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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, 2004
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: 333-91532 (1933 ACT)
BEHRINGER HARVARD REIT I, INC.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 68-0509956
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1323 NORTH STEMMONS FREEWAY, SUITE 210, DALLAS, TEXAS 75207
(Address of principal executive offices)
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (866) 655-1605
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 |X| No |_|
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
As of August 2, 2004, Behringer Harvard REIT I, Inc. had 5,809,538 shares of
common stock, $.0001 par value, outstanding.
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BEHRINGER HARVARD REIT I, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
PART I
FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003..............................3
Consolidated Statements of Operations for the three and six months ended June 30, 2004 and
June 30, 2003...................................................................................4
Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and June 30,
2003............................................................................................5
Notes to Consolidated Financial Statements.........................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................22
ITEM 4. CONTROLS AND PROCEDURES...........................................................................22
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................................................23
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES..................23
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...................................................................23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................................23
ITEM 5. OTHER INFORMATION.................................................................................24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................................................25
SIGNATURE..................................................................................................26
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BEHRINGER HARVARD REIT I, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
JUNE 30, DECEMBER 31,
2004 2003
--------------- ---------------
ASSETS
Cash and cash equivalents $ 18,601,751 $ 5,146,856
Restricted cash 6,544,297 10,492
Prepaid expenses and other assets 4,342,325 77,837
Investments in tenant in common interests 28,698,349 6,359,823
Deferred financing fees, net of accumulated amortization of
$9,281 and $2,730, respectively 265,130 89,533
--------------- ---------------
TOTAL ASSETS $ 58,451,852 $ 11,684,541
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgages payable $ 18,709,249 $ 4,332,656
Accounts payable 15,147 18,068
Payables to affiliates 411,469 76,608
Dividends payable 224,939 41,994
Accrued liabilities 74,636 133,867
Subscriptions for common stock 4,044,184 9,977
--------------- ---------------
TOTAL LIABILITIES 23,479,624 4,613,170
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value per share;
50,000,000 shares authorized, none outstanding - -
Common stock, $.0001 par value per share;
350,000,000 shares authorized, 4,139,481 and
843,878 shares issued and outstanding at June 30,
2004 and December 31, 2003, respectively 414 84
Additional paid-in capital 36,549,564 7,454,733
Cumulative distributions and net loss (1,577,750) (383,446)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 34,972,228 7,071,371
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,451,852 $ 11,684,541
=============== ===============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
BEHRINGER HARVARD REIT I, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2004 JUNE 30, 2003 JUNE 30, 2004 JUNE 30, 2003
--------------- --------------- --------------- ---------------
Total revenues $ - $ - $ - $ -
Expenses
Interest 157,541 - 228,449 -
Property and asset management fees 26,413 - 40,544 -
General and administrative 226,102 1,815 348,623 3,411
--------------- --------------- --------------- ---------------
Total expenses 410,056 1,815 617,616 3,411
--------------- --------------- --------------- ---------------
Interest income 50,657 2 75,762 1,529
--------------- --------------- --------------- ---------------
Net loss before equity in earnings of
investments in tenant in common interests (359,399) (1,813) (541,854) (1,882)
Equity in earnings of investments
in tenant in common interests 133,346 - 167,419 -
--------------- --------------- --------------- ---------------
Net loss $ (226,053) $ (1,813) $ (374,435) $ (1,882)
=============== =============== =============== ===============
Basic and diluted weighted
average shares outstanding 3,151,134 20,000 2,330,827 20,000
Basic and diluted loss per share $ (0.07) $ (0.09) $ (0.16) $ (0.09)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
BEHRINGER HARVARD REIT I, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2004 JUNE 30, 2003
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (374,435) $ (1,882)
Adjustments to reconcile net loss to net cash
flows used in operating activities
Amortization of deferred financing fees 6,551 -
Equity in earnings of investments in tenant in
common interests (167,419) -
Change in prepaid expenses and other assets (1,284,488) (7,295)
Change in accounts payable (2,921) -
Change in accrued liabilities (59,231) -
------------------- -------------------
CASH USED IN OPERATING ACTIVITIES (1,881,943) (9,177)
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of interests in properties (22,618,381) -
Escrow deposits on properties to be acquired (2,980,000) -
Distributions from investments 447,273 -
------------------- -------------------
CASH USED IN INVESTING ACTIVITIES (25,151,108) -
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs (182,147) -
Proceeds from mortgage notes 14,404,402 -
Payments on mortgage notes (27,810) -
Issuance of common stock 32,456,024 -
Offering costs (3,618,807) -
Dividends (378,979) -
Change in subscriptions for common stock 4,034,207 366,603
Change in restricted cash (6,533,805) (366,603)
Change in payables to affiliates 334,861 -
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES 40,487,946 -
------------------- -------------------
Net change in cash and cash equivalents 13,454,895 (9,177)
Cash and cash equivalents at beginning of period 5,146,856 196,290
------------------- -------------------
Cash and cash equivalents at end of period $ 18,601,751 $ 187,113
=================== ===================
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 221,898 $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued in dividend reinvestment plan $ 257,944 $ -
Dividends payable in common stock under dividend
reinvestment plan $ 96,013 $ -
See Notes to Consolidated Financial Statements.
5
BEHRINGER HARVARD REIT I, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Behringer Harvard REIT I, Inc. (the "Company") is a Maryland corporation
formed in June 2002, which intends to qualify as a real estate investment trust
("REIT"). The Company was organized to invest in commercial real estate
properties (generally institutional quality office buildings and other
commercial properties) and lease each such property to one or more tenants. The
Company is currently offering its common stock pursuant to the public offering
which commenced on February 19, 2003 (the "Offering") and is described below.
Substantially all of the Company's business is conducted through
Behringer Harvard Operating Partnership I LP ("Behringer OP I"), a Texas limited
partnership organized in 2002. The Company is the owner of a 0.1% interest in
Behringer OP I as its general partner. The remaining 99.9% of Behringer OP I is
held as a limited partner's interest by BHR Partners, LLC ("BHR Partners"), a
Delaware limited liability company which is a wholly owned subsidiary of the
Company.
The Company's advisor is Behringer Advisors LP ("Behringer Advisors"), a
Texas limited partnership formed in 2002. Behringer Advisors is an affiliate of
the Company. Behringer Advisors is responsible for managing the Company's
affairs on a day-to-day basis and for identifying and making acquisitions and
investments on behalf of the Company.
2. PUBLIC OFFERING
On February 19, 2003, the Company commenced the Offering of up to
80,000,000 shares of common stock offered at a price of $10 per share pursuant
to a Registration Statement on Form S-11 filed under the Securities Act of 1933.
The Registration Statement also covers up to 8,000,000 shares available
pursuant to the Company's dividend reinvestment plan and up to 3,520,000 shares
issuable to broker-dealers pursuant to warrants whereby participating
broker-dealers will have the right to purchase one share for every 25 shares
they sell pursuant to the Offering ("Offering Warrants"). The Offering is a best
efforts continuous offering that terminates no later than February 19, 2005
(except for the offering of shares under the Company's dividend reinvestment
plan, which is anticipated to be extended).
As of June 30, 2004, the Company had accepted subscriptions for
4,139,481 shares of its common stock, including 20,000 shares owned by Behringer
Harvard Holdings, LLC ("Behringer Holdings"). As of June 30, 2004, individual
broker-dealers had the right to acquire up to 165,580 Offering Warrants for a
nominal fee, however, none had been issued. These Offering Warrants allow the
broker-dealer to purchase the common stock at $12.00 per share and are effective
at the time the Offering Warrants are acquired. As of June 30, 2004, the Company
had no shares of preferred stock issued and outstanding. On May 27, 2004, the
independent members of the Board of Directors of the Company were granted
options to purchase a total of 9,000 shares of the Company's common stock at an
exercise price of $12 per share under the Company's Non-Employee Director Option
Plan. These options vest monthly through May 27, 2005 and expire on May 27,
2009. As of June 30, 2004, all 9,000 stock options were outstanding.
The Company admits new stockholders pursuant to the Offering at least
monthly. All subscription proceeds are held in escrow until the subscribing
investors are admitted as stockholders. Upon admission of new stockholders,
subscription proceeds are released to the Company from escrow and may be
utilized as consideration for investments and the payment or reimbursement of
dealer manager fees, selling commissions, organization and offering expenses and
operating expenses. Until required for such purposes, net offering proceeds are
held in short-term, liquid investments.
The Company's common stock is not currently listed on a national
exchange. However, management anticipates listing the common stock on a national
exchange on or before the twelfth anniversary of the
6
termination of the Offering. In the event the Company does not obtain its
listing prior to the twelfth anniversary of the termination of the Offering, the
Company charter requires the Company to begin the sale of its properties and
liquidation of its assets.
3. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2003, which was filed with the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
in the United States of America ("GAAP"), have been condensed or omitted in this
report on Form 10-Q pursuant to the rules and regulations of the SEC. In the
opinion of management, the disclosures contained in this report are adequate to
make the information presented not misleading.
The results for the interim periods shown in this report are not
necessarily indicative of future financial results. The accompanying
consolidated financial statements of the Company as of June 30, 2004 and June
30, 2003 have not been audited by independent accountants. In the opinion of
management, the accompanying unaudited consolidated financial statements include
all adjustments (of a normal recurring nature) necessary to present fairly the
consolidated financial position of the Company as of June 30, 2004 and December
31, 2003 and the consolidated results of its operations and cash flows for the
periods ended June 30, 2004 and 2003.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect (i) the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and (ii) the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All intercompany transactions, balances and
profits have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers investments in highly-liquid money market funds
with maturities of three months or less to be cash equivalents. The carrying
amount of cash and cash equivalents reported on the balance sheet approximates
fair value.
RESTRICTED CASH
Restricted cash includes subscription proceeds which are held in escrow
until investors are admitted as stockholders. The Company admits new
stockholders at least monthly. Upon acceptance of stockholders, shares of stock
are issued and subscription proceeds are released to the Company from escrow.
Restricted cash also includes $2,500,000 held in restricted money market
accounts as security for the Company's guarantee of funds borrowed by Behringer
Holdings.
INVESTMENTS IN TENANT IN COMMON INTERESTS
As of June 30, 2004, the "Investments in tenant in common interests" on
the Company's balance sheet consists of the Company's 14.4676% interest in the
Minnesota Center building in Bloomington, Minnesota acquired in October 2003,
the Company's 36.31276% interest in the Enclave on the Lake building in Houston,
Texas, and the Company's 35.709251% interest in St. Louis Place in St. Louis,
Missouri. Consolidation of these investments is not required as they do not
qualify as variable interest entities as defined in FIN No. 46R.
7
The Company accounts for these investments using the equity method of
accounting in accordance with Accounting Principles Board ("APB") Opinion No.
18, "The Equity Method of Accounting for Investments in Common Stock." The
equity method of accounting requires these investments to be initially recorded
at cost and subsequently increased (decreased) for the Company's share of net
income (loss), including eliminations for the Company's share of intercompany
transactions and reduced when distributions are received. The equity method of
accounting is utilized by the Company because the shared decision making
involved in a tenant in common interest investment creates an opportunity for
the Company to have some influence on the operating and financial decisions of
these investments and thereby creates some responsibility by the Company for a
return on its investment. Therefore, it is appropriate to include the results of
operations of these investments in the earnings or losses of the Company.
INVESTMENT IMPAIRMENTS
For real estate directly owned by the Company, management monitors
events and changes in circumstances indicating that the carrying amounts of the
real estate assets may not be recoverable. When such events or changes in
circumstances are present, the Company assesses potential impairment by
comparing estimated future undiscounted operating cash flows expected to be
generated over the life of the asset and from its eventual disposition, to the
carrying amount of the asset. In the event that the carrying amount exceeds the
estimated future undiscounted operating cash flows, the Company recognizes an
impairment loss to adjust the carrying amount of the asset to estimated fair
value.
For real estate owned by the Company through an investment in a joint
venture, tenant in common interest or other similar investment structure, at
each reporting date management will compare the estimated fair value of its
investment to the carrying value. An impairment charge is recorded to the extent
the fair value of its investment is less than the carrying amount and the
decline in value is determined to be other than a temporary decline.
PURCHASE PRICE ALLOCATION
Upon the acquisition of real estate properties, the Company allocates
the purchase price of those properties to the tangible assets acquired,
consisting of land and buildings, and identified intangible assets. Identified
intangible assets consist of the fair value of above-market and below-market
leases, in-place leases, in-place tenant improvements and tenant relationships.
The fair value of the tangible assets acquired, consisting of land and
buildings, is determined by valuing the property as if it were vacant, and the
"as-if-vacant" value is then allocated to land and buildings. Land values are
derived from appraisals, and building values are calculated as replacement cost
less depreciation or management's estimates of the relative fair value of these
assets using discounted cash flow analyses or similar methods. The value of the
building is depreciated over the estimated useful life of 25 years using the
straight-line method.
The Company determines the value of above-market and below-market
in-place leases for acquired properties 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 current market lease rates for
the corresponding in-place leases, measured over a period equal to the remaining
non-cancelable terms of the respective leases. The fair value of above-market
and below-market leases are recorded by the Company as intangible assets and
amortized as an adjustment to rental income over the remaining non-cancelable
terms of the respective leases.
The total value of identified real estate intangible assets acquired are
further allocated to in-place lease values, in-place tenant improvements and
tenant relationships based on management's evaluation of the specific
characteristics of each tenant's lease and the Company's overall relationship
with that respective tenant. The aggregate value for tenant improvements and
leasing commissions are based on estimates of these costs incurred at inception
of the acquired leases, amortized through the date of acquisition. The aggregate
value of in-place leases acquired and tenant relationships is determined by
applying a fair value model. The estimates of fair value of in-place leases
includes an estimate of carrying costs during the expected lease-up periods for
the respective
8
spaces considering current market conditions and the costs to execute similar
leases. In estimating the carrying costs that would have otherwise been incurred
had the leases not been in place, management included such items as real estate
taxes, insurance and other operating expenses as well as lost rental revenue
during the expected lease-up period based on current market conditions. The
estimates of fair value of tenant relationships also include costs to execute
similar leases including leasing commissions, legal and tenant improvements as
well as an estimate of the likelihood of renewal as determined by management on
a tenant-by-tenant basis.
The Company amortizes the value of in-place leases and in-place tenant
improvements to expense over the initial term of the respective leases. The
value of tenant relationship intangibles are amortized to expense over the
initial term and any anticipated renewal periods, but in no event does the
amortization period for intangible assets exceed the remaining depreciable life
of the building. Should a tenant terminate its lease, the unamortized portion of
the in-place lease value and tenant relationship intangibles would be charged to
expense.
REVENUE RECOGNITION
The Company recognizes rental income generated from all leases on real
estate assets in which it has an ownership interest, either directly or through
investments in joint ventures, on a straight-line basis over the terms of the
respective leases. Some leases contain provisions for the tenant's payment of
additional rent after certain tenant sales revenue thresholds are met. Such
contingent rent is recognized as revenue after the related revenue threshold is
met.
DEFERRED OFFERING COSTS
The Company's advisor funds all of the organization and offering costs
on the Company's behalf and is reimbursed for such organization and offering
costs up to 2.5% of the cumulative capital raised by the Company in its current
public offering. Organization and offering costs include items such as legal and
accounting fees, marketing, promotional and printing costs, and specifically
exclude internal salaries. The Company is required to repay the Company's
advisor, at an amount equal to the lesser of 2.5% of cumulative capital raised
or actual costs incurred by third parties less previous reimbursements paid to
the advisor. All offering costs are recorded as an offset to additional paid-in
capital, and all organization costs are recorded as an expense at the time the
Company becomes liable for the payment of these amounts.
INCOME TAXES
The Company currently accounts for income taxes in accordance with
Statement of Financial Accounting Standards 109, ACCOUNTING FOR INCOME TAXES
("SFAS 109"). Under the liability method of SFAS 109, deferred taxes are
determined based on the differences between the financial statements and tax
bases of assets and liabilities using enacted tax rates in effect in the years
the differences are expected to reverse. Currently, the Company has a deferred
tax asset of approximately $260,000. This deferred tax asset has been fully
reserved for as the Company anticipates qualifying as a REIT.
The Company's management will evaluate plans to make an election to be
taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code,
effective for the Company's taxable year ending December 31, 2004. The Company
believes that, commencing with the taxable year for which such election is made,
it will be organized and will operate in such a manner as to qualify for
taxation as a REIT under the Internal Revenue Code, and it intends to continue
to operate in such a manner, but no assurance can be given that it will operate
in a manner so as to qualify or remain qualified as a REIT.
If the Company qualifies for taxation as a REIT, it generally will not
be subject to federal corporate income taxes on income that it distributes
currently to its stockholders.
STOCK BASED COMPENSATION
The Company has two stock-based employee and director compensation
plans. The Company accounts for these plans under the fair value recognition
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and
related interpretations.
9
CONCENTRATION OF CREDIT RISK
At June 30, 2004, the Company had cash and cash equivalents and
restricted cash on deposit in six financial institutions in excess of federally
insured levels. The Company regularly monitors the financial stability of these
financial institutions and believes that it is not exposed to any significant
credit risk in cash and cash equivalents or restricted cash.
EARNINGS PER SHARE
Earnings per share are calculated based on the weighted average number
of common shares outstanding during each period. As of June 30, 2004, the
Company had issued the independent members of the Board of Directors options to
purchase 9,000 shares of the Company's common stock at $12.00 per share. These
options were anti-dilutive for the periods ended June 30, 2004. As of June 30,
2004, individual broker-dealers had the right to acquire up to 165,580 Offering
Warrants for a nominal fee, however, none had been issued as of June 30, 2004.
5. INVESTMENT IN TENANT IN COMMON INTEREST
The following is a summary of the Company's tenant in common interest
investments as of June 30, 2004:
Tenant in Carrying
Date Common Value of Mortgage
Property Name Acquired Interest Investment Payable
- ------------------------- -------------- ------------------- ---------------- ----------------
Minesota Center 10/15/03 14.467600% $ 6,119,063 $ 4,312,871
Enclave on the Lake 4/12/04 36.312760% 10,505,343 7,254,528
St. Louis Place 6/30/04 35.709251% 12,073,943 7,141,850
---------------- ----------------
Total $ 28,698,349 $ 18,709,249
================ ================
The Company's undivided tenant in common interest investments in
Minnesota Center, Enclave on the Lake and St. Louis Place as of June 30, 2004
consisted of its proportionate share of the following assets and liabilities:
10
Minnesota Enclave on St. Louis
Center the Lake Place
--------------- ----------------- ----------------
Land $ 3,500,000 $ 1,907,758 $ 1,498,056
Buildings, net 32,697,764 21,408,478 23,013,798
Real estate intangibles, net 6,126,875 7,219,353 7,066,797
Cash and cash equivalents 109,751 613,516 -
Restricted cash 2,520,583 513,516 2,505,160
Accounts receivable and other assets 226,343 311,729 1,237,676
87 --------------- ----------------- ----------------
Total assets $ 45,181,316 $ 31,974,350 $ 35,321,487
=============== ================= ================
Total liabilities $ 1,304,872 $ 1,162,969 $ 431,204
Equity 43,876,444 30,811,381 34,890,283
--------------- ----------------- ----------------
Total liabilities and equity $ 45,181,316 $ 31,974,350 $ 35,321,487
=============== ================= ================
The difference between the carrying value of the Company's investments
in tenant in common interests of $28,698,349 and its underlying net equity in
the three properties is a result of the fact that the Company's purchase price
differed from the other tenant in common interest holders.
In the six months ended June 30, 2004, the Company recorded $167,419 of
equity in earnings and $447,273 of distributions from its undivided tenant in
common interest investments. The Company's equity in earnings from these tenant
in common investments is its proportionate share of the following earnings of
the three properties for the six months ended June 30, 2004:
Minnesota Enclave on St. Louis
Center the Lake Place
--------------- ----------------- ----------------
Revenue $ 3,286,506 $ 928,148 $ -
Operating expenses:
Operating expenses 965,852 180,528 -
Property taxes 587,664 129,792 -
--------------- ----------------- ----------------
Total operating expenses 1,553,516 310,320 -
--------------- ----------------- ----------------
Operating income 1,732,990 617,828 -
--------------- ----------------- ----------------
Non-operating (income) expenses
Depreciation and amortization 1,398,365 293,093 -
(Interest income)/bank fees, net (1,188) (2,518) -
--------------- ----------------- ----------------
Total non-operating (income) expenses 1,397,177 290,575 -
Net income $ 335,813 $ 327,253 $ -
=============== ================= ================
11
6. MORTGAGES PAYABLE
The Company partially financed its acquisition of its 14.4676% tenant in
common interest in Minnesota Center on October 15, 2003 with borrowings of
$4,340,280 (the "Minnesota Center Loan") under a non-recourse loan agreement
with Greenwich Capital Financial Products, Inc (the "Minnesota Center Loan
Agreement"). The remaining tenant in common interests in Minnesota Center were
acquired by various investors who purchased their interests in a private
offering sponsored by the Company's affiliate, Behringer Holdings. Each tenant
in common investor, including the Company, is a borrower under the Minnesota
Center Loan Agreement. The original total borrowings of all tenant in common
interest holders under the Minnesota Center Loan Agreement was $30,000,000. The
Minnesota Center Loan accrues interest at 6.181%, and requires principal and
interest payments monthly based on a 30-year amortization period, with any
unamortized principal due at maturity on November 1, 2010. The Minnesota Center
Loan Agreement requires a minimum debt coverage ratio of not less than 1.10 and
permits no prepayment until the earlier of (i) 42 months following inception of
the Minnesota Center Loan or (ii) two years after securitization ("Minnesota
Center Lockout Period"). The Minnesota Center Loan is guaranteed by Robert M.
Behringer and Behringer Holdings. The Minnesota Center Loan may only be prepaid
after the Minnesota Center Lockout Period. As of June 30, 2004, the outstanding
principal balance under the Minnesota Center Loan was $4,312,871. As of June 30,
2004, the Company was in compliance with all of its covenants under the
Minnesota Center Loan Agreement.
The Company used borrowings of $7,262,552 (the "Enclave Loan") under a
loan agreement (the "Enclave Loan Agreement") with State Farm Life Insurance
Company to pay a portion of the purchase price for its undivided 36.31276%
tenant in common interest in Enclave on the Lake. The remaining tenant in common
interests in Enclave on the Lake were acquired by various investors who
purchased their interests in a private offering sponsored by the Company's
affiliate, Behringer Holdings. Each tenant in common investor, including the
Company, is a borrower under the Enclave Loan Agreement. The original total
borrowings of all tenant in common interest holders under the Enclave Loan
Agreement was $20,000,000. The interest rate under the Enclave Loan is fixed at
5.45% per annum. The Enclave Loan is guaranteed by Robert M. Behringer and
Behringer Holdings. The Enclave Loan Agreement allows for prepayment of the
entire outstanding principal after 42 months from the date of the Enclave Loan
Agreement subject to the payment of a prepayment penalty. No prepayment penalty
is due after 81 months from the date of the Enclave Loan Agreement. The Enclave
Loan has a seven year term. As of June 30, 2004, the outstanding principal
balance under the Enclave Loan was $7,254,528. As of June 30, 2004, the Company
was in compliance with all of its covenants under the Enclave Loan Agreement.
The Company used borrowings of $7,141,850 (the "St. Louis Place Loan")
under a loan agreement (the "St. Louis Place Loan Agreement") with Greenwich
Capital Financial Products, Inc. to pay a portion of its undivided 35.709251%
tenant in common interest in St. Louis Place. The remaining tenant in common
interests in St. Louis Place were acquired by various investors who purchased
their interests in a private offering sponsored by the Company's affiliate,
Behringer Holdings. Each tenant in common investor, including the Company, is a
borrower under the St. Louis Place Loan Agreement. The original total borrowings
of all tenant in common interest holders under the St. Louis Place Loan
Agreement was $20,000,000 (the "St. Louis Place Loan"). The interest rate under
the St. Louis Place Loan is fixed at 6.078% per annum. The St. Louis Place Loan
is guaranteed by Robert M. Behringer and Behringer Holdings. The St. Louis Place
Loan Agreement prohibits prepayment until the earlier of (i) 42 months or (ii) 2
years after securitization after which and prior to month 81 it may be defeased.
The St. Louis Place Loan Agreement has a seven year term. As of June 30, 2004,
the outstanding principal balance under the St. Louis Place Loan was $7,141,850.
As of June 30, 2004, the Company was in compliance will all of its covenants
under the St. Louis Place Loan Agreement.
7. STOCKHOLDERS' EQUITY
CAPITALIZATION
As of June 30, 2004, the Company had accepted subscriptions for
4,139,481 shares of its common stock, including 20,000 shares owned by Behringer
Holdings. As of June 30, 2004, individual broker-dealers had the right to
acquire up to 165,580 Offering Warrants for a nominal fee, however, none had
been issued. As of June
12
30, 2004, the Company had no shares of preferred stock issued and outstanding.
As of June 30, 2004, the Company had issued the independent members of the Board
of Directors options to purchase 9,000 shares of the Company's common stock at
$12.00 per share.
DIVIDENDS
The Company initiated the payment of monthly dividends in November 2003
in the amount of a 7.0% annualized rate of return, based on an investment in the
Company's common stock of $10 per share and calculated on a daily record basis
of $0.0019178 per share. The Company has a dividend reinvestment plan ("DRIP")
whereby stockholders may elect to receive additional shares of common stock in
lieu of a cash dividend. The Company records all dividends when declared, except
that the stock issued through the DRIP is recorded when the shares are actually
issued. The following are the dividends declared and the DRIP shares issued
during the six months ended June 30, 2004:
Distributions
Declared ----------------------------------------------------- DRIP
in 2004 Total Cash DRIP Units
- ----------------- --------------- --------------- --------------- ---------------
1st Quarter $ 265,859 $ 160,830 $ 105,029 6,096
2nd Quarter 554,010 327,485 226,525 17,458
--------------- --------------- --------------- ---------------
$ 819,869 $ 488,315 $ 331,554 23,554
=============== =============== =============== ===============
In January 2004, the Company issued 2,240 shares of common stock valued
at $22,403 to participants in the DRIP in lieu of cash dividends declared for
December 2003. In July 2004, the Company issued 9,601 shares of common stock
valued at $96,013 to participants in the DRIP program in lieu of cash dividends
declared for June 2004.
8. RELATED PARTY ARRANGEMENTS
Certain affiliates of the Company receive fees and compensation in
connection with the Offering, and in connection with the acquisition, management
and sale of the assets of the Company.
Behringer Securities LP ("Behringer Securities"), the Company's
affiliated dealer manager for the Offering, receives commissions of up to 7.0%
of gross offering proceeds before reallowance of commissions earned by
participating broker-dealers. In addition, up to 2.5% of gross proceeds before
reallowance to participating broker-dealers are paid to Behringer Securities as
a dealer manager fee; except that this dealer manager fee is reduced to 1.0% of
the gross proceeds of purchases made pursuant to the Company's dividend
reinvestment plan. Behringer Securities reallows all of its commissions of up to
7.0% of gross offering proceeds to participating broker-dealers and may reallow
a portion of its dealer manager fee of up to 1.5% of the gross offering proceeds
to be paid to such participating broker-dealers as marketing fees, including
bona fide conference fees incurred, and due diligence expense reimbursement. In
the six months ended June 30, 2004, Behringer Securities' commissions and dealer
manager fees totaled $2,073,578 and $804,767, respectively and were capitalized
as offering costs in "Additional paid-in capital" on the Company's balance
sheet.
Behringer Advisors, the affiliated advisor for the Company, or its
affiliates, receives up to 2.5% of gross offering proceeds for reimbursement of
organization and offering expenses. As of June 30, 2004, $3,473,970 of
organization and offering expenses had been incurred by Behringer Advisors on
behalf of the Company, of which $1,016,295 had been reimbursed by the Company
and the balance of $2,457,675 will be reimbursed at a rate of 2.5% of future
equity raised. Of the $1,016,295 of organization and offering expenses
reimbursed by the Company through June 30, 2004, $928,208 has been capitalized
as offering costs in "Additional paid-in capital" on the Company's balance sheet
and $88,087 has been expensed as organizational costs. For the six months ended
June 30, 2004, $811,407 of organization and offering expenses were reimbursed by
the Company, of which $740,896 was capitalized as offering costs in "Additional
paid-in capital" and $70,511 was expensed as organizational costs. Behringer
Advisors or its affiliates determines the amount of organization and offering
13
expenses owed based on specific invoice identification as well as an allocation
of costs to the Company and Behringer Harvard Mid-Term Value Enhancement Fund I
LP and Behringer Harvard Short-Term Opportunity Fund I LP, affiliates of the
Company, based on anticipated respective equity offering sizes of those
entities. Behringer Advisors or its affiliates also receives acquisition and
advisory fees of up to 3.0% of the contract purchase price of each asset for the
acquisition, development or construction of real property or, with respect to
any mortgage loan, up to 3.0% of the funds advanced for the purchase or making
of a mortgage loan. Behringer Advisors or its affiliates also receive up to 0.5%
of the contract purchase price of the real estate assets acquired by the Company
or, with respect to the making or purchase of a mortgage loan, up to 0.5% of the
funds advanced, for reimbursement of expenses related to making investments. In
the six months ended June 30, 2004, Behringer Advisors earned $775,595 in
acquisition and advisory fees for the investments acquired by the Company. The
Company capitalizes these fees as part of its investments in tenant in common
interests.
The Company pays HPT Management LP ("HPT Management"), its affiliated
property manager, fees for the management and leasing of the Company's
properties, which may be subcontracted to unaffiliated third parties. Such fees
are expected to equal 3.0% of gross revenues of the respective property, plus
leasing commissions based upon the customary leasing commission applicable to
the geographic location of the respective property. The Company incurred fees of
$30,133 in the six months ended June 30, 2004 for the services provided by HPT
Management in connection with the tenant in common investments.
The Company pays Behringer Advisors an annual advisor asset management
fee of 0.5% of aggregate asset value. Any portion of the asset management fee
may be deferred and paid in a subsequent year. In the six months ended June 30,
2004, the Company incurred $10,411 of advisor asset management fees.
Behringer Advisors or its affiliates will also be paid fees if the
advisor provides a substantial amount of services, as determined by the
Company's independent directors, in connection with the sale of one or more
properties. In such event, the Company will pay the advisor an amount not
exceeding the lesser of: (A) one-half of the brokerage commission paid, or (B)
3.0% of the sales price of each property sold, provided that such fee will be
subordinated to distributions to investors from sales proceeds of an amount
which, together with prior distributions to the investors, will equal (1) 100.0%
of their capital contributions plus (2) a 9.0% annual, cumulative,
non-compounded return on their capital contributions. Subordinated disposition
fees that are not payable at the date of sale, because investors have not yet
received their required minimum distributions, will be deferred and paid at such
time as these subordination conditions have been satisfied. In addition, after
investors have received a return of their net capital contributions and a 9.0%
annual, cumulative, non-compounded return, then Behringer Advisors is entitled
to 15.0% of remaining net sales proceeds. Subordinated participation in net
sales proceeds that are not payable at the date of sale, because investors have
not yet received their required minimum distribution, will be deferred and paid
at such time as the subordination conditions have been satisfied.
Upon listing of the Company's common stock on a national securities
exchange or inclusion for quotation on the Nasdaq Stock Market, a listing fee
will be paid to Behringer Advisors equal to 15.0% of the amount by which the
market value of the Company's outstanding stock plus distributions paid by the
Company prior to listing exceeds the sum of (i) the total amount of capital
raised from investors and (ii) a 9.0% annual, cumulative, non-compounded return
to investors on their capital contributions. Upon termination of the Advisory
Agreement with Behringer Advisors, a performance fee will be paid to Behringer
Advisors of 15.0% of the amount by which the Company's appraised asset value at
the time of such termination exceeds the aggregate capital contributions
contributed by investors plus payment to investors of a 9.0% annual, cumulative,
non-compounded return on the capital contributed by investors. No performance
fee will be paid if the Company has already paid or becomes obligated to pay
Behringer Advisors a listing fee. Persons independent of the Company and
independent of its advisor will perform such appraisal of the Company asset
value.
The Company will reimburse Behringer Advisors for all expenses it pays
or incurs in connection with the services it provides to the Company, subject to
the limitation that the Company will not reimburse for any amount by which the
advisor's operating expenses (including the asset management fee) at the end of
the four fiscal quarters immediately preceding the date reimbursement is sought
exceeds the greater of: (i) 2.0% of the Company's average invested assets, or
(ii) 25.0% of the Company's net income for that four quarter period other
14
than any additions to reserves for depreciation, bad debts or other similar
non-cash reserves and any gain from the sale of the Company's assets for that
period.
The Company is dependent on Behringer Advisors, Behringer Securities and
HPT Management for certain services that are essential to the Company, including
the sale of the Company's shares of common stock, asset acquisition and
disposition decisions, property management and leasing services and other
general administrative responsibilities. In the event that these companies were
unable to provide the respective services to the Company, the Company would be
required to obtain such services from other sources.
9. SUBSEQUENT EVENTS
On August 10, 2004, the Company acquired an undivided 79.4752% tenant
in common interest in Colorado Building, an 11-story office building containing
approximately 121,701 rentable square feet, located on approximately 0.31 acres
of land in Washington, D.C. (the "Colorado Property"). The Company's purchase
price for its 79.4752% interest in the Colorado Property was approximately
$35,000,000, excluding closing costs. The Company used borrowings of $22,253,046
("the Colorado Property Loan") under a loan agreement (the "Colorado Property
Loan Agreement") with Greenwich Capital Financial Products, Inc. (the "Colorado
Property Lender") to pay a portion of such purchase price and paid the remaining
portion of its purchase price from proceeds of the Company's offering of its
common stock to the public. The Company's tenant in common interest is held by
Behringer Harvard Colorado H LLC, which is wholly owned by the Company's
operating partnership, Behringer OP I.
The remaining tenant in common interests in the Colorado Property were
acquired by various investors who purchased their interests in a private
offering sponsored by the Company's affiliate, Behringer Holdings. Each tenant
in common investor, including the Company, is a party to the Colorado Property
Loan Agreement. The total borrowings of all tenant in common interest holders
under the Colorado Property Loan Agreement is $28,000,000. The interest rate
under the Colorado Property Loan Agreement is fixed at 6.075% per annum.Certain
obligations of the Colorado Property Loan are guaranteed by Robert M. Behringer
and Behringer Holdings. The Colorado Property Loan Agreement allows for
prepayment of the entire outstanding principal with no prepayment fee during the
last three months prior to maturity, with at least 15 days prior notice. The
Colorado Property Loan Agreement has a ten year term.
On July 23, 2004, the Company entered into a contract to purchase Travis
Tower, a 21-story office building containing approximately 507,470 rentable
square feet and a 10-story parking garage located on approximately 3.29 acres of
land in Houston, Texas (the "Travis Property"). The contract price for the
Travis Property is $52,000,000, plus closing costs. At closing, the Company
intends to assign a portion of its ownership interest to Behringer Holdings for
reorganization of the property into tenant in common interests in which the
Company will retain a significant interest. Purchase of the property will be
funded by a first mortgage loan of approximately $37,750,000 and equity. The
Company anticipates its final equity investment to be approximately $10,000,000,
which will come from proceeds from the Company's offering of its common stock to
the public. Deposits totaling $3,000,000 are required under the purchase
agreement. As of the date of this filing, a $2,000,000 deposit has been made by
the Company and the remaining $1,000,000 deposit is expected to be funded on or
about August 17, 2004. Acquisition of the Travis Property is expected to be
completed on or about September 9, 2004.
The Company issued 1,670,057 shares of its common stock between July 1,
2004 and August 2, 2004, resulting in gross proceeds of $16,695,086 to the
Company. Common stock outstanding as of August 2, 2004 totaled 5,809,538 shares.
10. COMMITMENTS AND CONTINGENCIES
On January 28, 2004, the Company and Behringer Holdings entered into an
agreement whereby the Company would provide loan guarantees to Behringer
Holdings, so that Behringer Holdings may use such loan guarantees to secure
short-term loans from lenders to fund acquisition and syndication costs related
to acquiring real estate projects for tenant in common syndication. Each
guaranty will be for a period not to exceed six months and shall be limited to
no more than $1,000,000. Behringer Holdings must pay to the Company a 1% fee
15
of any loan guaranteed by the Company for each six-month period. Behringer
Holdings has granted the Company a security interest in each purchase agreement
entered into with respect to a project for which a guaranty is made by the
Company. If Behringer Holdings fails to acquire such project, they shall
transfer all of their rights under the purchase agreement to the Company and
cooperate with the Company to obtain an extension of the purchase agreement with
the seller. During February 2004, the Company placed $2,500,000 in restricted
money market accounts with lenders as security for funds advanced to Behringer
Holdings. As of June 30, 2004, the Company had no guarantees outstanding on
borrowings by Behringer Holdings.
On August 9, 2004, the Accommodation Agreement was amended and restated
to include (1) options to extend the six month guaranty period for one or more
additional six-month periods, with an additional 1% fee payable on the date of
each extension; and (2) the option for the Company's guarantees to include the
guarantee of bridge loans. A bridge loan, as defined in the Amended and Restated
Accommodation Agreement, is any loan pursuant to which Behringer Holdings
acquires an interest in respect of a project, which interest is intended to be
sold in a tenant in common offering. Each bridge guaranty is limited to no more
than the obligations under the bridge loan. The term and fees associated with
the bridge guarantees are the same as those of the other guarantees allowed
under this agreement. The Company or its affiliates have the right, but not an
obligation, to purchase at least a 5% interest in each project with respect to
which a guaranty is made by the Company. The Company's purchase price for each
1% interest in a project will equal the price paid by Behringer Holdings, plus a
pro rata share of the closing costs.
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 the Company and the notes thereto:
FORWARD-LOOKING STATEMENTS
This section contains forward-looking statements, including discussion
and analysis of the Company's financial condition, anticipated capital
expenditures required to complete projects, amounts of anticipated cash
distributions to the Company's stockholders in the future and other matters.
These forward-looking statements are not historical facts but are the intent,
belief or current expectations of the Company's business and industry. Words
such as "anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates" and variations of these words and similar expressions are intended
to identify forward-looking statements. These statements are not guarantees of
the future performance and are subject to risks, uncertainties and other
factors, some of which are beyond the Company's control, are difficult to
predict and could cause actual results to differ materially from those expressed
or forecasted in the forward-looking statements.
Forward-looking statements that were true at the time made may
ultimately prove to be incorrect or false. You are cautioned to not place undue
reliance on forward-looking statements, which reflect the Company's management's
view only as of the date of this Form 10-Q. The Company undertakes no obligation
to update or revise forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results.
Factors that could cause actual results to differ materially from any
forward-looking statements made in this Form 10-Q include changes in general
economic conditions, changes in real estate conditions, construction costs which
may exceed estimates, construction delays, increases in interest rates, lease-up
risks, inability to obtain new tenants upon the expiration of existing leases,
and the potential need to fund tenant improvements or other capital expenditures
out of operating cash flow. The forward-looking statements should be read in
light of these factors and the factors identified in the "Risk Factors" section
of the Company's Registration Statement on Form S-11 filed with the Securities
and Exchange Commission.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of financial condition and results
of operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires the Company's management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On a regular basis,
the Company evaluates these estimates, including investment impairment. These
estimates are based on management's historical industry experience and on
various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The Company's
most sensitive estimates involve the allocation of the purchase price of
acquired properties and evaluating its real estate related investments for
impairment.
INVESTMENT IMPAIRMENTS
For real estate directly owned by the Company, management monitors
events and changes in circumstance indicating that the carrying amounts of the
real estate assets may not be recoverable. When such events or changes in
circumstances are present, the Company assesses potential impairment by
comparing estimated future undiscounted operating cash flows expected to be
generated over the life of the asset and from its
16
eventual disposition, to the carrying amount of the asset. In the event that the
carrying amount exceeds the estimated future undiscounted operating cash flows,
the Company recognizes an impairment loss to adjust the carrying amount of the
asset to estimated fair value.
For real estate owned by the Company through an investment in a joint
venture, tenant in common interest or other similar investment structure, at
each reporting date management will compare the estimated fair value of its
investment to the carrying value. An impairment charge is recorded to the extent
the fair value of its investment is less than the carrying amount and the
decline in value is determined to be other than a temporary decline.
PURCHASE PRICE ALLOCATION
Upon the acquisition of real estate properties, the Company allocates
the purchase price of those properties to the tangible assets acquired,
consisting of land and buildings, and identified intangible assets. Identified
intangible assets consist of the fair value of above-market and below-market
leases, in-place leases, in-place tenant improvements and tenant relationships.
The fair value of the tangible assets acquired, consisting of land and
buildings, is determined by valuing the property as if it were vacant, and the
"as-if-vacant" value is then allocated to land and buildings. Land values are
derived from appraisals, and building values are calculated as replacement cost
less depreciation or management's estimates of the relative fair value of these
assets using discounted cash flow analyses or similar methods. The value of the
building is depreciated over the estimated useful life of 25 years using the
straight-line method.
The Company determines the value of above-market and below-market
in-place leases for acquired properties based on the present value (using an
interest rate that 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 current market lease rates for
the corresponding in-place leases, measured over a period equal to the remaining
non-cancelable terms of the respective leases. The fair value of above-market
and below-market leases are recorded by the Company as intangible assets and
amortized as an adjustment to rental income over the remaining non-cancelable
terms of the respective leases.
The total value of identified real estate intangible assets acquired are
further allocated to in-place lease values, in-place tenant improvements and
tenant relationships based on management's evaluation of the specific
characteristics of each tenant's lease and the Company's overall relationship
with that respective tenant. The aggregate value for tenant improvements and
leasing commissions are based on estimates of these costs incurred at inception
of the acquired leases, amortized through the date of acquisition. The aggregate
value of in-place leases acquired and tenant relationships is determined by
applying a fair value model. The estimates of fair value of in-place leases
includes an estimate of carrying costs during the expected lease-up periods for
the respective spaces considering current market conditions and the costs to
execute similar leases. In estimating the carrying costs that would have
otherwise been incurred had the leases not been in place, management includes
such items as real estate taxes, insurance and other operating expenses as well
as lost rental revenue during the expected lease-up period based on current
market conditions. The estimates of fair value of tenant relationships also
include costs to execute similar leases including leasing commissions, legal and
tenant improvements as well as an estimate of the likelihood of renewal as
determined by management on a tenant-by-tenant basis.
The Company amortizes the value of in-place leases and in-place tenant
improvements to expense over the initial term of the respective leases. The
value of tenant relationship intangibles are amortized to expense over the
initial term and any anticipated renewal periods, but in no event does the
amortization period for intangible assets exceed the remaining depreciable life
of the building. Should a tenant terminate its lease, the unamortized portion of
the in-place lease value and tenant relationship intangibles would be charged to
expense.
RESULTS OF OPERATIONS
The Company commenced active operations when it received and accepted
subscriptions for a minimum of $2,500,000 pursuant to the Offering on October 1,
2003 and made its first real estate acquisition on October 15, 2003 with the
purchase of an undivided 14.4676% tenant in common interest in Minnesota Center.
17
As a result, the Company's results of operations for three and six month periods
ended June 30, 2004 are not comparable to results for the three and six month
periods ended June 30, 2003.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2004 TO THE THREE MONTHS ENDED
JUNE 30, 2003
Interest expense for the three months ended June 30, 2004 was $157,541
and was comprised of interest expense and amortization of deferred financing
fees related to the Company's mortgages associated with its tenant in common
interest investments. During the three months ended June 30, 2003, the Company
did not own any real estate investments and there was no outstanding debt.
Management believes there will be significant increases in interest expense in
the future as the Company continues to invest in additional real estate
properties.
Property and asset management fees for the three months ended June 30,
2004 was $26,413 and was comprised of property management and asset management
fees associated with the Company's tenant in common interest investments. During
the three months ended June 30, 2003, the Company did not own any real estate
investments. Management believes there will be significant increases in property
and asset management fees in the future as the Company continues to invest in
additional real estate properties.
General and administrative expense for the three months ended June 30,
2004 was $226,102 and was comprised of corporate general and administrative
expenses including directors' and officers' insurance premiums, organizational
expenses, transfer agent fees, auditing fees, legal fees and other
administrative expenses. During the three months ended June 30, 2003, these fees
totaled $1,815 due to the lack of corporate activity.
Interest income for the three months ended June 30, 2004 was $50,657 and
was comprised of interest income associated with funds on deposits with banks.
As the Company admits new stockholders, subscription proceeds are released to
the Company from escrow and may be utilized as consideration for investments and
the payment or reimbursement of dealer manager fees, selling commissions,
organization and offering expenses and operating expenses. Until required for
such purposes, net offering proceeds are held in short-term, liquid investments
and earn interest income. During the three months ended June 30, 2003, the
Company had lower cash balances on deposit with banks.
Equity in earnings of investments in tenant in common interests for the
three months ended June 30, 2004 was $133,346 and was comprised of the Company's
share of equity in the earnings of Minnesota Center and Enclave on the Lake,
which were acquired October 15, 2003 and April 12, 2004, respectively. During
the three months ended June 30, 2003, the Company did not own any real estate
investments.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2004 TO THE SIX MONTHS ENDED JUNE
30, 2003
Interest expense for the six months ended June 30, 2004 was $228,449 and
was comprised of interest expense and amortization of deferred financing fees
related to the Company's mortgages associated with its tenant in common interest
investments. During the six months ended June 30, 2003, the Company did not own
any real estate investments and there was no outstanding debt. Management
believes there will be significant increases in interest expense in the future
as the Company continues to invest in additional real estate properties.
Property and asset management fees for the six months ended June 30,
2004 was $40,544 and was comprised of property management and asset management
fees associated with the Company's tenant in common interest investments. During
the six months ended June 30, 2003, the Company did not own any real estate
investments. Management believes there will be significant increases in property
and asset management fees in the future as the Company continues to invest in
additional real estate properties.
General and administrative expense for the six months ended June 30,
2004 was $348,623 and was comprised of corporate general and administrative
expenses including directors' and officers' insurance premiums, organizational
expenses, transfer agent fees, auditing fees, legal fees and other
administrative expenses. During the six months ended June 30, 2003, these fees
totaled $3,411 due to the lack of corporate activity.
Interest income for the six months ended June 30, 2004 was $75,762 and
was comprised of interest income associated with funds on deposits with banks.
As the Company admits new stockholders, subscription
18
proceeds are released to the Company from escrow and may be utilized as
consideration for investments and the payment or reimbursement of dealer manager
fees, selling commissions, organization and offering expenses and operating
expenses. Until required for such purposes, net offering proceeds are held in
short-term, liquid investments and earn interest income. During the six months
ended June 30, 2003, the Company earned interest income of $1,529, a
significantly lower amount than in 2004 due to the lower cash balances on
deposit with banks in 2003.
Equity in earnings of investments in tenant in common interests for the
six months ended June 30, 2004 was $167,419 and was comprised of the Company's
share of equity in the earnings of Minnesota Center and Enclave on the Lake,
which were acquired October 15, 2003 and April 12, 2004, respectively. During
the six months ended June 30, 2003, the Company did not own any real estate
investments.
CASH FLOW ANALYSIS
The Company commenced active operations when it received and accepted
subscriptions for a minimum of $2,500,000 pursuant to the Offering on October 1,
2003 and made its first real estate acquisition on October 15, 2003 with the
purchase of an undivided 14.4676% tenant in common interest in Minnesota Center.
As a result, the Company's cash flows for six months ended June 30, 2004 are not
comparable to the cash flows for the six months ended June 30, 2003.
Cash flows from operating activities for the six months ended June 30,
2004 were $(1,881,943) and were primarily comprised of the net loss of
$(374,435) and changes in working capital accounts of $(1,346,640) including an
over-funding of the Company's undivided tenant in common interest investment in
St. Louis Place of $1,135,603. During July 2004, this over-funding was refunded
to the Company. During the six months ended June 30, 2003 cash flows from
operating activities was $(9,177), primarily due to the lack of investments and
corporate activity.
Cash flows from investing activities for the six months ended June 30,
2004 were $(25,151,108) and were comprised of purchases of interests in the
Enclave on the Lake and St. Louis Place properties of $(22,618,381),
distributions from the Company's investment in tenant in common interests of
$447,273 and deposits of $(2,980,000) for the purchase of a tenant in common
interest in an office building located in Washington, DC which closed on August
10, 2004. During the six months ended June 30, 2003, there were no cash flows
from investing activities.
Cash flows from financing activities for the six months ended June 30,
2004 were $40,487,946 and were comprised primarily of funds received from the
issuance of stock and proceeds from mortgage notes less a $2,500,000 increase in
restricted cash associated with the loan guarantees for Behringer Holdings, as
discussed in liquidity and capital resources. During the six months ended June
30, 2003, there were no cash flows from financing activities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal demands for funds will continue to be for
property acquisitions, either directly or through investment interests, for
mortgage loan investments, for the payment of operating expenses and dividends,
and for the payment of interest on the Company's outstanding indebtedness.
Generally, cash needs for items other than property acquisitions and mortgage
loan investments are expected to be met from operations, and cash needs for
property acquisitions are expected be met from the net proceeds of the Offering
and other offerings of the Company's securities. However, there may be a delay
between the sale of the Company's shares and its purchase of properties or
mortgage loan investments, which could result in a delay in the benefits to its
stockholders, if any, of returns generated from the Company's operations. The
Company expects that at least 84.2% of the money that stockholders invest in the
Offering will be used to buy real estate, make or invest in mortgage loans or
make other investments and approximately 0.8% of the gross proceeds of the
Offering will be set aside as initial working capital reserves for such
properties. The remaining 15.0% will be used to pay expenses and fees for
selling commissions and dealer manager fees, organization and offering expenses,
acquisition and advisory fees and acquisition expenses. The Company's advisor
evaluates potential property acquisitions and mortgage loan investments and
engages in negotiations with sellers and borrowers on the
19
Company's behalf. Investors should be aware that after a contract for the
purchase of a property is executed, the property generally will not be purchased
until the successful completion of due diligence. During this period, the
Company may decide to temporarily invest any unused proceeds from the Offering
in investments that could yield lower returns than the properties. These lower
returns may affect the Company's ability to make distributions.
The amount of dividends to be distributed to the Company's stockholders
will be determined by its board of directors and is dependent on a number of
factors, including funds available for payment of dividends, financial
condition, capital expenditure requirements and annual distribution requirements
needed to maintain the Company's status as a REIT under the Internal Revenue
Code.
The Company partially financed its acquisition of its 14.4676% tenant in
common interest in Minnesota Center on October 15, 2003 with borrowings of
$4,340,280 (the "Minnesota Center Loan") under a non-recourse loan agreement
with Greenwich Capital Financial Products, Inc (the "Minnesota Center Loan
Agreement"). The remaining tenant in common interests in Minnesota Center were
acquired by various investors who purchased their interests in a private
offering sponsored by the Company's affiliate, Behringer Holdings. Each tenant
in common investor, including the Company, is a borrower under the Minnesota
Center Loan Agreement. The original total borrowings of all tenant in common
interest holders under the Minnesota Center Loan Agreement was $30,000,000. The
Minnesota Center Loan accrues interest at 6.181%, and requires principal and
interest payments monthly based on a 30-year amortization period, with any
unamortized principal due at maturity on November 1, 2010. The Minnesota Center
Loan Agreement requires a minimum debt coverage ratio of not less than 1.10 and
permits no prepayment until the earlier of (i) 42 months following inception of
the Minnesota Center Loan or (ii) two years after securitization ("Minnesota
Center Lockout Period"). The Minnesota Center Loan is guaranteed by Robert M.
Behringer and Behringer Holdings. The Minnesota Center Loan may only be prepaid
after the Minnesota Center Lockout Period. As of June 30, 2004, the outstanding
principal balance under the Minnesota Center Loan was $4,312,871. As of June 30,
2004, the Company was in compliance with all of its covenants under the
Minnesota Center Loan Agreement.
The Company used borrowings of $7,262,552 (the "Enclave Loan") under a
loan agreement (the "Enclave Loan Agreement") with State Farm Life Insurance
Company to pay a portion of the purchase price for its undivided 36.31276%
tenant in common interest in Enclave on the Lake. The remaining tenant in common
interests in Enclave on the Lake were acquired by various investors who
purchased their interests in a private offering sponsored by the Company's
affiliate, Behringer Holdings. Each tenant in common investor, including the
Company, is a borrower under the Enclave Loan Agreement. The original total
borrowings of all tenant in common interest holders under the Enclave Loan
Agreement was $20,000,000. The interest rate under the Enclave Loan is fixed at
5.45% per annum. The Enclave Loan is guaranteed by Robert M. Behringer and
Behringer Holdings. The Enclave Loan Agreement allows for prepayment of the
entire outstanding principal after 42 months from the date of the Enclave Loan
Agreement subject to the payment of a prepayment penalty. No prepayment penalty
is due after 81 months from the date of the Enclave Loan Agreement. The Enclave
Loan has a seven year term. As of June 30, 2004, the outstanding principal
balance under the Enclave Loan was $7,254,528. As of June 30, 2004, the Company
was in compliance with all of its covenants under the Enclave Loan Agreement.
The Company used borrowings of $7,141,850 (the "St. Louis Place Loan")
under a loan agreement (the "St. Louis Place Loan Agreement") with Greenwich
Capital Financial Products, Inc. to pay a portion of its undivided 35.709251%
tenant in common interest in St. Louis Place. The remaining tenant in common
interests in St. Louis Place were acquired by various investors who purchased
their interests in a private offering sponsored by the Company's affiliate,
Behringer Holdings. Each tenant in common investor, including the Company, is a
borrower under the St. Louis Place Loan Agreement. The original total borrowings
of all tenant in common interest holders under the St. Louis Place Loan
Agreement was $20,000,000 (the "St. Louis Place Loan"). The interest rate under
the St. Louis Place Loan is fixed at 6.078% per annum. The St. Louis Place Loan
is guaranteed by Robert M. Behringer and Behringer Holdings. The St. Louis Place
Loan Agreement prohibits prepayment until the earlier of (i) 42 months or (ii) 2
years after securitization after which and prior to month 81 it may be defeased.
The St. Louis Place Loan Agreement has a seven year term. As of June 30, 2004,
20
the outstanding principal balance under the St. Louis Place Loan was $7,141,850.
As of June 30, 2004, the Company was in compliance will all of its covenants
under the St. Louis Place Loan Agreement.
As of June 30, 2004, Behringer OP I had $2,980,000 on deposit for the
purchase of a tenant in common interest in the Colorado Property in Washington,
D.C. The Company deposited an additional $2,280,000 for the purchase of a tenant
in common interest in the Colorado Property in July 2004 and subsequently closed
on this property on August 10, 2004. The purchase price for the Company's
79.4752% tenant in common interest in the Colorado Property was approximately
$35,000,000, excluding closing costs.
During July 2004, Behringer OP I made a deposit of $2,000,000 for the
future purchase of a tenant in common interest in an office building in Houston,
Texas, the Travis Property, which is expected to close in the third quarter of
2004. An additional $1,000,000 deposit is required on this property in August
2004. The contract price for the Travis Property is $52,000,000, plus closing
costs. At closing, the Company intends to assign a portion of its ownership
interest to Behringer Holdings for reorganization of the property into tenant in
common interests in which the Company will retain a significant interest.
Purchase of the property will be funded by a first mortgage loan of
approximately $37,750,000 and equity. The Company anticipates its final equity
investment to be approximately $10,000,000, which will come from proceeds from
the Company's offering of its common stock to the public. Acquisition of the
Travis Property is expected to be completed on or about September 9, 2004.
The Company expects to meet its future short-term operating liquidity
requirements through net cash provided by its current property operations and
the operations of properties to be acquired in the future. Management also
expects that the Company's properties will generate sufficient cash flow to
cover operating expenses plus pay a monthly dividend. Operating cash flows are
expected to increase as additional properties are added to the portfolio. Other
potential future sources of capital include proceeds from secured or unsecured
financings from banks or other lenders, proceeds from the sale of properties and
undistributed funds from operations. If necessary, the Company may use
financings or other sources of capital in the event of unforeseen significant
capital expenditures.
OFF-BALANCE SHEET ARRANGEMENTS
On January 28, 2004, the Company and Behringer Holdings entered into an
agreement (the "Accommodation Agreement") whereby the Company would provide loan
guarantees to Behringer Holdings, so that Behringer Holdings may use such loan
guarantees to secure short-term loans from lenders to fund acquisition and
syndication costs related to acquiring real estate projects for tenant in common
syndication. Each guaranty will be for a period not to exceed six months and
shall be limited to no more than $1,000,000. Behringer Holdings must pay to the
Company a 1% fee of any loan guaranteed by the Company for each six-month
period. During February 2004, the Company placed $2,500,000 in restricted money
market accounts with lenders as security for funds advanced to Behringer
Holdings. As of June 30, 2004, the Company had no loan guarantees outstanding on
borrowings by Behringer Holdings.
On August 9, 2004, the Accommodation Agreement was amended and restated
to include (1) options to extend the six month guaranty period for one or more
additional six-month periods, with an additional 1% fee payable on the date of
each extension; and (2) the option for the Company's guarantees to include the
guarantee of bridge loans. A bridge loan, as defined in the Amended and Restated
Accommodation Agreement, is any loan pursuant to which Behringer Holdings
acquires an interest in respect of a project, which interest is intended to be
sold in a tenant in common offering. Each bridge guaranty is limited to no more
than the obligations under the bridge loan. The term and fees associated with
the bridge guarantees are the same as those of the other guarantees allowed
under this agreement. The Company or its affiliates have the right, but not an
obligation, to purchase at least a 5% interest in each project with respect to
which a guaranty is made by the Company. The Company's purchase price for each
1% interest in a project will equal the price paid by Behringer Holdings, plus a
pro rata share of the closing costs.
The Company has no other off-balance sheet arrangements that are
reasonably likely to have a current or future material effect on the Company's
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
21
CONTRACTUAL OBLIGATIONS
The following table summarizes the Company's contractual obligations as
of June 30, 2004:
Payments due by period
---------------------------------------------------
Less than 1-3 3-5 More than
Total 1 year years years 5 years
------------------------------------------------------------------
Mortgage note payable
Minnesota Center $ 4,312,871 $ 49,461 $ 108,698 $ 122,408 $ 4,032,304
Enclave on the Lake 7,254,528 99,183 215,302 240,038 6,700,005
St. Louis Place 7,141,850 72,829 175,092 196,750 6,697,179
------------------------------------------------------------------
$18,709,249 $ 221,473 $ 499,092 $ 559,196 $17,429,488
==================================================================
INFLATION
The real estate market has not been affected significantly by inflation
in the past several years due to the relatively low inflation rate. The majority
of the Company's leases contain inflation protection provisions applicable to
reimbursement billings for common area maintenance charges, real estate tax and
insurance reimbursements on a per square foot basis, or in some cases, annual
reimbursement of operating expenses above a certain per square foot allowance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company has limited exposure to financial market risks, including
changes in interest rates and other relevant market prices. The Company has no
investments that would be materially affected by a 10% increase or decrease in
interest rates. See "Management's Discussion and Analysis of Financial Condition
and Results of Operation - Liquidity and Capital Resources." The Company does
not have any foreign operations and thus is not exposed to foreign currency
fluctuations.
ITEM 4. CONTROLS AND PROCEDURES.
Within the 90-day period prior to the filing of this report, the
Company's management evaluated, with the participation of the Company's
principal executive officer and principal financial officer, the effectiveness
of the Company's disclosure controls and procedures as of June 30, 2004. Based
on that evaluation, the Company's principal executive officer and principal
financial officer have concluded that the Company's disclosure controls and
procedures were effective as of the end of the period covered by this report. To
these officers' knowledge, there were no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
22
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
No events occurred during the quarter covered by this report that would
require a response to this item.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
As of June 30, 2004, the Company had sold the following securities
pursuant to the Offering for the following aggregate offering prices:
o 4,091,208 shares on a best efforts basis for $40,651,537; and
o 28,273 shares pursuant to the Company's dividend reinvestment
plan for $282,734.
The total of shares and gross offering proceeds pursuant to the Offering
as of June 30, 2004 is 4,119,481 shares for $40,934,271. The above-stated number
of shares sold and the gross offering proceeds received from such sales does not
include the 20,000 shares purchased by Behringer Holdings preceding the
commencement of the Offering.
Through June 30, 2004, the Company incurred the following expenses in
connection with the issuance and distribution of the registered securities
pursuant to the Offering:
TYPE OF EXPENSE AMOUNT
---------------------------------------- --------------------
Other expenses to affiliates $ 4,657,993
Other expenses to non-affiliates 14,386
--------------------
Total expenses $ 4,672,379
====================
The net offering proceeds to the Company, after deducting the total
expenses paid and accrued described above, are $36,261,892.
Other expenses to affiliates above include commissions and dealer
manager fees paid to Behringer Securities LP, an affiliate of the Company, which
reallowed all or a portion of the commissions and fees to soliciting dealers.
Through June 30, 2004, the Company had used $10,697,313 of such net
offering proceeds to purchase its tenant in common interest investments, net of
the mortgages payable. Of the amount used for the purchase of these investments,
$995,789 was paid to Behringer Advisors, an affiliate of the Company, as
acquisition and advisory fees and acquisition expense reimbursement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
No events occurred during the quarter covered by this report that would
require a response to this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of the Company's stockholders (the "Annual Meeting")
was held on May 27, 2004. There were present at the Annual Meeting, in person or
by proxy, holders of 1,367,498 shares of the Company's common stock entitled to
vote. All nominees standing for election as directors were elected. The
following directors were elected to hold office for a term expiring at the 2005
Annual Meeting or until their successors are elected and qualified, with the
vote for each director being reflected below:
23
Withheld
Nominee For Authority
- ---------------------------- -------------------- ---------------------
Robert M. Behringer 1,329,061 38,437
Robert S. Aisner 1,329,475 38,023
Charles G. Dannis 1,326,923 40,575
Steven W. Partridge 1,329,475 38,023
G. Ronald Witten 1,329,475 38,023
The affirmative vote of the holders of a plurality of the outstanding
shares of common stock represented at the Annual Meeting was required to elect
each director. No other matters were submitted to a vote of security holders at
the Annual Meeting.
ITEM 5. OTHER INFORMATION.
On August 10, 2004, the Company acquired an undivided 79.4752% tenant in
common interest in the Colorado Property, an 11-story office building containing
approximately 121,701 rentable square feet, located on approximately 0.31 acres
of land in Washington, D.C. from Hippo Properties LLC, an unaffiliated third
party. The Company's purchase price for its 79.475165% interest in the Colorado
Property was approximately $35,000,000, excluding closing costs and initial
tenant improvement and leasing escrows. The Company used borrowings of
$22,253,046 under the Colorado Property Loan Agreement with Greenwich Capital
Financial Products, Inc. to pay a portion of such purchase price and paid the
remaining portion of its purchase price from proceeds of the Company's offering
of its common stock to the public. The Company's tenant in common interest is
held by Behringer Harvard Colorado H LP, which is wholly owned by the Company's
operating partnership, Behringer OP I.
The remaining tenant in common interests in the Colorado Property were
acquired by various investors who purchased their interests in a private
offering sponsored by the Company's affiliate, Behringer Holdings. Each tenant
in common investor, including the Company, is a party to the Colorado Property
Loan Agreement. The total borrowings of all tenant in common interest holders
under the Colorado Property Loan Agreement is $28,000,000. The interest rate
under the Colorado Property Loan Agreement is fixed at 6.075% per annum. The
Colorado Property Loan is guaranteed by Robert M. Behringer and Behringer
Holdings. The Colorado Property Loan Agreement allows for prepayment of the
entire outstanding principal with no prepayment fee from and after the third
payment date prior to maturity, with at least 15 days prior notice. The Colorado
Property Loan Agreement has a ten year term.
Since it is impracticable to provide the required financial statements
for the Colorado Property at the time of this filing, and no financial
statements (audited or unaudited) are available at this time, the Company hereby
confirms that the required financial statements will be filed on or before
October 25, 2004, by the filing of a Form 8-K, which date is within the 60-day
period allowed for such filing of the required financial statements.
On July 23, 2004, the Company entered into a contract to purchase the
Travis Property, a 21-story office building containing approximately 507,470
rentable square feet and a 10-story parking garage located on approximately 3.29
acres of land in Houston, Texas from AEW/McCord, L.P., an unaffiliated third
party. The contract price for the Travis Property is $52,000,000, plus closing
costs. At closing, the Company intends to assign a portion its ownership
interest to Behringer Holdings for reorganization of the property into tenant in
common interests in which the Company will retain a significant interest.
Purchase of the property will be funded by a first mortgage loan of
approximately $37,750,000 and equity. The Company anticipates its final equity
investment to be approximately $10,000,000 which will come from proceeds from
the Company's offering of its common stock to the public. Deposits totaling
$3,000,000 are required under the purchase agreement. As of the date of this
filing, a $2,000,000 deposit has been made by the Company and the remaining
$1,000,000 deposit is expected to be funded on or about August 17, 2004.
Acquisition of the Travis Property is expected to be completed on or about
September 9, 2004.
24
The Company's decision to acquire the Travis Property will generally
depend upon:
o no material adverse change occurring relating to the property,
the tenants or in the local economic conditions;
o the Company's receipt of sufficient net proceeds from the
offering of its common stock to the public and financing
proceeds to make this acquisition; and
o the Company's receipt of satisfactory due diligence information
including appraisals, environmental reports and lease
information.
Other properties may be identified in the future that the Company may
acquire before or instead of the Travis Property. The Company cannot guarantee
that it will complete this acquisition.
In evaluating the Travis Property as a potential acquisition and
determining the appropriate amount of consideration to be paid for the property,
the Company has considered a variety of factors including overall valuation of
net rental income, location, demographics, quality of tenants, length of leases,
price per square foot, occupancy and the fact that overall rental rate at the
Travis Property is comparable to market rates. The Company believes that this
property is well located, has acceptable roadway access, is well maintained and
has been professionally managed. The Travis Property will be subject to
competition from similar office buildings within its market area, and its
economic performance could be affected by changes in local economic conditions.
The Company did not consider any other factors materially relevant to its
decision to acquire this property.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
The exhibits filed in response to Item 601 of Regulation S-K are
listed on the Exhibit Index attached hereto.
b) Reports on Form 8-K
The Company filed the following Current Reports on Form 8-K
during the second quarter of 2004:
1. On April 27, 2004, the Company filed a Current Report on
Form 8-K reporting the acquisition of the Enclave on the
Lake tenant in common interest.
2. On June 25, 2004, the Company filed Amendment No. 1 to
the Current Report on Form 8-K reporting the acquisition
of the Enclave on the Lake tenant in common interest.
This amendment contained the required financial
statements relating to the acquisition by the Company of
its tenant in common interest in the Enclave on the
Lake.
25
SIGNATURE
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.
Behringer Harvard REIT I, Inc.
Dated: August 16, 2004 By: /s/ Gary S. Bresky
-----------------------------------------
Gary S. Bresky
Chief Financial Officer and Treasurer
26
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
10.1 Purchase and Sale Agreement by and between Hippo Properties
LLC and Harvard Property Trust, LLC regarding the Colorado
Property
10.2 First Amendment to Purchase and Sale Agreement between Hippo
Properties LLC and Harvard Property Trust, LLC regarding the
Colorado Property
10.3 Second Amendment to Purchase and Sale Agreement between Hippo
Properties LLC and Harvard Property Trust, LLC regarding the
Colorado Property
10.4 Third Amendment to Purchase and Sale Agreement between Hippo
Properties LLC and Harvard Property Trust, LLC regarding the
Colorado Property
10.5 Tenants in Common Agreement regarding the Colorado Property
10.6 Loan Agreement with Greenwich Capital Financial Products, Inc.
regarding the Colorado Property
10.7 Guaranty of Recourse Obligations by Behringer Harvard
Holdings, LLC and Robert Behringer regarding the Colorado
Property
10.8 Property and Asset Management Agreement regarding the Colorado
Property
10.9 Amended and Restated Accommodation Agreement between the
Company and Behringer Harvard Holdings, LLC
31.1 Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certificate of Chief Executive and Financial Officers