Exhibit 99.1

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2007 AND 2006

TABLE OF CONTENTS


	Page No.

Independent Auditors’ Report		1

Combined Balance Sheets		2

Combined Statements of Operations		3

Combined Statements of Changes in Members’ Equity Deficit		4

Combined Statements of Cash Flows		5

Notes to Combined Financial Statements		6 – 18

Supplementary Information

Combined Balance Sheets		20

Combined Statements of Operations		21

INDEPENDENT AUDITORS’ REPORT

To the Members
Lightstone Member LLC, PRC Member LLC,
Lightstone Member II LLC and Lightstone Member III LLC
Lakewood, NJ 08701

We have audited the accompanying combined balance sheets of Lightstone Member LLC, PRC Member LLC, Lightstone Member II LLC and Lightstone Member III LLC (the “Companies”) as of December 31, 2007 and 2006, and the related combined statements of operations, changes in members’ equity deficit and cash flows for the years then ended. These financial statements are the responsibility of the Companies’ management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The Companies are not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companies’ internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Companies as of December 31, 2007 and 2006, and the combined results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an option on the basic financial statements taken as a whole. The supplementary information shown on pages 20 and 21 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subject to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ The Schonbraun McCann Group, LLP

Roseland, New Jersey
March 24, 2008

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
COMBINED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
(Dollar amounts in thousands)


	2007			2006

ASSETS

Investments in Real Estate, net of accumulated depreciation of $28,787 (2007) and $18,698 (2006)	$	235,595		$	304,358

Other Assets
Cash and cash equivalents		3,028			2,695
Escrow deposits		17,177			13,863
Rents and other receivables, net of allowance of $2,859 (2007) and $1,043 (2006)		7,307			7,255
In place lease value, net of accumulated amortization of $11,745 (2007) and $9,320 (2006)		6,409			9,256
Acquired lease rights, net of accumulated amortization of $5,483 (2007) and $3,816 (2006)		5,160			6,891
Deferred financing and lease costs, net of accumulated amortization of $2,014 (2007) and $1,120 (2006)		2,505			1,766
Prepaid expenses		968			981


	$	278,149		$	347,065


LIABILITIES AND MEMBERS’ EQUITY DEFICIT

Liabilities
Mortgage and other notes payable	$	306,131		$	308,092
Notes payable – related party		49,994			31,670
Interest payable		1,265			1,288
Deferred revenue		3,343			1,465
Accounts payable, accrued expenses and other liabilities		6,928			6,817
Acquired lease obligation, net of accumulated amortization of $7,241 (2007) and $6,105 (2006)		3,768			5,534
Due to affiliates		13,974			9,506

		385,403			364,372

Commitment and Contingencies

Members’ Deficit		(107,254	)		(17,307	)


	$	278,149		$	347,065

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

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2007 and 2006
(Dollar amounts in thousands)


	2007			2006


Revenues
Rental	$	35,660		$	40,959
Tenant reimbursements		19,449			16,587
Interest and other income		4,704			1,039

		59,813			58,585


Expenses
Rental property operating and maintenance expenses		24,591			23,311
Real estate taxes		5,352			4,974
Provision for losses on real estate		75,994			—
Interest, including amortization of $212 in 2007 and $330 in 2006 and prepayment penalty of $1,050 in 2006		25,144			25,112
Depreciation and amortization		14,108			16,102
General and administrative		4,395			3,017

		149,584			72,516


Net Loss	$	(89,771	)	$	(13,931	)

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

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
COMBINED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY DEFICIT
YEARS ENDED DECEMBER 31, 2007 AND 2006
(Dollar amounts in thousands)


	Presidential Realty Corp.			David Lichtenstein			Cedar Asset Management, LLC			Harold Rubin			Total


Balance at January 1, 2006	$	(1,598	)	$	533		$	(55	)	$	114		$	(1,006	)

Contributions		—			—			—			—			—

Distributions		(652	)		(1,705	)		(2	)		(12	)		(2,370	)

Net loss		(4,040	)		(9,782	)		(79	)		(30	)		(13,931	)


Balance at December 31, 2006		(6,290	)		(10,954	)		(136	)		72			(17,307	)

Distributions		(160	)		—			—			(16	)		(176	)

Net loss		(26,034	)		(63,554	)		(131	)		(52	)		(89,771	)


Balance at December 31, 2007	$	(32,484	)	$	(74,508	)	$	(267	)	$	4		$	(107,254	)

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

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2007 and 2006
Increase (decrease) in cash and cash equivalents
(Dollar amounts in thousands)


	2007			2006

Cash Flows From Operating Activities:
Net loss	$	(89,771	)	$	(13,931	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization		14,320			16,432
Provision for losses on real estate		75,994			—
Net change in revenue related to acquired lease rights/obligations		(35	)		(1,864	)
Bad debt allowance		1,816			725
Rents and other receivables		(1,868	)		(1,536	)
Prepaid expenses		13			(86	)
Accounts payable, accrued expenses and other liabilities		111			1,632
Interest expense payable		(23	)		(209	)
Due to affiliates, net		4,468			5,191
Deferred leasing costs		(2,095	)		(1,112	)
Deferred revenue		1,878			(164	)

Net cash provided by operating activities		4,808			5,078


Cash Flows Used In Investing Activities:
Escrow deposits, net		(3,314	)		1,382
Additions to properties		(17,320	)		(12,203	)

Net cash used in investing activities		(20,634	)		(10,821	)


Cash Flows From Financing Activities:
Proceeds from mortgage notes payable		—			110,500
Repayment of mortgage note payable		(1,961	)		(105,758	)
Proceeds from notes payable – related party		18,324			3,470
Deferred financing costs		(28	)		(892	)
Capital distributions		(176	)		(2,370	)

Net cash provided by financing activities		16,159			4,950


Net change in cash and cash equivalents		333			(793	)

Cash and cash equivalents, beginning of year		2,695			3,488


Cash and cash equivalents, end of year	$	3,028		$	2,695



Supplemental Disclosures of Cash Flow Information:
Cash paid during the year ended for:
Interest	$	24,954		$	23,942

Prepayment penalty	$	—		$	1,050

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

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


1.	ORGANIZATION AND DESCRIPTION OF BUSINESS

	a.	Formation

		Lightstone Member LLC (“Lightstone”) and PRC Member LLC (“PRC”) were both organized under the laws of the Commonwealth of Delaware on September 10, 2004. Lightstone Member II LLC (“Lightstone II”) and Lightstone Member III LLC (“Lightstone III”) were formed under the laws of Commonwealth of Delaware on December 1, 2004, and June 30, 2005, respectively. They are collectively the “Entities” or the “Companies”. The purpose of the Companies is to acquire, own, develop and manage retail malls. The Companies own the following retail malls as of December 31, 2007:


Property Name	Location	Approximate Square Feet	Ownership		Occupancy at Dec. 31, 2007


Martinsburg Mall	Martinsburg, WV	552,000		Fee	97	%
Mt. Berry Square Mall	Rome, GA	478,000		Fee	91	%
Bradley Square Mall	Cleveland, TN	385,000		Fee	92	%
W. Manchester Mall	York, PA	733,000		Fee	88	%
Shenango Valley Mall	Hermitage, PA	508,000		Leasehold	99	%
Shawnee Mall	Shawnee, OK	444,000		Fee	64	%
Brazos Outlet Center	Lake Jackson, TX	698,000		Fee	90	%
Burlington Mall	Burlington, NC	412,000		Fee	58	%
Macon Mall	Macon, GA	1,446,000		Fee/Leasehold	81	%

		5,656,000


	As of December 31, 2007, members of the Companies and their respective percentage interests are as follow:


Lightstone and PRC	Ownership Interests


Presidential Realty Corp.	29	%
David Lichtenstein (Managing Member)	70	%
Cedar Asset Management, LLC	1	%


Lightstone II	Ownership Interests

Presidential Realty Corp.	29	%
David Lichtenstein (Managing Member)	70	%
Harold Rubin	1	%

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


1.	ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)

	a.	Formation (continued)


Lightstone III	Ownership Interests


Presidential Realty Corp.	29	%
David Lichtenstein (Managing Member)	71	%


	b.	Cash Distribution, Profit and Loss Allocations

		The Companies shall continue to operate until dissolved per the operating agreements. The liability of each of the members is limited to the amount of capital contributed.

		Distributions of proceeds shall be distributed to the members at the discretion of the Managing Member, subject to the terms and conditions of all indebtedness of the Companies; provided that cash flow shall be distributed not less than annually and capital proceeds shall be distributed not later than forty-five days from the closing of the transaction giving rise to such capital proceeds.

		Distributions of cash flow shall be made to the members as follows:


		(a)	First, to the Managing Member and its affiliate, Cedar Asset Management, LLC (or Harold Rubin), until the Managing Member and its affiliate (or Harold Rubin) have received an aggregate amount equal to an accrued return of 11% per annum (“Preferred Return”) on the Managing Member’s and affiliate’s unreturned capital contribution.

		(b)	Then, to the members in accordance with their respective ownership interests.

		Capital proceeds shall be distributed to the members as follows:

		(a)	First, to the Managing Member and its affiliates, until the Managing Member and its affiliates have received an aggregate amount equal to an accrued return of 11% per annum on the Managing Member’s and its affiliates’ unreturned capital contribution.

		(b)	Then, to the Managing Member and its affiliates, until the Managing Member and its affiliates have received an aggregate amount equal the Managing Member’s and its affiliates’ capital contribution.

		(c)	Then, to the members in accordance with their respective ownership interests.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


1.	ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)

	c.	Allocation of Profits and Losses

		For financial reporting purposes, income is allocated based upon the cash flow distribution formula above. Losses are allocated pro-rata based upon ownership interests.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	a.	Basis of Accounting

		The accompanying combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

	b.	Principles of Combination

		The combined financial statements include the accounts of Lightstone and its wholly owned subsidiaries; Mount Berry Square Mall LLC, Bradley Square Mall LLC, West Manchester Mall LLC and Shenango Valley Mall LLC; PRC and its wholly owned subsidiary; Martinsburg Mall LLC; Lightstone II and its wholly owned subsidiaries; Shawnee Mall LLC and Brazos Outlet Mall LLC; Lightstone III and its wholly owned subsidiaries; Macon Mall LLC and Burlington Mall LLC. All material intercompany balances and transactions have been eliminated in combination. The financial statements were combined due to common ownership and control.

	c.	Use of Estimates

		The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. They also affect reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the carrying amount of investments in real estate, valuation of receivables and the allocation of purchase price to acquired lease rights and obligations. Actual results could differ from those estimates.

	d.	Cash and Cash Equivalents

		For purposes of the statement of cash flows, the Companies consider short-term investments with maturities of 90 days or less when purchased to be cash equivalents. The Companies maintain cash accounts at financial institutions, which are insured up to a maximum of $100,000. At various times during the year, balances exceeded the federally insured limit. Due to the stature and high credit quality of the financial institutions, such credit risk is considered to be minimal.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	e.	Marketing

		General marketing and advertising costs are expensed as incurred and were approximately $1,718 and $1,295 for 2007 and 2006, respectively.

	f.	Revenue Recognition and Tenant Receivables

		Base rental revenues from rental retail properties are recognized on a straight-line basis over the noncancelable terms of the related leases, which are all accounted for as operating leases. “Percentage rent” or rental revenue which is based upon a percentage of the sales recorded by the Companies’ tenants, is recognized in the period in which the tenants achieve their specified threshold per their lease agreements. These amounts are included in rental revenue in the accompanying financial statements.

		Rental income is also recognized in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, whereby the amortization of acquired favorable leases and acquired unfavorable leases is recognized as a reduction of or an addition to base rental income, respectively, over the terms of the respective leases. The net amount included in base rental income for the years ended December 31, 2007 and 2006 are as follows:


	2007			2006


Martinsburg Mall	$	(148	)	$	(97	)
Bradley Square Mall		74			107
West Manchester Mall		200			704
Shenango Valley Mall		238			274
Mount Berry Square Mall		116			175
Shawnee Mall		(32	)		126
Brazos Outlets Center		(69	)		574
Burlington Mall		1			51
Macon Mall		(345	)		(50	)


	$	35		$	1,864

Reimbursements from tenants related to real estate taxes, insurance and other shopping center operating expenses are recognized as revenue, based on a predetermined formula, in the period the applicable costs are incurred. Lease termination fees are recognized when the related leases are canceled, the tenant surrenders the space, and the Companies have no continuing obligation to provide services to such former tenants.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	f.	Revenue Recognition and Tenant Receivables (Continued)

		The Companies provide an allowance for doubtful accounts against the portion of tenant receivables which is estimated to be uncollectible. Management of the Companies reviews its allowance for doubtful accounts monthly. Balances that are past due over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered doubtful. Allowance for doubtful accounts as of December 31, 2007 and 2006 was approximately $2,859 and $1,043, respectively.

	g.	Deferred Charges

		Deferred leasing commissions, acquired in-place lease value, and other direct costs associated with the acquisition of tenants are capitalized and amortized on a straight-line basis over the terms of the related leases. Loan costs are capitalized and amortized to interest expense over the term of the related loan using a method that approximates the effective-interest method.

	h.	Real Estate and Depreciation

		Real estate is stated at historical cost less accumulated depreciation. The building and improvements thereon are depreciated on the straight-line basis over an estimated useful life of 40 years. Tenant improvements are depreciated on the straight-line basis over the shorter of the lease term or their estimated useful life. Equipment is depreciated on the straight-line basis over estimated useful lives of 5 to 7 years.

		Improvements and replacements are capitalized when they extend the useful life or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred.

	i.	Impairment of Long-Lived Assets

		Management assesses whether there has been impairment in the value of its long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. Provision for losses on real estate includes the impairment on assets to be held and used. See Note 4.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	j.	Purchase Accounting for Acquisition of Interests in Real Estate Entities

		Management allocated the purchase price of properties to tangible and identified intangible assets acquired based on its fair value in accordance with the provisions of SFAS No. 141, Business Combinations. The fair value of the tangible assets of an acquired property (which includes land, building, and improvements) was determined by valuing the properties as if vacant, and the “as-if-vacant” value was then allocated to land, building and improvements based on management’s determination of the relative fair values of these assets. Management determined the “as-if-vacant” fair value of properties using methods similar to those used by independent appraisers.

		Factors considered by management in performing these analyses included an estimate of carrying costs to execute similar leases. In estimating carrying costs, management included real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimated costs to execute similar leases including leasing commissions, legal and other related costs.

		In allocating the fair value of the identified intangible assets and liabilities of acquired properties, above-market and below-market in-place lease values were recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease values (included in the acquired lease rights in the accompanying combined balance sheets) are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values (presented as acquired lease obligations in the accompanying combined balance sheets) are amortized as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases.

		The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, was measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value was allocated between in-place lease values and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease; however, the value of tenant relationships has not been separated from in-place lease value because such value and its consequence to amortization expense is immaterial for these particular acquisitions. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	j.	Purchase Accounting for Acquisition of Interests in Real Estate Entities (Continued)

		Purchase accounting was applied, on a pro-rata basis, to the assets and liabilities related to the Properties. The results of operations of the Properties since acquisition are included in the accompanying combined statements of operations. The purchase price of the Properties, including closing costs, was as follows:


Lightstone	$	84,089
PRC		27,247
Lightstone II		45,500
Lightstone III		167,006


	$	323,842


	The fair value of the real estate acquired was allocated to the acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, if any, based in each case on their fair values.

	The following are the amounts that were assigned to each major asset and liability caption at the acquisition date:


	Lightstone			PRC			Lightstone II			Lightstone III


Land	$	10,641		$	6,875		$	7,086		$	25,930
Buildings and tenant improvements		70,378			16,546			35,797			132,946
Acquired lease rights⁽¹⁾		2,426			1,843			1,851			4,588
Acquired lease obligations ⁽¹⁾		(6,069	)		(781	)		(2,052	)		(2,737	)
In-place lease values⁽¹⁾		6,713			2,764			2,818			6,279


	$	84,089		$	27,247		$	45,500		$	167,006


	⁽¹⁾	These intangibles are being amortized over the remaining lease terms. The weighted average remaining lease terms are approximately 4.2 years.


k.	Income Taxes

	The Companies are limited liability companies which elected to be treated as partnerships for income tax purposes and are, therefore, not subject to income taxes at the entity level. All income and losses pass through to the members and are reported by them individually for income tax purposes.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)


3.	ESCROW DEPOSITS

	Escrow deposits include funds and other restricted deposits required in conjunction with the Companies’ loan agreements. Such amounts are to be used for specific purposes, such as the payment of real estate taxes, insurance and capital improvements.

4.	REAL ESTATE

	The investments in real estate consist of nine retail malls as identified in Note 1. During 2007 the current downturn in the commercial real estate and lack of demand for retail space in the regions covered by certain holdings has caused management to reassess the carrying value of each of the properties. Based on this assessment, management has determined that four of the nine properties have suffered an impairment loss of $75,994 in the aggregate. Determined fair values of the impaired properties at December 31, 2007, are as follows:


Macon Mall	$	79,680
Burlington Mall	$	7,900
Mt. Berry Square Mall	$	19,490
W. Manchester Mall	$	25,450


	In accordance with the provisions of SFAS No. 144, the above properties were written down from their individual carrying values to the determined fair values and the Company recognized a loss of $75,994 in the aggregate.

	Fair value was determined on an income approach where future estimated cash flows are capitalized to arrive at an estimate of value. Cash flow was determined for each property based on current and anticipated operations. The capitalization rates were developed from market data specific to each of the malls. The inputs used to assess fair value are considered unobservable level 3 inputs.

	At December 31, 2007, and 2006 investments in real estate consists of the following:


	2007			2006


Land	$	50,466		$	50,466
Buildings and improvements		252,594			237,230
Tenant improvements		37,316			35,360

		340,376			323,056
Less accumulated depreciation		(28,787	)		(18,698	)


Carrying value before impairment		311,589			304,358

Impairment		(75,994	)		—


	$	235,595		$	304,358

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)




5.	MORTGAGE AND OTHER NOTES PAYABLE


	On June 8, 2006, Martinsburg Mall, LLC (“Martinsburg”), Shenango Valley Mall, LLC (“Shenango”), Mount Berry Square Mall, LLC (“Mt. Berry”), and Bradley Mall, LLC (“Bradley”) together borrowed $73,900 from CIBC Inc., at an interest rate of 5.93% per annum. The loan is payable interest only monthly for twenty three months and thereafter in equal monthly installment of $440 and is secured by the related real estate, assignment of leases, rent and security deposits. The loan matures in July 2016 with no prepayment option. The loan, however, may be defeased.

	Management allocated the loan amount to the Properties as follows:


Martinsburg	$	27,285
Bradley		12,615
Shenango		13,470
Mt. Berry		20,530


	$	73,900


	On June 8, 2006, West Manchester, Mall LLC (“West Manchester”) borrowed $29,600 from CIBC Inc., at an interest rate of LIBOR plus 232 basis points (approximately 7.06% per annum at December 31, 2007), subject to a minimum rate of 7.89% per annum. The loan is payable interest only monthly and is secured by its real estate, assignment of leases, rent and security deposits. The loan matures on June 8, 2008 and contains a prepayment penalty equal to .75% of the outstanding principal amount if repaid prior to maturity. The loan is guaranteed, up to $10,360, by Lightstone Holdings, LLC an affiliate of a member.

	On June 8, 2006, Martinsburg, Shenango, Mount Berry, and Bradley borrowed $7,000 from CIBC Bank, at an interest rate of 12% per annum. Principal and interest on this loan is payable in equal monthly installment of $72 and is secured by the related real estate, assignment of leases, rent and security deposits of each property. The loan matures on July 1, 2016 with no prepayment option till three months prior to maturity date; however, the loan may be defeased.

	At December 31, 2007 and 2006 loan amount allocated to properties were as follows:


	2007		2006


Martinsburg	$	2,575	$	2,579
Bradley		1,186		1,189
Shenango		1,276		1,279
Mt. Berry		1,947		1,949


	$	6,984	$	6,996

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)




5.	MORTGAGE AND OTHER NOTES PAYABLE (Continued)


	On December 16, 2004, Lightstone II borrowed $39,500 from Wachovia at an interest rate of the greater of 8.8% per annum or the 30 day LIBOR plus 280 basis points (approximately 7.54% at December 31, 2007). This loan is payable interest only monthly and originally matured on January 9, 2007 with three one-year options with an extension fee of .125% of the outstanding principal. This loan is secured by the real estate, assignment of leases, rent and security deposits of Brazos Outlet Center LLC (“Brazos”) and Shawnee Mall LLC (“Shawnee”).

	The Company extended the loan until January 2009.

	Management allocated the loan amount to the properties as follows:


Brazos	$	21,725
Shawnee		17,775


	$	39,500


	On June 30, 2005, Lightstone III borrowed $141,200 (“Mortgage”) from Wachovia at an interest rate of 5.78% per annum. This loan is payable interest only monthly until July 11, 2006 and then installments of $827 as principal and interest until maturity on June 11, 2015. This loan is secured by the real estate, assignment of leases, rent and security deposits of Macon Mall LLC (“Macon”) and Burlington Mall LLC (“Burlington”). On June 30, 2005, Wachovia made an additional mezzanine loan (“Mezzanine”) in the amount of $17,650 under the same terms as the first mortgage.

	Management allocate the mortgage and Mezzanine loans to the properties at acquisition as follows:


	First Mortgage		Mezzanine Loan


Macon	$	114,203	$	14,275
Burlington		26,997		3,375


	$	141,200	$	17,650


	Mortgage and Mezzanine loans to the properties at December 31, 2007:


	First Mortgage		Mezzanine Loan


Macon	$	112,257	$	14,032
Burlington		26,541		3,317


	$	138,798	$	17,349

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)




5.	MORTGAGE AND OTHER NOTES PAYABLE (Continued)

	Mortgage and Mezzanine loans to the properties at December 31, 2006:


	First Mortgage		Mezzanine Loan


Macon	$	113,659	$	14,208
Burlington		26,870		3,359


	$	140,529	$	17,567


	Future minimum annual principal payments at December 31, 2007, after exercising of extension options, are as follows:


2008	$	32,006
2009		42,597
2010		3,287
2011		3,489
2012		3,666
Thereafter		221,086


	$	306,131


6.	NOTES PAYABLE – RELATED PARTY

	Lightstone borrowed $8,600 in 2004 from Presidential Realty Corp., a member of the Companies. The loan bears interest of 11% per annum, payable monthly. The entire loan payable is due in September 2014. The loan is secured by an assignment of the Companies’ ownership interest in its subsidiaries, subject to the first mortgage lien to CIBC Inc. The loan has a prepayment penalty of 3% of principal. $959 was recorded as interest expense in each of 2007 and 2006. PRC borrowed $2,600 in 2004 from David Lichtenstein and Cedar Asset Management, LLC, members of the Companies. The loans bear interest of 11% per annum, payable interest only monthly. The entire loan balances are due in September 2014. The loans are secured by an assignment of the Companies’ ownership interest in PRC’s subsidiary, subject to the first mortgage lien to CIBC Inc.

	This loan has a prepayment penalty of 3% of principal. $290 was recorded as interest expense in each of 2007 and 2006.

	Lightstone II borrowed $7,500 in 2004 from Presidential Realty Corp., a member of the Companies. This loan bears interest only at the rate of 11% per annum payable in monthly installments and matures on December 23, 2014. This loan is secured by interest in certain subsidiaries subject to the first mortgage lien to Wachovia Bank. Presidential Realty Corp. funded an additional $335 in 2006 under the same terms.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)




6.	NOTES PAYABLE – RELATED PARTY (Continued)

	This loan has a prepayment penalty of 3% of principal. Approximately $873 and $856 were recorded as interest expense in 2007 and 2006, respectively.

	On June 30, 2005, Lightstone III borrowed $9,500 from Presidential Realty Corp., a member of the Companies. This loan bears interest only at a rate of 11% per annum payable monthly and matures on June 30, 2015. This loan is secured by membership interests in certain subsidiaries, subject to the first mortgage lien to Wachovia bank.

	This loan has a prepayment penalty of 3% of principal. $1,060 was recorded as interest expense in 2007 and 2006.

	A member of the Company advanced $1,947 in 2005 for working capital needs of certain properties. This amount was repaid with approximately $125 of interest expense in 2006. The member advanced $3,135 in 2006 and an additional $18,324 in 2007 for the same purpose.

	The net amount due to affiliates represents advances from affiliated entities and is due upon demand at interest rate of 11%.

7.	RENTALS UNDER OPERATING LEASES

	The Companies’ receive rental income from the leasing of retail shopping center space under operating leases. The Companies recognize income from tenant operating leases on a straight-line basis over the respective lease terms and, accordingly, rental income in a given period will vary from actual contractual rental amounts due. Rental income recorded in 2007 and 2006 in excess of amounts contractually due was approximately $365 and $856, respectively.

	The minimum annual future base rentals due under non-cancelable operating leases as of December 31, 2007, are approximately as follows:


2008	$	25,856
2009		21,623
2010		17,765
2011		12,586
2012		8,890
Thereafter		6,856


	$	93,576


	Minimum annual future rentals due do not include amounts which are payable by certain tenants based upon certain reimbursable operating expenses. The tenants include national and regional chains and local retailers and, consequently, the Companies’ credit risk is concentrated in the retail industry.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(Dollar amounts in thousands)




8.	COMMITMENT AND CONTINGENCIES

	Shenango Valley Mall is subject to a ground lease. The Companies exercised the first 17 year ground lease option in 2005 which expires on December 31, 2021. The ground lease payment is based upon 10% of monthly gross revenues, as defined. The gross revenues, upon which the ground rent is computed, cannot be less than 75% of gross revenues of the previous year. Approximately $324 and $436 were expensed as ground rent for Shenango in 2007 and 2006, respectively.

	A parcel of Macon Mall is under a ground lease that expires in 2071. The ground lease is subject to an annual rent payment of $54 throughout the remainder of its term. The Companies are responsible for all other costs including real estate taxes and utilities. Future minimum lease payments are as follows:


2008	$	54
2009		54
2010		54
2011		54
2012		54
Thereafter		3,186


	$	3,456


9.	FAIR VALUE OF FINANCIAL INSTRUMENTS

	As of December 31, 2007, the fair values of the Companies’ mortgage and other notes and mezzanine notes payable to related parties approximate the carrying values as the terms are similar to those currently available to the Companies for debt with similar risk and the same remaining maturities. The carrying amounts for cash and cash equivalents, restricted cash, rents and other receivables, due to affiliates, and accounts payable and other liabilities approximate fair value because of the short-term nature of these instruments.


10.	SUBSEQUENT EVENTS

	Subsequent to the date of these financial statements the Company notified the servicers of Lightstone III’s mezzanine loans ($17,650 Wachovia and $9,500 Presidential) relating to the Macon and Burlington Malls that the cash flows were insufficient to pay the required monthly debt service. At that time, regularly scheduled debt service payments were suspended. The failure to pay under the mezzanine loan agreements constitutes a default on the mezzanine loans allowing the lenders to exercise certain remedies contained in the loan agreements. Default on the mezzanine loans does not, in itself, constitute a default under the first mortgage on the properties. The Company is in discussions with the servicer of the loans in an attempt to restructure the debt.

SUPPLEMENTARY INFORMATION

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
COMBINED BALANCE SHEETS
DECEMBER 31, 2007
(Dollar amounts in thousands)


	Lightstone			PRC			Lightstone II			Lightstone III			Combined


ASSETS

Investment in real estate, net of accumulated depreciation	$	67,144		$	21,991		$	62,913		$	83,547		$	235,595

Other Assets
Cash and cash equivalents		635			3			831			1,559			3,028
Escrow deposits		3,952			2,422			1,743			9,060			17,177
Rents and other receivables, net		2,678			509			1,936			2,184			7,307
In-place lease value, net of accumulated amortization		2,197			1,401			795			2,016			6,409
Acquired lease rights, net of accumulated amortization		1,239			903			654			2,364			5,160
Deferred financing and leasing costs, net of accumulated amortization		998			195			759			553			2,505
Prepaid expenses		599			44			225			100			968


	$	79,442		$	27,468		$	69,856		$	101,383		$	278,149


LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)

Liabilities
Mortgage and other notes payable	$	80,623		$	29,861		$	39,500		$	156,147		$	306,131
Notes payable - related party		8,600			2,600			29,294			9,500			49,994
Interest payable		461			129			174			501			1,265
Deferred revenue		1,196			171			495			1,481			3,343
Accounts payable, accrued expenses and other liabilities		1,169			351			3,388			2,020			6,928
Acquired lease obligation, net of accumulated amortization		1,895			332			494			1,047			3,768
Due to affiliates		9,253			(3,459	)		3,871			4,309			13,974

		103,197			29,985			77,216			175,005			385,403

Commitments and Contingencies Members’ Equity (Deficit)		(23,755	)		(2,517	)		(7,360	)		(73,622	)		(107,254	)


	$	79,442		$	27,468		$	69,856		$	101,383		$	278,149

The accompanying notes are an integral part of this combined supplementary information.

LIGHTSTONE MEMBER LLC
PRC MEMBER LLC
LIGHTSTONE MEMBER II LLC
LIGHTSTONE MEMBER III LLC
COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007
(Dollar amounts in thousands)


	Lightstone			PRC			Lightstone II			Lightstone III			Combined

Revenue
Rental	$	11,314		$	3,219		$	6,980		$	14,147		$	35,660
Tenant reimbursements		7,012			2,007			2,714			7,716			19,449
Interest and other income		195			95			118			4,296			4,704

		18,521			5,321			9,812			26,159			59,813


Expenses
Rental property operating and maintenance expenses		8,710			2,506			5,237			8,138			24,591
Real estate taxes		1,757			331			643			2,621			5,352
Provision for losses on real estate		7,324			—			—			68,670			75,994
Interest including amortization of $212		7,253			1,775			5,850			10,266			25,144
Depreciation and amortization		4,001			900			2,847			6,360			14,108
General and administrative		1,778			605			476			1,536			4,395

		30,823			6,117			15,053			97,591			149,584


Net Loss	$	(12,302	)	$	(796	)	$	(5,241	)	$	(71,432	)	$	(89,771	)

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