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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 SEPTEMBER 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: 333-100126 (1933 ACT)
BEHRINGER HARVARD MID-TERM VALUE ENHANCEMENT FUND I LP
(Exact Name of Registrant as Specified in Its Charter)
TEXAS 71-0897613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15601 DALLAS PARKWAY, SUITE 600, ADDISON, TEXAS 75001
(Address of principal executive offices)
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (866) 655-1610
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|
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BEHRINGER HARVARD MID-TERM VALUE ENHANCEMENT FUND I LP
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004
PART I
FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003.........................3
Consolidated Statements of Operations for the three and nine months ended
September 30, 2004 and September 30, 2003.......................................................4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2004
and September 30, 2003..........................................................................5
Notes to Consolidated Financial Statements.........................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................................14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................18
ITEM 4. CONTROLS AND PROCEDURES...........................................................................18
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................................................19
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.......................................19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...................................................................19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................................19
ITEM 5. OTHER INFORMATION.................................................................................19
ITEM 6. EXHIBITS..........................................................................................19
SIGNATURE....................................................................................................20
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BEHRINGER HARVARD MID-TERM VALUE ENHANCEMENT FUND I LP
Consolidated Balance Sheets
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
2004 2003
-------------------- -------------------
Assets
REAL ESTATE
Land $ 2,786,232 $ -
Buildings, net 5,412,634 -
Real estate intangibles, net 659,313 -
-------------------- -------------------
TOTAL REAL ESTATE 8,858,179 -
Cash and cash equivalents 7,191,129 1,986,114
Restricted cash 1,262,789 75,132
Accounts receivable 54,518 -
Prepaid expenses and other assets 2,130,766 31,590
-------------------- -------------------
TOTAL ASSETS $ 19,497,381 $ 2,092,836
==================== ===================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts payable $ - $ 7,584
Payables to affiliates 90,007 85,521
Distributions payable 96,235 -
Accrued liabilities 326,128 68,752
Subscriptions for limited partnership units 1,263,045 75,132
-------------------- -------------------
TOTAL LIABILITIES 1,775,415 236,989
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL
Limited partners, 44,000,000 units authorized;
2,078,706 units and 223,345 units issued
and outstanding at September 30, 2004 and
December 31, 2003, respectively 17,721,494 1,855,373
General partners 472 474
-------------------- -------------------
TOTAL PARTNERS' CAPITAL 17,721,966 1,855,847
-------------------- -------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 19,497,381 $ 2,092,836
==================== ===================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
BEHRINGER HARVARD MID-TERM VALUE ENHANCEMENT FUND I LP
Consolidated Statements of Operations
(Unaudited)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
-------------------- -------------------- -------------------- --------------------
REVENUE
Rental revenue $ 396,474 $ - $ 526,279 $ -
-------------------- -------------------- -------------------- --------------------
TOTAL REVENUES 396,474 - 526,279 -
EXPENSES
Property operating expenses 157,499 - 174,344 -
Real estate taxes 39,664 - 65,050 -
Property and asset management fees 21,724 - 28,874 -
General and administrative 103,423 - 217,282 -
Depreciation and amortization 95,506 - 126,668 -
-------------------- -------------------- -------------------- --------------------
TOTAL EXPENSES 417,816 - 612,218 -
OTHER INCOME 14,133 - 26,081 -
-------------------- -------------------- -------------------- --------------------
NET LOSS $ (7,209) $ - $ (59,858) $ -
==================== ==================== ==================== ====================
ALLOCATION OF NET LOSS:
Net loss allocated to general partners $ 1 $ - $ (2) $ -
==================== ==================== ==================== ====================
Net loss allocated to limited partners $ (7,210) $ - $ (59,856) $ -
==================== ==================== ==================== ====================
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 1,641,927 - 911,719 -
==================== ==================== ==================== ====================
NET LOSS PER LIMITED PARTNERSHIP UNIT $ 0.00 $ - $ (0.07) $ -
==================== ==================== ==================== ====================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
BEHRINGER HARVARD MID-TERM VALUE ENHANCEMENT FUND I LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
---------------------- ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (59,858) $ -
Adjustments to reconcile net loss to
net cash flows provided by operating activities
Depreciation and amortization 115,362 -
Change in accounts receivable (54,518) -
Change in prepaid expenses and other assets (82,379) -
Change in accounts payable (7,584) -
Change in accrued liabilities 183,965 -
---------------------- ----------------------
CASH PROVIDED BY OPERATING ACTIVITIES 94,988 -
---------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate (8,916,926) -
Escrow deposits for real estate to be acquired (2,000,000)
---------------------- ----------------------
CASH USED IN INVESTING ACTIVITIES (10,916,926) -
---------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Limited partners' contributions 18,377,048 -
Offering costs (2,188,523) -
Distributions (166,315) -
Change in limited partners' subscriptions 1,187,913 965,618
Change in restricted cash (1,187,657) (965,618)
Change in payables to affiliates 4,487 -
---------------------- ----------------------
CASH PROVIDED BY FINANCING ACTIVITIES 16,026,953 -
---------------------- ----------------------
Net change in cash and cash equivalents 5,205,015 -
Cash and cash equivalents at beginning of period 1,986,114 600
---------------------- ----------------------
Cash and cash equivalents at end of period $ 7,191,129 $ 600
====================== ======================
NON-CASH FINANCING ACTIVITIES:
Limited partnership units issued under distribution
reinvestment plan $ 153,314 $ -
Distributions payable in limited partnership units
under distribution reinvestment plan $ 45,049 $ -
5
BEHRINGER HARVARD MID-TERM VALUE ENHANCEMENT FUND I LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Behringer Harvard Mid-Term Value Enhancement Fund I LP (the
"Partnership") is a limited partnership formed in Texas on July 30, 2002. The
general partners of the Partnership are Behringer Harvard Advisors I LP and
Robert M. Behringer (collectively the "General Partners"). The Partnership was
funded through capital contributions from its General Partners and initial
limited partner on September 20, 2002 (date of inception) and is currently
offering its limited partnership units pursuant to the public offering which
commenced on February 19, 2003 ("the Offering") and is described below. The
Partnership intends to use the proceeds from the Offering, after deducting
offering expenses, primarily to acquire institutional quality office and office
service center properties, in highly desirable locations in markets with
barriers to entry and limited potential for new development.
An advisory board has been established to provide the General Partners
with advice and guidance with respect to (i) the identification of assets for
acquisition; (ii) general economic and market conditions, general business
principles, specific business principles relating to the Partnership's business
plan; (iii) inroads to establishing beneficial strategic partners, customers,
and suppliers; (iv) opportunities within and related to the industry; and (v)
other assistance as may be determined by the General Partners or their
representatives from time to time. The Partnership's partnership agreement (the
"Partnership Agreement") provides that it will continue in existence until the
earlier of December 31, 2022 or termination of the Partnership by written
consent of all the Partners.
The Partnership was in the development stage through March 11, 2004. On
March 12, 2004, the Partnership commenced operations with its acquisition of a
property in Hopkins, Minnesota, a suburb of Minneapolis, Minnesota.
2. PUBLIC OFFERING
On February 19, 2003, the Partnership commenced the Offering of up to
40,000,000 units of limited partnership interest to be offered at a price of $10
per unit pursuant to a Registration Statement on Form S-11 filed under the
Securities Act of 1933. The Registration Statement also covers up to 4,000,000
units available pursuant to the Partnership's distribution reinvestment plan at
$10 per unit.
On December 22, 2003, the Partnership satisfied the minimum offering
requirement of $2,000,000 established for its Offering and accepted
subscriptions for 202,781 partnership units, from which gross proceeds of
$2,023,365 were distributed to the Partnership. In addition, special escrow
accounts were established for subscriptions from residents of New York, Nebraska
and Pennsylvania. The minimum offering requirement of $2,500,000 for the New
York escrow account was satisfied on January 26, 2004 and the Partnership
accepted subscriptions from the New York residents on February 1, 2004. The
minimum offering requirement of $22,000,000 for Nebraska and Pennsylvania was
satisfied on October 8, 2004. All additional subscription proceeds are held in
escrow until investors are admitted as limited partners. The Partnership admits
new investors at least monthly. At that time, subscription proceeds are released
to the Partnership from escrow and 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.
As of September 30, 2004, the Partnership had accepted subscriptions for
2,078,706 limited partnership units.
3. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Partnership'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
6
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.
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 Partnership 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 financial position of the
Partnership as of September 30, 2004 and December 31, 2003 and the consolidated
results of its operations and cash flows for the periods ended September 30,
2004 and 2003.
Amounts in previous periods have been reclassified to conform to current
period presentation with no effect on previously reported net income or
partners' capital.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with GAAP 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
Partnership and its subsidiaries. All intercompany transactions, balances and
profits have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Partnership considers investments in highly-liquid money market
funds with original 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
Subscription proceeds are held in escrow until investors are admitted as
limited partners. The Partnership admits new limited partners at least monthly.
Upon acceptance of limited partners, which generally occurs monthly, limited
partnership units are issued and subscription proceeds are released to the
Partnership from escrow.
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets includes escrow deposits for real
estate to be acquired and prepaid expenses such as prepaid insurance.
INVESTMENT IMPAIRMENT
For real estate directly owned by the Partnership, 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 Partnership 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 Partnership recognizes
an impairment loss to adjust the carrying amount of the asset to estimated fair
value.
PURCHASE PRICE ALLOCATIONS
Upon the acquisition of real estate properties, the Partnership
allocates the purchase price of those properties to the tangible assets
acquired, consisting of land and buildings, and identified intangible assets.
7
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 Partnership 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 Partnership 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,
in-place leasing commissions and tenant relationships based on management's
evaluation of the specific characteristics of each tenant's lease and the
Partnership'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. 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 Partnership 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 related real estate intangibles would be charged to expense.
REVENUE RECOGNITION
The Partnership 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.
OFFERING COSTS
The General Partners fund all of the organization and offering costs on
the Partnership's behalf and are reimbursed for such organization and offering
costs up to 2.5% of the cumulative capital raised by the Partnership 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 selling commissions and dealer manager fees. The
Partnership is required to repay the General Partners at an amount equal to the
lesser of 2.5% of the cumulative capital raised or actual costs incurred by the
General Partners or their affiliates less previous reimbursements paid to the
General Partners. All offering costs are recorded as an offset to partners'
capital, and
8
all organization costs are recorded as an expense at the time the Partnership
becomes liable for the payment of these amounts.
CASH FLOW DISTRIBUTIONS
Net cash distributions, as defined in the Partnership Agreement, are to
be distributed to the partners as follows:
a) To the limited partners, on a per unit basis, until each of such
limited partners has received distributions of net cash from
operations with respect to such fiscal year, or applicable
portion thereof, equal to eight percent (8.0%) per annum of
their net capital contribution;
b) Then to the limited partners, on a per unit basis, until each
limited partner has received or has been deemed to have received
one hundred percent (100.0%) of their net capital contribution;
and
c) Thereafter, eighty-five percent (85.0%) to the limited partners,
on a per unit basis, and fifteen percent (15.0%) to the General
Partners.
Other limitations of allocated or received distributions are defined
within the Partnership Agreement.
INCOME (LOSS) ALLOCATIONS
Net income for each applicable accounting period is allocated to the
Partners as follows:
a) To the Partners to the extent of and in proportion to
allocations of net loss as noted below; and
b) Then, so as to cause the capital accounts of all Partners to
permit liquidating distributions to be made in the same manner
and priority as set forth in the Partnership Agreement with
respect to net cash distributions.
Net loss for each applicable accounting period is allocated to the
Partners as follows:
a) To the Partners having positive balances in their capital
accounts (in proportion to the aggregate positive balances in
all capital accounts) in an amount not to exceed such positive
balance as of the last day of the fiscal year; and
b) Then, eighty-five percent (85.0%) to the limited partners and
fifteen percent (15.0%) to the General Partners.
The Partnership distributes to its General Partners a share of net cash
from operations, a 15% distribution after the limited partners have received
distributions equal to their net capital contributions plus an 8.0% annual
cumulative (noncompounded) return on their net capital contributions; provided,
however, that in no event will the General Partners receive more than 10.0% of
cash available for distribution.
INCOME TAXES
The Partnership is not a taxpaying entity and, accordingly, records no
income taxes. The Partners are individually responsible for reporting their
share of the Partnership's taxable income or loss on their income tax returns.
Certain transactions of the Partnership may be subject to accounting
methods for income tax purposes, which differ from the accounting methods used
in preparing these financial statements in accordance with GAAP. Accordingly,
the net income or loss of the Partnership and the resulting balances in the
Partners' capital accounts reported for income tax purposes may differ from the
balances reported for those same items in the accompanying financial statements.
CONCENTRATION OF CREDIT RISK
At September 30, 2004, the Partnership had cash and cash equivalents and
restricted cash in excess of federally insured levels on deposit in two
financial institutions. The Partnership regularly monitors the financial
stability of these financial institutions and believes that it is not exposed to
any significant credit risk.
9
5. REAL ESTATE
ACQUISITIONS
On March 12, 2004, the Partnership acquired a one-story office building
containing approximately 29,660 rentable square feet, located on approximately
2.5 acres of land (the "Hopkins Property"). The Hopkins Property is located in
Hopkins, Minnesota, a suburb of Minneapolis, Minnesota. The purchase price of
the Hopkins Property was approximately $3,100,000. The Partnership used proceeds
from its public offering to pay the entire purchase price and all closing costs
of the acquisition. The Hopkins Property is held by Behringer Harvard Hopkins,
LLC, a wholly-owned subsidiary of the Partnership. The purchase price has been
allocated to the assets acquired and liabilities assumed as follows:
Estimated
Useful
` Description Allocation Life
----------------------------- -------------- --------------
Land $ 786,232 -
Building 2,225,359 25 years
Real estate intangibles 54,334 7.5 years
Prepaid insurance 4,000 -
Prepaid rent (13,548) -
--------------
Total $ 3,056,377 -
==============
On June 28, 2004, the Partnership acquired a two-story office building
containing approximately 79,049 rentable square feet, located on approximately
5.1 acres of land (the "Northpoint Property"). The Northpoint Property is
located in Dallas, Texas. The purchase price of the Northpoint Property was
approximately $5,800,000. The Partnership used proceeds from its public offering
to pay the entire purchase price and all closing costs of the acquisition. The
Northpoint Property is held by Behringer Harvard Northpoint I LP, in which
Behringer Harvard Northpoint I GP, LLC, a wholly owned subsidiary of the
Partnership, is the general partner and the Partnership is the limited partner.
The purchase price has been allocated to the assets acquired and liabilities
assumed as follows:
Estimated
Useful
Description Allocation Life
----------------------------- -------------- --------------
Land $ 2,000,000 -
Building 3,230,449 25 years
Real estate intangibles 639,314 3.9 years
Prepaid expenses 12,797 -
Accrued liabilities (59,897) -
--------------
$ 5,822,663
==============
PRO FORMA RESULTS OF OPERATIONS
The following summary presents the results of operations for the three
and nine months ended September 30, 2004 and 2003, on an unaudited pro forma
basis, as if the acquisitions of the Hopkins Property and Northpoint Property
had occurred as of January 1 of the respective years. The pro forma results are
for illustrative purposes only and do not purport to be indicative of the actual
results that would have occurred had the transactions been consummated as of
January 1, 2003, nor are they indicative of results of operations that may occur
in the future.
10
Three months Nine months
ended September 30, ended September 30,
------------------------------- -------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- --------------
Total revenues $ 396,474 $ 310,676 $ 1,071,572 $ 1,088,729
Total expenses (417,816) (235,359) (1,055,218) (754,414)
Other income 14,133 - 26,081 -
-------------- -------------- -------------- --------------
Net income (loss) $ (7,209) $ 75,317 $ 42,435 $ 334,315
============== ============== ============== ==============
6. PARTNERS' CAPITAL
The Partnership initiated the declaration of monthly distributions in
March 2004 in the amount of a 6% annualized rate of return, based on an
investment in the Partnership's limited partnership unit of $10 per unit. The
Partnership has a distribution reinvestment plan ("DRIP") whereby unit holders
may elect to receive additional limited partnership units in lieu of a cash
distribution. The Partnership records all distributions when declared, except
that the units issued through the DRIP are recorded when the units are actually
issued. The following are the distributions declared during the nine months
ended September 30, 2004.
Distributions
Declared -------------------------------------------------
in 2004 Total Cash DRIP
--------------- --------------- --------------- ---------------
1st Quarter $ 52,414 $ 27,645 $ 24,769
2nd Quarter 114,244 56,059 58,185
3rd Quarter 249,206 133,797 115,409
--------------- --------------- ---------------
$ 415,864 $ 217,501 $ 198,363
=============== =============== ===============
In October 2004, the Partnership issued 4,505 limited partnership units
valued at $45,049 to participants in the DRIP in lieu of cash distributions
declared for September 2004. As of September 30, 2004, distributions payable
were $96,235.
7. RELATED PARTY ARRANGEMENTS
The General Partners and certain of their affiliates receive fees and
compensation in connection with the Offering and in the acquisition, management
and sale of the assets of the Partnership.
The following is a summary of the related party fees and compensation
incurred by the Partnership during the nine months ended September 30, 2004.
11
Total capitalized
Total to offering Total capitalized Total
incurred costs to real estate expensed
------------------------------------------------------------------------------
Behringer Securities, commissions
and dealer manager fees $ 1,736,347 $ 1,736,347 $ - $ -
Behringer Advisors I, reimbursement
of organization and offering expenses 460,034 451,574 - 8,460
Behringer Advisors I, acquisition,
advisory fees and expenses 308,875 - 308,875 -
HPT Management LP, property management
and leasing fees 13,233 - - 13,233
Behringer Advisors I, asset management
fees 15,641 - - 15,641
-------------- -------------- -------------- --------------
Total $ 2,534,130 $ 2,187,921 $ 308,875 $ 37,334
============== ============== ============== ==============
Behringer Securities LP ("Behringer Securities"), the Partnership's
affiliated dealer manager, 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 is 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 Partnership's distribution
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.
During the nine months ended September 30, 2004, Behringer Securities'
commissions and dealer manager fees totaled $1,274,781 and $461,566,
respectively and were capitalized as offering costs in "Partners' capital" on
the Partnership's balance sheet.
Behringer Advisors I, a general partner of and advisor to the
Partnership, or Behringer Advisors I's affiliates receive up to 2.5% of gross
offering proceeds for reimbursement of organization and offering expenses. As of
September 30, 2004, $2,202,717 of organization and offering expenses had been
incurred by Behringer Advisors I on behalf of the Partnership, of which $515,637
had been reimbursed by the Partnership and the balance of $1,687,080 will be
reimbursed at a rate of 2.5% of future equity raised. Of the $515,637 of
organization and offering costs reimbursed by the Partnership as of September
30, 2004, $506,154 had been capitalized as offering costs in "Partners' capital"
on the Partnership's balance sheet and $9,483 had been expensed as
organizational costs. For the nine months ended September 30, 2004, $460,034 of
organization and offering expenses were reimbursed by the Partnership, of which
$451,574 was capitalized as offering costs in "Partners' capital" and $8,460 was
expensed as organizational costs. Behringer Advisors I or its affiliates
determine the amount of organization and offering expenses owed, based on
specific invoice identification as well as an allocation of costs to the
Partnership, Behringer Harvard Short-Term Opportunity Fund I LP and Behringer
Harvard REIT I, Inc., affiliates of the Partnership, based on anticipated
respective equity offering sizes of those entities.
Behringer Advisors I or its affiliates receive 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 making or purchase
of a mortgage loan. Behringer Advisors I or its affiliates also receive up to
0.5% of the contract purchase price of the assets acquired by the Partnership
for reimbursement of expenses related to making investments. During the nine
months ended September 30, 2004, Behringer Advisors I acquisition and advisory
fees totaled $264,750 and $44,125 reimbursement for related expenses.
For the management and leasing of its properties, the Partnership pays
HPT Management, its property manager, property management and leasing fees equal
to the lesser of: (A) the amounts charged by unaffiliated persons rendering
comparable services in the same geographic area or (B)(1) for commercial
properties that are
12
not leased on a long-term net lease basis, 4.0% of gross revenues, plus separate
leasing fees of up to 1.5% of gross revenues based upon the customary leasing
fees applicable to the geographic location of the properties, and (2) in the
case of commercial properties that are leased on a long-term (10 or more years)
net lease basis, 1.0% of gross revenues plus a one-time initial leasing fee of
3.0% of gross revenues payable over the first five years of the lease term. The
Partnership reimburses the costs and expenses incurred by HPT Management on the
Partnership's behalf, including the wages and salaries and other
employee-related expenses of all on-site employees of HPT Management who are
engaged in the operation, management, maintenance and leasing or access control
of Partnership properties, including taxes, insurance and benefits relating to
such employees, and legal, travel and other out-of-pocket expenses that are
directly related to the management of specific properties. During the nine
months ended September 30, 2004 the Partnership incurred $13,233 in property
management fees payable to HPT Management.
The Partnership pays Behringer Advisors I or its affiliates an annual
advisor asset management fee of 0.5% of the aggregate asset value of the
Partnership's assets. Any portion of the asset management fee may be deferred
and paid in a subsequent year. During the nine months ended September 30, 2004,
the Partnership incurred $15,641 of asset management fees.
In connection with the sale of the properties of the Partnership, the
Partnership will pay to the General Partners or their affiliates a real estate
commission in an amount not exceeding the lesser of: (A) 50.0% of the
reasonable, customary and competitive real estate brokerage commissions
customarily paid for the sale of a comparable property in light of the size,
type and location of the property, or (B) 3.0% of the gross sales price of each
property, subordinated to distributions to Limited Partners from the sale
proceeds of an amount which, together with prior distributions to the Limited
Partners, will equal (1) 100.0% of their capital contributions plus (2) an 8.0%
annual cumulative (noncompounded) return of their net capital contributions.
Subordinated real estate commissions that are not payable at the date of sale,
because Limited Partners 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 the limited partners have
received a return of their net capital contributions and an 8.0% annual
cumulative (noncompounded) return on their net capital contributions, then the
General Partners are entitled to receive 15.0% of the remaining residual
proceeds available for distribution (a subordinated participation in net sale
proceeds and distributions); provided, however, that in no event will the
General Partners receive in the aggregate more than 15.0% of sale proceeds
remaining after the limited partners have received a return of their net capital
contributions.
The Partnership is dependent on Behringer Advisors I, Behringer
Securities and HPT Management for certain services that are essential to the
Partnership, including the sale of the Partnership's shares of limited
partnership units, 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 Partnership, the Partnership would be required to
obtain such services from other sources.
8. SUBSEQUENT EVENTS
On October 19, 2004, the Partnership acquired a two-story office
building containing approximately 70,660 rentable square feet on approximately
6.02 acres of land in Englewood, Colorado, a suburb of Denver ("Tucson Way").
The contract price for Tucson Way was approximately $9,100,000, excluding
closing costs. The Partnership used proceeds from its public offering to pay the
entire purchase price and all closing costs of the acquisition. Tucson Way is
held by Behringer Harvard 7400 Tucson Way, LLC, a wholly owned subsidiary of the
Partnership. As of September 30, 2004, the Partnership had $2,000,000 on deposit
in escrow for the purchase of Tucson Way.
The Partnership issued 468,340 units of limited partnership between
October 1, 2004 and November 1, 2004, resulting in gross proceeds of $4,666,840
to the Partnership. Units of limited partnership outstanding as of November 1,
2004 totaled 2,547,046 units.
13
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 Partnership and the notes thereto:
FORWARD-LOOKING STATEMENTS
This section of the quarterly report contains forward-looking
statements, including discussion and analysis of the Partnership's financial
condition, anticipated capital expenditures required to complete projects,
amounts of anticipated cash distributions to the Partnership's limited partners
in the future and other matters. These forward-looking statements are not
historical facts but are the intent, belief or current expectations of the
Partnership's management based on their knowledge and understanding of the
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
Partnership'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 Partnership's
management's view only as of the date of this Form 10-Q. The Partnership
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 that 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 Partnership's
Registration Statement on Form S-11, as 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 Partnership's consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of
these financial statements requires the Partnership'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 Partnership 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 Partnership'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 Partnership, 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 Partnership 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 Partnership recognizes
an impairment loss to adjust the carrying amount of the asset to estimated fair
value.
14
PURCHASE PRICE ALLOCATION
Upon the acquisition of real estate properties, the Partnership
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 Partnership 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 Partnership 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,
in-place leasing commissions and tenant relationships based on management's
evaluation of the specific characteristics of each tenant's lease and the
Partnership'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. 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 Partnership 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 related real estate intangibles would be charged to expense.
RESULTS OF OPERATIONS
The Partnership commenced active operations when it made its first real
estate acquisition on March 12, 2004 with the purchase of a property in a suburb
of Minneapolis, Minnesota (the "Hopkins Property"). As a result, the
Partnership's results of operations for the three and nine month periods ended
September 30, 2004 are not comparable to the results of operations for the three
and nine month periods ended September 30, 2003.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2004 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2003
Rental revenue for the three months ended September 30, 2004 was
$396,474 and was comprised of revenue, including adjustments for straight-line
rent and amortization of above and below market leases, from the Hopkins and
Northpoint Properties. During the three months ended September 30, 2003, the
Partnership did not own any real estate. Management believes there will be
future increases in rental revenue as the Partnership continues to acquire
additional real estate properties.
15
Property operating expenses for the three months ended September 30,
2004 were $157,499 and were comprised of operating expenses from the Hopkins and
Northpoint Properties. During the three months ended September 30, 2003, the
Partnership did not own any real estate. Management believes there will be
future increases in property operating expenses as the Partnership continues to
acquire additional real estate properties.
Real estate taxes for the three months ended September 30, 2004 were
$39,664 and were comprised of real estate taxes from the Hopkins and Northpoint
Properties. During the three months ended September 30, 2003, the Partnership
did not own any real estate. Management believes there will be future increases
in real estate taxes as the Partnership continues to acquire additional real
estate properties.
Property and asset management fees for the three months ended September
30, 2004 were $21,724 and were comprised of property and asset management fees
from the Hopkins and Northpoint Properties. During the three months ended
September 30, 2003, the Partnership did not own any real estate. Management
believes there will be future increases in property and asset management fees as
the Partnership continues to acquire additional real estate properties.
General and administrative expenses for the three months ended September
30, 2004 were $103,423 and were comprised of general and administrative expenses
from the Hopkins and Northpoint Properties and corporate general and
administrative expenses, including directors' and officers' insurance premiums,
organizational expenses, transfer agent fees, auditing fees and other
administrative expenses. During the three months ended September 30, 2003, the
Partnership did not own any real estate and there was a lack of corporate
activity. Management believes there will be future increases in general and
administrative expenses as the Partnership continues to acquire additional real
estate properties and add limited partners.
Depreciation and amortization expense for the three months ended
September 30, 2004 was $95,506 and was comprised of depreciation and
amortization of the Hopkins and Northpoint Properties. During the three months
ended September 30, 2003, the Partnership did not own any real estate.
Management believes there will be future increases in depreciation and
amortization expense as the Partnership continues to acquire additional real
estate properties.
Other income for the three months ended September 30, 2004 was $14,133
and was comprised primarily of interest income associated with funds on deposit
with banks. As the Partnership admits new unit holders, subscription proceeds
are released to the Partnership 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 September
30, 2003, the Partnership had lower cash balances on deposit with banks.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2004 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2003
Rental revenue for the nine months ended September 30, 2004 was $526,279
and was comprised of revenue, including adjustments for straight-line rent and
amortization of above and below market leases, from the Hopkins and Northpoint
Properties. During the nine months ended September 30, 2003, the Partnership did
not own any real estate. Management believes there will be future increases in
rental revenue as the Partnership continues to acquire additional real estate
properties.
Property operating expenses for the nine months ended September 30, 2004
were $174,344 and were comprised of operating expenses from the Hopkins and
Northpoint Properties. During the nine months ended September 30, 2003, the
Partnership did not own any real estate. Management believes there will be
future increases in property operating expenses as the Partnership continues to
acquire additional real estate properties.
Real estate taxes for the nine months ended September 30, 2004 were
$65,050 and were comprised of real estate taxes from the Hopkins and Northpoint
Properties. During the nine months ended September 30, 2003, the Partnership did
not own any real estate. Management believes there will be future increases in
real estate taxes as the Partnership continues to acquire additional real estate
properties.
16
Property and asset management fees for the nine months ended September
30, 2004 were $28,874 and were comprised of property and asset management fees
from the Hopkins and Northpoint Properties. During the nine months ended
September 30, 2003, the Partnership did not own any real estate. Management
believes there will be future increases in property and asset management fees as
the Partnership continues to acquire additional real estate properties.
General and administrative expenses for the nine months ended September
30, 2004 were $217,282 and were comprised of general and administrative expenses
from the Hopkins and Northpoint Properties and corporate general and
administrative expenses, including directors' and officers' insurance premiums,
organizational expenses, transfer agent fees, auditing fees and other
administrative expenses. During the nine months ended September 30, 2003, the
Partnership did not own any real estate and there was a lack of corporate
activity. Management believes there will be future increases in general and
administrative expenses as the Partnership continues to acquire additional real
estate properties and add limited partners.
Depreciation and amortization expense for the nine months ended
September 30, 2004 was $126,668 and was comprised of depreciation and
amortization of the Hopkins and Northpoint Properties. During the nine months
ended September 30, 2003, the Partnership did not own any real estate.
Management believes there will be future increases in depreciation and
amortization expense as the Partnership continues to acquire additional real
estate properties.
Other income for the nine months ended September 30, 2004 was $26,081
and was comprised primarily of interest income associated with funds on deposit
with banks. As the Partnership admits new unit holders, subscription proceeds
are released to the Partnership 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 nine months ended September 30,
2003, the Partnership had lower cash balances on deposit with banks.
CASH FLOW ANALYSIS
The Partnership commenced active operations when it made its first real
estate acquisition on March 12, 2004 with the purchase of the Hopkins Property.
As a result, the Partnership's cash flows for the nine months ended September
30, 2004 are not comparable to the cash flows for the nine months ended
September 30, 2003.
Cash flows from operating activities for the nine months ended September
30, 2004 were $94,988 and were primarily comprised of the net loss of ($59,858)
adjusted for depreciation and amortization of $115,362 and changes in working
capital accounts of $39,484. There were no cash flows from operating activities
for the nine months ended September 30, 2003 due to the lack of real estate
investments and corporate activity.
Cash flows from investing activities for the nine months ended September
30, 2004 were $(10,916,926) and were comprised of the Partnership's acquisitions
of the Hopkins Property and the Northpoint Property and an escrow deposit for
the Tucson Way property acquired October 19, 2004. During the nine months ended
September 30, 2003, the Partnership had not purchased any real estate
investments.
Cash flows from financing activities for the nine months ended September
30, 2004 were $16,026,953 and were comprised primarily of funds received from
the issuance of limited partnership units. During the nine months ended
September 30, 2003, the Partnership had not accepted any subscriptions for
limited partnership units.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's principal demands for funds will continue to be for
property acquisitions, either directly or through investment interests, for the
payment of operating expenses and distributions. Generally, cash needs for items
other than property acquisitions are expected to be met from operations, and
cash needs for property acquisitions are expected be met from the net proceeds
of the Offering. However, there may be a delay between the sale of the
Partnership's units and its purchase of properties, which could result in a
delay in the benefits to its
17
limited partners, if any, of returns generated from the Partnership's
operations. The Partnership expects that at least 84.2% of the money that
limited partners invest in the Offering will be used to buy real estate 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 General Partners will evaluate
potential property acquisitions and will engage in negotiations with sellers on
the Partnership'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 Partnership 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 Partnership's ability to make distributions.
The timing and amount of cash to be distributed to the Partnership's
limited partners will be determined by the General Partners and will be
dependent on a number of factors, including funds available for payment of
distributions, financial condition and capital expenditures.
The Partnership expects to meet its future short-term operating
liquidity requirements through net cash provided by the operations of current
properties and those to be acquired in the future. Management also expects that
the Partnership's properties will generate sufficient cash flow to cover
operating expenses and the payment of a monthly distribution. Currently, a
portion of the distributions are paid from cash provided by operations and a
portion is paid from sales of securities. 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 Partnership may use financings or other sources of
capital in the event of unforeseen significant capital expenditures.
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 Partnership'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 Partnership has limited exposure to financial market risks,
including changes in interest rates and other relevant market prices. The
Partnership has no investments that would be affected by an increase or decrease
in interest rates. The Partnership 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
management of Behringer Advisors I evaluated, with the participation of its
chief executive officer and chief financial officer, the effectiveness of the
Partnership's disclosure controls and procedures as of September 30, 2004. Based
on that evaluation, the chief executive officer and chief financial officer of
Behringer Advisors I have concluded that the Partnership'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
Partnership's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
18
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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
As of September 30, 2004, the Partnership had sold 2,078,706 of limited
partnership units pursuant to the Offering for gross proceeds of $20,754,477.
Through September 30, 2004, the Partnership 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 $ 2,454,594
Other expenses to non-affiliates 8,604
---------------------
Total expenses $ 2,463,198
=====================
The net offering proceeds to the Partnership, after deducting the total
expenses incurred and described above, are $18,291,279.
Other expenses to affiliates above include commissions and dealer
manager fees paid to Behringer Securities LP, an affiliate of the Partnership,
which reallowed all or a portion of the commissions and fees to soliciting
dealers.
Through September 30, 2004, the Partnership had used $8,916,926 of such
net offering proceeds to purchase the Hopkins Property and the Northpoint
Property. Of the amount used for the purchase of the Hopkins Property and the
Northpoint Property, $308,875 was paid to Behringer Advisors I, an affiliate of
the Partnership, 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.
No events occurred during the quarter covered by this report that would
require a response to this item.
ITEM 5. OTHER INFORMATION.
No events occurred during the quarter covered by this report that would
require a response to this item.
ITEM 6. EXHIBITS.
The exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
19
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 Mid-Term
Value Enhancement Fund I LP
By: Behringer Harvard Advisors I LP
Co-General Partner
Dated: November 15, 2004 By: /s/ Gary S. Bresky
--------------------------------
Gary S. Bresky
Chief Financial Officer and
Treasurer
20
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
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