real property of equivalent value (“Lichtenstein Funding Requirement”);

WHEREAS, Lichtenstein, as the managing member of the Company, desires to satisfy the Lichtenstein Funding Requirement and directs the Company to contribute to the REIT OP 51.98% (equaling to 26.25% interest) in the Owner;

WHEREAS, as consideration for the Contributed Interest in the Owner, the REIT OP shall contribute to Lightstone SLP operating partnership units in the REIT OP worth [$2,500,000.00] (the “Contribution Amount”).

NOW THEREFORE, in consideration of the premises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound hereby, the parties agree as follows:

1.Contribution of the Contribution Amount.  As of the date hereof, the REIT OP hereby contributes the Contribution Amount to Lightstone SLP in exchange for the contribution of the Contributed Interest in the Owner by the Company to the REIT OP.  The contribution of the Contribution Amount shall be deemed a $2,500,000.00 capital contribution by the REIT OP to Lightstone SLP in exchange for 51.98% (equaling to 26.25% interest) in the Owner and shall be credited as such to a capital account established for the REIT OP on the books of Lightstone SLP.

2.Representations and Warranties of the REIT.  The REIT represents and warrants to the Company that:

(a)The REIT is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has all requisite corporate power and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business.

(b)The execution, delivery and performance by the REIT of this Agreement, and the consummation of the transactions contemplated hereby, are within the corporate powers of the REIT and have been duly authorized by all necessary corporate action on the part of the REIT.  This Agreement constitutes the valid and binding agreement of the REIT.

(c)The execution, delivery and performance by the REIT of this Agreement, and the consummation of the transactions contemplated hereby, do not (i) violate the articles of incorporation or bylaws of the REIT; or (ii) contravene or conflict with, or constitute a violation of, any material applicable law in any material respect.

(d)The Contribution Amount is being contributed to the Company free and clear of any and all liens, charges and security interests.

3.Representations and Warranties of the Company.  The Company represents and warrants to the REIT that:

(a)The Company has been duly formed as a limited Company and is validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business.

(b)The execution, delivery and performance by the Company of this Agreement, and the consummation of the transactions contemplated hereby, are within its powers and authority and have been duly authorized by all necessary limited partnership action.  This Agreement constitutes the valid and binding agreement of the Company.

(c)The execution, delivery and performance by the Company of this Agreement, and the consummation of the transactions contemplated hereby, do not (i) violate the organizational documents of the Company; or (ii) contravene or conflict with, or constitute a violation of, any material applicable law in any material respect.

(d)The 26.25% membership interest in the Owner to be received by the REIT OP will upon issuance be duly issued, non-assignable and free of liens, charges and security interests (other than any existing under the limited liability company agreement of the Owner).

(e)To the best of its knowledge and other than the existing first mortgage with Countrywide Commercial Real Estate Finance, Inc., and its successors and assigns, the Properties are free and clear of any and all liens, security interests, encumbrances, adverse claims, suits or proceedings at law or in equity,.

4.General Provisions.

(a)Further Assurances.  Each party to this Agreement, at any time and from time to time upon the reasonable request of another party to this Agreement, shall promptly execute and deliver, or cause to be executed and delivered, all such further instruments and take all such further actions as may be reasonably necessary or appropriate to confirm or carry out the purposes and intent of this Agreement.

(b)Assignment.  Neither this Agreement nor any of the rights or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

(c)Governing Law.  This Agreement shall be governed by and construed and interpreted in accordance with the substantive laws of the State of New York, without giving effect to any choice of law or conflicts of law provision or rule that would cause the application of the laws of a jurisdiction other than New York.

(d)Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.  If any provision of this Agreement, or the application thereof to any person or entity or any circumstance, is found to be invalid or unenforceable in any jurisdiction, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

(e)Counterparts.  This Agreement may be executed (including by facsimile transmission) with counterpart pages or in one or more counterparts, each of which shall be deemed an original and all of which shall, taken together, be considered one and the same agreement, it being understood that both parties need not sign the same counterpart.

(f)Amendment; Waiver.  No provision of this Agreement may be amended unless such amendment is approved in writing by the parties hereto.  No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be executed as of the day and year first above written.

LIGHTSTONE VALUE PLUS REIT II LP
By:	LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, its General Partner
By:
	Name: David Lichtenstein
	Title: Chief Executive Officer

LIGHTSTONE HOLDINGS, LLC, a Delaware limited liability company
By:
	Name: David Lichtenstein
	Title: Managing Member

EX-10.11

ASSIGNMENT OF MEMBERSHIP INTEREST

ASSIGNMENT OF MEMBERSHIP INTEREST dated as of June 30, 2010, (the “Assignment”) made by LIGHTSTONE HOLDINGS, LLC, a Delaware limited partnership (the “Assignor”) to LIGHTSTONE VALUE PLUS REIT II LP, a Delaware limited partnership (the “Assignee”).

RECITALS

(1)WHEREAS, Assignor owns a 50.5% membership interest (“Membership Interest”) in BROWNMILL LLC, a New Jersey limited liability company (“Brownmill”).

(2)WHEREAS, Assignor and Assignee desire to enter into this Assignment whereby Assignor will transfer the Assigned Membership Interest (as defined below) of its Membership Interest to Assignee.

(3)WHEREAS, the Assignor is the legal and beneficial owner of a the Assigned Membership Interest existing under and evidenced by that certain First Amended and Restated Operating Agreement of Brownmill, dated as of September 27, 2005 (as it may be amended, supplemented or otherwise modified from time to time in accordance with its terms, the “Operating Agreement”).

NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

Section 1.Assignment and Acceptance of Assigned Membership Interest.  As of the Effective Date (as defined in Section 10), the Assignor hereby sells, transfers, conveys and assigns (without recourse and, except as set forth herein, representation or warranty) (collectively, the “Assignment”) to the Assignee 51.98% of its Membership Interest (equaling to 26.25% interest in Brownmill) of the Assignor’s right, title and interest in and to the Membership Interest and of its right under the Operating Agreement, including, without limitation, all its (a) rights to receive moneys due and to become due under or pursuant to the Operating Agreement, (b) rights to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Operating Agreement, (c) claims for damages arising out of or for breach of or default under the Operating Agreement, and (d) rights to perform thereunder and to compel performance, and otherwise exercise all rights and remedies thereunder.  The percentage interest of the Assignor’s right, title and interest in the Membership Interest and of the Assignor’s rights under the Operating Agreement that are being assigned to the Assignee pursuant to this Agreement are hereinafter referred to as the “Assigned Membership Interest”.  The Assignee, upon the execution of this Assignment, hereby accepts from the Assignor the Assigned Membership Interest and agrees to become a successor member in Brownmill in the place and stead of the Assignor to the extent of the Assigned Membership Interest and to be bound by the terms and provisions of the Operating Agreement.

Section 2.Capital Account.  On or prior to the Effective Date, all profits and losses, and all other items of income, gain, loss deduction or credit, allocable to the Assigned Membership Interest shall be credited or charged, as the case may be, to the Assignee and the Assignee shall be entitled to the portion of all distributions, payments or other allocations payable in respect of the Assigned Membership Interest, regardless of the source of such distributions, payments or other allocations or the date on which they were earned.

Section 3.Representations and Warranties of the Assignor.  The Assignor represents to Assignee as of the Effective Date, that:

(a)This Assignment has been duly executed and delivered by the Assignor and is a valid and binding obligation of the Assignor, enforceable in accordance with its terms; and

(b)The Assignor is the sole owner of the Assigned Membership Interest free and clear of any liens, and the Assignee, upon consummation of the Assignment hereunder, shall acquire good title to the Assigned Membership Interest.

Section 4.Covenants of the Assignor.  Assignor agrees that (i) Assignor shall not assert that the Assignment is invalid, ineffective or void on the basis that the Assignment conflicts with or violates any provision of the Operating Agreement and (ii) anything in the Operating Agreement to the contrary notwithstanding, Assignor shall impose no condition on Assignee’s admission as a member of Brownmill.

Section 5.Filings.  On or as soon as practicable after the Effective Date, the Assignee shall file and record or cause to be filed and recorded with all proper offices or agencies all documents and instruments required to effect the terms herein, if any, including, without limitation, (a) this Assignment and (b) any limited liability company and assumed or fictitious name certificate or certificates and any amendments thereto.

Section 6.Future Assurances.  Each of the Assignor and the Assignee mutually agrees to cooperate at all times from and after the date hereof with respect to any of the matters described herein, and to execute such further deeds, bills of sale, assignments, releases, assumptions, notifications or other documents as may be reasonably requested for the purpose of giving effect to, evidencing or giving notice of the assignment evidenced hereby.

Section 7.Successors and Assigns.  This Assignment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.

Section 8.Modification and Waiver.  To the fullest extent permitted by law, no supplement, modification, waiver or termination of this Assignment or any provisions hereof shall be binding unless executed in writing by all parties hereto.

Section 9.Counterparts.  Any number of counterparts of this Assignment may be executed.  Each counterpart will be deemed to be an original instrument and all counterparts taken together will constitute one agreement.  Delivery of an executed counterpart of a signature page to this Assignment by telecopier shall be as effective as delivery of a manually executed counterpart of this Assignment.

2

Section 10.Execution:  Effective Date.  This Assignment will be binding and effective and will result in the assignment of the Assigned Membership Interest on the date first written above (the “Effective Date”).

Section 11.Governing Law.  This Assignment will be governed by the laws of the State of Delaware.

[SIGNATURE PAGES FOLLOW]

3

IN WITNESS WHEREOF, the undersigned parties have duly executed and delivered this Agreement as of the day and year first written above.

ASSIGNOR:
	LIGHTSTONE HOLDINGS, LLC, a Delaware limited liability company
By:
	Name: David Lichtenstein
	Title: Managing Member

ASSIGNEE:
	LIGHTSTONE VALUE PLUS REIT II LP
By:	LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, its General Partner
By:
	Name: Donna Brandin
	Title: Chief Financial Officer

4

EX-31.1

EXHIBIT 31.1

Certifications

  I, David Lichtenstein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus Real Estate Investment Trust II, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter  that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 16, 2010

/s/ David Lichtenstein                      

David Lichtenstein

Chairman and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certifications

I, Donna Brandin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus Real Estate Investment Trust II, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter  that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 16, 2010

/s/ Donna Brandin                    

Donna Brandin

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)  

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, David Lichtenstein, the Chief Executive Officer and Chairman of the Board of Directors of Lightstone Value Plus Real Estate Investment Trust II, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2010 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C 78m); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David Lichtenstein                      

David Lichtenstein

Chairman and Chief Executive Officer

(Principal Executive Officer)

August 16, 2010

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Donna Brandin, the Chief Financial Officer, Treasurer and Principal Accounting Officer of Lightstone Value Plus Real Estate Investment Trust II, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2010 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C 78m); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Donna Brandin                      

Donna Brandin

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

August 16, 2010