3.	*Acquisitions*

2013 Acquisitions - Arkansas Hotel Portfolio

On June 18, 2013, the Company, through LVP TPS Little Rock Holdings LLC and LVP TPS Fayetteville Holdings, LLC, both joint venture subsidiaries of our Operating Partnership, completed the portfolio acquisition of 95% ownership interests in two 92-room limited service hotels (the "Arkansas Hotel Portfolio"), which operate as TownePlace Suites by Marriott, located in Little Rock, which we refer to as the TPS Little Rock Hotel, and Johnson/Springdale, Arkansas, which we refer to as the TPS Fayetteville Hotel, from certain limited liability companies controlled by the same seller, an unrelated third party. The remaining 5% ownership interests were acquired by TPSLR, LLC for the TPS Little Rock Hotel and TPSFN, LLC for the TPS Fayetteville Hotel, respectively, both unrelated third parties.

The Arkansas Hotel Portfolio was acquired as part of a transaction in which the third party sellers sold a portfolio of four hotel properties, two of which comprise the Arkansas Hotel Portfolio, and two hotel properties acquired by Lightstone Value Plus Real Estate Investment Trust, Inc. ("Lightstone REIT I"). The aggregate purchase price paid for the four properties was $29.1 million, of which $10.7 million related to the Arkansas Hotel Portfolio and such amount was determined based on an internal allocation of the purchase price which was approved by the separate boards of directors of the Company and Lightstone REIT I. Additionally, in connection with the acquisition, our advisor received an acquisition fee equal to 0.95% of the contractual purchase price of $10.7 million, or approximately $102. The fair value of the assets acquired of $11.9 million exceeded the aggregate cost of $10.7 million, resulting in the recognition of a bargain purchase gain of approximately $1.2 million in the consolidated statements of operations during the second quarter of 2013.

The acquisition was funded with $3.7 million in cash and a $7.0 million demand note, or the Demand Note, entered into between our Operating Partnership and Lightstone Value Plus Real Estate Investment Trust, Inc. ("Lightstone REIT I"). The Demand Note is due on demand and bears interest at a floating rate of LIBOR plus 4.95% (5.14% as of June 30, 2013) payable on demand. As a result of a $3.0 million paydown in June 2013, the outstanding balance of the Demand Note was $4.0 million as of June 30, 2013.

We established a separate TRS for both the TPS Fayetteville Hotel and the TPS Little Rock Hotel, respectively, which have each entered into operating lease agreements for each respective hotel. At closing, each TRS entered into a separate management agreement with a management company controlled by the minority owner of each hotel for the management of the respective hotel. Additionally, each TRS entered into a 20-year franchise agreement, or the Franchise Agreement, with Marriott, pursuant to which the TPS Fayetteville Hotel and the TPS Little Rock Hotel will both continue to operate as a "TownePlace Suites by Marriott," commencing on June 18, 2013.

The acquisition of the Arkansas Hotel Portfolio was accounted for under the purchase method of accounting with the Company treated as the acquiring entity. Accordingly, the consideration paid by the Company to complete the acquisition of the Arkansas Hotel Portfolio has been allocated to the assets acquired based upon their estimated fair values as of the date of the acquisition. The allocation of the purchase price, including the bargain purchase gain, of the Arkansas Hotel Portfolio is based upon certain preliminary valuations and other analyses that have not been completed as of the date of this filing. Any changes in the estimated fair values of the net assets recorded for these acquisitions upon the finalization of more detailed analyses will change the allocation of the purchase price. As such, the purchase price allocations for this transaction are preliminary estimates, which are subject to change within the measurement period. Any subsequent changes to the purchase price allocations that are material will be adjusted retroactively. There was no contingent consideration related to this acquisition. Approximately $1.5 million was allocated to land and improvements, $8.5 million was allocated to building and improvements, and $1.9 million was allocated to furniture and fixtures and other assets.

The aggregate capitalization rate for the Arkansas Hotel Portfolio as of the closing of the acquisition was approximately 10.6%. We calculate the capitalization rate for a real property by dividing net operating income of the property by the purchase price of the property, excluding costs. For purposes of this calculation, net operating income is determined using the projected or budgeted net operating income based upon then-current projections. Additionally, net operating income is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation.

2012 Acquisitions

On July 13, 2012, the Company completed the acquisition of a SpringHill Suites by Marriott Hotel (the "SpringHill Suites Hotel") located in Peabody, Massachusetts.

On December 31, 2012, the Company acquired an aggregate 87.7% ownership interest in a Fairfield Inn hotel (the "FFI Hotel") located in East Rutherford, New Jersey.

Financial Information

The following table provides the total amount of rental revenue and net income included in the Company's consolidated statements of operations from the SpringHill Suites Hotel, the FFI Hotel and the Arkansas Hotel Portfolio since their respective dates of acquisition for the period indicated:

	For the Three Months Ended June 30, 2013		For the Six Months Ended June 30, 2013

Rental revenue	$	2,358	$	3,592
Net inomce (1)	$	1,107	$	523

Note:

(1)

Includes the $1.2 million bargain purchase gain recorded in the second quarter of 2013 in connection with the acquisitions of the TPS Fayetteville Hotel.

The following table provides unaudited pro forma results of operations for the period indicated, as if the SpringHill Suites Hotel, the FFI Hotel and the Arkansas Hotel Portfolio had been acquired at the beginning of that period. Such pro forma results are not necessarily indicative of the results that actually would have occurred had these acquisitions been completed on the date indicated, nor are they indicative of the future operating results of the combined company.

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2013		2012			2013		2012
Pro forma rental revenue	$	4,158	$	3,281		$	7,272	$	6,566
Pro forma net income (1)	$	459	$	(73	)	$	354	$	663

Pro forma net income per Company's common share, basic and diluted	$	0.08	$	(0.01	)	$	0.06	$	0.14

Note:

(1)

Excludes the $1.2 million bargain purchase gain recorded in the second quarter of 2013 in connection with the acquisitions of the TPS Fayetteville Hotel.