10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

Commission File Number: 000-53650

Behringer Harvard Opportunity REIT II, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	20-8198863
(State or other jurisdiction of incorporation or	(I.R.S. Employer
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) 655-3600

None

(Former name, former address and former fiscal year, if changed since last report)

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 o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of October 31, 2012, Behringer Harvard Opportunity REIT II, Inc. had 26,065,533 shares of common stock outstanding.

BEHRINGER HARVARD OPPORTUNITY REIT II, INC.

FORM 10-Q

Quarter Ended September 30, 2012

	PART I
	FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (Unaudited).
	Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2012 and 2011	4
	Condensed Consolidated Statements of Equity for the Nine Months Ended September 30, 2012 and 2011	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
	PART II
	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosure	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signature		41

2

PART I

FINANCIAL INFORMATION

Item 1.                   Financial Statements.

Behringer Harvard Opportunity REIT II, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except shares)

(unaudited)

	September 30,			December 31,
	2012			2011
Assets
Real estate
Land and improvements, net	$	73,440		$	86,962
Buildings and improvements, net	200,242			218,839
Real estate under development	443			105
Total real estate	274,125			305,906
Assets associated with real estate held for sale	42,970			29,420
Cash and cash equivalents	60,916			80,130
Restricted cash	5,948			5,616
Accounts receivable, net	2,637			1,704
Receivable from related party	3,350			3,485
Prepaid expenses and other assets	1,862			1,596
Furniture, fixtures and equipment, net	7,044			7,219
Deferred financing fees, net	3,511			4,533
Lease intangibles, net	5,838			8,387
Total assets	$	408,201		$	447,996
Liabilities and Equity
Notes payable	$	181,593		$	239,757
Accounts payable	2,732			3,718
Acquired below-market leases, net	1,068			1,271
Distributions payable	—			1,069
Accrued and other liabilities	8,641			5,140
Obligations associated with real estate held for sale	35,880			37
Total liabilities	229,914			250,992
Commitments and contingencies
Equity
Preferred stock, $.0001 par value per share; 50,000,000 shares authorized, none outstanding	—			—
Convertible stock, $.0001 par value per share; 1,000 shares authorized, 1,000 outstanding	—			—
Common stock, $.0001 par value per share; 350,000,000 shares authorized, 26,065,533 and 25,267,048 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	3			3
Additional paid-in capital	233,324			225,968
Accumulated distributions and net loss	(63,682		)	(43,657		)
Accumulated other comprehensive income	(103		)	83
Total Behringer Harvard Opportunity REIT II, Inc. equity	169,542			182,397
Noncontrolling interest	8,745			14,607
Total equity	178,287			197,004
Total liabilities and equity	$	408,201		$	447,996

See Notes to Condensed Consolidated Financial Statements.

3

Behringer Harvard Opportunity REIT II, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Revenues
Rental revenue	$	8,407		$	6,332		$	25,007		$	17,098
Hotel revenue	3,073			1,865			7,980			4,856
Interest income from real estate loan receivable	—			444			—			2,926
Total revenues	11,480			8,641			32,987			24,880
Expenses:
Property operating expenses	5,793			4,479			16,673			12,178
Interest expense	2,319			1,741			6,901			4,769
Real estate taxes	1,218			895			3,548			2,557
Property management fees	428			225			1,233			771
Asset management fees	808			780			2,444			2,140
General and administrative	850			613			2,241			1,667
Acquisition expense	10			331			739			1,786
Depreciation and amortization	3,455			3,066			11,185			8,564
Total expenses	14,881			12,130			44,964			34,432
Interest income, net	30			24			105			111
Other income	17			821			96			821
Loss from continuing operations before income taxes and equity in losses’ of unconsolidated joint ventures	(3,354		)	(2,644		)	(11,776		)	(8,620		)
Equity in earnings of unconsolidated joint ventures	—			2,989			—			2,681
Income (loss) from continuing operations	(3,354		)	345			(11,776		)	(5,939		)
Income (loss) from discontinued operations	(39		)	(65		)	7,759			(954		)
Net income (loss)	(3,393		)	280			(4,017		)	(6,893		)
Noncontrolling interest in continuing operations	275			376			978			1,158
Noncontrolling interest in discontinued operations	17			40			(729		)	193
Net (income) loss attributable to the noncontrolling interest	292			416			249			1,351
Net income (loss) attributable to the Company	$	(3,101	)	$	696		$	(3,768	)	$	(5,542	)
Amounts attributable to the Company
Continuing operations	$	(3,079	)	$	721		$	(10,798	)	$	(4,781	)
Discontinued operations	(22		)	(25		)	7,030			(761		)
Net income (loss) attributable to the Company	$	(3,101	)	$	696		$	(3,768	)	$	(5,542	)
Weighted average shares outstanding:
Basic and diluted	26,069			24,508			25,962			23,739
Net income (loss) per share
Continuing operations	$	(0.12	)	$	0.03		$	(0.42	)	$	(0.20	)
Discontinued operations	—			—			0.27			(0.03		)
Basic and diluted income (loss) per share	$	(0.12	)	$	0.03		$	(0.15	)	$	(0.23	)
Comprehensive income (loss):
Net income (loss)	$	(3,393	)	$	280		$	(4,017	)	$	(6,893	)
Other comprehensive income (loss):
Unrealized losses on interest rate derivatives	9			(104		)	8			(346		)
Foreign currency translation gain (loss)	161			(169		)	(193		)	87
Total other comprehensive loss	170			(273		)	(185		)	(259		)
Comprehensive income (loss)	(3,223		)	7			(4,202		)	(7,152		)
Comprehensive income (loss) attributable to noncontrolling interest	292			437			248			1,420
Comprehensive income (loss) attributable to the Company	$	(2,931	)	$	444		$	(3,954	)	$	(5,732	)

See Notes to Condensed Consolidated Financial Statements.

4

Behringer Harvard Opportunity REIT II, Inc.

Condensed Consolidated Statements of  Equity

(unaudited)

(in thousands)

														Accumulated
	Convertible Stock			Common Stock				Additional			Accumulated			Other
	Number	Par		Number		Par		Paid-in			Distributions and			Comprehensive			Noncontrolling			Total
	of Shares	Value		of Shares		Value		Capital			Net (Loss)			Income (loss)			Interest			Equity
Balance at Janauary 1, 2011	1	$	—	22,330		$	2	$	195,149		$	(23,883	)	$	410		$	10,533		$	182,211
Issuance of common stock, net				2,420		—		24,436												24,436
Redemption of common stock				(174	)			(1,573		)										(1,573		)
Distributions declared on common stock											(8,881		)							(8,881		)
Contributions from noncontrolling interest																	3,648			3,648
Distributions to noncontrolling interest																	(497		)	(497		)
Other comprehensive income (loss):
Unrealized losses on interest rate derivatives														(277		)	(69		)	(346		)
Foreign currency translation gain														87						87
Net loss											(5,542		)				(1,351		)	(6,893		)
Balance at September 30, 2011	1	$	—	24,576		$	2	$	218,012		$	(38,306	)	$	220		$	12,264		$	192,192
Balance at January 1, 2012	1	$	—	25,267		$	3	$	225,968		$	(43,657	)	$	83		$	14,607		$	197,004
Issuance of common stock, net				910		—		8,346												8,346
Redemption of common stock				(111	)			(990		)										(990		)
Distributions declared on common stock											(16,257		)							(16,257		)
Contributions from noncontrolling interest																	1,543			1,543
Distributions to noncontrolling interest																	(7,157		)	(7,157		)
Other comprehensive income (loss):
Unrealized gains on interest rate derivatives														7			1			8
Foreign currency translation loss														(193		)				(193		)
Net loss											(3,768		)				(249		)	(4,017		)
Balance at Septmeber 30, 2012	1	$	—	26,066		$	3	$	233,324		$	(63,682	)	$	(103	)	$	8,745		$	178,287

See Notes to Condensed Consolidated Financial Statements.

5

Behringer Harvard Opportunity REIT II, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine months ended September 30,
	2012			2011
Cash flows from operating activities:
Net loss	$	(4,017	)	$	(6,893	)
Adjustments to reconcile net income (loss) to net cash flows used in operating activities:
Depreciation and amortization	12,262			11,484
Amortization of deferred financing fees	800			1,008
Equity in losses of unconsolidated joint venture	—			(2,681		)
Gain on sale of discontinued operations	(9,264		)	—
Loss on early extinguishment of debt	1,236			—
Change in operating assets and liabilities:
Accounts receivable	(932		)	(301		)
Interest receivable-real estate loan receivable	—			2,227
Prepaid expenses and other assets	(261		)	(1,182		)
Accounts payable	1,024			(250		)
Accrued and other liabilities	3,428			2,007
Net receivables to related parties	104			(152		)
Addition of lease intangibles	(336		)	(556		)
Cash provided by operating activities	4,044			4,711
Cash flows from investing activities:
Purchases of real estate	(11,039		)	(37,381		)
Proceeds from sale of discontinued operations	38,684			—
Additions to property and equipment	(11,701		)	(8,975		)
Repayment of real estate loans receivable	—			25,000
Change in restricted cash	(332		)	4,861
Cash provided by (used in) investing activities	15,612			(16,495		)
Cash flows from financing activities:
Financing costs	(1,015		)	(728		)
Proceeds from notes payable	7,401			30,626
Payments on notes payable	(29,761		)	(1,212		)
Issuance of common stock	6,142			17,934
Redemptions of common stock	(990		)	(1,573		)
Offering costs	(553		)	(1,647		)
Distributions	(14,536		)	(2,899		)
Contributions from noncontrolling interest holders	1,543			3,648
Distributions to noncontrolling interest holders	(7,157		)	(497		)
Cash provided by (used in) financing activities	(38,926		)	43,652
Effect of exchange rate changes on cash and cash equivalents	56			77
Net change in cash and cash equivalents	(19,214		)	31,945
Cash and cash equivalents at beginning of period	80,130			49,375
Cash and cash equivalents at end of period	$	60,916		$	81,320

See Notes to Condensed Consolidated Financial Statements.

6

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.             Business and Organization

Business

Behringer Harvard Opportunity REIT II, Inc. (which may be referred to as the “Company,” “we,” “us,” or “our”) was organized as a Maryland corporation on January 9, 2007 and has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes.

We acquire and operate commercial real estate and real estate-related assets.  In particular, we focus generally on acquiring commercial properties with significant possibilities for short-term capital appreciation, such as those requiring development, redevelopment, or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who are distressed or face time-sensitive deadlines.  In addition, our opportunistic investment strategy also includes investments in real estate-related assets that present opportunities for higher current income.  Such investments may have capital gain characteristics, whether as a result of a discount purchase or related equity participations.  We may acquire a wide variety of commercial properties, including office, industrial, retail, hospitality, recreation and leisure, single-tenant, multifamily, and other real properties.  These properties may be existing, income-producing properties, newly constructed properties, or properties under development or construction.  They may include multifamily properties purchased for conversion into condominiums and single-tenant properties that may be converted for multi-tenant use.  We may invest in real estate-related securities, including securities issued by other real estate companies, either for investment or in change of control transactions completed on a negotiated basis or otherwise.  Further, we also may originate or invest in collateralized mortgage-backed securities and mortgage, bridge or mezzanine loans, or in entities that make investments similar to the foregoing.  We expect to make our investments in or in respect of real estate assets located in the United States and other countries based on our view of existing market conditions.  We completed our first property acquisition, an office building located in Denver, Colorado, on October 28, 2008.  As of September 30, 2012, we had 11 real estate investments, all of which were consolidated into our condensed consolidated financial statements (including Parrot’s Landing classified as held for sale).

Substantially all of our business is conducted through Behringer Harvard Opportunity OP II LP, a limited partnership organized in Delaware on January 12, 2007 (“Behringer Harvard Opportunity OP II”).  As of September 30, 2012, our wholly-owned subsidiary, BHO II, Inc., a Delaware corporation, was the sole general partner of Behringer Harvard Opportunity OP II and owned a 0.1% partnership interest in Behringer Harvard Opportunity OP II.  As of September 30, 2012, our wholly-owned subsidiary, BHO Business Trust II, a Maryland business trust, was the sole limited partner of Behringer Harvard Opportunity OP II and owned the remaining 99.9% interest in Behringer Harvard Opportunity OP II.

We are externally managed and advised by Behringer Harvard Opportunity Advisors II, LLC, a Texas limited liability company that was formed on March 16, 2010 (the “Advisor”) when Behringer Harvard Opportunity Advisors II LP, a Texas limited partnership formed in January 2007, was converted to a limited liability company.  The Advisor is responsible for managing our day-to-day affairs and for identifying and making acquisitions and investments on our behalf.

Organization

On February 26, 2007, we filed a Registration Statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer up to 125,000,000 shares of common stock for sale to the public (the “Initial Offering”), of which 25,000,000 shares were being offered pursuant to our distribution reinvestment plan (the “DRP”).  On July 3, 2011, the Initial Offering terminated in accordance with its terms.

Prior to termination of the Initial Offering, on September 13, 2010, we filed a second Registration Statement on Form S-11 with the SEC to register a follow-on public offering of up to 75,000,000 shares of our common stock for sale to the public (the “Follow-On Offering” and, together with the Initial Offering, the “Offerings”), of which 25,000,000 shares were being offered pursuant to the DRP.  We terminated the primary portion of the Follow-On Offering effective March 15, 2012 and the DRP portion of the Follow-On Offering effective April 3, 2012. Through September 30, 2012, we raised gross offering proceeds of approximately $265.3 million from the sale of approximately 26.7 million shares under the Offerings, including shares sold under the DRP.

In connection with our initial capitalization, on January 19, 2007, we issued 22,471 shares of our common stock and 1,000 shares of our convertible stock to Behringer Harvard Holdings.  Behringer Harvard Holdings transferred its shares of convertible stock to the Advisor on April 2, 2010.  As of September 30, 2012, we had 26.1 million shares of common stock outstanding, including the 22,471 shares issued to Behringer Harvard Holdings.  As of September 30, 2012, we had 1,000 shares of convertible stock issued and outstanding to the Advisor.

7

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We commenced operations on April 1, 2008 upon satisfaction of the conditions of our escrow agreement and our acceptance of initial subscriptions of common stock in the Initial Offering. Upon admission of new stockholders, subscription proceeds for the primary offerings were used for payment of dealer manager fees and selling commissions and could be utilized in the Offerings as consideration for investments and the payment or reimbursement of offering expenses and operating expenses.  Until required for such purposes, net offering proceeds are held in short-term, liquid investments. We used the net proceeds from the Offerings primarily to acquire real estate and real estate-related assets consistent with our opportunistic investment strategy.  As of September 30, 2012, we had issued 26.7 million shares of our common stock, including 22,471 shares owned by Behringer Harvard Holdings and 2.2 million shares issued through the DRP.  As of September 30, 2012, we had redeemed 0.6 million shares of our common stock.

Our common stock is not currently listed on a national securities exchange.  Depending upon then prevailing market conditions, it is our intention to consider beginning the process of liquidating our assets and distributing the net proceeds to our stockholders within three to six years after the termination of the Initial Offering.  If we do not begin an orderly liquidation within that period, we may seek to have our shares listed on a national securities exchange.

2.             Interim Unaudited Financial Information

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on March 28, 2012.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted 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 condensed consolidated balance sheet as of September 30, 2012, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2012 and 2011 and condensed consolidated statements of equity and cash flows for the nine months ended September 30, 2012 and 2011 have not been audited by our independent registered public accounting firm.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to fairly present our condensed consolidated financial position as of September 30, 2012 and December 31, 2011 and our condensed consolidated results of operations and cash flows for the periods ended September 30, 2012 and 2011.  Such adjustments are of a normal recurring nature.

3.             Summary of Significant Accounting Policies

Described below are certain of our significant accounting policies.  The disclosures regarding several of the policies have been condensed or omitted in accordance with interim reporting regulations specified by Form 10-Q.  Please see our Annual Report on Form 10-K for a complete listing of all of our 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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates include such items as purchase price allocation for real estate acquisitions, impairment of long-lived assets, depreciation and amortization, and allowance for doubtful accounts.  Actual results could differ from those estimates.

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control.  All inter-company transactions, balances, and profits have been eliminated in consolidation.  Interests in entities acquired will be evaluated based on applicable GAAP, which includes the requirement to consolidate entities deemed to be variable interest entities (“VIE”) in which we are the primary beneficiary.  If the interest in the entity is determined not to be a VIE, then the entity will be evaluated for consolidation based on legal form, economic substance, and the extent to which we have control and/or substantive participating rights under the respective ownership agreement.  In the Notes to Condensed Consolidated Financial Statements, all dollar and share amounts in tabulation are in thousands of dollars and shares, respectively, unless otherwise noted.

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary.  The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity.  Determining expected

8

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses.  A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

We have evaluated subsequent events for recognition or disclosure in our consolidated financial statements.

Real Estate

Upon the acquisition of real estate properties, we recognize the assets acquired, the liabilities assumed and any noncontrolling interest as of the acquisition date, measured at their fair values.  The acquisition date is the date on which we obtain control of the real estate property.  The assets acquired and liabilities assumed may consist of land, inclusive of associated rights, buildings, assumed debt, identified intangible assets and liabilities and asset retirement obligations. Identified intangible assets generally consist of above-market leases, in-place leases, in-place tenant improvements, in-place leasing commissions and tenant relationships.  Identified intangible liabilities generally consist of below-market leases. Goodwill is recognized as of the acquisition date and measured as the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree over the fair value of the identifiable net assets acquired.  Likewise, a bargain purchase gain is recognized in current earnings when the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree is less than the fair value of the identifiable net assets acquired.  Acquisition-related costs are expensed in the period incurred.  Initial valuations are subject to change until our information is finalized, which is no later than twelve months from the acquisition date.

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 fair value of these assets using discounted cash flow analyses or similar methods believed to be used by market participants.  The value of buildings is depreciated over the estimated useful life of 25 years using the straight-line method.

We determine the fair value of assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that management believes we could obtain at the date of the debt assumption.  Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan using the effective interest method.

We determine the value of above-market and below-market 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 (1) the contractual amounts to be paid pursuant to the in-place leases and (2) management’s estimate of current market lease rates for the corresponding in-place leases, measured over a period equal to (a) the remaining non-cancelable lease term for above-market leases, or (b) the remaining non-cancelable lease term plus any below-market fixed rate renewal options that, based on a qualitative assessment of several factors, including the financial condition of the lessee, the business conditions in the industry in which the lessee operates, the economic conditions in the area in which the property is located, and the ability of the lessee to sublease the property during the renewal term, are reasonably assured to be exercised by the lessee for below-market leases.  We record the fair value of above-market and below-market leases as intangible assets or intangible liabilities, respectively, and amortize them as an adjustment to rental income over the determined lease term.

The total value of identified real estate intangible assets acquired is further allocated to in-place leases, in-place tenant improvements, in-place leasing commissions and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant.  The aggregate value for tenant improvements and leasing commissions is 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 include 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, we include 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 the fair value of tenant relationships also include costs to execute similar leases including leasing commissions, legal fees and tenant improvements as well as an estimate of the likelihood of renewal as determined by management on a tenant-by-tenant basis.

We amortize the value of in-place leases, in-place tenant improvements and in-place leasing commissions to expense over the initial term of the respective leases.  The tenant relationship values are amortized to expense over the initial

9

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

term and any anticipated renewal periods, but in no event does the amortization period for intangible assets or liabilities exceed the remaining depreciable life of the building.  Should a tenant terminate its lease, the unamortized portion of the acquired lease intangibles related to that tenant would be charged to expense.

Anticipated amortization expense associated with the acquired lease intangibles for each of the following five years as of September 30, 2012 is as follows:

Year	Lease / Other Intangibles
September 30, 2012 - December 31, 2012	$	394
2013	1,302
2014	795
2015	437
2016	260

Accumulated depreciation and amortization related to our consolidated investments in real estate assets and intangibles were as follows:

										Acquired
	Buildings and			Land and			Lease			Below-Market
September 30, 2012	Improvements			Improvements			Intangibles			Leases
Cost	$	215,266		$	75,585		$	14,109		$	(2,368	)
Less: depreciation and amortization	(15,024		)	(2,145		)	(8,271		)	1,300
Net (1)	$	200,242		$	73,440		$	5,838		$	(1,068	)

										Acquired
	Buildings and			Land and			Lease			Below-Market
December 31, 2011	Improvements			Improvements			Intangibles			Leases
Cost	$	228,999		$	88,292		$	16,210		$	(2,232	)
Less: depreciation and amortization	(10,160		)	(1,330		)	(7,823		)	961
Net (2)	$	218,839		$	86,962		$	8,387		$	(1,271	)

(1)   Excludes Parrot’s Landing, which was sold on October 31, 2012, and one of the four industrial buildings at Interchange Business Center, which was sold on October 18, 2012 (both classified as held for sale at September 30, 2012).

(2)   Excludes Palms of Monterrey, which was sold on January 5, 2012 (classified as held for sale at December 31, 2011).

Real Estate Held for Sale

We classify properties as held for sale when certain criteria are met, in accordance with GAAP.  At that time we present the assets and obligations of the property held for sale separately in our consolidated balance sheet and we cease recording depreciation and amortization expense related to that property.  Properties held for sale are reported at the lower of their carrying amount or their estimated fair value, less estimated costs to sell.  As of September 30, 2012, Parrot’s Landing and one of the four industrial buildings at Interchange Business Center were classified as held for sale and a sale of the properties was completed on October 31, 2012 and October 18, 2012, respectively.  As of December 31, 2011, our Palms of Monterrey property was classified as held for sale and a sale of the property was completed on January 5, 2012.

Cash and Cash Equivalents

We consider investments in highly liquid money market funds or investments 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.

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Restricted Cash

As required by our lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate taxes and other reserves for our consolidated properties.  Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures.  Alternatively, a lender may require its own formula for an escrow of capital reserves.

Investment Impairment

For all of our real estate and real estate related investments, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable.  Examples of the types of events and circumstances that would cause management to assess our assets for potential impairment include, but are not limited to: a significant decrease in the market price of an asset; a significant adverse change in the manner in which the asset is being used; an accumulation of costs in excess of the acquisition basis plus construction of the property; major vacancies and the resulting loss of revenues; natural disasters; a change in the projected holding period; legitimate purchase offers and changes in the global and local markets or economic conditions.  Our assets may at times be concentrated in limited geographic locations and, to the extent that our portfolio is concentrated in limited geographic locations, downturns specifically related to such regions may result in tenants defaulting on their lease obligations at a portion of our properties within a short time period, which may result in asset impairments.  When such events or changes in circumstances are present, we assess 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, we recognize an impairment loss to adjust the carrying amount of the asset to estimated fair value.  We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist.  While we believe our estimates of future cash flows are reasonable, different assumptions regarding factors such as market rents, economic conditions, and occupancy rates could significantly affect these estimates.

In evaluating our investments for impairment, management may use appraisals and make estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during our ownership, and the projected sales price of each of the properties.  A future change in these estimates and assumptions could result in understating or overstating the carrying value of our investments, which could be material to our financial statements.

We believe the carrying value of our operating real estate is currently recoverable.  Accordingly, there were no impairment charges for the nine months ended September 30, 2012 or 2011.  However, if market conditions worsen beyond our current expectations, or if changes in our strategy significantly affect any key assumptions used in our fair value calculations, we may need to take charges in future periods for impairments related to our existing investments.  Any such non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

Revenue Recognition

We recognize rental income generated from leases on real estate assets on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any.  Straight-line rental revenue of $0.1 million and $0.2 million was recognized in rental revenues for the three and nine months ended September 30, 2012, respectively, and includes amounts recognized in discontinued operations.  Straight-line rental revenue of $0.2 million and $0.3 million was recognized in rental revenues for the three and nine months ended September 30, 2011, respectively, and includes amounts recognized in discontinued operations.  Net below market lease amortization of less than $0.1 million and $0.1 million was recognized in rental revenues for the three and nine months ended September 30, 2012, respectively, and includes amounts recognized in discontinued operations.  Net below market lease amortization of less than $0.1 million and $0.3 million was recognized in rental revenues for the three and nine months ended September 30, 2011, respectively, and includes amounts recognized in discontinued operations.

Hotel revenue is derived from the operations of the Courtyard Kauai at Coconut Beach Hotel, consisting of guest room, food and beverage, and other revenue, and is recognized as the services are rendered.

Accounts Receivable

Accounts receivable primarily consist of receivables from our tenants related to our consolidated properties of $1.2 million and straight-line rental revenue receivables of $1.1 million as of September 30, 2012.  Accounts receivable primarily consisted of receivables from our tenants related to our consolidated properties of $0.4 million and straight-line rental revenue receivables of $0.9 million as of December 31, 2011.

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Prepaid Expenses and Other Assets

Prepaid expenses and other assets include prepaid directors’ and officers’ insurance, as well as prepaid insurance of our consolidated properties.

Furniture, Fixtures, and Equipment

Furniture, fixtures, and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives of five to seven years.  Maintenance and repairs are charged to operations as incurred while improvements to such assets are capitalized.  Accumulated depreciation associated with our furniture, fixtures, and equipment was $2.2 million and $1.2 million as of September 30, 2012 and December 31, 2011, respectively.

Deferred Financing Fees

Deferred financing fees are recorded at cost and are amortized to interest expense of our notes payable using a straight-line method that approximates the effective interest method over the life of the related debt.  Accumulated amortization of deferred financing fees was $2 million and $1.2 million as of September 30, 2012 and December 31, 2011, respectively.

Derivative Financial Instruments

Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements or other identified risks and to minimize the variability caused by foreign currency translation risk related to our net investment in foreign real estate.  To accomplish these objectives, we use various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR.  These instruments include LIBOR-based interest rate swaps and caps.  For our net investments in foreign real estate, we may use foreign exchange put/call options to eliminate the impact of foreign currency exchange movements on our financial position.

We measure our derivative instruments and hedging activities at fair value and record them as an asset or liability, depending on our rights or obligations under the applicable derivative contract.  For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged items are recorded in earnings.  Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.  For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivatives are reported in other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged item affects earnings.  We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

As of September 30, 2012, we do not have any derivatives designated as net investment hedges or fair value hedges.  No derivatives were being used for trading or speculative purposes.  See Notes 5 and 11 for further information regarding our derivative financial instruments.

Organization and Offering Expenses

We reimbursed the Advisor and its affiliates for organization and offering expenses (other than selling commissions and the dealer manager fee) incurred on our behalf in connection with the primary offering component of the Offerings.

The Advisor will reimburse us to the extent that the total amount spent on organization and offering expenses in the Offerings (other than selling commissions and the dealer manager fee) exceeds 1.5% of the gross proceeds raised in the primary component of the Offerings.  We terminated the primary portion of the Follow-On Offering effective March 15, 2012.  Based on our current review of gross proceeds from our Offerings, we have recorded a receivable from the Advisor for approximately $3.8 million for organization and offering expenses that were previously reimbursed to the Advisor.  The receivable of $3.8 million is presented net of other payables of $0.4 million to the Advisor on our consolidated balance sheet.  We expect to receive payment from the Advisor for this receivable during the first quarter of 2013.

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 we become liable for the payment of these amounts.

Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and have qualified as a REIT since the year ended December 31, 2008.  To qualify as a REIT, we

12

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our stockholders.  As a REIT, we generally will not be subject to federal income tax at the corporate level.  We are organized and operate in such a manner as to qualify for taxation as a REIT under the Code and intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REIT.

We have reviewed our tax positions under GAAP guidance that clarifies the relevant criteria and approach for the recognition and measurement of uncertain tax positions.  The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return.  A tax position may only be recognized in the financial statements if it is more likely than not that the tax position will be sustained upon examination.  We believe it is more likely than not that the tax positions taken relative to our status as a REIT will be sustained in any tax examination.

Foreign Currency Translation

For our international investment where the functional currency is other than the U.S. dollar, assets and liabilities are translated using period-end exchange rates, while the statement of operations amounts are translated using the average exchange rates for the respective period.  Gains and losses resulting from the change in exchange rates from period to period are reported separately as a component of accumulated other comprehensive income (loss) (“AOCI”).  Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations and comprehensive income (loss).

The Euro is the functional currency for the operations of Holstenplatz and Alte Jakobstraße.  We also maintain a Euro-denominated bank account that is translated into U.S. dollars at the current exchange rate at each reporting period.  For the nine months ended September 30, 2012, the foreign currency translation adjustment was a loss of $0.2 million.  For the nine months ended September 30, 2011, the foreign currency translation adjustment was a gain of $0.1 million.

Accumulated Other Comprehensive Income (Loss)

AOCI, which is reported in the accompanying consolidated statement of equity, consists of gains and losses affecting equity that are excluded from net income (loss) under GAAP.  The components of AOCI consist of cumulative foreign currency translation gains and losses and the unrealized gain on derivative instruments.

Stock-Based Compensation

We have adopted a stock-based incentive award plan for our directors and consultants and for employees, directors and consultants of our affiliates.  We have not issued any stock-based awards under the plan as of September 30, 2012.

Concentration of Credit Risk

At September 30, 2012 and December 31, 2011, we had cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels.  We have diversified our cash and cash equivalents among several banking institutions in an attempt to minimize exposure to any one of these entities.  We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk in cash and cash equivalents or restricted cash.

Noncontrolling Interest

Noncontrolling interest represents the noncontrolling ownership interest’s proportionate share of the equity in our consolidated real estate investments.  Income and losses are allocated to noncontrolling interest holders based on their ownership percentage.

Earnings per Share

Net income (loss) per share is calculated based on the weighted average number of common shares outstanding during each period.  The weighted average shares outstanding used to calculate both basic and diluted income (loss) per share were the same for the three and nine months ended September 30, 2012 and 2011, as there were no potentially dilutive securities outstanding.

13

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Reportable Segments

GAAP establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments.  We have determined that we have one reportable segment, with activities related to the ownership, development and management of real estate assets.  Our chief operating decision maker evaluates operating performance on an individual property level.  Therefore, our properties are aggregated into one reportable segment.

4.New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (the “FASB”) issued updated guidance for fair value measurements.  The guidance amends existing guidance to provide common fair value measurements and related disclosure requirements between GAAP and International Financial Reporting Standards.  This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The adoption of this guidance did not have an impact on our financial statements except for disclosures.

In June 2011, the FASB issued updated guidance related to comprehensive income.  The guidance requires registrants to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  Additionally, registrants will be required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.  This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Due to our early adoption, this guidance did not have a material impact on our financial statements.

5.Assets and Liabilities Measured at Fair Value

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability.  As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy) has been established.

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access.  Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.  Level 3 inputs are unobservable inputs for the asset or liability that are typically based on an entity’s own assumptions, as there is little, if any, related market activity.  In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.  Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Recurring Fair Value Measurements

Currently, we use interest rate swaps and caps to manage our interest rate risk.  The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, implied volatilities, and foreign currency exchange rates.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties.  However, as of September 30, 2012, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.  As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

14

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following fair value hierarchy table presents information about our assets measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011.

September 30, 2012	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	1	$	—	$	1

December 31, 2011	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	19	$	—	$	19

Derivative financial instruments classified as assets are included in prepaid expenses and other assets on the balance sheet.

6.Financial Instruments not Reported at Fair Value

We determined the following disclosure of estimated fair values using available market information and appropriate valuation methodologies.  However, considerable judgment is necessary to interpret market data and develop the related estimates of fair value.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

As of September 30, 2012 and December 31, 2011, management estimated that the carrying value of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, other liabilities, payables/receivables from related parties, and distributions payable were at amounts that reasonably approximated their fair value based on their highly-liquid nature and/or short-term maturities.  The notes payable, including the loans classified as obligations associated with real estate held for sale at September 30, 2012 secured by Parrot’s Landing and one of the four industrial buildings at Interchange Business Center, totaling $217.3 million and $239.8 million as of September 30, 2012 and December 31, 2011, respectively, have a fair value of approximately $219.7 million and $242.2 million as of September 30, 2012 and December 31, 2011, respectively, based upon interest rates for debt with similar terms and remaining maturities that management believes we could obtain.  The fair value of the notes payable is categorized as a Level 2 basis.  The fair value is estimated using a discounted cash flow analysis valuation on the borrowing rates currently available for loans with similar terms and maturities.  The fair value of the notes payable was determined by discounting the future contractual interest and principal payments by a market rate.  Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, 2012 and December 31, 2011.

7.Real Estate and Real Estate-Related Investments

As of September 30, 2012, we consolidated 11 real estate investments.  The following table presents certain information about our consolidated investments as of September 30, 2012:

Property Name	Location	Date Acquired	Ownership Interest
1875 Lawrence	Denver, CO	October 28, 2008	100	%
Holstenplatz	Hamburg, Germany	June 30, 2010	100	%
Parrot’s Landing (1)	North Lauderdale, Florida	September 17, 2010	90	%
Florida MOB Portfolio (2)	South Florida	October 8, 2010/October 20, 2010 (2)	90	%(3)
Courtyard Kauai Coconut Beach Hotel	Kauai, Hawaii	October 20, 2010	80	%
Interchange Business Center (4)	San Bernardino, California	November 23, 2010	80	%
River Club and the Townhomes at River Club	Athens, Georiga	April 25, 2011	85	%
Babcock Self Storage	San Antonio, Texas	August 30, 2011	85	%
Lakes of Margate	Margate, Florida	October 19, 2011	92.5	%
Arbors Harbor Town	Memphis, Tennessee	December 20, 2011	94	%
Alte Jakobstraße	Berlin, Germany	April 5, 2012	99.7	%

(1) Classified as held for sale on our condensed consolidated balance sheet as of September 30, 2012.  On October 31, 2012, we sold Parrot’s Landing to an unaffiliated third party for a contract price of approximately $56.3 million, excluding transaction costs.

(2) We acquired a portfolio of eight medical office buildings, known as the Original Florida MOB Portfolio on October 8, 2010.  We acquired a medical office building known as Gardens Medical Pavilion on October 20, 2010.  Collectively, the Original Florida MOB Portfolio and Gardens Medical Pavilion are referred to as the Florida MOB Portfolio.

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(3) The Florida MOB Portfolio consists of nine Medical Office Buildings.  We own 90% of each of eight of the buildings. We own 90% of a 90% JV interest in the ninth building, Gardens Medical Pavilion.

(4) On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center. The building is classified as held for sale on our condensed consolidated balance sheet as of September 30, 2012.

Real Estate Asset Acquisitions

Alte Jakobstraße

On April 5, 2012, we acquired Alte Jakobstraße 79-80 (“Alte Jakobstraße”), a multi-tenant office building located in Berlin, Germany, from an unaffiliated third party.  The purchase price for Alte Jakobstraße, excluding closing costs, was approximately €8.4 million or approximately $11.1 million based on the exchange rate in effect on April 5, 2012.  We funded the purchase price with proceeds from the Follow-On Offering and financing activities.  In connection with the acquisition of Alte Jakobstraße, on April 5, 2012, we entered into a loan for €5.9 million or approximately $7.8 million ($7.3 million was funded as of September 30, 2012) based on the exchange rate in effect on April 5, 2012 (the “AJS Loan”) with an unaffiliated third party.  The AJS Loan bears interest at a fixed annual rate of approximately 2.3% for three years and must be repaid in the amount of 4% annually of the original loan amount plus interest.  The AJS Loan must be repaid in its entirety by December 30, 2015.  The AJS Loan is secured by Alte Jakobstraße, including the leases and rents.

Alte Jakobstraße contributed rental revenue of $0.6 million and a GAAP net loss of $0.1 million to our condensed consolidated statements of operations for the period from April 5, 2012 through September 30, 2012.  The following unaudited pro forma summary presents consolidated information as if the business combination had occurred on January 1, 2011:

	Pro Forma for the Nine Months Ended September 30,
	2012			2011
Revenue	$	33,299		$	25,635
Net loss	$	(3,819	)	$	(7,832	)
Net loss per share	$	(0.15	)	$	(0.33	)

These pro forma amounts have been calculated after applying our accounting policies and adjusting the results of Alte Jakobstraße to reflect additional depreciation and amortization that would have been charged assuming the fair value adjustments to the tangible and intangible assets had been applied from January 1, 2011.  Included in the pro forma net loss for both the nine months ended September 30, 2012 and September 30, 2011 is depreciation and amortization expense of $0.3 million.

During the nine months ended September 30, 2012, we incurred $0.5 million in acquisition expenses related to the acquisition of Alte Jakobstraße.  The following table summarizes the amounts of identified assets acquired at the acquisition date:

	Alte Jakobstraße
Land	$	2,367
Buildings	8,523
Lease intangibles, net	333
Acquired below-market leases, net	(184		)
Total identifiable net assets	$	11,039

16

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Real Estate Asset Dispositions

Palms of Monterrey

On January 5, 2012, we sold the Palms of Monterrey for a contract sales price of $39.3 million, excluding transaction costs.  A portion of the proceeds from the sale was used to fully satisfy the existing indebtedness of $19.7 million associated with the property.  The Palms of Monterrey was classified as held for sale on our consolidated balance sheet as of December 31, 2011.

Parrot’s Landing

On October 31, 2012, we sold Parrot’s Landing for a contract sales price of approximately $56.3 million, excluding transaction costs, of which approximately $28.6 million was used to fully satisfy the existing indebtness, resulting in net sales proceeds to us of approximately $18.5 million.  Parrot’s Landing was classified as held for sale on our consolidated balance sheet as of September 30, 2012.  See Note 16 for further information regarding discontinued operations.

Interchange Business Center

On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center for a contract sales price of approximately $7.5 million, excluding transaction costs.  The proceeds from the sale were used to satisfy a portion of the existing indebtedness associated with the four buildings.  The building sold had been vacant since the initial date of acquisition and was classified as held for sale on our consolidated balance sheet as of September 30, 2012.

8.Real Estate Loan Receivable

PAL Loan

On August 14, 2009, we entered into a loan agreement with an unaffiliated third party borrower to provide up to $25 million of second lien financing for the privatization of, and improvements to, approximately 3,200 hotel lodging units on ten U.S. Army installations.  On August 15, 2011, the debtor associated with the PAL Loan exercised its option to prepay the entire balance of the loan.  We had no investments in real estate loans receivable as of September 30, 2012 and December 31, 2011.  During the nine months ended September 30, 2011, we earned $3.2 million in interest income from the PAL Loan.

9.Notes Payable

The following table sets forth information on our notes payable as of September 30, 2012 and December 31, 2011:

	Notes Payable as of				Interest	Maturity
Description	September 30, 2012		December 31, 2011		Rate	Date
1875 Lawrence	$	15,056	$	21,016	30-day LIBOR + 2.5% (1)(2)	12/31/12
Interchange Business Center	9,883		19,619		30-day LIBOR + 5% (1)(3)	12/01/13
Holstenplatz	10,009		10,084		3.887%	04/30/15
Courtyard Kauai at Coconut Beach Hotel	38,000		38,000		30-day LIBOR + .95% (1)	11/09/15
Florida MOB Portfolio - Palmetto Building	6,114		6,222		4.55%	01/01/16
Florida MOB Portfolio - Victor Farris Building	12,324		12,542		4.55%	01/01/16
Palms of Monterrey	—		19,700		30-day LIBOR + 3.35% (1)(4)	07/01/17
Parrot’s Landing	—		29,013		4.23%	10/01/17
Florida MOB Portfolio - Gardens Medical Pavilion	14,468		14,713		4.9%	01/01/18
River Club and the Townhomes at River Club	25,200		25,200		5.26%	05/01/18
Babcock Self Storage	2,236		2,265		5.80%	08/30/18
Lakes of Margate	15,234		15,383		5.49% and 5.92%	01/01/20
Arbors Harbor Town	26,000		26,000		3.985%	01/01/19
Alte Jakobstraße	7,069		—		2.3%	12/30/15
	$	181,593	$	239,757
Notes Payable included with Obligations associated with real estate held for sale:
Interchange Business Center (5)	$	7,036			30-day LIBOR + 5% (1)(3)	12/01/13
Parrot’s Landing (6)	28,639				4.23%	10/01/17
	$	35,675

(1)30-day LIBOR was 0.21% at September 30, 2012.

(2)The loan has a minimum interest rate of 6.25%.

(3)The 30-day LIBOR rate is set at a minimum value of 2.5%.

(4)The loan has a maximum interest rate of 7%.

(5)On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center to an unaffiliated third party.  Based on the loan agreement, the net proceeds from the sale of approximately $7 million (classified as obligations associated with real estate held for sale on our condensed consolidated balance sheet as of September 30, 2012) were used to satisfy a portion of the existing indebtedness associated with the four buildings.

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(6)On October 31, 2012, we sold Parrot’s Landing to an unaffiliated third party. We classified the note payable as obligations associated with real estate held for sale on our condensed consolidated balance sheet as of September 30, 2012.

At September 30, 2012, our notes payable balance, including the loans classified as obligations associated with real estate held for sale secured by Parrot’s Landing and one of the four industrial buildings at Interchange Business Center, was $217.3 million and consisted of the notes payable related to our consolidated properties.  We have unconditionally guaranteed payment of the note payable related to 1875 Lawrence for an amount not to exceed the lesser of (i) $11.75 million and (ii) 50% of the total amount advanced under the loan agreement if the aggregate amount advanced is less than $23.5 million.  We currently intend to refinance the note payable or exercise the one-year extension option pursuant to the terms under the loan agreement.  We have guaranteed payment of certain recourse liabilities with respect to certain customary nonrecourse carveouts as set forth in the guaranties in favor of the unaffiliated lenders with respect to the Courtyard Kauai at Coconut Beach Hotel notes payable.  For the nine months ended September 30, 2012, we sold one asset to an unaffiliated third party and used a portion of the proceeds from the sale to fully satisfy the existing indebtedness of $19.7 million associated with the property.  Furthermore, we made a principal payment of $5.9 million on the loan related to 1875 Lawrence.  During October 2012, we sold one asset and one of the four industrial buildings at Interchange Business Center to an unaffiliated third party and used the proceeds from the sale to satisfy the existing indebtedness of $35.7 million (classified as obligations associated with real estate held for sale). See footnote 16, Discontinued Operations and Real Estate Held for Sale for further details.

We are subject to customary affirmative, negative, and financial covenants and representations, warranties and borrowing conditions, all as set forth in our loan agreements.  As of September 30, 2012, we believe we were in compliance with the covenants under our loan agreements.

The following table summarizes our contractual obligations for principal payments excluding obligations associated with real estate held for sale as of September 30, 2012:

Year	Amount Due
October 1, 2012 - December 31, 2012	$	15,711
2013	11,870
2014	2,585
2015	55,953
2016	18,677
Thereafter	76,797
	$	181,593

10.Leasing Activity

Future minimum base rental payments of our office and industrial properties due to us under non-cancelable leases in effect as of September 30, 2012 for our consolidated properties are as follows:

September 30, 2012 - December 31, 2012	$	14,886
2013	14,787
2014	11,341
2015	8,664
2016	6,017
Thereafter	7,954
Total	$	63,649

The schedule above does not include rental payments due to us from our multifamily, hotel, student housing, and self-storage properties, as leases associated with these properties typically are for periods of one year or less.  As of September 30, 2012, none of our tenants accounted for 10% or more of our aggregate annual rental revenues from our consolidated properties.

11.Derivative Instruments and Hedging Activities

We may be exposed to the risk associated with variability of interest rates that might impact our cash flows and the results of operations.  The hedging strategy of entering into interest rate caps and swaps, therefore, is to eliminate or reduce, to the extent possible, the volatility of cash flows.

18

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In October 2010, we entered into a new interest rate cap agreement related to the debt on the Courtyard Kauai Coconut Beach Hotel, and in November 2010, we entered into an interest rate cap agreement related to our debt on Interchange Business Center.

Derivative instruments classified as assets were reported at their combined fair values of less than $0.1 million in prepaid expenses and other assets at September 30, 2012 and December 31, 2011.  During the nine months ended September 30, 2012 and 2011, we recorded an unrealized gain of less than $0.1 million and an unrealized loss of $0.3 million to AOCI in our statement of equity to adjust the carrying amount of the interest rate caps qualifying as hedges at September 30, 2012 and 2011, respectively.

The following table summarizes the notional values of our derivative financial instruments.  The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate, or market risks:

Type / Description	Notional Value		Interest Rate / Strike Rate	Index	Maturity
Cash Flow Hedges
Interest rate cap - Courtyard Kauai Coconut Beach Hotel	$	38,000	3.00% - 6.00%	30-day LIBOR	October 15, 2014
Interest rate cap - Interchange Business Center	$	5,000	2.50%	30-day LIBOR	December 1, 2013

The table below presents the fair value of our derivative financial instruments, as well as their classification on the consolidated balance sheets as of September 30, 2012 and December 31, 2011:

Derivatives designated as	Balance Sheet	Asset Derivatives
hedging instruments:	Location	September 30, 2012		December 31, 2011
Interest rate derivative contracts	Prepaid expenses and other assets	$	1	$	19

The table below presents the effect of our derivative financial instruments on the consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011:

Derivatives in Cash Flow Hedging Relationships
Amount of Gain or (Loss)					Amount of Gain or (Loss)
Recognized in AOCI on					Recognized in AOCI on
Derivative (Effective Portion)					Derivative (Effective Portion)
Three Months Ended September 30,					Nine Months Ended September 30,
2012		2011			2012		2011
$	9	$	(104	)	$	8	$	(346	)

Derivatives in Cash Flow Hedging Relationships
Amount of Loss Reclassifed from AOCI into Income (Effective Portion)					Amount of Loss Reclassifed from AOCI into Income (Effective Portion)
Three Months Ended September 30,					Nine Months Ended September 30,
2012			2011		2012			2011
$	(12	)	$	—	$	(26	)	$	—

19

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

12.Commitments and Contingencies

Our operating leases consist of ground leases on each of eight buildings acquired in connection with the purchase of the Original Florida MOB Portfolio.  Each ground lease is for a term of 50 years, with a 25-year extension option.  The annual payment for each ground lease increases by 10% every five years.  For the three and nine months ended September 30, 2012, we incurred $0.1 million and $0.2 million, respectively, in lease expense related to our ground leases.  For the three and nine months ended September 30, 2011, we incurred less than $0.1 million and $0.2 million, respectively, in lease expense related to our ground leases.  Future minimum lease payments for all operating leases from September 30, 2012 are as follows:

September 30, 2012 - December 31, 2012	$	73
2013	293
2014	293
2015	301
2016	301
Therafter	21,528
Total	$	22,789

13.Distributions

Distributions are authorized at the discretion of our board of directors based on its analysis of our performance over the previous period and expectations of performance for future periods.  These analyses may include actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for our portfolio, capital expenditure needs, general financial and market conditions and other factors that our board deems relevant.  The board’s decision will be influenced, in substantial part, by its obligation to ensure that we maintain our status as a REIT.  In light of the continued uncertainty in the global financial and real estate markets, we cannot provide assurance that we will be able to achieve expected cash flows necessary to pay distributions at any particular level, or at all.  On March 20, 2012, our board of directors declared a special distribution of $0.50 per share of common stock payable to our stockholders of record as of April 3, 2012 and determined to cease regular, monthly distributions in favor of payment of periodic distributions from excess proceeds from asset dispositions or from other sources as necessary to maintain our REIT tax status.  The special distribution payment was made on May 10, 2012.

Until our investments are generating sufficient operating cash flow to fully fund the payment of distributions to our stockholders, we have paid and may in the future pay some or all of our distributions from sources other than operating cash flow.  We have, for example, generated cash to pay distributions from financing activities, components of which may include proceeds from the Offerings and borrowings (including borrowings secured by our assets) in anticipation of future operating cash flow.  We have also utilized cash from refinancings and dispositions, the components of which may represent a return of capital and/or the gains on sale.  In addition, from time to time, our Advisor may agree to waive or defer all or a portion of the acquisition, asset management or other fees or incentives due to it, pay general administrative expenses, or otherwise supplement investor returns in order to increase the amount of cash that we have available to pay distributions to our stockholders.

We paid no distributions to stockholders during the three months ended September 30, 2012.  Total distributions paid to stockholders during the nine months ended September 30, 2012 were $17.3 million and consisted of the special cash distribution of $13 million and the regular distributions of $4.3 million.  A portion of the $4.3 million regular distributions to stockholders was funded from cash flow provided by operations.  Total distributions of $8.8 million were paid to stockholders during the nine months ended September 30, 2011.  Distributions funded through the issuance of shares under the DRP during the nine months ended September 30, 2011 were $5.9 million.  Accordingly, cash amounts distributed to stockholders during the nine months ended September 30, 2011 were $2.9 million and were funded from cash flow provided by operations.  Future distributions declared and paid may exceed cash flow from operating activities until such time as we invest in additional real estate or real estate-related assets at favorable yields and our investments reach stabilization.

20

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Distributions paid to stockholders were funded through various sources, including cash flow from operating activities, proceeds raised as part of our Offerings, reinvestment through our DRP and additional borrowings.  The following summarizes certain information related to the sources of recent distributions:

	September 30,
	2012		2011
Total Distributions Paid	$	17,326	$	8,811
Principal Sources of Funding:
Distribution Reinvestment Plan	$	2,790	$	5,912
Cash flow provided by (used in) operating activities	$	4,044	$	4,711
Cash available at the beginning of the period (1)	$	80,130	$	49,375

(1)Represents the cash available at the beginning of the reporting period primarily attributable to excess funds raised from the issuance of common stock and borrowings, after the impact of historical operating activities, other investing and financing activities.

Distributions for the first three quarters of 2012 and 2011 were as follows ($ in thousands, except per share amounts):

								Cash Flow			Total		Declared
		Distributions Paid						Provided by (used in)			Distributions		Distribution
	2012	Cash		Reinvested		Total		Operations			Declared		Per Share
Third quarter	Regular distribution	$	—	$	—	$	—	$	3,550		$	—	$	—
Second quarter	Regular distribution	388		716		1,104		1,325			—		—
Second quarter	Special cash distribution	13,048		—		13,048		—			—		—
First quarter	Regular distribution	1,100		2,074		3,174		(831		)	3,209		0.125
First quarter	Special cash distribution (a)	—		—		—		—			13,048		0.500
		$	14,536	$	2,790	$	17,326	$	4,044		$	16,257	$	0.625

								Cash Flow					Declared
		Distributions Paid						Provided by (used in)			Distributions		Distribution
	2011	Cash		Reinvested		Total		Operations			Declared		Per Share
Third quarter	Regular distribution	$	1,026	$	2,049	$	3,075	$	5,716		$	3,090	$	0.126
Second quarter	Regular distribution	972		1,991		2,963		(593		)	2,976		0.125
First quarter	Regular distribution	901		1,872		2,773		(412		)	2,815		0.123
		$	2,899	$	5,912	$	8,811	$	4,711		$	8,881	$	0.374

(a)         Declared amount is based upon number of stockholders as of April 3, 2012.

Distributions declared per share assume the share was issued and outstanding each day during the period.  Beginning June 2009 through March 2012, the declared daily regular distribution rate was $0.0013699 per share of common stock, which was equivalent to an annualized distribution rate of 5.0% assuming the share was purchased for $10.00.

14.Related Party Transactions

The Advisor and certain of its affiliates will receive fees and compensation in connection with the Offerings, and in connection with the acquisition, management, and sale of our assets.

Pursuant to a Dealer Manager Agreement, we engaged Behringer Securities LP (“Behringer Securities”) to act as our dealer manager in connection with the Offerings.  The Follow-On Offering terminated as to the primary portion on March 15, 2012 and we terminated the DRP portion of the Follow-On Offering effective April 3, 2012.  The terms of the Dealer Manager Agreement were the same in all material respects as the terms of the agreement entered with Behringer Securities dated January 4, 2008 pursuant to which Behringer Securities acted as the dealer manager for the Initial Offering.

Behringer Securities received commissions of up to 7% of gross primary offering proceeds.  Behringer Securities reallowed 100% of selling commissions earned to participating broker-dealers.  In addition, we paid Behringer Securities a dealer manager fee of up to 2.5% of gross offering proceeds.  Pursuant to separately negotiated agreements, Behringer Securities reallowed a portion of its dealer manager fee in an aggregate amount up to 2% of gross offering proceeds to broker-dealers participating in the Offerings; provided, however, that Behringer Securities reallowed, in the aggregate, no more than 1.5% of gross offering proceeds for marketing fees and expenses, conference fees and non-itemized, non-invoiced due diligence efforts and no more than 0.5% of gross offering proceeds for out-of-pocket and bona fide, separately invoiced due diligence expenses incurred as fees, costs or other expenses from third parties.  Further, in special cases pursuant to separately negotiated agreements and subject to applicable limitations imposed by the Financial Industry Regulatory

21

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Authority, Behringer Securities used a portion of its dealer manager fee to reimburse certain broker-dealers participating in the Offerings for technology costs and expenses associated with the Offerings and costs and expenses associated with the facilitation of the marketing and ownership of our shares by such broker-dealers’ customers.  No selling commissions, dealer manager fees or organization and offering expenses were paid for sales under the DRP.  For the nine months ended September 30, 2012, Behringer Securities earned selling commissions and dealer manager fees of $0.4 million and $0.2 million, respectively, which were recorded as a reduction to additional paid-in capital.  For the nine months ended September 30, 2011, Behringer Securities earned selling commissions and dealer manager fees of $1.2 million and $0.4 million, respectively, which were recorded as a reduction to additional paid-in capital.

We reimbursed the Advisor and its affiliates for organization and offering expenses (other than selling commissions and the dealer manager fee) incurred on our behalf in connection with the primary offering component of the Offerings.  The total we were required to remit to the Advisor for organization and offering expenses (other than selling commissions and the dealer manager fee) was limited to 1.5% of the gross proceeds raised in the completed primary offering components of the Offerings as determined upon completion of the Offerings.  The Advisor or its affiliates determined the amount of organization and offering expenses owed based on specific invoice identification, as well as an allocation of costs to us and other Behringer Harvard programs, based on respective equity offering results of those entities in offering.

The Advisor is required to reimburse us to the extent that the total amount spent on organization and offering expenses (other than selling commissions and the dealer manager fee) in the Offerings exceeds 1.5% of the gross proceeds raised in the primary component of the Offerings.  Based on the gross proceeds from our Offerings, we have recorded a receivable from the Advisor for approximately $3.8 million of organization and offering expenses that were previously reimbursed to the Advisor.  The receivable of $3.8 million is presented net of other payables of $0.4 million to the Advisor on our consolidated balance sheet.  We expect to receive payment from the Advisor for this receivable during the first quarter of 2013.

Since our inception through September 30, 2012, approximately $16.4 million of organization and offering expenses was incurred by the Advisor or its affiliates on our behalf.  Of this amount, $7.5 million has been reimbursed by us.  As of September 30, 2012, we had no amounts payable to the Advisor for organization and offering expenses.

The Advisor or its affiliates will also receive acquisition and advisory fees of 2.5% of the amount paid and/or in respect of the purchase, development, construction, or improvement of each asset we acquire, including any debt attributable to those assets.  The Advisor and its affiliates will also receive acquisition and advisory fees of 2.5% of the funds advanced in respect of a loan investment.  We incurred acquisition and advisory fees payable to the Advisor of $0.5 million for the nine months ended September 30, 2012.  We incurred acquisition and advisory fees payable to the Advisor of $0.9 million for the nine months ended September 30, 2011.

The Advisor or its affiliates also receive an acquisition expense reimbursement in the amount of 0.25% of (i) the funds paid for purchasing an asset, including any debt attributable to the asset, (ii) the funds budgeted for development, construction, or improvement in the case of assets that we acquire and intend to develop, construct, or improve, and (iii) the funds advanced in respect of a loan investment.  In addition, to the extent the Advisor or its affiliates directly provide services formerly provided or usually provided by third parties, including, without limitation, accounting services related to the preparation of audits required by the SEC, property condition reports, title services, title insurance, insurance brokerage or environmental services related to the preparation of environmental assessments in connection with a completed investment, the direct employee costs and burden to the Advisor of providing these services will be acquisition expenses for which we will reimburse the Advisor.  We also pay third parties, or reimburse the Advisor or its affiliates, for any investment-related expenses due to third parties in the case of a completed investment, including, but not limited to, legal fees and expenses, travel and communication expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance, premium expenses, and other closing costs.  In addition, acquisition expenses for which we will reimburse the Advisor, include any payments made to (i) a prospective seller of an asset, (ii) an agent of a prospective seller of an asset, or (iii) a party that has the right to control the sale of an asset intended for investment by us that are not refundable and that are not ultimately applied against the purchase price for such asset.  Except as described above with respect to services customarily or previously provided by third parties, the Advisor is responsible for paying all of the expenses it incurs associated with persons employed by the Advisor to the extent that they are dedicated to making investments for us, such as wages and benefits of the investment personnel.  The Advisor and its affiliates are also responsible for paying all of the investment-related expenses that we or the Advisor or its affiliates incur that are due to third parties or related to the additional services provided by the Advisor as described above with respect to investments we do not make, other than certain non-refundable payments made in connection with any acquisition.  For the nine months ended September 30, 2012 and 2011, we incurred acquisition expense reimbursements of less than $0.1 million and $0.1 million, respectively.

22

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We pay the Advisor or its affiliates a debt financing fee of 1% of the amount available under any loan or line of credit made available to us.  It is anticipated that the Advisor will pay some or all of these fees to third parties with whom it subcontracts to coordinate financing for us.  We incurred debt financing fees of $0.1 million and $0.2 million for the nine months ended September 30, 2012 and 2011, respectively.

We pay the Advisor or its affiliates a development fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project if such affiliate provides the development services and if a majority of our independent directors determines that such development fee is fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties.  We incurred no such fees for the nine months ended September 30, 2012 or 2011.

We pay our property manager and affiliate of the Advisor, Behringer Harvard Opportunity II Management Services, LLC (“BHO II Management”), or its affiliates, fees for the management, leasing, and construction supervision of our properties.  Property management fees are 4.5% of the gross revenues of the properties managed by BHO II Management or its affiliates, plus leasing commissions based upon the customary leasing commission applicable to the same geographic location of the respective property.  In the event that we contract directly with a third-party property manager in respect of a property, BHO II Management or its affiliates receives an oversight fee equal to 0.5% of the gross revenues of the property managed.  In no event will BHO II Management or its affiliates receive both a property management fee and an oversight fee with respect to any particular property.  In the event we own a property through a joint venture that does not pay BHO II Management directly for its services, we will pay BHO II Management a management fee or oversight fee, as applicable, based only on our economic interest in the property.  We incurred and expensed property management fees or oversight fees to BHO II Management of approximately $0.9 million and $0.2 million for the nine months ended September 30, 2012 and 2011, respectively.

We pay the Advisor or its affiliates a monthly asset management fee of one-twelfth of 1.0% of the sum of the higher of the cost or value of each asset.  For the nine months ended September 30, 2012 and 2011, we expensed $2.3 million and $2.1 million, respectively, of asset management fees.

We reimburse the Advisor or its affiliates for all expenses paid or incurred by the Advisor in connection with the services provided to us, subject to the limitation that we will not reimburse the Advisor for any amount by which our operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of:  (A) 2% of our average invested assets, or (B) 25% of our net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of our assets for that period.  Notwithstanding the above, we may reimburse the Advisor for expenses in excess of this limitation if a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the nine months ended September 30, 2012 and 2011, we incurred and expensed such costs for administrative services of $1.1 million and $0.8 million, respectively.

We are dependent on Behringer Securities, the Advisor, and BHO II Management for certain services that are essential to us, including 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 us with their respective services, we would be required to obtain such services from other sources.

On November 1, 2012, we, through a wholly-owned subsidiary of our operating partnership, entered into a lease agreement with Behringer Harvard Europe Real Estate GmbH, to lease approximately 380 rentable square meters at Holstenplatz.  The lease commenced on November 1, 2012 for a 14-month term with two options to extend the lease for an additional one-year terms.  The annualized rent is approximately $80,000.  Our management and board of directors determined that the lease was fair and reasonable to us and on terms and conditions that are no less favorable to us than can be obtained from unaffiliated third parties for comparable transactions or services in the same location.

23

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

15.Supplemental Cash Flow Information

Supplemental cash flow information is summarized below:

	Nine months ended September 30,
	2012		2011
Interest paid	$	7,400	$	6,266
Non-cash investing activities:
Capital expenditures for real estate in accounts payable	$	72	$	1,140
Capital expenditures for real estate in accrued liabilities	$	439	$	38
Receivable from sale of property in unconsolidated joint venture	$	—	$	7,108
Non-cash financing activities:
Common stock issued in distribution reinvestment plan	$	2,790	$	5,912
Accrued dividends payable	$	—	$	1,009
Offering costs payable to related parties	$	8	$	—
Offering costs receivable from related parties	$	—	$	2,238

16.Discontinued Operations and Real Estate Held for Sale

On December 22, 2011, we sold Archibald Business Center for a contract price of $15 million.  On January 5, 2012, we sold the Palms of Monterrey for a contract sales price of $39.3 million, and on October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center for a contract sales price of approximately $7.5 million, excluding transaction costs.  The proceeds from the sale were used to satisfy a portion of the existing indebtedness associated with the four buildings.  The building sold had been vacant since the initial date of acquisition.  On October 31, 2012, we sold Parrot’s Landing for a contract sales price of $56.3 million.

We have classified the results of operations for the properties discussed above into discontinued operations in the accompanying condensed consolidated statements of operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Rental revenue	$	1,691		$	2,988		$	5,118		$	8,991
Expenses
Property operating expenses	595			938			1,867			2,789
Interest expense	380			813			1,231			2,448
Real estate taxes	292			351			893			1,126
Property management fees	62			94			199			278
Asset management fees	17			21			51			65
Depreciation and amortization	384			836			1,146			3,239
Total expenses	1,730			3,053			5,387			9,945
Loss on early extinguishment of debt (1)	—			—			(1,236		)	—
Gain on sale of real estate property	—			—			9,264			—
Income (loss) from discontinued operations	$	(39	)	$	(65	)	$	7,759		$	(954	)

(1)Loss on early extinguishment of debt for the nine months ended September 30, 2012 was approximately $1.2 million and was comprised of the write-off of deferred financing fees and an early termination fee.

24

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The major classes of assets and liabilities associated with the real estate held for sale as of September 30, 2012 and December 31, 2011was as follows:

	September 30, 2012		December 31, 2011
Land and improvements, net	$	14,747	$	6,316
Building and improvements, net	27,745		22,294
Furniture, fixtures and equipment, net	478		810
Assets associated with real estate held for sale	$	42,970	$	29,420
Notes Payable	$	35,675	$	—
Accrued and other liabilities	205		37
Obligations associated with real estate held for sale	$	35,880	$	37

*****

25

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 our accompanying financial statements and the notes thereto.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These forward-looking statements include discussion and analysis of the financial condition of Behringer Harvard Opportunity REIT II, Inc. and our subsidiaries (which may be referred to herein as the “Company,” “we,” “us” or “our”), including our ability to rent space on favorable terms, to address our debt maturities and to fund our liquidity requirements, the value of our assets, our anticipated capital expenditures, the amount and timing of anticipated future cash distributions to our stockholders, the estimated per share value of our common stock and other matters.  Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.

These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy and other future conditions.  These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements.  Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described herein and under Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2012 and the factors described below:

·no trading market for our shares exists, and we can provide no assurance that one will ever develop;

·possible delays in locating suitable investments;

·our potential inability to invest in a diverse portfolio;

·investments in foreign properties are susceptible to currency exchange rate fluctuations, adverse political developments, and changes in foreign laws;

·adverse market and economic challenges experienced by the U.S. and global economies or real estate industry as a whole and the local economic conditions in the markets in which our properties are located;

·the availability of credit generally, and any failure to refinance or extend our debt as it comes due or a failure to satisfy the conditions and requirements of that debt;

·future increases in interest rates;

·our ability to raise capital in the future by issuing additional equity or debt securities, selling our assets or otherwise;

·payment of distributions from sources other than cash flows from operating activities;

·our obligation to pay substantial fees to our Advisor and its affiliates;

·our ability to retain our executive officers and other key personnel of our Advisor, our property manager and their affiliates;

·conflicts of interest arising out of our relationships with our Advisor and its affiliates;

·unfavorable changes in laws or regulations impacting our business or our assets; and

·factors that could affect our ability to qualify as a real estate investment trust.

Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Report, and may ultimately prove to be incorrect.  We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, except as required by applicable law.  We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.

26

Cautionary Note

The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Quarterly Report on Form 10-Q are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties.  Moreover, these representations, warranties or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.

Executive Overview

We were formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic basis.  In particular, we focus generally on acquiring commercial properties with significant possibilities for short-term capital appreciation, such as those requiring development, redevelopment or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who are distressed or face time-sensitive deadlines.  In addition, our opportunistic investment strategy may also include investments in loans secured by or related to real estate at more attractive rates of current return than have been available for some time.  Such loan investments may have capital gain characteristics, whether as a result of a discount purchase or related equity participations.  We may acquire a wide variety of commercial properties, including office, industrial, retail, hospitality, recreation and leisure, single-tenant, multifamily, and other real properties.  These properties may be existing, income-producing properties, newly constructed properties or properties under development or construction and may include multifamily properties purchased for conversion into condominiums or single-tenant properties that may be converted for multi-tenant use.  Further, we may invest in real estate-related securities, including securities issued by other real estate companies, either for investment or in change of control transactions completed on a negotiated basis or otherwise.  We also may originate or invest in collateralized mortgage-backed securities and mortgage, bridge or mezzanine loans, or in entities that make investments similar to the foregoing.  We expect to make our investments in or in respect of real estate assets located in the United States and other countries based on current market conditions.

On February 26, 2007, we filed an initial Registration Statement on Form S-11 with the SEC to offer up to 125,000,000 shares in the Initial Offering, of which 25,000,000 shares were being offered pursuant to DRP.  On July 3, 2011, the Initial Offering terminated in accordance with its terms.

Prior to termination of the Initial Offering, on September 13, 2010, we filed a second Registration Statement on Form S-11 with the SEC to register up to 75,000,000 shares of our common stock for sale to the public in the Follow-On Offering, of which 25,000,000 shares were offered pursuant to the DRP.  We terminated the primary portion of the Follow-On Offering on March 15, 2012 and the DRP component effective April 3, 2012.  We raised gross offering proceeds of approximately $265.3 million from the sale of approximately 26.7 million shares under the Offerings, including shares sold under the DRP.

Market Outlook

During the third quarter of 2012, the U.S. economy showed signs of stabilizing, but with growth coming at a slower pace as compared to prior economic recoveries.  GDP growth increased to 2% from 1.3% in the prior quarter, a pace that is too slow to dramatically improve the overall economy in the near term.  A major contributor to this slow growth was the European debt crisis and its effect on the global economy, as well as uncertainty by U.S. businesses as to the impact of the presidential election and the resolution of the so-called “fiscal cliff”.  Consequently, projections for global growth were reduced and U.S. exports were down for the third quarter of 2012.  However, domestically, many economic reports suggested that several sectors are in a recovery mode.  The U.S. economy added 171,000 new jobs in October 2012, which puts job creation for the year ahead of 2011’s pace.  The labor force participation rate, is a key metric that measures those working or looking for jobs, was also higher. American manufacturing and factory output were up 2.8% for the year to September 2012, beating consensus estimates.  Retail sales reported higher growth in August and September of 2012 than had been reported since 2010.  Housing, which is critical to a sustained recovery, is providing clearer evidence that it has moved off the bottom and rebounding with increased housing starts and sales and improved projections and confidence by homebuilders going forward.  All of these factors are leading to increased consumer sentiment and spending.  On a net basis, we believe the general consensus is the U.S. economy is currently able to overcome the negative global issues and is moving forward at a moderate, but uneven pace.  As an owner of office and industrial real estate properties, the majority of our income and cash flow is derived from rental revenue received pursuant to tenant leases for space at our properties.  Over the past several months there has been some improvement in fundamental benchmarks such as occupancy, rental rates and pricing.  Continued improvement in these fundamentals is dependent upon sustained economic growth.  Occupancy and rental rate stabilization will vary by market and property type.

A portion of our portfolio is currently invested in nine medical office buildings.  The demand for health care services, and consequently health care properties, is projected to increase in the near future.  The Centers for Medicare and

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Medicaid Services project that national health care expenditures will rise to $3.5 trillion in 2015, or 18.2% of gross domestic product.  The annual growth in national health expenditures for 2012 through 2021 is expected to be 5.7%, which would be 0.9% faster than the expected annual increase in GDP during this period.  While demographics are the primary driver of demand, economic conditions and availability of services contribute to health care service utilization rates.  We believe the health care property market may be less susceptible to fluctuations and economic downturns relative to other property sectors.

The total U.S. population is projected to increase by 20.4% through 2030.  The population aged 65 and over is projected to increase by 79.2% through 2030.  This population is an important component of health care utilization.  Most health care services are provided within a health care facility such as a hospital, a physician’s office or a senior housing facility.

Smith Travel Research indicates that the year-to-date national overall occupancy rate for hospitality properties in the United States increased to 67.1% and the national overall Average Daily Rate (“ADR”) increased to $107.34.  The hotel industry is expected to see continued modest growth in 2012.  If the economy continues to improve, we expect room rates for hotels to increase since increased demand for hotel rooms generally correlates with growth in the U.S. gross domestic product (GDP).  Compared to prior year, Courtyard Kauai at Coconut Beach Hotel has experienced double digit increase in occupancy rate and an approximately 6% increase in ADR.

Although an uneven U.S. economy may provide some resistance, primarily with respect to overall job growth, the favorable demand/supply fundamentals present in multifamily sector should still support reasonable growth.  On the demand side, the demographics for the targeted multifamily renter, the age group from 20 to 34 years old, are still positive in the sector.  This group is growing in size and while the other age segments have experienced employment declines, their aggregate employment has increased.  Further, while this age group in previous economic cycles experienced increasing single family home ownership, higher credit standards for single family mortgages and more reluctance to commit to home ownership are currently leading to more rental demand.  At the same time on the supply side, developments of new multifamily communities decreased substantially since 2008, such that supply has not been keeping up with demand.  We believe that this demand will lead to increased development activity; however, since high quality multifamily developments can take 18 to 36 months to entitle, permit and construct, we believe there is, even in the most aggressive outlook, a continued window of limited supply.  Accordingly, many analysts are still projecting continued multifamily rental growth, albeit at a slower pace.  However, multifamily performance is highly correlated with job and income growth.  While the factors noted above should position the multifamily sector to perform better in a slow growth environment, eventually the multifamily sector will need stronger employment and disposable consumer income to maintain rental growth.  As of September 30, 2012, a portion of our portfolio is invested in three multifamily properties including one classified as held for sale.

Current interest rates and the availability of multifamily financing are also favorable factors in the multifamily sector.  In the last 9 months, five and ten year treasury rates have declined approximately 25% and 13%, respectively, and as of September 30, 2012, are approximately 0.6% and 1.7%, respectively.  Competition for multifamily financing, particularly high quality, stabilized communities such as ours, has also added to the favorable financing environment.  In addition to government sponsored entities, insurance companies and commercial banks have been aggressive lenders in our sector.  While there is a risk that the European debt crisis, future legislative restrictions on Fannie Mae and Freddie Mac multifamily lending, or inflationary or capital pressures could eventually reverse these trends resulting in increased lending costs for multifamily, thus far this has not occurred.

Unlike traditional multifamily housing, all leases for student housing property typically commence and terminate on the same dates.  In the case of our typical student housing leases, this date coincides with the commencement of the fall academic term with the leases typically terminating at the completion of the last summer school session of the academic year.  As such, we must re-lease each property in its entirety each year, resulting in significant turnover in our tenant population from year to year.  As a result, we are highly dependent upon the effectiveness of our marketing and leasing efforts during the annual leasing season that typically begins in January and ends in August of each year.  Our properties’ occupancy rates are therefore typically relatively stable during the August to July academic year, but are susceptible to fluctuation at the commencement of each new academic year, which may be greater than the fluctuation in occupancy rates experienced by traditional multifamily properties.  A portion of our portfolio is currently invested in two student housing complexes.

Liquidity and Capital Resources

Our principal demands for funds will be for the (a) acquisition of real estate and real estate-related assets, (b) payment of operating expenses and (c) payment of interest on our outstanding indebtedness.  Generally, we expect to meet cash needs for the payment of operating expenses and interest on our outstanding indebtedness from our cash flow from operations.  To the extent that our cash flow from operations is not sufficient to cover our operating expenses, interest on our

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outstanding indebtedness, redemptions or distributions, we expect to use any proceeds not invested from the Offerings, borrowings and asset sales to fund such needs.

We continually evaluate our liquidity and ability to fund future operations and debt obligations.  As part of those analyses, we consider lease expirations and other factors.  Leases at our consolidated office and industrial properties representing 23% of our annualized base rent will expire by the end of 2013.  As a normal course of business, we are pursuing renewals, extensions and new leases.  If we are unable to renew or extend the expiring leases under similar terms or are unable to negotiate new leases, it would negatively impact our liquidity and adversely affect our ability to fund our ongoing operations.

We expect to fund our short-term liquidity requirements by using cash on hand, cash flow from the operations of investments we acquire and asset sales.  Operating cash flows are expected to increase as additional real estate assets are added to the portfolio and our existing portfolio stabilizes.  Although we intend to diversify our real estate portfolio, to the extent our portfolio is concentrated in certain geographic regions, types of assets, industries or business sectors, downturns relating generally to such regions, assets, industry or business sectors may result in tenants defaulting on their lease obligations at a number of our properties within a short time period.  Such defaults could negatively affect our liquidity and adversely affect our ability to fund our ongoing operations.

For both our short-term and long-term liquidity requirements, other potential future sources of capital may include proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of our investments, if and when any are sold, and undistributed funds from operations or cash flow.  If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.

We may, but are not required to, establish capital reserves from net offering proceeds, cash flow generated by operating properties and other investments, or net sale proceeds from the sale of our properties and other investments.  Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures.  Alternatively, a lender may establish its own criteria for escrow of capital reserves.

We intend to borrow money to acquire properties and make other investments.  There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment.  Under our charter, the maximum amount of our indebtedness is limited to 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors.  In addition to our charter limitation, our board of directors has adopted a policy to generally limit our aggregate borrowings to approximately 75% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests.  Our policy limitation, however, does not apply to individual real estate assets. We terminated the primary portion of the Follow-On Offering effective March 15, 2012 and the DRP component effective April 3, 2012.

The debt markets have experienced pervasive and fundamental disruptions.  Should the overall cost of borrowings increase, either by increases in the index rates or by increases in lender spreads, we will need to factor such increases into the economics of our acquisitions, developments and investments.  This may result in our investment operations generating lower overall economic returns and a reduced level of cash flow, which could potentially impact our ability to make distributions to our stockholders.  In addition, the dislocations in the debt markets have reduced the amount of capital that is available to finance real estate, which in turn: (a) leads to a decline in real estate values generally; (b) slows real estate transaction activity; (c) reduces the loan to value ratio upon which lenders are willing to extend debt; and (d) results in difficulty in refinancing debt as it becomes due, all of which may reasonably be expected to have a material adverse impact on the value of real estate investments and the revenues, income or cash flow from the operations of real properties and mortgage loans. In addition, the current state of the debt markets has negatively impacted our ability to raise equity capital.

Debt Financings

We may, from time to time, obtain mortgage, bridge or mezzanine loans for acquisitions and investments, as well as property development.  We may obtain financing at the time an asset is acquired or an investment is made or at such later time as determined to be necessary, depending on multiple factors.

At September 30, 2012, our notes payable balance was $217.3 million, including the loans secured by Parrot’s Landing and one of the four industrial buildings at Interchange Business Center classified as obligations associated with real estate held for sale.  We have unconditionally guaranteed payment of the note payable related to 1875 Lawrence which has a maturity date of December 31, 2012 for an amount not to exceed the lesser of (i) $11.75 million and (ii) 50% of the total amount advanced under the loan agreement if the aggregate amount advanced is less than $23.5 million.  We currently plan on refinancing the note payable or exercising the one year extension option pursuant to the terms under the loan agreement.  We have guaranteed payment of certain recourse liabilities with respect to certain customary nonrecourse carveouts as set forth in the

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guaranties in favor of the unaffiliated lenders with respect to the notes payable related to the Courtyard Kauai at Coconut Beach Hotel.  For the nine months ended September 30, 2012, we sold one asset to an unaffiliated third party and used a portion of the proceeds from the sale to fully satisfy the existing indebtedness of $19.7 million associated with the property.  Furthermore, we made a principal payment of $5.9 million on the loan related to 1875 Lawrence.  During October 2012, we sold one asset and one of the four industrial buildings at Interchange Business Center to an unaffiliated third party and used the proceeds from the sale to satisfy the existing indebtedness of $35.7 million (classified as obligations associated with real estate held for sale). See footnote 16, Discontinued Operations and Real Estate Held for Sale for further details.

Our loan agreements stipulate that we comply with certain reporting and financial covenants.  These covenants include, among other things, maintaining minimum debt service coverage ratios and liquidity.  As of September 30, 2012, we believe we were in compliance with the debt covenants under our loan agreements.

One of our principal long-term liquidity requirements includes the repayment of maturing debt.  The following table provides information with respect to the maturities and scheduled principal repayments of our indebtedness excluding obligations associated with real estate held for sale as of September 30, 2012.  The table does not represent any extension options ($ in thousands).

	Payments Due by Period
	October 1, 2012 - December 31, 2012		2013		2014		2015		2016		Thereafter		Total
Principal payments - variable rate debt	$	15,055	$	9,883	$	—	$	38,000	$	—	$	—	$	62,938
Principal payments - fixed rate debt	656		1,987		2,585		17,953		18,677		76,797		118,655
Interest payments - variable rate debt (based on rates in effect as of September 30, 2012)	615		1,223		448		422		—		—		2,708
Interest payments - fixed rate debt	1,380		5,431		5,351		5,011		3,914		7,339		28,426
Operating leases(1)	73		293		293		301		301		21,528		22,789
Total (2)	$	17,779	$	18,817	$	8,677	$	61,687	$	22,892	$	105,664	$	235,516

(1)Our operating leases consist of ground leases on each of eight buildings acquired in connection with the purchase of the Original Florida MOB Portfolio.  Each ground lease is for a term of 50 years, with a 25-year extension option.  The annual payment for each ground lease increases by 10% every five years.

(2)Does not include the loans secured by Parrot’s Landing and one of the four industrial buildings at Interchange Business Center which are classified as obligations associated with real estate held for sale on our consolidated balance sheet totaling $35.7 million.

Results of Operations

Three months ended September 30, 2012 as compared to the three months ended September 30, 2011.

Continuing Operations

As of September 30, 2012, we had 11 real estate investments, ten of which were consolidated in our continuing operations.  As of September 30, 2011, we had ten real estate and real estate-related investments, seven of which were consolidated in our continuing operations.

Our results of operations for the respective periods presented reflect increases in most categories due to the growth of our portfolio in each period presented.  Management expects increases in most categories in the future as we purchase additional real estate and real estate-related assets and as we begin to realize the full year impact of our acquisitions.

Revenues.  Revenues for the three months ended September 30, 2012 were $11.5 million, an increase of $2.8 million from the three months ended September 30, 2011.  The change in revenue is primarily due to:

·an increase in rental revenue of $2.1 million due to the acquisition of three consolidated properties; and

·an increase of hotel revenue of $1.2 million at the Courtyard Kauai at Coconut Beach Hotel due to completion of the planned renovation.

For the three months ended September 30, 2011, we earned $0.4 million of interest income from our real estate loan receivable related to the PAL Loan.  The debtor associated with the PAL real estate loan receivable exercised its option to prepay the entire balance of the loan on August 15, 2011.

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Property Operating Expenses.  Property operating expenses for the three months ended September 30, 2012 were $5.8 million and were comprised of operating expenses for the 10 properties we consolidated.  Property operating expenses for the three months ended September 30, 2011 were $4.5 million and were comprised of operating expenses for the seven properties we consolidated.  This increase is principally a result of acquisitions during 2012 and the fourth quarter of 2011 and increased activity related to Courtyard Kauai at Coconut Beach Hotel.

Interest Expense.  Interest expense for the three months ended September 30, 2012 was $2.3 million as compared to $1.7 million for the three months ended September 30, 2011.

Real Estate Taxes.  Real estate taxes for the three months ended September 30, 2012 were $1.2 million related to our consolidated properties.  Real estate taxes for the three months ended September 30, 2011 were $0.9 million.

Property Management Fees.  Property management fees related to our consolidated properties for the three months ended September 30, 2012 were $0.4 million.  Property management fees for the three months ended September 30, 2011 were $0.2 million.

Asset Management Fees.   Asset management fees for the three months ended September 30, 2012 were $0.8 million and consisted of asset management fees related to our ten consolidated properties.  Asset management fees for the three months ended September 30, 2011 were $0.8 million and consisted of asset management fees related to our seven properties we consolidated in 2011.

General and Administrative Expenses.  General and administrative expenses for the three months ended September 30, 2012 were $0.9 million, as compared to $0.6 million for the three months ended September 30, 2011, and were comprised of auditing fees, legal fees, board of directors’ fees, and other administrative expenses.  We expect general and administrative expense to increase as a result of certain costs now expensed as a result of the termination of the Offerings.

Depreciation and Amortization Expense.  Depreciation and amortization expense for the three months ended September 30, 2012 was $3.5 million and was comprised of depreciation and amortization expense related to our ten consolidated properties.  Depreciation and amortization expense for the three months ended September 30, 2011 was $3.1 million and was comprised of depreciation and amortization related to our seven consolidated properties.

Nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011.

Continuing Operations

As of September 30, 2012, we had 11 real estate investments, ten of which were consolidated in our continuing operations.  As of September 30, 2011, we had ten real estate and real estate-related investments, seven of which were consolidated in our continuing operations.

Our results of operations for the respective periods presented reflect increases in most categories due to the growth of our portfolio in each period presented.  Management expects increases in most categories in the future as we purchase additional real estate and real estate-related assets and as we begin to realize the full year impact of our acquisitions.

Revenues.  Revenues for the nine months ended September 30, 2012 were $33 million, an increase of $8.1 million from the nine months ended September 30, 2011.  The change in revenue is primarily due to:

·an increase in rental revenue of $7.9 million due to the acquisition of four consolidated properties; and

·an increase of hotel revenue of $3.1 million at the Courtyard Kauai at Coconut Beach Hotel due to completion of the planned renovation.

For the nine months ended September 30, 2011, we earned interest income from our real estate loan receivable of $2.9 million, all of which was related to the PAL Loan.

Property Operating Expenses.  Property operating expenses for the nine months ended September 30, 2012 were $16.7 million and were comprised of operating expenses for the ten properties we consolidated.  Property operating expenses for the nine months ended September 30, 2011 were $12.2 million and were comprised of operating expenses for the seven properties we consolidated.  This increase is principally a result of acquisitions during 2012 and the fourth quarter of 2011 and increased activity related to Courtyard Kauai at Coconut Beach Hotel.

Interest Expense.  Interest expense for the nine months ended September 30, 2012 was $6.9 million as compared to $4.8 million for the nine months ended September 30, 2011.

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Real Estate Taxes.  Real estate taxes for the nine months ended September 30, 2012 were $3.5 million related to our consolidated properties.  Real estate taxes for the nine months ended September 30, 2011 were $2.6 million.

Property Management Fees.  Property management fees related to our consolidated properties for the nine months ended September 30, 2012 were $1.2 million.  Property management fees for the nine months ended September 30, 2011 were $0.8 million.

Asset Management Fees.   Asset management fees for the nine months ended September 30, 2012 were $2.4 million and consisted of asset management fees related to our ten consolidated properties.  Asset management fees for the nine months ended September 30, 2011 were $2.1 million and consisted of asset management fees related to our seven properties we consolidated in 2011.

General and Administrative Expenses.  General and administrative expenses for the nine months ended September 30, 2012 were $2.2 million, as compared to $1.7 million for the nine months ended September 30, 2011, and were comprised of auditing fees, legal fees, board of directors’ fees and other administrative expenses.  We expect general and administrative expense to increase as a result of certain costs capitalized during the Offerings that will now be expensed as a result of its termination.

Depreciation and Amortization Expense.  Depreciation and amortization expense for the nine months ended September 30, 2012 was $11.2 million and was comprised of depreciation and amortization expense related to our ten consolidated properties.  Depreciation and amortization expense for the nine months ended September 30, 2011 was $8.6 million and was comprised of depreciation and amortization related to our seven consolidated properties.

See Note 16 to Condensed Consolidated Financial Statements for further information regarding discontinued operations.

Cash Flow Analysis

Cash provided by operating activities for the nine months ended September 30, 2012 was $4 million and was primarily comprised of the net loss of $4 million, adjusted for depreciation and amortization, including amortization of deferred financing fees of $13.1 million, cash used for working capital and other operating activities of approximately $4.2 million and offset by a gain on sale of the Palms of Monterrey of $9.3 million.  Cash provided by operating activities for the nine months ended September 30, 2011 was $4.7 million and was comprised of the net loss of $6.9 million, adjusted for depreciation and amortization, including amortization of deferred financing fees of $12.5 million and cash provided by working capital and other operating activities of approximately $1.8 million, offset by equity in (gains) / losses of unconsolidated joint ventures of $2.7 million.

Cash provided by investing activities for the nine months ended September 30, 2012 was $15.6 million, and was comprised of net proceeds from sale of the Palms of Monterrey of $38.7 million, offset by purchase of real estate of $11 million, additions of property and equipment of $11.7 million and an increase in restricted cash of approximately $0.4 million.  Cash used in investing activities for the nine months ended September 30, 2011 was $16.5 million, and was comprised of purchases of real estate of $37.4 million, cash used for additions of property and equipment of approximately $9 million, offset by repayment of notes receivable of $25 million and a decrease in restricted cash of $4.9 million.

Cash used in financing activities for the nine months ended September 30, 2012 was $38.9 million, and was comprised of payments to notes payable, net of proceeds and financing costs, of $23.4 million, cash distributions to our stockholders of $14.5 million, net distributions to non-controlling interest holders of $5.6 million, redemptions of common stock of $1 million, offset by the issuance of common stock, net of offering costs, of $5.6 million.  Cash provided by financing activities for the nine months ended September 30, 2011 was $43.7 million, and was comprised of proceeds from notes payable, net of payments and financing costs, of $28.7 million, the issuance of common stock, net of offering costs, of $16.3 million offset by net contributions from non-controlling interest holders of $3.2 million, redemptions of common stock of $1.6 million and cash distributions to our shareholders of $2.9 million.

Funds from Operations

Funds from operations (“FFO”) is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance.  We use FFO as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) in the April 2002 “White Paper of Funds From Operations” which is net income (loss), computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property and impairments of depreciable real estate (including impairments of investments in unconsolidated joint ventures and partnerships which resulted from measurable decreases in the fair value of the depreciable real estate held by the joint venture or partnership), plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures, subsidiaries, and noncontrolling interests as one measure to evaluate our operating performance.  In October 2011, NAREIT clarified the FFO definition to exclude impairment charges of depreciable real estate (including impairments of investments

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in unconsolidated joint ventures and partnerships which resulted from measurable decreases in the fair value of the depreciable real estate held by the joint venture or partnership).  We have calculated FFO for all periods presented in accordance with this clarification.

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time.  Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient.  As a result, our management believes that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance.

We believe that FFO is helpful to investors and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, impairments of depreciable assets, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which is not immediately apparent from net income.

FFO should not be considered as an alternative to net income (loss), as an indication of our liquidity, nor as an indication of funds available to fund our cash needs, including our ability to make distributions and should be reviewed in connection with other GAAP measurements.  Additionally, the exclusion of impairments limits the usefulness of FFO as a historical operating performance measure since an impairment charge indicates that operating performance has been permanently affected.  FFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO.  Our FFO as presented may not be comparable to amounts calculated by other REITs that do not define these terms in accordance with the current NAREIT definition or that interpret the definition differently.

Our calculation of FFO for the three and nine months ended September 30, 2012 and 2011 is presented below ($ in thousands except per share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income (loss) attributable to the Company	$	(3,101	)	$	696		$	(3,768	)	$	(5,542	)
Adjustments for:
Real estate depreciation and amortization(1)	3,461			3,515			10,933			10,624
Gain on sale of real estate(2)	—			(3,261		)	(8,338		)	(3,261		)
Funds from operations (FFO)	$	360		$	950		$	(1,173	)	$	1,821
GAAP weighted average shares:
Basic and diluted	26,069			24,508			25,962			23,739
FFO per share	$	0.01		$	0.04		$	(0.05	)	$	0.08
Net income (loss) per share	$	(0.12	)	$	0.03		$	(0.15	)	$	(0.23	)

(1) Real estate depreciation and amortization includes our consolidated depreciation and amortization expense, as well as our pro rata share of those unconsolidated investments which we account for under the equity method of accounting and the noncontrolling interest adjustment for the third-party partners’ share of the real estate depreciation and amortization.  Reflects the real estate depreciation and amortization of continuing operations, as well as discontinued operations.

(2) For the three and nine months ended September 30, 2011, the $3.3 million represents our portion of the gain on the sale of an investment in an unconsolidated joint venture which is included in equity in earnings of unconsolidated joint ventures.

Provided below is additional information related to selected items included in net gain (loss) above, which may be helpful in assessing our operating results.

·Straight-line rental revenue of $0.1 million and $0.2 million was recognized for the three and nine months ended September 30, 2012, respectively.  Straight-line rental revenue of $0.2 million and $0.3 million was recognized for the three and nine months ended September 30, 2011, respectively.  The noncontrolling interest portion of straight-line rental revenue for each of the three and nine months ended September 30, 2012 was less than $0.1 million.  The noncontrolling interest portion of straight-line rental revenue for each of the three and nine months ended September 30, 2011 was less than $0.1 million.

·Net above/below market lease amortization of less than $0.1 million and $0.1 million was recognized as an increase to rental revenue for the three and nine months ended September 30, 2012, respectively.  Net above/below market lease amortization of less than $0.1 million and $0.3 million was recognized as an increase to rental revenue for the three and nine months ended September 30, 2011 respectively.  The noncontrolling interest portion of net above/below market lease amortization for the three and nine months ended September 30, 2012 was less than $0.1 million.  The noncontrolling interest portion of net

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above/below market lease amortization for the three and nine months ended September 30, 2011 was less than $0.1 million.

·Amortization of deferred financing costs of $0.3 million and $0.8 million was recognized as interest expense for our notes payable for the three and nine months ended September 30, 2012, respectively.  Amortization of deferred financing costs of $0.3 million and $0.8 million was recognized as interest expense for our notes payable for the three and nine months ended September 30, 2011.

In addition, cash flows generated from FFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO, such as capital expenditures and payments of principal on debt, each of which may impact the amount of cash available for distribution to our stockholders.

Distributions

Distributions are authorized at the discretion of our board of directors based on its analysis of our performance over the previous periods and expectations of performance for future periods.  These analyses may include actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for our portfolio, capital expenditure needs, general financial and market conditions and other factors that our board deems relevant.  The board’s decision will be substantially influenced by its obligation to ensure that we maintain our status as a REIT.  In light of the continued uncertainty in the global financial and real estate markets, we cannot provide assurance that we will be able to achieve expected cash flows necessary to pay distributions at any particular level, or at all.

On March 20, 2012, our board of directors declared a special distribution of $0.50 per share of common stock payable to our stockholders of record as of April 3, 2012 and determined to cease regular, monthly distributions in favor of payment of periodic distributions from excess proceeds from asset dispositions or from other sources as necessary to maintain our REIT tax status.  The payment date for the special distribution was on May 10, 2012.

Until our investments are generating sufficient operating cash flow to fully fund the payment of distributions to our stockholders, we have paid and may in the future pay some or all of our distributions from sources other than operating cash flow.  We have, for example, generated cash to pay distributions from financing activities, components of which include proceeds from the Offerings and borrowings (including borrowings secured by our assets) in anticipation of future operating cash flow.  We have also utilized cash from refinancing and dispositions, the components of which may represent a return of capital and/or the gains on sale.  In addition, from time to time, our Advisor may agree to waive or defer all or a portion of the acquisition, asset management or other fees or incentives due to it, pay general administrative expenses or otherwise supplement investor returns in order to increase the amount of cash that we have available to pay distributions to our stockholders.

The following summarizes certain information related to the sources of recent distributions ($ in thousands):

	September 30,
	2012		2011
Total Distributions Paid (1)	$	17,326	$	8,811
Principal Sources of Funding:
Distribution Reinvestment Plan	$	2,790	$	5,912
Cash flow provided by (used in) operating activities	$	4,044	$	4,711
Cash available at the beginning of the period (2)	$	80,130	$	49,375

(1)Nine months ending September 30, 2012, includes special cash distribution of $13 million.

(2)Represents the cash available at the beginning of the reporting period primarily attributable to excess funds raised from the issuance of common stock and borrowings, after the impact of historical operating activities, other investing and financing activities.

We paid no distributions to stockholders during the three months ended September 30, 2012.  Total distributions paid to stockholders during the nine months ended September 30, 2012 were $17.3 million and consisted of the special cash distribution of $13 million and the regular distribution of $4.3 million.  A portion of the $4.3 million regular distributions to stockholders was funded from cash flow provided by operations.  Total distributions of $8.8 million were paid to stockholders during the nine months ended September 30, 2011.  Distributions funded through the issuance of shares under the DRP during the nine months ended September 30, 2011 were $5.9 million.  Accordingly, cash amounts distributed to stockholders during the nine months ended September 30, 2011 were $2.9 million and were funded from cash provided by operations.  Future distributions declared and paid may exceed cash flow from operating activities or fund from operations until such time as we invest in additional real estate or real estate-related assets at favorable yields and our investments reach stabilization.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP.  The preparation of these financial statements requires our 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, we evaluate 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.

Below is a discussion of the accounting policies that we consider to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Principles of Consolidation and Basis of Presentation

Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control.  All inter-company transactions, balances, and profits have been eliminated in consolidation.  Interests in entities acquired will be evaluated based on applicable GAAP, which includes the requirement to consolidate entities deemed to be variable interest entities (“VIE”) in which we are the primary beneficiary.  If the interest in the entity is determined not to be a VIE, then the entity will be evaluated for consolidation based on legal form, economic substance, and the extent to which we have control and/or substantive participating rights under the respective ownership agreement.

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary.  The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity.  Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses.  A change in the judgments, assumptions and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

Real Estate

Upon the acquisition of real estate properties, we recognize the assets acquired, the liabilities assumed, and any noncontrolling interest as of the acquisition date, measured at their fair values.  The acquisition date is the date on which we obtain control of the real estate property.  The assets acquired and liabilities assumed may consist of land, inclusive of associated rights, buildings, assumed debt, identified intangible assets and liabilities and asset retirement obligations.  Identified intangible assets generally consist of above-market leases, in-place leases, in-place tenant improvements, in place leasing commissions and tenant relationships.  Identified intangible liabilities generally consist of below market leases.  Goodwill is recognized as of the acquisition date and measured as the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree over the fair value of the identifiable net assets acquired.  Likewise, a bargain purchase gain is recognized in current earnings when the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree is less than the fair value of the identifiable net assets acquired.  Acquisition-related costs are expensed in the period incurred.  Initial valuations are subject to change until our information is finalized, which is no later than twelve months from the acquisition date.

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 fair value of these assets using discounted cash flow analyses or similar methods believed to be used by market participants.  The value of buildings is depreciated over the estimated useful life of 25 years using the straight-line method.

We determine the fair value of assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that management believes we could obtain at the date of the debt assumption.  Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan using the effective interest method.

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We determine the value of above-market and below-market 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 (1) the contractual amounts to be paid pursuant to the in-place leases and (2) management’s estimate of current market lease rates for the corresponding in-place leases, measured over a period equal to (a) the remaining non-cancelable lease term for above-market leases, or (b) the remaining non-cancelable lease term plus any below-market fixed rate renewal options that, based on a qualitative assessment of several factors, including the financial condition of the lessee, the business conditions in the industry in which the lessee operates, the economic conditions in the area in which the property is located, and the ability of the lessee to sublease the property during the renewal term, are reasonably assured to be exercised by the lessee for below-market leases.  We record the fair value of above-market and below-market leases as intangible assets or intangible liabilities, respectively, and amortize them as an adjustment to rental income over the determined lease term.

The total value of identified real estate intangible assets acquired is further allocated to in-place leases, in place tenant improvements, in place leasing commissions and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant.  The aggregate value for tenant improvements and leasing commissions is 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 include 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, we include 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 the fair value of tenant relationships also include costs to execute similar leases, including leasing commissions, legal fees and tenant improvements, as well as an estimate of the likelihood of renewal as determined by management on a tenant-by-tenant basis.

We amortize the value of in-place leases, in place tenant improvements and in place leasing commissions to expense over the initial term of the respective leases.  The tenant relationship values are amortized to expense over the initial term and any anticipated renewal periods, but in no event does the amortization period for intangible assets or liabilities exceed the remaining depreciable life of the building.  Should a tenant terminate its lease, the unamortized portion of the acquired lease intangibles related to that tenant would be charged to expense.

Investment Impairments

For all of our real estate and real estate related investments, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable.  Examples of the types of events and circumstances that would cause management to assess our assets for potential impairment include, but are not limited to: a significant decrease in the market price of an asset; a significant adverse change in the manner in which the asset is being used; an accumulation of costs in excess of the acquisition basis plus construction of the property; major vacancies and the resulting loss of revenues; natural disasters; a change in the projected holding period; legitimate purchase offers and changes in the global and local markets or economic conditions.  Our assets may at times be concentrated in limited geographic locations and, to the extent that our portfolio is concentrated in limited geographic locations, downturns specifically related to such regions may result in tenants defaulting on their lease obligations at a portion of our properties within a short time period, which may result in asset impairments.  When such events or changes in circumstances are present, we assess 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, we recognize an impairment loss to adjust the carrying amount of the asset to estimated fair value.  We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist.  While we believe our estimates of future cash flows are reasonable, different assumptions regarding factors such as market rents, economic conditions, and occupancy rates could significantly affect these estimates.

In evaluating our investments for impairment, management may use appraisals and make estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during our ownership, and the projected sales price of each of the properties.  A future change in these estimates and assumptions could result in understating or overstating the carrying value of our investments, which could be material to our financial statements.

We believe the carrying value of our operating real estate is currently recoverable.  Accordingly, there were no impairment charges for the three or nine months ended September 30, 2012 or 2011.  However, if market conditions worsen beyond our current expectations, or if changes in our strategy significantly affect any key assumptions used in our fair value calculations, we may need to take charges in future periods for impairments related to our existing investments.  Any such non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

As of September 30, 2012, we maintained approximately $2.1 million in Euro-denominated accounts at European financial institutions.  We currently have two investments in Europe, and as such, we believe that we are not materially exposed to any significant foreign currency fluctuations related to these accounts as we do not usually maintain large balances in European financial institutions unless such funds are required for capital needs.

Interest Rate Risk

We may be exposed to interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other permitted investments.  Our management’s objectives, with regard to interest rate risks, are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs.  To achieve these objectives, we will borrow primarily at fixed rates or variable rates with the lowest margins available and in some cases, with the ability to convert variable rates to fixed rates.  With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.  We may enter into derivative financial instruments such as options, forwards, interest rate swaps, caps, or floors to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate portion of our variable rate debt.  Of our $217.3 million in notes payable, including the loans classified as obligations associated with real estate held for sale at September 30, 2012 secured by Parrot’s Landing and one of the four industrial buildings at Interchange Business Center, $62.9 million represented debt subject to variable interest rates, of which $24.9 million is subject to minimum interest rates.  If our variable interest rates increased 100 basis points, we estimate that total annual interest cost, including interest expensed and interest capitalized, would increase by $0.4 million.

Interest rate caps classified as assets were reported at their combined fair value of less than $0.1 million within prepaid expenses and other assets at September 30, 2012.  A 100 basis point decrease in interest rates would result in a less than $0.1 million net decrease in the fair value of our interest rate caps.  A 100 basis point increase in interest rates would result in a $0.1 million net increase in the fair value of our interest rate caps.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of September 30, 2012, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e).  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of September 30, 2012, to provide reasonable assurance that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There has been no change in internal control over financial reporting that occurred during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.Legal Proceedings.

We are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A.Risk Factors.

There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

During the period covered by this quarterly report, we did not sell any equity securities that were not registered under the Securities Act of 1933.

Share Redemption Program

Our board of directors has adopted a share redemption program that permits stockholders to sell their shares back to us after they have held them for at least one year, subject to the significant conditions and limitations of the program.  Our board of directors can amend the provisions of our share redemption program without the approval of our stockholders.

The terms on which we redeem shares may differ between redemptions upon a stockholder’s death, “qualifying disability” (as defined in the share redemption program) or confinement to a long-term care facility (collectively, “Exceptional Redemptions”) and all other redemptions (“Ordinary Redemptions”).  Our board of directors determined to suspend until further notice accepting Ordinary Redemptions effective April 1, 2012.  Under our share redemption program in effect for the three months ended September 30, 2012, the purchase price for shares redeemed pursuant to an Exceptional Redemption request is set forth below.

In the case of Exceptional Redemptions, prior to the first valuation conducted by the board of directors, or a committee thereof (the “Initial Board Valuation”), the purchase price per share for the redeemed shares will equal 90% of the difference of (a) average price per share the original purchaser or purchasers of shares paid to us for all of his or her shares (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock) (the “Original Share Price”) less (b) the aggregate distributions per share of any net sale proceeds from the sale of one or more of our assets, or other special distributions so designated by the board of directors (the “Special Distributions”), distributed to stockholders prior to the redemption date and declared from the date of first issue of such redeemed Shares.

On or after the Initial Board Valuation, the purchase price per share for the redeemed shares will equal the lesser of 90% of:

·the current estimated value per share (the “Valuation”) as determined in accordance with the Valuation Policy; and

·the Original Share Price less any Special Distributions distributed to stockholders prior to the redemption date and declared from the date of first issue of such redeemed Shares.

Notwithstanding the redemption prices set forth above, our board of directors may determine, whether pursuant to formulas or processes approved or set by our board of directors, the redemption price of the shares, which may differ between Ordinary Redemptions and Exceptional Redemptions; provided, however, that we must provide at least 30 days’ notice to stockholders before applying this new price determined by our board of directors.

Any shares approved for redemption will be redeemed on a periodic basis as determined from time to time by our board of directors, and no less frequently than annually.  We will not redeem, during any twelve-month period, more than 5% of the weighted average number of shares outstanding during the twelve-month period immediately prior to the date of redemption.  For periods beginning on or after April 1, 2012, the cash available for redemption in any quarterly period will generally be limited to no more than $250,000, and in no event more than $1,000,000 in any twelve-month period.  The redemption limitations apply to all redemptions, whether Ordinary or Exceptional Redemptions.

During the three months ended September 30, 2012 our board of directors redeemed all six Exceptional redemption requests received that complied with the applicable requirements and guidelines of the share redemption program for an aggregate of 8,873 shares redeemed for $0.1 million (approximately $8.55 per share).  We have funded all share redemptions with proceeds from the Offerings.

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We have not presented information regarding submitted and unfulfilled Ordinary Redemption requests for the three months ended September 30, 2012 as our board of directors suspended Ordinary Redemptions effective April 1, 2012 and we believe many stockholders who may otherwise desire to have their shares redeemed have not submitted a request due to the suspension of Ordinary Redemptions.

Any Ordinary Redemption requests submitted while Ordinary Redemptions are suspended will be returned to investors and must be resubmitted upon resumption of Ordinary Redemptions. If Ordinary Redemptions are resumed, we will give all stockholders notice that we are resuming Ordinary Redemptions, so that all stockholders will have an equal opportunity to submit shares for redemption.  Upon resumption of Ordinary Redemptions, any redemption requests will be honored pro rata among all requests received based on funds available. Requests will not be honored on a first come, first served basis.

During the quarter ended September 30, 2012, we redeemed shares as follows:

2012	Total Number of Shares Redeemed	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Be Purchased Under the Plans or Programs
July	—	$	—	—
August	8,873	$	8.55	8,873		(1)
September	—	$	—	—
	8,873	$	8.55	8,873		(1)

(1) A description of the maximum number of shares that may be purchased under our redemption program is included in the narrative preceding this table.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosure.

None.

Item 5.Other Information.

Annual Meeting

On November 7, 2012, we held our annual meeting of stockholders.  A total of 14,392,256 shares of our common stock outstanding and entitled to vote were represented at the meeting in person or by proxy, representing approximately 55.2% of the total number of shares entitled to vote at the meeting.

At the annual meeting, our stockholders elected the six nominees listed below to serve on our board of directors until the next annual meeting of stockholders, and each will continue in office until his or her successor has been elected and qualified or until his or her earlier death, resignation, or retirement.  The votes cast with respect to each director were as follows:

Nominee	For	Withheld
Robert M. Behringer	13,748,337	643,918
Robert S. Aisner	13,758,433	633,822
Andreas K. Bremer	13,772,659	619,596
Diane S. Detering-Paddison	13,776,641	615,614
Cynthia Pharr Lee	13,780,795	611,460
Jeffrey P. Mayer	13,778,813	613,442

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In addition, at the annual meeting, the stockholders approved an amendment and restatement of our charter.  The proposal to amend and restate the charter is described in detail in the proxy statement related to the annual meeting of stockholders.  The votes cast with respect to the amendment and restatement of the charter were as follows:

For	Against	Abstain
13,243,841	516,644	631,770

We have filed the Third Articles of Amendment and Restatement with the State Department of Assessment and Taxation of the State of Maryland (the “SDAT”), and they were effective immediately upon filing on November 7, 2012.

Finally, at the annual meeting, our stockholders approved a proposal to permit the board of directors to adjourn the meeting, if necessary, to solicit additional proxies in favor of the first two proposals if there were not sufficient votes for the proposals.

Bylaw Amendment

In connection with the stockholder approval of our amended and restated charter, our board of directors approved an amendment and restatement of our bylaws to reduce the quorum required for stockholder meetings.  As amended, our bylaws provide that a quorum is 40% of all the votes entitled to be cast at a stockholder meeting instead of the 50% previously provided.  As approved by our board of directors, our amended and restated bylaws became effective immediately upon the filing of our Third Articles of Amendment and Restatement with the SDAT on November 7, 2012.

Item 6.Exhibits.

The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.

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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 OPPORTUNITY REIT II, INC.
Dated: November 14, 2012	By:	/s/ Andrew J. Bruce
		Andrew J. Bruce
		Chief Financial Officer
		Principal Financial Officer

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Index to Exhibits

Exhibit Number	Description
3.1*	Third Articles of Amendment and Restatement
3.2*	Second Amended and Restated Bylaws
4.2	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Exhibit 4.5 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11, Commission File No. 333-140887
10.1*	Real Estate Purchase and Sale Agreement between Dedicated (Parrots Landing) LP, as buyer, and 7900 Hampton Blvd, LLC as seller, dated August 24, 2012.
10.2*	First Amendment to Real Estate Purchase and Sale Agreement between Dedicated (Parrots Landing) LP, as buyer, and 7900 Hampton Blvd, LLC as seller, dated August 24, 2012.
31.1*	Rule 13a-14(a)/15d-14(a) Certification
31.2*	Rule 13a-14(a)/15d-14(a) Certification
32.1*	Section 1350 Certification**
32.2*	Section 1350 Certification**
99.1	Second Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 4.4 to Form 10-K filed on March 28, 2012)
101**	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed on November 14, 2012, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

* Filed herewith

** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section.  Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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EX-3.1

Exhibit 3.1

THIRD ARTICLES OF AMENDMENT AND RESTATEMENT

OF

BEHRINGER HARVARD OPPORTUNITY REIT II, INC.

FIRST:  Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation, desires to amend and restate its charter as currently in effect and as hereinafter amended.

SECOND:  The following provisions are all the provisions of the charter currently in effect and as hereinafter amended:

ARTICLE I

NAME

The name of the corporation is Behringer Harvard Opportunity REIT II, Inc. (the “Company”).  So far as may be practicable, the business of the Company shall be conducted and transacted under that name.  Under circumstances in which the Board determines that the use of the name “Behringer Harvard Opportunity REIT II, Inc.” is not practicable, it may use any other designation or name for the Company.

ARTICLE II

PURPOSES AND POWERS

The purposes for which the Company is formed are to engage in any lawful act or activity (including, without limitation or obligation, qualifying as a real estate investment trust under Sections 856 through 860, or any successor sections, of the Internal Revenue Code of 1986, as amended (the “Code”)), for which corporations may be organized under the MGCL and the general laws of the State of Maryland as now or hereafter in force.

ARTICLE III

RESIDENT AGENT AND PRINCIPAL OFFICE

The name and address of the resident agent for service of process of the Company in the State of Maryland is CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202.  The address of the Company’s principal office in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202.  The Company may have such other offices and places of business within or outside the State of Maryland as the Board may from time to time determine.

ARTICLE IV

DEFINITIONS

As used in the Charter, the following terms, when capitalized, shall have the following meanings unless the context otherwise requires:

“ACQUISITION EXPENSES” means any and all expenses incurred by the Company, the Advisor, or any Affiliate of either in connection with the selection and acquisition of any Asset, whether or not acquired, including, without limitation, legal fees and expenses, travel and communications expenses,

costs of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses, and title insurance premiums.

“ACQUISITION FEE” means any and all fees and commissions, exclusive of Acquisition Expenses, paid by any Person to any other Person (including any fees or commissions paid by or to any Affiliate of the Company or the Advisor) in connection with making or investing in Mortgages or other loans or the purchase, development or construction of a Property, including, without limitation, real estate commissions, selection fees, Development Fees, Construction Fees, nonrecurring management fees, loan fees, points or any other fees of a similar nature. Excluded shall be Development Fees and Construction Fees paid to any Person not affiliated with the Sponsor in connection with the actual development and construction of a project.

“ADVISOR” or “ADVISORS” means the Person or Persons, if any, appointed, employed or contracted with by the Company pursuant to Section 8.1 hereof and responsible for directing or performing the day-to-day business affairs of the Company, including any Person to whom the Advisor subcontracts all or substantially all of these functions.

“ADVISORY MANAGEMENT AGREEMENT” means the agreement between the Company and the Advisor pursuant to which the Advisor will direct or perform the day-to-day business affairs of the Company.

“ADVISORY MANAGEMENT AGREEMENT TERMINATION” shall have the meaning as provided in Section 5.3(iii) herein.

“AFFILIATE” or “AFFILIATED” means, with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, 10% or more of the outstanding voting securities of that other Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by that other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with that other Person; (iv) any executive officer, director, trustee or general partner of that other Person; and (v) any legal entity for which that Person acts as an executive officer, director, trustee or general partner.

“ASSET” means any Property, Mortgage, loan, or other direct or indirect investment (other than investments in bank accounts, money market funds or other current assets) owned by the Company, directly or indirectly through one or more of its Affiliates, and any other investment made by the Company, directly or indirectly through one or more of its Affiliates or Joint Ventures.

“AVERAGE INVESTED ASSETS” means, for a specified period, the average of the aggregate book value of the Assets, before deducting depreciation, bad debts or other non-cash reserves, computed by taking the average of the values at the end of each month during the period.

“BOARD” means, collectively, the individuals named in Section 6.1 of the Charter and any other individuals who may be duly elected and qualified to serve as Directors thereafter to replace any such individual or fill a vacancy caused by the death, removal or resignation of any such individual or caused by an increase in the number of Directors.

“BYLAWS” means the bylaws of the Company, as amended from time to time.

“CHANGE OF CONTROL” means any (i) event (including, without limitation, issue, transfer or other disposition of Shares of capital stock of the Company or equity interests in the Operating Partnership, merger, share exchange or consolidation) after which any “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the

2

Exchange Act), directly or indirectly, of securities of the Company or the Operating Partnership representing greater than 50% of the combined voting power of the Company’s or the Operating Partnership’s then outstanding securities, respectively; provided, that, a Change of Control shall not be deemed to occur as a result of any widely distributed public offering of the Common Shares or (ii) direct or indirect sale, transfer, conveyance or other disposition (other than pursuant to clause (i)), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company or the Operating Partnership, taken as a whole, to any “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act).

“CHARTER” means these Third Articles of Amendment and Restatement and any Articles of Amendment, Articles Supplementary or other modification or amendment thereto.

“CLOSING PRICE” on any date shall mean the last sale price for any class or series of the Common Shares, regular way, or, in case no sale takes place on that day, the average of the closing bid and asked prices, regular way, for the Common Shares, in either case as reported in the principal consolidated transaction reporting system with respect to Common Shares Listed or, if such Common Shares are not Listed, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system or other quotation service that may then be in use or, if the Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Common Shares selected by the Board.

“CODE” shall have the meaning provided in Article II herein.

“COMMENCEMENT OF THE INITIAL PUBLIC OFFERING” shall mean the date that the Securities and Exchange Commission declares effective the registration statement filed under the Securities Act for the Initial Public Offering.

“COMMON SHARES” shall have the meaning as provided in Section 5.1 herein.

“COMPANY” shall have the meaning provided in Article I herein.

“COMPANY VALUE” shall mean the actual value of the Company as a going concern based on the difference between (a) the actual value of all of its assets as determined in good faith by the Board, including a majority of the Independent Directors, and (b) all of its liabilities as set forth on its balance sheet for the period ended immediately prior to the determination date, provided that (i) if the Company Value is being determined in connection with a Change of Control that establishes the Company’s net worth, then the Company Value shall be the net worth established thereby and (ii) if the Company Value is being determined in connection with a Listing, then the Company Value shall be equal to the number of outstanding Common Shares multiplied by the Closing Price of a single Common Share averaged over a period of 30 trading days during which the Shares are listed or quoted for trading after the date of Listing.  For purposes hereof, a “trading day” shall be any day on which the NYSE is open for trading, whether or not the Common Shares are then listed on the NYSE and whether or not there is an actual trade of Common Shares on any such day.  If the holder of Convertible Shares disagrees as to the Company Value as determined by the Board, then each of the holder of Convertible Shares and the Company shall name one appraiser and the two named appraisers shall promptly agree in good faith to the appointment of one other appraiser whose determination of the Value shall be final and binding on the parties as to the Company Value.  The cost of such appraisal shall be split evenly between the Company and the Advisor.

“COMPETITIVE REAL ESTATE COMMISSION” means a real estate or brokerage commission paid (or, if no commission is paid, the amount that customarily would be paid) for the purchase or sale of a

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Property that is reasonable, customary and competitive in light of the size, type and location of the Property (as determined by the Board, including a majority of the Independent Directors).

“CONSTRUCTION FEE” means a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitations on a Property.

“CONTRACT PURCHASE PRICE” means (i) the amount actually paid and/or budgeted in respect of the purchase, development, construction or improvement of a Property, (ii) the amount of funds advanced with respect to a Mortgage or other loan, or (iii) the amount actually paid and/or budgeted in respect of the purchase of other Assets, in each case exclusive of Acquisition Fees and Acquisition Expenses but including any debt attributable to such acquired Assets.

“CONVERSION PRODUCT” means the lesser of (1) the product of 0.2 times the amount, if any, by which (A) the sum of the Company Value as of the date of the Triggering Event plus total Distributions paid to holders of Common Shares through the date of the Triggering Event, exceeds (B) the sum of Invested Capital plus the Stockholders’ 10% Return as of the date of the Triggering Event, or (2) the product of 0.15 times the amount, if any, by which (X) the sum of the Company Value as of the date of the Triggering Event plus total Distributions paid to holders of Common Shares through the date of the Triggering Event, exceeds (Y) the sum of Invested Capital plus the Stockholders’ 6% Return as of the date of the Triggering Event.

“CONVERTIBLE SHARES” shall have the meaning as provided in Section 5.1 herein.

“DEVELOPMENT FEE” means a fee for the packaging of an Asset, including the negotiation and approval of plans, and any assistance in obtaining zoning and necessary variances and financing for a specific Property, either initially or at a later date.

“DIRECTOR” means a member of the Company’s Board.

“DISTRIBUTIONS” means any dividends or other distributions of money or other property, pursuant to Section 5.2(iii) hereof, by the Company to owners of Common Shares, including distributions that may constitute a return of capital for federal income tax purposes but excluding distributions that constitute the redemption of any Common Shares and excluding distributions on any Common Shares before their redemption.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute thereto.  Reference to any provision of the Exchange Act shall mean the provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“INDEPENDENT APPRAISER” means a Person with no material current or prior business or personal relationship with the Advisor or the Directors and who is a qualified appraiser of Real Property of the type held by the Company or of other Assets as determined by the Board.  Membership in a nationally recognized appraisal society, such as the Appraisal Institute, shall be conclusive evidence of such qualification as to Real Property.

“INDEPENDENT DIRECTOR” means a Director who is not on the date of determination, and within the last two years from the date of determination has not been, directly or indirectly associated with the Sponsor, the Advisor or any of their Affiliates by virtue of (i) ownership of an interest in the Sponsor, the Advisor or any of their Affiliates, other than the Company, (ii) employment by the Company, the Sponsor, the Advisor or any of their Affiliates, (iii) service as an officer or director of the Sponsor, the

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Advisor or any of their Affiliates, other than as a Director of the Company, (iv) performance of services for the Company, other than as a Director of the Company, (v) service as a director or trustee of more than three real estate investment trusts organized by the Sponsor or advised by the Advisor, or (vi) maintenance of a material business or professional relationship with the Sponsor, the Advisor or any of their Affiliates.  Consistent with (v) above, serving as an independent director of or receiving independent director fees from or owning an interest in a REIT or other real estate program organized by the Sponsor or advised or managed by the Advisor or its Affiliates shall not, by itself, cause a Director to be deemed associated with the Sponsor or the Advisor.  A business or professional relationship is considered “material” if the aggregate annual gross revenue derived by the Director from the Sponsor, the Advisor and their Affiliates exceeds five percent of either the Director’s annual gross income during either of the last two calendar years or the Director’s net worth on a fair market value basis.  An indirect association with the Sponsor or the Advisor shall include circumstances in which a Director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law or brother- or sister-in-law is or has been associated with the Sponsor, the Advisor, any of their Affiliates or the Company.

“INITIAL INVESTMENT” means that portion of the initial capitalization of the Company contributed by the Sponsor or its Affiliates pursuant to Section 8.1 herein.

“INITIAL PUBLIC OFFERING” means the first Offering.

“INVESTED CAPITAL” means the amount calculated by multiplying the total number of Common Shares issued by the Company by the price paid for each Common Share, reduced by an amount equal to the total number of Common Shares repurchased from Stockholders by the Company (pursuant to any Company plan to repurchase such Common Shares) multiplied by the price paid for each such redeemed Common Share when initially purchased from the Company.

“JOINT VENTURE” means a legal organization formed to provide for the sharing of risks and rewards in an enterprise co-owned and operated for mutual benefit by two or more business partners and established to acquire or hold Assets.

“LEVERAGE” means the aggregate amount of indebtedness of the Company on a consolidated basis for money borrowed (including purchase money mortgage loans) outstanding at any time, both secured and unsecured.

“LISTING” means the effective date of the Form 8-A (or any successor form) filed with the Securities and Exchange Commission to register the Common Shares on a national securities exchange and the commencement of trading of the Common Shares on the relevant national securities exchange.  Upon such Listing, the Common Shares shall be deemed Listed.  A Listing shall also be deemed to occur on the effective date of a merger in which the consideration received by the holders of Common Shares is securities of another issuer that are listed on a national securities exchange.

“MGCL” means the Maryland General Corporation Law in effect on the date hereof, and as may be amended from time to time.

“MORTGAGES” means, in connection with mortgage financing provided, invested in, participated in or purchased by the Company, all of the notes, deeds of trust, security interests or other evidence of indebtedness or obligations, which are secured or collateralized by Real Property owned by the borrowers under the notes, deeds of trust, security interests or other evidences of indebtedness or obligations.

“NET ASSETS” means the total assets of the Company (other than intangibles) at cost, before deducting depreciation, reserves for bad debts or other non-cash reserves, less total liabilities, calculated quarterly by the Company on a basis consistently applied.

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“NET INCOME” means for any period, the Company’s total revenues applicable to the period, less the total expenses applicable to the period other than additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the Sale of the Assets.

“NET SALES PROCEEDS” means in the case of a transaction described in clause (i)(A) of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Company, including all real estate commissions, closing costs and legal fees and expenses. In the case of a transaction described in clause (i) (B) of the definition, Net Sales Proceeds means the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Company, including any legal fees and expenses and other selling expenses incurred in connection with such transaction. In the case of a transaction described in clause (i) (C) of the definition, Net Sales Proceeds means the proceeds of any such transaction actually distributed to the Company from the Joint Venture less the amount of any selling expenses, including legal fees and expenses incurred by or on behalf of the Company (other than those paid by the Joint Venture).  In the case of a transaction or series of transactions described in clause (i) (D) of the definition of Sale, Net Sales Proceeds means the proceeds of any such transaction (including the aggregate of all payments under a Mortgage or other loan or in satisfaction thereof other than regularly scheduled interest payments) less the amount of selling expenses incurred by or on behalf of the Company, including all commissions, closing costs and legal fees and expenses.  In the case of a transaction described in clause (i)(E) of the definition, Net Sales Proceeds means the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Company, including any legal fees and expenses and other selling expenses incurred in connection with such transaction. In the case of a transaction described in clause (ii) of the definition of Sale, Net Sales Proceeds means the proceeds of such transaction or series of transactions less all amounts generated thereby which are reinvested in one or more Assets within 180 days thereafter and less the amount of any real estate commissions, closing costs, and legal fees and expenses and other selling expenses incurred by or allocated to the Company in connection with such transaction or series of transactions. Net Sales Proceeds shall also include any consideration (including non-cash consideration such as stock, notes or other property or securities) that the Company determines, in its discretion, to be economically equivalent to proceeds of a Sale, valued in the reasonable determination of the Company.  Net Sales Proceeds shall not include any reserves established by the Company in its sole discretion.

“NYSE” means the New York Stock Exchange.

“OFFERING” means any public offering of Shares pursuant to an effective registration statement filed under the Securities Act.

“OPERATING PARTNERSHIP” means Behringer Harvard Opportunity OP II, LP, a Delaware limited partnership, through which the Company may conduct operations and own Assets.

“ORGANIZATION AND OFFERING EXPENSES” means any and all costs and expenses incurred by and to be paid from the assets of the Company in connection with preparing the Company for an Offering (including, with respect to the Initial Public Offering, the formation of the Company and including the qualification and registration of the Offering), and the marketing and distribution of Shares, including, without limitation: total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); expenses for printing, engraving, amending registration statements and supplementing prospectuses; mailing and distributing costs; salaries of employees while engaged in sales activity, such as preparing supplemental sales literature; telephone and other telecommunications costs; all advertising and marketing expenses (including the costs related to investor and broker-dealer meetings); charges of transfer agents, registrars, trustees, escrow holders, depositories and experts; fees, expenses and taxes related to the filing, registration and qualification of the Offering under federal and state laws, including taxes and fees; and accountants’ and attorneys’ fees.

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“PERSON” means an individual, corporation, association, business trust, estate, trust, partnership, limited liability company or other legal entity.

“PREFERRED SHARES” shall have the meaning provided in Section 5.1 herein.

“PROPERTY” or “PROPERTIES” means, as the context requires, any or all, respectively, of the Real Property acquired by the Company, either directly or indirectly (including through joint venture arrangements or other partnership or investment interests).

“PRORATED TERM” means the quotient, the numerator of which is the number of days from and including the effective date of the Initial Public Offering through and including the date of the Advisory Management Agreement Termination and the denominator of which is the number of days elapsed from and including the effective date of the Initial Public Offering through and including the date of the Triggering Event.

“PROSPECTUS” has the meaning set forth in Section 2(10) of the Securities Act, including a preliminary prospectus, an offering circular as described in Rule 253 of the General Rules and Regulations under the Securities Act, or, in the case of an intrastate offering, any document by whatever name known, utilized for the purpose of offering and selling Securities to the public.

“REAL PROPERTY” or “REAL ESTATE” means land, rights in land (including leasehold interests), and any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land.

“REIT” means a corporation, trust, association or other legal entity (other than a real estate syndication) that is engaged primarily in investing in equity interests in real estate (including fee ownership and leasehold interests) or in loans secured by real estate or both as defined pursuant to the REIT Provisions of the Code.

“REIT PROVISIONS OF THE CODE” means Sections 856 through 860 of the Code and any successor or other provisions of the Code relating to real estate investment trusts (including provisions as to the attribution of ownership of beneficial interests therein) and the regulations promulgated thereunder.

“SALE” or “SALES” means (i) any transaction or series of transactions whereby: (A) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including the lease of any Property consisting of a building only, and including any event with respect to any Property which gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Operating Partnership in any Joint Venture in which it is a co-venturer or partner; (C) any Joint Venture directly or indirectly (except as described in other subsections of this definition) in which the Company or the Operating Partnership as a co-venturer or partner sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including any event with respect to any Property which gives rise to insurance claims or condemnation awards; (D) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, conveys or relinquishes its interest in any Mortgage or other loan or portion thereof (including with respect to any Mortgage or other loan, all payments thereunder or in satisfaction thereof other than regularly scheduled interest payments) of amounts owed pursuant to such Mortgage or other loan and any event with respect to a Mortgage or other loan which gives rise to a significant amount of insurance proceeds or similar awards; or (E) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or

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relinquishes its ownership of any other Asset not previously described in this definition or any portion thereof, but (ii) not including any transaction or series of transactions specified in clause (i) (A) through (E) above in which the net proceeds of such transaction or series of transactions are reinvested in one or more Assets within 180 days thereafter.

“SDAT” shall have the meaning as provided in Section 5.5 herein.

“SECURITIES” means any of the following issued by the Company, as the text requires:  Shares, any other stock, shares or other evidences of equity or beneficial or other interests, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire, any of the foregoing.

“SECURITIES ACT” means the Securities Act of 1933, as amended from time to time, or any successor statute thereto.  Reference to any provision of the Securities Act shall mean the provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“SHARES” means shares of capital stock of the Company of any class or series, including Common Shares, Convertible Shares or Preferred Shares.

“SPONSOR” means any Person directly or indirectly instrumental in organizing, wholly or in part, the Company or any Person who will control, manage or participate in the management of the Company, and any Affiliate of any such Person.  Not included is any Person whose only relationship with the Company is that of an independent property manager and whose only compensation is as such.  “Sponsor” does not include wholly independent third parties such as attorneys, accountants and underwriters whose only compensation is for professional services.  A Person may also be deemed a Sponsor of the Company by: (i) taking the initiative, directly or indirectly, in founding or organizing the Company, either alone or in conjunction with one or more other Persons, (ii) receiving a material participation in the Company in connection with founding or organizing the business of the Company, in consideration of services or property, or both services and property, (iii) has a substantial number of relationships and contacts with the Company, (iv) possessing significant rights to control Properties, (v) receiving fees for providing services to the Company which are paid on a basis that is not customary in the industry, or (vi) providing goods or services to the Company on a basis which was not negotiated at arm’s-length with the Company.

“STOCKHOLDERS” means the holders of record of the Shares as maintained in the books and records of the Company or its transfer agent.

“STOCKHOLDERS’ 6% RETURN” means, as of any date, an aggregate amount equal to a 6% cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based on a 365-day year); provided, however, that for purposes of calculating the Stockholders’ 6% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 6% Return is being calculated net of Distributions attributable to Net Sales Proceeds but (consistent with the definition of Invested Capital) shall always exclude an amount equal to the total number of Common Shares repurchased from Stockholders by the Company (pursuant to any Company plan to repurchase Common Shares) multiplied by the price paid for each such redeemed Common Share when initially purchased from the Company.

“STOCKHOLDERS’ 10% RETURN” means, as of any date, an aggregate amount equal to a 10% cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based on a 365-day year); provided, however, that for purposes of calculating the Stockholders’

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10% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 10% Return is being calculated net of Distributions attributable to Net Sales Proceeds but (consistent with the definition of Invested Capital) shall always exclude an amount equal to the total number of Common Shares repurchased from Stockholders by the Company (pursuant to any Company plan to repurchase Common Shares) multiplied by the price paid for each such redeemed Common Share when initially purchased from the Company.

“TERMINATION DATE” means the date of termination of the Advisory Management Agreement.

“TERMINATION OF THE INITIAL PUBLIC OFFERING” shall mean the earlier of (i) the date on which the Initial Public Offering expires or is terminated by the Company, excluding an Offering of shares pursuant to the Reinvestment Plan (as defined below) or (ii) the date on which all shares offered in the Initial Public Offering are sold, excluding shares that may be sold pursuant to the Reinvestment Plan.

“TOTAL OPERATING EXPENSES” means all costs and expenses paid or incurred by the Company (on a consolidated basis), as determined under generally accepted accounting principles, which are in any way related to the operation of the Company or to Company business, including advisory fees, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves, (v) incentive fees paid in compliance with Section 8.7 hereof, notwithstanding the next succeeding clause (vi); and (vi) Acquisition Fees and Acquisition Expenses, real estate commissions on the Sale of Property, and other fees and expenses connected with the acquisition, operation, ownership and disposition of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

“TRIGGERING EVENT” shall have the meaning as provided in Section 5.3(iii)(a) herein.

“UNIMPROVED REAL PROPERTY” means Property in which the Company has an equity interest that was not acquired for the purpose of producing rental or other operating income, that has no development or construction in process and for which no development or construction is planned, in good faith, to commence within one year.

ARTICLE V

STOCK

SECTION 5.1  AUTHORIZED SHARES.  The total number of Shares that the Company shall have authority to issue is 400,001,000 Shares, of which (i) 350,000,000 shall be designated as common stock, $0.0001 par value per Share (the “Common Shares”); (ii) 1,000 shall be designated as non-participating, non-voting, convertible stock, $0.0001 par value per share (the “Convertible Shares”); and (iii) 50,000,000 shall be designated as preferred stock, $0.0001 par value per Share (the “Preferred Shares”).  The aggregate par value of all authorized shares of stock having par value is $40,000.10.  If shares of one class of stock are classified or reclassified into shares of another class of stock pursuant to Section 5.2(ii) or Section 5.4 of this Article V, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, as the case may be, so that the aggregate number of Shares of all classes that the Company has authority to issue shall not be more than the total number of Shares set forth in the first sentence of this Article.  To the extent permitted by Maryland law, the Board, without any action by the Stockholders, may amend the Charter from time to time to (i) increase or decrease the aggregate number of Shares that the Company has the authority to issue,

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(ii) increase or decrease the number of Shares of any class or series that the Company has authority to issue, or (iii) classify or reclassify any unissued Shares by setting or changing the preferences, conversion or other rights, restrictions, limitations as to dividends or other distributions, qualifications or terms and conditions of redemption of such Shares.  The Company shall at all times reserve and keep available, out of its authorized but unissued Shares, such number of Shares as shall from time to time be sufficient solely for the purpose of effecting the redemption, conversion or exchange of outstanding limited partnership interests of the Operating Partnership, other than those owned by the Company, which are convertible or exchangeable into Shares.  The Company shall issue Shares upon the redemption, conversion or exchange of such limited partnership interests in accordance with the terms of the partnership agreement of the Operating Partnership.

SECTION 5.2  COMMON SHARES.

(i)            COMMON SHARES SUBJECT TO TERMS OF PREFERRED SHARES.  The Common Shares shall be subject to the express terms of any series of Preferred Shares.

(ii)           DESCRIPTION.  Subject to the provisions of Section 5.10 hereof and except as may otherwise be specified in the terms of any class or series of Common Shares, each Common Share shall entitle the holder thereof to one (1) vote per share on all matters upon which Stockholders are entitled to vote pursuant to Section 11.2 hereof.  Shares of a particular class of Common Shares shall have equal dividend, distribution, liquidation and other rights, and shall have no preference, cumulative, preemptive, conversion or exchange rights.  The Board may classify or reclassify any unissued Common Shares from time to time in one or more classes or series of stock.

(iii)          DISTRIBUTION RIGHTS.  The Board from time to time may authorize and the Company may pay to Stockholders the dividends or other distributions in cash or other property as the Board in its discretion shall determine.  The Board shall endeavor to authorize, and the Company shall pay to the extent authorized, such dividends and distributions as shall be necessary for the Company to qualify as a REIT under the REIT Provisions of the Code unless the Board has determined, in its sole discretion, that qualification as a REIT is not in the best interests of the Company; provided, however, Stockholders shall have no right to any dividend or distribution unless and until authorized by the Board and declared by the Company.  The exercise of the powers and rights of the Board pursuant to this section shall be subject to the provisions of any class or series of Shares at the time outstanding.  The receipt by any Person in whose name any Shares are registered on the records of the Company or by his or her duly authorized agent shall be a sufficient discharge for all dividends or distributions payable or deliverable in respect of the Shares and from all liability to see to the application thereof.  Distributions in kind shall not be permitted, except for distributions of readily marketable securities, distributions of beneficial interests in a liquidating trust established for the dissolution of the Company and the liquidation of its assets in accordance with the terms of the Charter or distributions in which (a) the Board advises each holder of Common Shares of the risks associated with direct ownership of the property, (b) the Board offers each holder of Common Shares the election of receiving such in-kind distributions, and (c) in-kind distributions are made only to those holders of Common Shares that accept the offer.

(iv)          RIGHTS UPON LIQUIDATION.  In the event of any voluntary or involuntary liquidation, dissolution or winding up, or any distribution of the assets of the Company, the aggregate assets available for distribution to holders of the Common Shares shall be determined in accordance with the MGCL.  Each holder of Common Shares shall be entitled to receive, ratably with each other holder of Common Shares, that portion of the aggregate assets available for distribution as the number of outstanding Common Shares held by the holder bears to the total number of Common Shares then outstanding.

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(v)           VOTING RIGHTS.  Except as may be provided otherwise in the Charter, and subject to the express terms of any series of Preferred Shares, the holders of the Common Shares shall have the exclusive right to vote on all matters (as to which a holder of Common Shares shall be entitled to vote pursuant to applicable law) at all meetings of the Stockholders of the Company.

SECTION 5.3   CONVERTIBLE SHARES.

(i)DISTRIBUTION RIGHTS.  The holders of the outstanding Convertible Shares shall not be entitled to receive dividends or other distributions on the Convertible Shares.

(ii)           VOTING RIGHTS.

(a)Except for the voting rights expressly conferred by this Section 5.3(ii), the holders of the outstanding Convertible Shares shall not be entitled (I) to vote on any matter, or (II) to receive notice of, or to participate in, any meeting of Stockholders at which they are not entitled to vote.

(b)The affirmative vote of the holders of at least two-thirds of the outstanding Convertible Shares, voting together as a single class for such purposes with each share entitled to one vote, shall be required for the adoption of any amendment, alteration or repeal of any provision of the Charter that materially and adversely changes the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms and conditions of redemption of the Convertible Shares (it being understood that an increase in the number of Directors is not such a material and adverse change).

(iii)CONVERSION.

(a)Each outstanding Convertible Share shall become convertible into a number of Common Shares as and at the time set forth in paragraph (b) of this Section 5.3(iii), automatically and without any further action required, upon the occurrence of the first to occur of any of the following events (the “Triggering Event”): (A) the date when the Company shall have paid total Distributions in an amount equal to or in excess of the sum of Invested Capital and the Stockholders’ 10% Return; or (B) Listing.

(b)If the Triggering Event occurs prior to an Advisory Management Agreement Termination (as defined below), each Convertible Share shall be converted into a number of Common Shares equal to 1/1000 of the result of (I) the Conversion Product divided by (II) the quotient of the Company Value divided by the number of outstanding Common Shares on the date of the conversion.  Such conversion, in the case of conversion upon Listing, will not occur until the 31st trading day after the date of the Listing.  If the Triggering Event occurs after an Advisory Management Agreement Termination, then each Convertible Share shall be converted into that number of Common Shares as set forth above multiplied by the Prorated Term.

(c)An “Advisory Management Agreement Termination” shall mean a termination or expiration without renewal (except to the extent of a termination or expiration with the Company followed by the adoption of the same or substantially similar Advisory Management Agreement with a successor, whether by merger, consolidation, sale of all or substantially all of the assets of the Company, or

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otherwise) of the Company’s Advisory Management Agreement with Behringer Harvard Opportunity Advisors II LP for any reason except for a termination or expiration without renewal due to a material breach by Behringer Harvard Opportunity Advisors II LP of the Advisory Management Agreement.

(d)If, in the good faith judgment of the Board, full conversion of the Convertible Shares would jeopardize the Company’s status as a REIT, then only such number of Convertible Shares (or fraction thereof) shall be converted into Common Shares such that the Company’s REIT status is not jeopardized.  Each remaining Convertible Share shall convert as provided herein when the Board of Directors determines that conversion of such Convertible Share would not jeopardize the Company’s qualification as a REIT.  The Board of Directors shall consider whether it can make this determination at least once per quarter following a Triggering Event.

(e)As promptly as practicable after a Triggering Event, the Company shall issue and deliver to each holder of Convertible Shares a certificate or certificates representing the number of Common Shares into which his, her or its Convertible Shares were converted (or shall cause the issuance of the Common Shares to be reflected in the Company’s stock ledger, if the Common Shares are uncertificated).  The person in whose name the Common Shares are issued shall be deemed to have become a Stockholder of record on the date of conversion.

(f)The issuance of Common Shares on conversion of outstanding Convertible Shares shall be made by the Company without charge for expenses or for any tax in respect of the issuance of the Common Shares.

(g)In the event of any reclassification or recapitalization of the outstanding Common Shares (except a change in par value, or from no par value to par value, or subdivision or other split or combination of shares), or in case of any consolidation or merger to which the Company is a party, except a merger in which the Company is the surviving corporation and which does not result in any reclassification or recapitalization, the Company or the successor or purchasing business entity shall provide that the holder of each Convertible Share then outstanding shall thereafter continue to have the right, with as nearly the same economic rights and effects as possible, to convert, upon a Triggering Event, the Convertible Shares into the kind and amount of stock and other securities and property received by holders of the Common Shares of the Company in connection with the reclassification, recapitalization, consolidation or merger.  The provisions of this paragraph (g) of this Section 5.3(iii) shall similarly apply to successive reclassifications, recapitalizations, consolidations or mergers.

(h)Common Shares issued on conversion of Convertible Shares shall be issued as fully paid shares and shall be nonassessable by the Company. The Company shall, at all times, reserve and keep available, for the purpose of effecting the conversion of the outstanding Convertible Shares, the number of its duly authorized Common Shares as shall be sufficient to effect the conversion of all of the outstanding Convertible Shares.

(i)Convertible Shares converted as provided herein shall become authorized but unissued Common Shares.

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(iv)EXCEPTED HOLDER LIMIT FOR HOLDER OF CONVERTIBLE SHARES.  For purposes of Section 5.10 hereof, the holder of the Convertible Shares shall have an Excepted Holder Limit (as such term is defined in Section 5.10) of a 20% interest (in value or number of as-converted shares, whichever is more restrictive) of the aggregate of the outstanding Common Shares of the Company, subject to adjustment pursuant to Section 5.10(ii)(g), including any adjustment approved by the Board.

SECTION 5.4   PREFERRED SHARES.  The Board is hereby expressly granted the authority to authorize from time to time the issuance of one or more series of Preferred Shares.  Prior to the issuance of each such class or series, the Board, by resolution, shall fix the number of shares to be included in each series, and the designation, preferences, terms, rights, restrictions, limitations, qualifications and terms and conditions of redemption of the shares of each class or series, if any.  The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(i)            The designation of the series, which may be by distinguishing number, letter or title.

(ii)           The dividend rate on the shares of the series, if any, whether any dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of the series.

(iii)          The redemption rights, including conditions and the price or prices, if any, for shares of the series.

(iv)          The terms and amounts of any sinking fund for the purchase or redemption of shares of the series.

(v)           The rights of the shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, and the relative rights of priority, if any, of payment of shares of the series.

(vi)          Whether the shares of the series shall be convertible into shares of any other class or series or any other security of the Company or any other corporation or other entity, and, if so, the specification of such other class or series of such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates on which such shares shall be convertible and all other terms and conditions upon which such conversion may be made.

(vii)         Restrictions on the issuance of shares of the same series or of any other class or series.

(viii)        The voting rights of the holders of shares of the series subject to the limitations contained in this Section 5.4; provided, however, that, when a privately issued Preferred Share is entitled to vote on a matter with the holders of Common Shares, the relationship between the number of votes per privately issued Preferred Share and the consideration paid to the Company for each privately offered Preferred Share shall not exceed the relationship between the number of votes per any publicly offered Share and the book value per outstanding Common Share.

(ix)          Any other relative rights, preferences and limitations on that series, subject to the express provisions of any other series of Preferred Shares then outstanding.  Notwithstanding any other provision of the Charter, the Board may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares, or alter the designation or classify or reclassify any unissued shares of a particular series of Preferred Shares, by fixing or altering, in one or more respects, from time to time before issuing the shares, the terms, rights, restrictions and qualifications of the shares of any such series of Preferred Shares.

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SECTION 5.5  CLASSIFIED OR RECLASSIFIED SHARES.  Prior to issuance of classified or reclassified shares of any class or series, the Board by resolution shall:  (a) designate that class or series to distinguish it from all other classes and series of stock of the Company; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the provisions of Section 5.10 and subject to the express terms of any class or series of stock outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Company to file articles supplementary with the State Department of Assessments and Taxation of Maryland (“SDAT”).  Any of the terms of any class or series of stock set or changed pursuant to clause (c) of this Section 5.5 may be made dependent upon facts or events ascertainable outside the Charter (including determinations by the Board or other facts or events within the control of the Company) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of stock is clearly and expressly set forth in the articles supplementary filed with the SDAT.

SECTION 5.6  CHARTER AND BYLAWS.  The rights of all Stockholders and the terms of all Shares are subject to the provisions of the Charter and the Bylaws.

SECTION 5.7   GENERAL NATURE OF SHARES.  All Shares shall be personal property entitling the Stockholders only to those rights provided in the Charter, the MGCL or the resolution creating any class or series of Shares.  The legal ownership of the Company’s assets and the right to conduct the business of the Company are vested exclusively in the Board; the Stockholders shall have no interest therein other than the beneficial interest in the Company conferred by their Shares and shall have no right to compel any partition, division, dividend or distribution of the Company or any of the Company’s assets.  The death of a Stockholder shall not terminate the Company or give his or her legal representative any rights against other Stockholders, the Board, the Company or the Company’s assets, except the right, exercised in accordance with applicable provisions of the Bylaws, to require the Company to reflect on its books the change in ownership of the Shares.  Holders of Shares shall not have any preemptive or other right to purchase or subscribe for any class of Securities of the Company that the Company may at any time issue or sell.

SECTION 5.8   NO ISSUANCE OF SHARE CERTIFICATES.  Until Listing, the Company shall not issue share certificates to holders of Common Shares.  A Stockholder’s investment shall be recorded on the books of the Company.  To transfer his or her Shares, a Stockholder shall submit an executed form to the Company, which form shall be provided by the Company upon request.  Such transfer will also be recorded on the books of the Company.  Upon issuance or transfer of Shares, the Company will provide the Stockholder with information concerning his or her rights with regard to such stock, as required by the Bylaws and the MGCL or other applicable law. The Board may authorize the issuance of Preferred Shares or Convertible Shares without certificates.

SECTION 5.9   [RESERVED.]

SECTION 5.10  RESTRICTIONS ON OWNERSHIP AND TRANSFER.

(i)            DEFINITIONS.  For purposes of Section 5.10, the following terms shall have the following meanings:

“BENEFICIAL OWNERSHIP” means ownership of Shares by a Person, whether the interest in the Shares is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code.  The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

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“BUSINESS DAY” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.

“CHARITABLE BENEFICIARY” means one or more beneficiaries of the Trust as determined pursuant to Section 5.10(iii)(f), provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

“COMMON SHARE OWNERSHIP LIMIT” means not more than 9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding Common Shares of the Company.

“CONSTRUCTIVE OWNERSHIP” means ownership of Shares by a Person, whether the interest in the Shares is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.  The terms “Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

“EXCEPTED HOLDER” means a Stockholder for whom an Excepted Holder Limit is created by this Charter (including pursuant to Section 5.3(iv) hereof) or by the Board pursuant to Section 5.10(ii)(g).

“EXCEPTED HOLDER LIMIT” means, provided that the affected Excepted Holder agrees to comply with the requirements established by the Board pursuant to Section 5.10(ii)(g), the percentage limit established by the Board pursuant to Section 5.10(ii)(g).

“MARKET PRICE” on any date means, with respect to any class or series of outstanding Shares, the Closing Price for such Shares on such date or, in the event that no Closing Price is available for such Shares, the fair market value of the Shares, as determined in good faith by the Board.

“PERSON” means an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act, and a group to which an Excepted Holder Limit applies.

“PREFERRED SHARE OWNERSHIP LIMIT” means not more than 9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding Preferred Shares of the Company.

“PROHIBITED OWNER” means, with respect to any purported Transfer, any Person who, but for the provisions of Section 5.10(ii)(a), would Beneficially Own or Constructively Own Shares, and if appropriate in the context, shall also mean any Person who would have been the record owner of the Shares that the Prohibited Owner would have so owned.

“RESTRICTION TERMINATION DATE” means the first day after the Commencement of the Initial Public Offering on which the Company determines pursuant to Section 7.2(ii) of the Charter that it is no longer in the best interests of the Company to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership

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and Transfers of Shares set forth herein is no longer required in order for the Company to qualify as a REIT.

“TRANSFER” means any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Shares or the right to vote or receive dividends on Shares, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any Securities or rights convertible into or exchangeable for Shares or any interest in Shares or any exercise of any such conversion or exchange right and (c) Transfers of interests in other entities that result in changes in Beneficial or Constructive Ownership of Shares; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise.  The terms “Transferring” and “Transferred” shall have the correlative meanings.

“TRUST” means any trust provided for in Section 5.10(iii)(a).

“TRUSTEE” means the Person, unaffiliated with the Company or a Prohibited Owner, that is appointed by the Company to serve as trustee of the Trust.

(ii)           SHARES.

(a)OWNERSHIP LIMITATIONS.  During the period commencing on the date of the Company’s qualification as a REIT and prior to the Restriction Termination Date, but subject to Section 5.11 hereof:

(I)BASIC RESTRICTIONS.

(A) (1) No Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own Common Shares in excess of the Common Share Ownership Limit, (2) no Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own Preferred Shares in excess of the Preferred Share Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own Shares in excess of the Excepted Holder Limit for such Excepted Holder.

(B) No Person shall Beneficially or Constructively Own Shares to the extent that the Beneficial or Constructive Ownership of Shares would result in the Company being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise failing to qualify as a REIT (including, but not limited to, Beneficial or Constructive Ownership that would result in the Company owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Company from the tenant would cause the Company to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

(C) Any Transfer of Shares that, if effective, would result in Shares being beneficially owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares.

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(II)TRANSFER IN TRUST.  If any Transfer of Shares occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning Shares in violation of Section 5.10(ii)(a)(I)(A) or (B),

(A) then that number of Shares the Beneficial or Constructive Ownership of which otherwise would cause such Person to violate Section 5.10(ii)(a)(I)(A) or (B) (rounded to the nearest whole share) shall be automatically transferred to a Trust for the benefit of a Charitable Beneficiary, as described in Section 5.10(iii), effective as of the close of business on the Business Day prior to the date of the Transfer, and such Person shall acquire no rights in the shares; or

(B) if the transfer to the Trust described in clause (A) of this sentence would not be effective for any reason to prevent the violation of Section 5.10(ii)(a)(I)(A) or (B), then the Transfer of that number of Shares that otherwise would cause any Person to violate Section 5.10(ii)(a)(I)(A) or (B) shall be void ab initio, and the intended transferee shall acquire no rights in the Shares.

(b)REMEDIES FOR BREACH.  If the Board or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event that has purported to have taken place that would result in a violation of Section 5.10(ii)(a) or that a Person intends to acquire or has attempted to acquire Beneficial or Constructive Ownership of any Shares in violation of Section 5.10(ii)(a) (whether or not the violation is intended), the Board or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent the Transfer or other event, including, without limitation, causing the Company to redeem shares, refusing to give effect to the Transfer on the books of the Company or instituting proceedings to enjoin the Transfer or other event; provided, however, that any Transfer or attempted Transfer or other event in violation of Section 5.10(ii)(a) shall automatically result in the transfer to the Trust described above, and, where applicable, the Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board or a committee thereof.

(c)NOTICE OF RESTRICTED TRANSFER.  Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of Shares that will or may violate Section 5.10(ii)(a)(I) or any Person who would have owned Shares that resulted in a transfer to the Trust pursuant to the provisions of Section 5.10(ii)(a)(II) shall immediately give written notice to the Company of the event, or in the case of a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Company the other information as the Company may request in order to determine the effect, if any, of the Transfer on the Company’s status as a REIT.

(d)OWNERS REQUIRED TO PROVIDE INFORMATION.  From the Commencement of the Initial Public Offering and prior to the Restriction Termination Date:

(I)every owner of more than five percent (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding Shares, within 30 days after the end of each taxable year, shall give written notice to the Company stating the name and address of the owner, the number of Shares Beneficially Owned and a description of the manner in which the Shares are held.  Each such owner shall provide to the

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Company the additional information as the Company may request in order to determine the effect, if any, of such Beneficial Ownership on the Company’s status as a REIT and to ensure compliance with the Common Share Ownership Limit and Preferred Share Ownership Limit; and

(II)each Person who is a Beneficial or Constructive Owner of Shares and each Person (including the stockholder of record) who is holding Shares for a Beneficial or Constructive Owner shall provide to the Company the information as the Company may request, in good faith, in order to determine the Company’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.

(e)REMEDIES NOT LIMITED.  Subject to Section 7.2(ii) of the Charter, nothing contained in this Section 5.10(ii)(e) shall limit the authority of the Board to take any other action as it deems necessary or advisable to protect the Company and the interests of its stockholders in preserving the Company’s status as a REIT.

(f)AMBIGUITY.  In the case of an ambiguity in the application of any of the provisions of this Section 5.10(ii), Section 5.10(iii), or any definition contained in Section 5.10(i), the Board shall have the power to determine the application of the provisions of this Section 5.10(ii) or Section 5.10(iii) or any such definition with respect to any situation based on the facts known to it.  In the event Section 5.10(ii) or (iii) requires an action by the Board and the Charter fails to provide specific guidance with respect to such action, the Board shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Section 5.10.

(g)EXCEPTIONS.

(I)Subject to Section 5.10(ii)(a)(I)(B), the Board, in its sole discretion, may exempt (prospectively or retroactively) a Person from the Common Share Ownership Limit and the Preferred Share Ownership Limit, as the case may be, and may establish or increase an Excepted Holder Limit for such Person if:

(A) the Board obtains the representations and undertakings from the Person as are reasonably necessary to ascertain that no individual’s Beneficial or Constructive Ownership of such Shares will violate Section 5.10(ii)(a)(I)(A) or (B);

(B) the Person does not and represents that it will not own, actually or Constructively, an interest in a tenant of the Company (or a tenant of any entity owned or controlled by the Company) that would cause the Company to own, actually or Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board obtains such additional representations and undertakings from such Person as are reasonably necessary to ascertain this fact (for this purpose, a tenant from whom the Company (or an entity owned or controlled by the Company) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the Board, rent from the tenant would not adversely affect the Company’s ability to qualify as a REIT, shall not be treated as a tenant of the Company); and

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(C) the Person agrees that any violation or attempted violation of the representations or undertakings (or other action which is contrary to the restrictions contained in Section 5.10(ii)(a) through Section 5.10(ii)(f)) will result in such Shares being automatically transferred to a Trust or in the purported Transfer of such Shares being void ab initio in accordance with Section 5.10(ii)(a) and Section 5.10(iii).

(II)Prior to granting any exception pursuant to Section 5.10(ii)(g)(I), the Board may require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the Company’s status as a REIT.  Notwithstanding the receipt of any ruling or opinion, the Board may impose the conditions or restrictions as it deems appropriate in connection with granting such exception.

(III)Subject to Section 5.10(ii)(a)(I)(B), an underwriter which participates in an Offering or a private placement of Shares (or Securities convertible into or exchangeable for Shares) may Beneficially Own or Constructively Own Shares (or Securities convertible into or exchangeable for Shares) in excess of the Common Share Ownership Limit, the Preferred Share Ownership Limit or both such limits, but only to the extent necessary to facilitate the Offering or private placement.

(IV)The Board may only reduce the Excepted Holder Limit for an Excepted Holder: (1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder.  No Excepted Holder Limit shall be reduced to a percentage that is less than the Common Share Ownership Limit or the Preferred Share Ownership Limit.

(h)NOTICE TO STOCKHOLDERS UPON ISSUANCE OR TRANSFER.  Upon issuance or Transfer of Shares prior to the Restriction Termination Date, the Company shall provide the recipient with a notice containing information about the Shares purchased or otherwise Transferred, in lieu of issuance of a Share certificate, in a form substantially similar to the following:

The securities of Behringer Harvard Opportunity REIT II, Inc. are subject to restrictions on Beneficial and Constructive Ownership and Transfer for the purpose of the Company’s maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended.  Subject to certain further restrictions and except as expressly provided in this Charter, (i) no Person may Beneficially or Constructively Own Common Shares of the Company in excess of 9.8% (in value or number of Shares) of the outstanding Common Shares of the Company unless the Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially or Constructively Own Preferred Shares of the Company in excess of 9.8% (in value or number of Shares) of the outstanding Preferred Shares of the Company unless the Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may

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Beneficially or Constructively Own Shares that would result in the Company being “closely held” under Section 856(h) of the Code or otherwise cause the Company to fail to qualify as a REIT; and (iv) no Person may Transfer Shares if the Transfer would result in the Shares of the Company being owned by fewer than 100 Persons.  Any Person who Beneficially or Constructively Owns or attempts to Beneficially or Constructively Own Shares that cause or will cause a Person to Beneficially or Constructively Own Shares in excess or in violation of the above limitations must immediately notify the Company.  If any of the restrictions on transfer or ownership are or would be violated, the Shares will be deemed to have automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries upon such transfer.  In addition, the Company may redeem Shares upon the terms and conditions specified by the Board in its sole discretion if the Board determines that ownership or a Transfer or other event may violate the restrictions described above.  Furthermore, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio.

All capitalized terms in this notice have the meanings defined in the Charter of the Company, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Shares of the Company on request and without charge.

Instead of the foregoing notice, at the time of issue or transfer of shares without certificates, the Company may send the Stockholder a written statement indicating that the Company will furnish information about the restrictions on transfer to the Stockholder on request and without charge.  If the Company issues Shares with certificates, each certificate shall either contain the notice set forth above or shall state that the Company will furnish information about the restrictions on transfer to the Stockholder on request and without charge.

(iii)          TRANSFER OF SHARES IN TRUST.

(a)OWNERSHIP IN TRUST.  Upon any purported Transfer or other event described in Section 5.10(ii)(a)(II) that would result in a transfer of Shares to a Trust, such Shares shall be deemed to have been transferred to the Trustee as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries.  Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Trust pursuant to Section 5.10(ii)(a)(II).  The Trustee shall be appointed by the Company and shall be a Person unaffiliated with the Company and any Prohibited Owner.  Each Charitable Beneficiary shall be designated by the Company as provided in Section 5.10(iii)(f).

(b)STATUS OF SHARES HELD BY THE TRUSTEE.  Shares held by the Trustee shall be issued and outstanding Shares of the Company.  The Prohibited Owner shall have no rights in the Shares held by the Trustee.  The Prohibited Owner shall not

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benefit economically from ownership of any Shares held in trust by the Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the Shares held in the Trust.

(c)DIVIDEND AND VOTING RIGHTS.  The Trustee shall have all voting rights and rights to dividends or other distributions with respect to Shares held in the Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary.  Any dividend or other distribution paid prior to the discovery by the Company that the Shares have been transferred to the Trustee shall be paid by the recipient of the dividend or distribution to the Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Trustee.  Any dividend or distribution so paid to the Trustee shall be held in trust for the Charitable Beneficiary.  The Prohibited Owner shall have no voting rights with respect to Shares held in the Trust and, subject to Maryland law, effective as of the date that the Shares have been transferred to the Trustee, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Company that the Shares have been transferred to the Trustee and (ii) to recast the vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Company has already taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast the vote.  Notwithstanding the provisions of this Section 5.10, until the Company has received notification that Shares have been transferred into a Trust, the Company shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of Stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of Stockholders.

(d)SALE OF SHARES BY TRUSTEE.  Within 20 days of receiving notice from the Company that Shares have been transferred to the Trust, the Trustee of the Trust shall sell the Shares held in the Trust to a person, designated by the Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in Section 5.10(ii)(a)(I).  Upon such sale, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 5.10(iii)(d).  The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the Shares or, if the Prohibited Owner did not give value for the Shares in connection with the event causing the Shares to be held in the Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the Shares on the day of the event causing the Shares to be held in the Trust and (2) the price per Share received by the Trustee from the sale or other disposition of the Shares held in the Trust.  The Trustee may reduce the amount payable to the Prohibited Owner by the amount of dividends and distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Trustee pursuant to Section 5.10(iii)(c).  Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.  If, prior to the discovery by the Company that Shares have been transferred to the Trustee, the Shares are sold by a Prohibited Owner, then (i) the Shares shall be deemed to have been sold on behalf of the Trust and (ii) to the extent that the Prohibited Owner received an amount for the Shares that exceeds the amount that the Prohibited Owner was entitled to receive pursuant to this Section 5.10, the excess shall be paid to the Trustee upon demand.

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(e)PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE.   Shares transferred to the Trustee shall be deemed to have been offered for sale to the Company, or its designee, at a price per Share equal to the lesser of (i) the price per Share in the transaction that resulted in the transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of the devise or gift) and (ii) the Market Price on the date the Company, or its designee, accepts such offer.  The Company may reduce the amount payable to the Prohibited Owner by the amount of dividends and distributions which has been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Trustee pursuant to Section 5.10(iii)(c).  The Company may pay the amount of the reduction to the Trustee for the benefit of the Charitable Beneficiary.  The Company shall have the right to accept such offer until the Trustee has sold the Shares held in the Trust pursuant to Section 5.10(iii)(d).  Upon such a sale to the Company, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

(f)DESIGNATION OF CHARITABLE BENEFICIARIES.  By written notice to the Trustee, the Company shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust such that (i) the Shares held in the Trust would not violate the restrictions set forth in Section 5.10(ii)(a)(I) in the hands of the Charitable Beneficiary and (ii) each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

SECTION 5.11  SETTLEMENTS.  Nothing in Section 5.10 shall preclude the settlement of any transaction with respect to the Common Shares entered into through the facilities of the NYSE or other national securities exchange on which the Common Shares are Listed.  The fact that the settlement of any transaction occurs shall not negate the effect of any provision of Section 5.10, and any transfer in such a transaction shall be subject to all of the provisions and limitations set forth in Section 5.10.

SECTION 5.12  SEVERABILITY.  If any provision of Section 5.10 or any application of any such provision is determined to be void, invalid or unenforceable by any court having jurisdiction over the issue, the validity and enforceability of the remaining provisions of Section 5.10 shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of the court.

SECTION 5.13  ENFORCEMENT.  The Company is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of Section 5.10.

SECTION 5.14  NON-WAIVER.  No delay or failure on the part of the Company or the Board in exercising any right hereunder shall operate as a waiver of any right of the Company or the Board, as the case may be, except to the extent specifically waived in writing.

SECTION 5.15  REPURCHASE OF SHARES.  The Board may establish, from time to time, a program or programs by which the Company voluntarily repurchases Shares from its Stockholders; provided, however, that such repurchase does not impair the capital or operations of the Company as determined by the Board.  The Sponsor, Advisor, members of the Board or any Affiliates thereof may not receive any fees arising out of the repurchase of Shares by the Company.

SECTION 5.16  DISTRIBUTION REINVESTMENT PLANS.  The Board may establish, from time to time, a distribution reinvestment plan or plans (each, a “Reinvestment Plan”).  Under any such

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Reinvestment Plan, (i) all material information regarding distributions to the holders of Common Shares and the effect of reinvesting such distributions, including the tax consequences thereof, shall be provided to the holders of Common Shares not less often than annually, and (ii) each holder of Common Shares participating in such Reinvestment Plan shall have a reasonable opportunity to withdraw from the Reinvestment Plan not less often than annually after receipt of the information required in clause (i) above.

ARTICLE VI

BOARD OF DIRECTORS

SECTION 6.1   NUMBER OF DIRECTORS.  The number of Directors of the Company shall be six (6).  Except as otherwise set forth herein, the number of Directors may be increased or decreased from time to time pursuant to the Bylaws by the affirmative vote of a majority of the members then serving on the Board; provided, however, that such number shall be not more than 15 nor less than three (3).  A majority of the seats on the Board shall be for Independent Directors.  Any vacancies, including those which arise by reason of an increase in the number of Directors, may be filled by the affirmative vote of a majority of the remaining Directors, though less than a quorum.  Unless these are vacancies in all Independent Director seats, Independent Directors shall nominate replacements for vacancies in the Independent Director positions.  No reduction in the number of Directors shall cause the removal of any Director from office prior to the expiration of his term, except as may otherwise be provided in the terms of any Preferred Shares issued by the Company.  For the purposes of voting for Directors, each Share of stock may be voted for as many individuals as there are Directors to be elected and for whose election the Share is entitled to be voted.  Cumulative voting for Directors is prohibited.

The names of the six Directors who shall serve on the Board until the next annual meeting of the Stockholders and until their successors are duly elected and qualified, subject to the filling of vacancies or an increase in the number of Directors prior to the next annual meeting of the Stockholders, are:

Robert M. Behringer

Robert S. Aisner

Andreas K. Bremer

Diane S. Detering-Paddison

Cynthia Pharr Lee

Jeffrey P. Mayer

SECTION 6.2   EXPERIENCE.  Each Director, other than Independent Directors, shall have at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the type of assets being acquired by the Company.  At least one of the Independent Directors shall have three years of relevant real estate experience.

SECTION 6.3   COMMITTEES.  Subject to the MGCL, the Board may establish committees as it deems appropriate, in its discretion, provided that the majority of the members of each committee are Independent Directors.

SECTION 6.4   TERM.  Each Director shall hold office for one year, until the next annual meeting of Stockholders and until his or her successor is duly elected and qualifies.  Directors may be elected to an unlimited number of successive terms.

SECTION 6.5   RESIGNATION, REMOVAL OR DEATH.  Any Director may resign by written notice to the Board, effective upon execution and delivery to the Company of the written notice or upon

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any future date specified in the notice. A Director may be removed from office with or without cause only at a meeting of the Stockholders called for that purpose, by the affirmative vote of the holders of not less than a majority of the Common Shares then outstanding and entitled to vote generally in the election of directors, subject to the rights of any Preferred Shares to vote for the Directors. The notice of the meeting shall indicate that the purpose, or one of the purposes, of the meeting is to determine if a Director should be removed.

SECTION 6.6   RATIFICATION OF CHARTER BY INDEPENDENT DIRECTORS.  This Charter shall be reviewed and ratified by the Board, including by a majority of the Independent Directors, at the first meeting of the Board following the date that the Board consists of a majority of Independent Directors.

ARTICLE VII

POWERS OF THE BOARD OF DIRECTORS

SECTION 7.1  GENERAL.  The business and affairs of the Company shall be managed under the direction of the Board, and the Board shall have full, exclusive and absolute power, control and authority over the Company’s assets and over the business of the Company as if it, in its own right, was the sole owner thereof, except as otherwise limited by this Charter.  In accordance with the policies on investments and borrowing set forth in this Article VII and Article IX hereof, the Board shall monitor the administrative procedures, investment operations and performance of the Company and the Advisor to assure that the policies are carried out.  The Board may take any action that, in its sole judgment and discretion, is necessary or desirable to conduct the business of the Company.  The Charter shall be construed with a presumption in favor of the grant of power and authority to the Board.  Any construction of the Charter or determination made in good faith by the Board concerning its powers and authority hereunder shall be conclusive.

SECTION 7.2   SPECIFIC POWERS AND AUTHORITY.  Subject only to the express limitations set forth herein, and in addition to all other powers and authority conferred by the Charter by law, the Board, without any vote, action or consent by the Stockholders, shall have and may exercise, at any time or times, in the name of the Company or on its behalf the following powers and authorities:

(i)INVESTMENTS.  The Board shall have the power and authority to invest in, purchase or otherwise acquire and to hold real, personal or mixed, tangible or intangible, property of any kind wherever located, or rights or interests therein or in connection therewith, all without regard to whether the property, interests or rights are authorized by law for the investment of funds held by trustees or other fiduciaries, or whether obligations the Company acquires have a term greater or lesser than the term of office of the Directors or the possible termination of the Company, for such consideration as the Board may deem proper (including cash, property of any kind or Securities of the Company).

(ii)REIT QUALIFICATION.  The Board shall use its best efforts to cause the Company and its Stockholders to qualify for U.S. federal income tax treatment in accordance with the REIT Provisions of the Code, unless the Board, in its sole discretion, determines at any time, due to changes in tax legislation or otherwise, that qualification as a REIT is not in the best interests of the Company.  Following REIT qualification, the Board shall use its commercially reasonable best efforts to take the actions as are necessary, and may take the actions as it deems desirable (in its sole discretion) to preserve the status of the Company as a REIT; provided, however, that in the event that the Board determines that it no longer is in the best interests of the Company to qualify as a REIT, the Board may revoke or otherwise terminate the Company’s REIT election pursuant to Section 856(g) of the Code.  The Board also may determine that compliance with any restriction or limitation set forth in this Charter which is intended to preserve the status of the Company as a REIT, including, without limitation, the restrictions

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and limitations on stock ownership and transfers in Section 5.10 hereof, is no longer required for REIT qualification and may waive compliance with any restriction or limitation during any period in which the Board has determined not to pursue or preserve the Company’s status as a REIT.

(iii)SALE, DISPOSITION AND USE OF COMPANY ASSETS.  The Board shall have the power and authority to (A) sell, rent, lease, hire, exchange, release, partition, assign, mortgage, grant security interests in, encumber, negotiate, dedicate, grant easements in and options with respect to, convey, transfer (including transfers to entities wholly or partially owned by the Company or any Director) any or all of the Company’s assets, (B) dispose of any or all of the Company’s assets by deeds (including deeds in lieu of foreclosure with or without consideration), trust deeds, assignments, bills of sale, transfers, leases, mortgages, financing statements, security agreements and other instruments for any of the purposes executed and delivered for and on behalf of the Company or the Board by one or more of the Directors or by a duly authorized officer, employee, agent or nominee of the Company, on the terms as it deems appropriate, (C) give consents and make contracts relating to the Company’s assets and their use or other property or matters, (D) develop, improve, manage, use, alter or otherwise deal with the Company’s assets, and (E) rent, lease or hire from others property of any kind; provided, however, that the Company may not use or apply land for any purposes not permitted by applicable law.  This clause (iii) shall in no way limit the voting rights of stockholders set forth in Section 11.2.

(iv)FINANCINGS.  The Board shall have the power and authority (a) to borrow or, in any other manner, raise money for the purposes and on the terms it determines, which terms (1) may include evidencing the same by issuance of Securities of the Company and (2) may have such provisions as the Board may determine; (b) to reacquire such Securities; (c) to enter into other contracts or obligations on behalf of the Company to guarantee, indemnify or act as surety with respect to payment or performance of obligations of any Person (d) to mortgage, pledge, assign, grant security interests in or otherwise encumber the Company’s assets to secure any such Securities of the Company, contracts or obligations (including guarantees, indemnifications and suretyships); and (e) to renew, modify, release, compromise, extend, consolidate or cancel, in whole or in part, any obligation to or of the Company or participate in any reorganization of obligors to the Company; provided, however, that the Company’s Leverage shall be limited by the provisions of Section 9.3(viii) hereof.

(v)LENDING.  Subject to all applicable limitations in the Charter, including without limitation Section 10.3 hereof, the Board shall have the power and authority to lend money or other assets of the Company on the terms, for the purposes and to the Persons as it may determine.

(vi)ISSUANCE OF SECURITIES.  Subject to the provisions of Article V hereof, the Board may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or other Securities, whether now or hereafter authorized, for such consideration as the Board may deem advisable (or without consideration in the case of a stock split or stock dividend), subject to the restrictions or limitations, if any, as may be set forth in the Charter or the Bylaws.

(vii)EXPENSES AND TAXES.  The Board shall have the power and authority (A) to pay any charges, expenses or liabilities necessary or desirable, in the sole discretion of the Board, for carrying out the purposes of the Charter and conducting the business of the Company, including (1) compensation or fees to Directors, officers, employees and agents of the Company, and to Persons contracting with the Company and (2) any taxes, levies, charges and assessments of any kind imposed upon or chargeable against the Company, the Company’s assets or the Directors in connection therewith and (B) to prepare and file any tax returns, reports or other documents and take any other appropriate action relating to the payment of any charges, expenses or liabilities.

(viii)COLLECTION AND ENFORCEMENT.  The Board shall have the power and authority to collect, sue for and receive money or other property due to the Company; to consent to extensions of

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time for the payment, or to the renewal, of any Securities or obligations; to engage or to intervene in, prosecute, defend, compound, enforce, compromise, release, abandon or adjust any actions, suits, proceedings, disputes, claims, demands, security interests or things relating to the Company, the Company’s assets or the Company’s affairs; and to exercise any rights and enter into any agreements and take any other action necessary or desirable in connection with the foregoing.

(ix)DEPOSITS.  The Board shall have the power and authority to deposit funds or Securities constituting part of the Company’s assets in banks, trust companies, savings and loan associations, financial institutions and other depositories, whether or not the deposits will draw interest, subject to withdrawal on the terms and in the manner as the Board may determine.

(x)VALUATION OF ASSETS.  The Board shall have the power and authority to determine the value of all or any part of the Company’s assets and of any services, Securities, property or other consideration to be furnished to or acquired by the Company, and to revalue all or any part of the Company’s assets, all in accordance with such appraisals or other information as are reasonable and necessary, in its sole judgment.

(xi)OWNERSHIP AND VOTING POWERS.  The Board shall have the power and authority to exercise all of the rights, powers, options and privileges pertaining to the ownership of any of the Company’s assets to the same extent that an individual owner might, including without limitation to vote or give any consent, request or notice or waive any notice, either in person or by proxy or power of attorney, which proxies and powers of attorney may be for any general or special meetings or action, and may include the exercise of discretionary powers.

(xii)OFFICERS, ETC.; DELEGATION OF POWERS.  The Board shall have the power and authority to elect, appoint or employ the officers for the Company and the committees of the Board with the powers and duties as the Board may determine, the Company’s Bylaws provide or the MGCL requires; to engage, employ or contract with and pay compensation to any Person (including any Director and any Person who is an Affiliate of any Director) as agent, representative, Advisor, member of an advisory board, employee or independent contractor (including advisors, consultants, transfer agents, registrars, underwriters, accountants, attorneys-at-law, real estate agents, property and other managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, to perform such services on the terms as the Board may determine; to delegate to one or more Directors, officers or other Persons engaged or employed as aforesaid or to committees of the Board or to the Advisor, the performance of acts or other things (including granting of consents), the making of decisions and the execution of such deeds, contracts, leases or other instruments, either in the names of the Company, the Board or as their attorneys or otherwise, as the Board may determine; and to establish committees as it deems appropriate.

(xiii)ASSOCIATIONS.  The Board shall have the power and authority to cause the Company to enter into Joint Ventures, general or limited partnerships, participation or agency arrangements or any other lawful combinations, relationships or associations of any kind.

(xiv)REORGANIZATIONS, ETC.  The Board shall have the power and authority to cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire all or any part of the Company’s assets, carry on any business in which the Company shall have an interest or otherwise exercise the powers the Board deems necessary, useful or desirable to carry on the business of the Company or to carry out the provisions of the Charter, to merge or consolidate the Company with any Person; to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer all or any part of the Company’s assets to or with any Person in exchange for Securities of such Person or otherwise; and to lend money to, subscribe for and purchase the Securities of, and enter into any contracts with, any Person in which the Company holds, or is about to acquire, securities or any other interests.

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(xv)INSURANCE.  The Board shall have the power and authority to purchase and pay for out of the Company’s assets insurance policies insuring the Stockholders, the Company and the Company’s assets against any and all risks, and insuring the Directors, officers, Advisors and Affiliates of the Company, individually (each an “Insured”) against all claims and liabilities of every nature arising by reason of each Insured holding or having held any such status, office or position or by reason of any action alleged to have been taken or omitted by the Insured in such capacity, whether or not the Company would have the power to indemnify against the claim or liability.  Nothing contained herein shall preclude the Company from purchasing and paying for the types of insurance, including extended coverage liability and casualty and workers’ compensation, as would be customary for any Person owning comparable assets and engaged in a similar business, or from naming the Insured as an additional insured party thereunder, provided that the addition does not add to the premiums payable by the Company.  The Board’s power to purchase and pay for such insurance policies shall be limited to policies that comply with all applicable federal and state laws.

(xvi)DISTRIBUTIONS.  The Board shall have the power and authority to authorize dividends for declaration and payment by the Company or other distributions to Stockholders.

(xvii)DISCONTINUE OPERATIONS; BANKRUPTCY.  The Board shall have the power and authority to discontinue the operations of the Company; to petition or apply for relief under any provision of federal or state bankruptcy, insolvency or reorganization laws or similar laws for the relief of debtors; to permit any Property to be foreclosed upon without raising any legal or equitable defenses that may be available to the Company or the Directors or otherwise defending or responding to the foreclosure; to confess judgment against the Company (as hereinafter defined); or to take such other action with respect to indebtedness or other obligations of the Directors, the Company’s assets or the Company as the Board, in such capacity, and in its discretion may determine.

(xviii)FISCAL YEAR.  Subject to the Code, the Board shall have the power and authority to adopt, and from time to time to change, the fiscal year for the Company.

(xix)SEAL.  The Board shall have the power and authority to adopt and use a seal, but the use of a seal shall not be required for the execution of instruments or obligations of the Company.

(xx)BYLAWS.  The Board shall have the exclusive power and authority to adopt, implement and from time to time alter, amend or repeal the Bylaws.

(xxi)LISTING SHARES.  The Board shall have the power and authority to cause the Listing of the Common Shares at any time after completion of the Initial Public Offering.

(xxii)FURTHER POWERS.  The Board shall have the power and authority to do all other acts and things and execute and deliver all instruments incident to the foregoing powers, and to exercise all powers that it deems necessary, useful or desirable to carry on the business of the Company or to carry out the provisions of the Charter, even if the powers are not specifically provided hereby.

SECTION 7.3  DETERMINATION BY BOARD OF BEST INTEREST OF COMPANY.  The determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board consistent with the Charter, shall be final and conclusive and shall be binding upon the Company and every Stockholder:  (a) the amount of the Net Income of the Company for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its stock or the payment of other distributions; (b) the amount of paid-in surplus, net assets, other surplus, annual or other cash flow, funds from operations, net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; (c) the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any

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obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); (d) any interpretation of a provision of this Charter, including the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to dividends or distributions, qualifications or terms or conditions of redemption of any class or series of Shares; (e) the fair value, or any sale, bid or ask price to be applied in determining the fair value, of any asset owned or held by the Company or of any Shares; (f) the number of Shares of any class; (g) any matter relating to the acquisition, holding and disposition of any assets by the Company; (h) any matter relating to the qualification of the Company as a REIT or election of a different tax status for the Company; or (i) any other matter relating to the business and affairs of the Company or required or permitted by applicable law, the Charter or Bylaws or otherwise to be determined by the Board.

ARTICLE VIII

ADVISOR

SECTION 8.1  APPOINTMENT AND INITIAL INVESTMENT OF ADVISOR.  The Board is responsible for setting the general policies of the Company and for the general supervision of its business conducted by officers, agents, employees, advisors or independent contractors of the Company.  However, the Board is not required personally to conduct the business of the Company, and it may (but need not) appoint, employ or contract with any Person (including a Person Affiliated with any Director) as an Advisor and may grant or delegate the authority to the Advisor as the Board may, in its sole discretion, deem necessary or desirable.  The term of retention of any Advisor shall not exceed one year, although there is no limit to the number of times that a particular Advisor may be retained.  Prior to the sale of a Share in the Initial Public Offering, the Company shall require that the initial Advisor or its Affiliate make an initial investment of at least $200,000 in the Company.  The Company shall restrict the transfer of this initial investment while the Advisor remains a Sponsor except for transfers to Affiliates of the Advisor.

SECTION 8.2  SUPERVISION OF ADVISOR.  The Board shall review and evaluate the qualifications of the Advisor before entering into an Advisory Management Agreement and shall evaluate the performance of the Advisor before renewing an Advisory Management Agreement, and the criteria used in such evaluation shall be reflected in the minutes of the meetings of the Board.  The Board may exercise broad discretion in allowing the Advisor to administer and regulate the operations of the Company, to act as agent for the Company, to execute documents on behalf of the Company and to make executive decisions that conform to general policies and principles established by the Board.  The Board shall monitor the Advisor to assure that the administrative procedures, operations and programs of the Company are in the best interests of the Stockholders and are fulfilled.  The Independent Directors are responsible for reviewing the fees and expenses of the Company at least annually and with sufficient frequency to determine that the expenses incurred are reasonable in light of the investment performance of the Company, its Net Assets, its Net Income and the fees and expenses of other comparable unaffiliated REITs. Each such determination shall be reflected in the minutes of the meetings of the Board.  The Independent Directors also will be responsible for reviewing, from time to time and at least annually, the performance of the Advisor and determining that the compensation to be paid to the Advisor is reasonable in relation to the nature and quality of services performed and that such compensation is within the limits prescribed by the Charter.  The Independent Directors shall also supervise the performance of the Advisor and the compensation paid to the Advisor by the Company to determine that the provisions of the Advisory Management Agreement are being carried out.  The Independent Directors shall consider all factors that they deem relevant, and the findings of the Independent Directors on the factors considered shall be recorded in the minutes of the Board.  The Board shall determine whether any successor Advisor possesses sufficient qualifications to perform the advisory function for the Company and whether the compensation provided for in its contract with the Company is justified.

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SECTION 8.3  FIDUCIARY OBLIGATIONS.  The Advisor shall have a fiduciary duty and responsibility to the Company and to the holders of Common Shares.

SECTION 8.4  AFFILIATION AND FUNCTIONS.  The Board, by resolution or in the Bylaws, may provide guidelines, provisions or requirements concerning the affiliation and functions of the Advisor.

SECTION 8.5  TERMINATION.  Either a majority of the Independent Directors or the Advisor may terminate the Advisory Management Agreement on 60 days’ written notice without cause or penalty, and, in that event, the Advisor will cooperate with the Company and the Board in making an orderly transition of the advisory function.

SECTION 8.6  COMMISSION ON SALE OF ASSETS.  The Company may pay the Advisor or an Affiliate thereof a disposition fee upon the Sale of one or more Assets, in an amount equal to the lesser of (i) one-half (1/2) of the Competitive Real Estate Commission (including the disposition fee paid to the Advisor or its Affiliate), or (ii) three percent (3%) of the sales price of such Asset.  Payment of such fee may be made only if the Advisor provides a substantial amount of services in connection with the Sale of a Property or Properties or Asset or Assets, as determined by a majority of the Independent Directors.  In addition, the amount paid when added to all other real estate commissions paid to unaffiliated parties in connection with such Sale shall not exceed the lesser of the Competitive Real Estate Commission or an amount equal to 6% of the sales price of such Asset.

SECTION 8.7  INCENTIVE FEES.  The Company may pay the Advisor an interest in the gain from the Sale of Assets, for which full consideration is not paid in cash or property of equivalent value, provided the amount or percentage of the interest is reasonable.  Such an interest in gain from the Sale of Assets shall be considered presumptively reasonable if it does not exceed 15% of the net proceeds remaining after payment to holders of Common Shares, in the aggregate, of an amount equal to 100% of the Invested Capital, plus an amount equal to the Stockholders’ 6% Return.  In the case of multiple Advisors, such Advisor and any of their Affiliates shall be allowed such fees provided such fees are distributed by a proportional method reasonably designed to reflect the value added to the Assets by each respective Advisor or any Affiliate.

SECTION 8.8  ACQUISITION FEES.  The Company shall not purchase an Asset if the Acquisition Fees and Acquisition Expenses incurred in connection therewith are not reasonable or if they exceed an amount equal to 6% of the Contract Purchase Price, or, in the case of a Mortgage, 6% of the funds advanced, provided, however, that a majority of the Directors (including a majority of the Independent Directors) not otherwise interested in the transaction may approve fees and expenses in excess of this limit if they determine the transaction to be commercially competitive, fair and reasonable to the Company.

SECTION 8.9  REIMBURSEMENT FOR TOTAL OPERATING EXPENSES.  The Independent Directors shall have the responsibility of limiting Total Operating Expenses to amounts that do not exceed the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for the four consecutive fiscal quarters then ended unless they have made a finding that, based on such unusual and non-recurring factors that they deem sufficient, a higher level of expenses (an “Excess Amount”) is justified.  After the end of any fiscal quarter of the Company for which there is an Excess Amount for the four consecutive fiscal quarters then ended, such fact shall be disclosed in the next quarterly report of the Company or shall be disclosed in writing and sent to the holders of Common Shares within 60 days of such quarter-end, together with an explanation of the factors the Independent Directors considered in determining that such Excess Amount was justified.  Any such finding and the reasons in support thereof shall be reflected in the minutes of the meetings of the Board.  In the event that the Independent Directors do not determine that excess expenses are justified, the Advisor shall reimburse the Company the amount

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by which the expenses exceeded the 2%/25% Guidelines.  Reimbursement by the Company of the Advisor for all or any portion of the Total Operating Expenses that exceed the limitation of the 2%/25% Guidelines may, at the option of the Advisor, be deferred without interest and may be reimbursed in any subsequent period where such limitation would permit such reimbursement if the Total Operating Expenses were incurred during such period.

SECTION 8.10  CORPORATE OPPORTUNITIES.  For so long as the Company is externally advised by the Advisor, the Company has no interest in any opportunity known to the Advisor or an Affiliate thereof unless it has been recommended to the Company by the Advisor.  The preceding sentence shall be of no consequence except in connection with the application of the corporate opportunity doctrine.

ARTICLE IX

INVESTMENT POLICIES AND LIMITATIONS

SECTION 9.1  INVESTMENT POLICIES.  The Board shall establish written policies on investments and borrowings and shall monitor the administrative procedures, investment operations and performance of the Company and the Advisor to ensure such policies are carried out.  Independent Directors shall review the investment policies of the Company with sufficient frequency (and, upon Commencement of the Initial Public Offering, not less often than annually) to determine that the policies being followed by the Company are in the best interests of its holders of Common Shares.  Each determination and the basis therefor shall be set forth in the minutes of the meetings of the Board.

SECTION 9.2 LIMITATIONS ON INVESTMENTS IN EQUITY SECURITIES.  The Company may invest in equity securities only if a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction approve such investment as being fair, competitive and commercially reasonable; provided, that investments in equity securities in “publicly traded entities” that are otherwise approved by a majority of Directors (including a majority of Independent Directors) shall be deemed fair, competitive and commercially reasonable if the Company acquires the equity securities through a trade that is effected in a recognized securities market.  For these purposes, a “publicly traded entity” shall mean any entity having securities listed on a national securities exchange or included for quotation on an inter-dealer quotation system.  This provision is not intended to limit (i) real estate acquisitions effected through the purchase of all of the equity securities of an existing entity, (ii) the investment in wholly owned subsidiaries of the Company or (iii) investments in mortgage-backed securities.

SECTION 9.3  OTHER INVESTMENT LIMITATIONS.  In addition to other investment restrictions imposed by the Board from time to time, consistent with the Company’s objective of qualifying as a REIT, the following shall apply to the Company’s investments:

(i)Not more than 10% of the Company’s total assets shall be invested in Unimproved Real Property or mortgage loans on Unimproved Real Property.

(ii)The Company shall not invest in commodities or commodity future contracts.  This limitation is not intended to apply to futures contracts, when used solely for hedging purposes in connection with the Company’s ordinary business of investing in Assets.

(iii)The Company shall not invest in or make any Mortgage unless an appraisal is obtained concerning the underlying property except for those loans insured or guaranteed by a government or government agency.  In cases in which a majority of Independent Directors so determine, and in all cases in which the transaction is with the Advisor, Sponsor, Directors, or any Affiliates thereof, the appraisal of

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the underlying property must be obtained from an Independent Appraiser.  The appraisal shall be maintained in the Company’s records for at least five years and shall be available for inspection and duplication by any holder of Common Shares.  In addition to the appraisal, a mortgagee’s or owner’s title insurance policy or commitment as to the priority of the mortgage or condition of the title must be obtained.

(iv)The Company shall not make or invest in any Mortgage, including a construction loan, on any one property if the aggregate amount of all mortgage loans outstanding on the property, including the loans of the Company, would exceed an amount equal to 85% of the appraised value of the property as determined by appraisal unless substantial justification exists because of the presence of other underwriting criteria.  For purposes of this subsection, the “aggregate amount of all mortgage loans outstanding on the property, including the loans of the Company” shall include all interest (excluding contingent participation in income and/or appreciation in value of the mortgaged property), the current payment of which may be deferred pursuant to the terms of such loans, to the extent that deferred interest on each loan exceeds 5% per annum of the principal balance of the loan.

(v)The Company shall not invest in indebtedness secured by a mortgage on Real Property which is subordinate to the mortgage or equity interest of the Advisor, any Director, the Sponsor or any Affiliate of the Company.

(vi)The Company shall not issue (A) equity Securities redeemable solely at the option of the holder (except that Stockholders may offer their Common Shares to the Company pursuant to any redemption plan adopted by the Board on terms outlined in the Prospectus relating to any Offering, as such plan is thereafter amended in accordance with its terms); (B) debt Securities unless the historical debt service coverage (in the most recently completed fiscal year) as adjusted for known changes is sufficient to properly service that higher level of debt as determined by the Board or a duly authorized officer of the Company; (C) equity Securities on a deferred payment basis or under similar arrangements; or (D) options or warrants to purchase Shares of the Company to the Advisor, Directors, Sponsor or any Affiliate thereof except on the same terms as the options or warrants are sold to the general public.  Options or warrants may be issued to persons other than the Advisor, Directors, Sponsor or any Affiliate thereof, but not at exercise prices less than the fair market value of the underlying Securities on the date of grant and not for consideration (which may include services) that in the judgment of the Independent Directors has a market value less than the value of the option or warrant on the date of grant.  Options or warrants issuable to the Advisor, Directors, Sponsor or any Affiliate thereof shall not exceed ten percent (10%) of the outstanding Common Shares on the date of grant.

(vii)A majority of the Directors shall authorize the consideration to be paid for each Asset, ordinarily based on the fair market value of the Asset.  If a majority of the Independent Directors determine, or if the Asset is acquired from the Advisor, a Director, the Sponsor or their Affiliates, the fair market value shall be determined by a qualified Independent Appraiser selected by the Independent Directors.

(viii)The aggregate Leverage shall be reasonable in relation to the Net Assets and shall be reviewed by the Board at least quarterly.  The maximum amount of the Leverage shall not exceed 300% of the Net Assets as of the date of any borrowing.  Notwithstanding the foregoing, Leverage may exceed such limit if any excess in borrowing over the 300% level is approved by a majority of the Independent Directors.  Any such excess borrowing shall be disclosed to Stockholders in the next quarterly report of the Company following the borrowing, along with justification for the excess.

(ix)The Company shall not invest in real estate contracts of sale unless the contracts of sale are in recordable form and appropriately recorded in the chain of title.

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ARTICLE X

CONFLICTS OF INTEREST

SECTION 10.1  RELATED PARTY TRANSACTIONS.  Any transaction between the Company and a Sponsor, the Advisor, a Director or an Affiliate thereof may be effected only if a majority of the Directors (including a majority of the Independent Directors) not otherwise interested in such transaction approve such transaction as fair and reasonable to the Company and the Stockholders.

ARTICLE XI

STOCKHOLDERS

SECTION 11.1  MEETINGS OF STOCKHOLDERS.  There shall be an annual meeting of the Stockholders, to be held at such time and place as shall be determined by or in the manner prescribed in the Bylaws, at which the Directors shall be elected and any other proper business may be conducted.  The annual meeting will be held on a date that is a reasonable period of time following the distribution of the Company’s annual report to Stockholders but not less than thirty (30) days after delivery of such report; the Directors, including the Independent Directors, shall take reasonable efforts to ensure that this requirement is met.  A majority of the Common Shares present in person or by proxy at an annual meeting at which a quorum is present, may, without the necessity for concurrence by the Board, vote to elect the Directors.  Special meetings of Stockholders may be called in the manner provided in the Bylaws, including by the president or by a majority of the Directors or a majority of the Independent Directors, and shall be called by an officer of the Company upon written request of Stockholders holding in the aggregate not less than ten percent (10%) of the outstanding Common Shares entitled to be voted on any issue proposed to be considered at any such special meeting.  Notice of any special meeting of Stockholders shall be given as provided in the Bylaws, and the special meeting shall be held not less than 15 days nor more than 60 days after the delivery of such notice.  If the meeting is called by written request of Stockholders as described in this Section 11.1, notice of the special meeting shall be sent to all Stockholders within ten (10) days of the receipt of the written request, and the special meeting shall be held at the time and place specified in the Stockholder request; provided, however, that if none is so specified, at such time and place convenient to the holders of Common Shares.  If there are no Directors, the officers of the Company shall promptly call a special meeting of the Stockholders entitled to vote for the election of successor Directors.  Any meeting may be adjourned and reconvened as the Board may determine or as otherwise provided in the Bylaws.

SECTION 11.2  VOTING RIGHTS OF HOLDERS OF COMMON STOCK.  Subject to the provisions of any class or series of Shares then outstanding and the mandatory provisions of any applicable laws or regulations, the holders of Common Shares shall be entitled to vote only on the following matters: (i) election or removal of Directors, without the necessity for concurrence by the Board, as provided in Sections 11.1 and 6.5 hereof; (ii) an amendment of the Charter, without the necessity for concurrence by the Board; (iii) the Company being a party to a merger, consolidation, share exchange or a transfer of all or substantially all of its assets, notwithstanding that the MGCL may not require the approval of the holders of Common Shares; (iv) dissolution of the Company, without the necessity for concurrence by the Board; and (v) such other matters with respect to which the Board has adopted a resolution declaring that a proposed action is advisable and declaring that the matter be submitted to the holders of Common Shares for approval or ratification.  Except with respect to the foregoing matters, no action taken by the holders of Common Shares at any meeting shall in any way bind the Board.  Further, except as provided by Section 13.1 hereof, none of the actions in (ii), (iii) or (iv) above may be taken without the affirmative vote of the holders of not less than a majority of the Common Shares then outstanding and entitled to vote on the matter.

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SECTION 11.3  VOTING LIMITATIONS ON SHARES HELD BY THE ADVISOR, DIRECTORS AND AFFILIATES.  Following the sale of any Common Shares in the Initial Public Offering, with respect to Shares owned by the Advisor, any Director, or any of their Affiliates, neither the Advisor, nor such Director(s), nor any of their Affiliates may vote or consent on matters submitted to the holders of Common Shares regarding the removal of the Advisor, such Director(s) or any of their Affiliates or any transaction between the Company and any of them, provided the preceding restriction shall only apply to Directors with an interest in the matter submitted to the holders of Common Shares for a vote.  In determining the requisite percentage in interest of Shares necessary to approve a matter on which the Advisor, such interested Director(s) and any of their Affiliates may not vote or consent, any Shares owned by any of them shall not be included.

SECTION 11.4  RIGHT OF INSPECTION.  Any holder of Common Shares and any designated representative thereof shall be permitted access to the records of the Company to which it is entitled under the MGCL at all reasonable times, and may inspect and copy any of them for a reasonable charge.  Inspection of the Company books and records by the office or agency administering the securities laws of a jurisdiction shall be provided upon reasonable notice and during normal business hours.

SECTION 11.5  ACCESS TO STOCKHOLDER LIST.  An alphabetical list of the names and addresses of the holders of Common Shares, along with the number of Common Shares held by each of them (the “Stockholder List”), shall be maintained as part of the books and records of the Company and shall be available for inspection by a holder of Common shares or such holder’s agent at the home office of the Company in accordance with Maryland law.  Each Stockholder who receives a copy of the Stockholder List shall keep such list confidential and shall sign a confidentiality agreement to the effect that such Stockholder will keep the Stockholder List confidential and share such list only with its employees, representatives or agents who agree in writing to maintain the confidentiality of the Stockholder List.

SECTION 11.6  PROXY TO LIQUIDATE.  After six (6) years following the Termination of the Initial Public Offering, if the Company is not then Listed, in the process of Listing or making an orderly liquidation and sale of the Company’s assets, and unless such date is extended by the majority vote of the Directors, including a majority of the Independent Directors, (i) the Board shall adopt a resolution that declares a proposed liquidation (within 30 months of Stockholder approval thereof) is advisable on substantially the terms and conditions set forth in the resolution and directs that the proposed liquidation be submitted for consideration at a meeting of the Stockholders and (ii) the Company shall formally proxy the Stockholders holding Shares entitled to vote thereon to determine whether the Company should be liquidated (the “Proxy to Liquidate”) as soon as reasonably practicable following the receipt of independent appraisals of the Company’s assets, which the Company shall obtain as part of this proxy process, and the filing with and review of such Proxy to Liquidate by the Securities and Exchange Commission if the Company’s securities are then registered with the Commission under the Exchange Act.  Notwithstanding the required Board resolution, the Proxy to Liquidate need not state the Board’s ongoing support of the liquidation proposal if the Board does not support the proposal as of the date of the Proxy to Liquidate.  To ensure that Stockholders are adequately informed when casting their votes, the Proxy to Liquidate furnished to each Stockholder holding Shares entitled to vote thereon shall include financial information setting forth per Share pro forma tax and financial projections that assume that all of the Company’s assets will be sold immediately at prices consistent with their appraised values, or such other information as the Company deems appropriate and informative, provided in all such cases that the furnishing of such information to Stockholders shall not contravene applicable law or applicable rules and regulations of the Securities and Exchange Commission regarding the solicitation of proxies, if such rules are applicable.  The Proxy to Liquidate shall set a meeting of the Stockholders holding Shares entitled to vote thereon no earlier than forty-five (45) days after notice thereof, and the actual voting results shall be tabulated by the Company’s independent accountants or an independent agent, who will receive the votes directly from the Stockholders holding Shares entitled to vote thereon.  The Company shall disclose the

33

complete voting results for the Proxy to Liquidate in the Company’s next annual or quarterly report sent to the Stockholders for the period following the date on which voting was completed.  Under no circumstances, however, shall the Board direct the Operating Partnership to make distributions “in kind” of any assets to the Stockholders under any dissolution conducted pursuant to this Section.

After two years following the Stockholder vote called for above, if the liquidation proposal shall fail to be approved by the Stockholders, then upon receipt by the Secretary of the Company of written requests from Stockholders holding ten percent (10%) or more of the outstanding Common Shares the Board and the Company shall repeat the process described in the preceding paragraph.  The Company shall not be required to send Proxies to Liquidate to Stockholders more frequently than once during every two (2) year period.

SECTION 11.7  TENDER OFFERS.  If any Stockholder makes a tender offer, including, without limitation, a “mini-tender” offer, such Stockholder must comply with all of the provisions set forth in Regulation 14D of the Exchange Act, including, without limitation, disclosure and notice requirements, that would be applicable if the tender offer was for more than 5% of the outstanding Securities of the Company, provided, however, that such documents are not required to be filed with the Securities and Exchange Commission.  In addition, any such Stockholder must provide notice to the Company at least ten (10) business days prior to initiating any such tender offer.  If any Stockholder initiates a tender offer without complying with the provisions set forth above (a “Non-Compliant Tender Offer”), the Company, in its sole discretion, shall have the right to redeem such non-compliant Stockholder’s Shares and any Shares acquired in such tender offer (collectively, the “Tendered Shares”) at the lesser of (i) the price then being paid per Share of Common Stock purchased in the Company’s latest Offering at full purchase price (not discounted for commission reductions nor for reductions in sale price permitted pursuant to the distribution reinvestment plan), (ii) the fair market value of the Shares as determined by an independent valuation obtained by the Company or (iii) the lowest tender offer price offered in such Non-Compliant Tender Offer.  The Company may purchase such Tendered Shares upon delivery of the purchase price to the Stockholder initiating such Non-Compliant Tender Offer, and, upon such delivery, the Company may instruct any transfer agent to transfer such purchased Shares to the Company.  In addition, any Stockholder who makes a Non-Compliant Tender Offer shall be responsible for all expenses incurred by the Company in connection with the enforcement of the provisions of this Section 11.7, including, without limitation, expenses incurred in connection with the review of all documents related to such tender offer and expenses incurred in connection with any purchase of Tendered Shares by the Company.  The Company maintains the right to offset any such expenses against the dollar amount to be paid by the Company for the purchase of Tendered Shares pursuant to this Section 11.7.  In addition to the remedies provided herein, the Company may seek injunctive relief, including, without limitation, a temporary or permanent restraining order, in connection with any Non-Compliant Tender Offer.  This Section 11.7 shall be of no force or effect with respect to any Shares that are then Listed.

SECTION 11.8  RIGHTS OF OBJECTING STOCKHOLDERS.  Holders of Shares shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL unless the Board, upon the affirmative vote of a majority of the Board, shall determine that such rights apply, with respect to all or any classes or series of stock, to one or more transactions or all transactions occurring after the date of such determination in connection with which holders of such Shares would otherwise be entitled to exercise such rights.

SECTION 11.9  UNSOLICITED TAKEOVER STATUTE.  Until such time as the Common Shares are Listed, the Company may not elect to be governed by the provisions of Title 3, Subtitle 8 of the MGCL.

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ARTICLE XII

LIABILITY OF STOCKHOLDERS, DIRECTORS, ADVISORS AND AFFILIATES;
TRANSACTIONS BETWEEN AFFILIATES AND THE COMPANY

SECTION 12.1  LIMITATION OF STOCKHOLDER LIABILITY.  No Stockholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Company by reason of his being a Stockholder, nor shall any Stockholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any Person in connection with the Company’s assets or the affairs of the Company by reason of his being a Stockholder.  The Common Shares shall be non-assessable by the Company upon receipt by the Company of the consideration for which the Board authorized their issuance.

SECTION 12.2  LIMITATION OF DIRECTOR AND OFFICER LIABILITY.  To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no director or officer of the Company shall be liable to the Company or its stockholders for money damages. Neither the amendment nor repeal of this Section 12.2 nor the adoption or amendment of any other provision of the charter or bylaws inconsistent with this Section 12.2, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption.

SECTION 12.3  INDEMNIFICATION.  The Company shall indemnify, to the fullest extent permitted by Maryland law, as applicable from time to time, its present and former directors and officers, whether serving or having or at its request any other entity, for any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) relating to any action alleged to have been taken or omitted in such capacity as a director or officer. The Company shall pay or reimburse all reasonable expenses incurred by a present or former director or officer, whether serving or having served, the Company or at its request any other entity, in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) in which the present or former director or officer is a party, in advance of the final disposition of the proceeding, to the fullest extent permitted by, and in accordance with the applicable requirements of, Maryland law, as applicable from time to time. The Company may indemnify any other persons, including a person who served a predecessor of the Company as an officer or director, permitted but not required to be indemnified by Maryland law as applicable from time to time, if and to extent indemnification is authorized and determined to be appropriate, in each case in accordance with applicable law. No amendment of the Charter of the Company or repeal of any of its provisions shall limit or eliminate any of the benefits provided to directors and officers under this Section 12.3 in respect of any act or omission that occurred prior to such amendment or repeal.

SECTION 12.4  EXPRESS EXCULPATORY CLAUSES IN INSTRUMENTS.  Neither the Stockholders nor the Directors, officers, employees or agents of the Company shall be liable under any written instrument creating an obligation of the Company by reason of their being Stockholders, Directors, officers, employees or agents of the Company, and all Persons shall look solely to the Company’s assets for the payment of any claim under or for the performance of that instrument.  The omission of the foregoing exculpatory language from any instrument shall not affect the validity or enforceability of such instrument and shall not render any Stockholder, Director, officer, employee or agent liable thereunder to any third party, nor shall the Directors or any officer, employee or agent of the Company be liable to anyone as a result of such omission.

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ARTICLE XIII

AMENDMENT; ROLLUP TRANSACTIONS; EXTRAORDINARY ACTIONS

SECTION 13.1  AMENDMENT.  The Company reserves the right from time to time to make any amendment to its Charter, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Charter, of any Shares of outstanding stock.  All rights and powers conferred by the Charter on Stockholders, Directors and officers are granted subject to this reservation.  Notwithstanding anything to the contrary contained herein, a majority of the entire Board (including a majority of the Independent Directors) without the vote or consent of the Stockholders may at any time amend the Charter (a) to increase or decrease the number of aggregate Shares of the Company or the number of Shares of any class or series that the Company has the right to issue, (b) to change the name of the Company, or (c) to change the designation of classes or series of unissued Shares; provided, however, that an amendment of the Charter that adversely affects the rights, preferences and privileges of holders of Common Shares shall require the concurrence of the holders of a majority of the outstanding Common Shares.

SECTION 13.2  EXTRAORDINARY ACTIONS.  Notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of the holders of shares entitled to cast a greater number of votes, any such action shall be effective and valid if taken or approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter.

ARTICLE XIV

MISCELLANEOUS

SECTION 14.1  GOVERNING LAW.  These Third Articles of Amendment and Restatement are executed by the individual named below and delivered in the State of Maryland with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the MGCL without regard to conflicts of laws provisions thereof.

SECTION 14.2  RELIANCE BY THIRD PARTIES.  Any certificate shall be final and conclusive as to any persons dealing with the Company if executed by an individual who, according to the records of the Company or of any recording office in which this Charter may be recorded, appears to be the Secretary or an Assistant Secretary of the Company or a Director, and if certifying to: (i) the number or identity of Directors, officers of the Company or Stockholders; (ii) the due authorization of the execution of any document; (iii) the action or vote taken, and the existence of a quorum, at a meeting of the Board or Stockholders; (iv) a copy of the Charter or of the Bylaws as a true and complete copy as then in force; (v) an amendment to this Charter; (vi) the dissolution of the Company; or (vii) the existence of any fact or facts that relate to the affairs of the Company.  No purchaser, lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made on behalf of the Company by the Board or by any duly authorized officer, employee or agent of the Company.

SECTION 14.3  PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.

(i)The provisions of this Charter are severable, and if the Board shall determine that any one or more of such provisions are in conflict with the REIT Provisions of the Code, or other applicable federal or state laws, the conflicting provisions shall be deemed never to have constituted a part of this Charter, even without any amendment of this Charter; provided, however, that such determination by the Board shall not affect or impair any of the remaining provisions of this Charter or render invalid or

36

improper any action taken or omitted prior to such determination.  No Director shall be liable for making or failing to make such a determination.

(ii)If any provision of this Charter shall be held invalid or unenforceable in any jurisdiction, such holding shall not in any manner affect or render invalid or unenforceable such provision in any other jurisdiction or any other provision of this Charter in any jurisdiction.

SECTION 14.4  CONSTRUCTION.  In this Charter, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include both genders.  The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of this Charter.  In defining or interpreting the powers and duties of the Company and its Directors and officers, reference may be made, to the extent appropriate, to the Code and to Titles 1 through 3 of the MGCL.

SECTION 14.5  RECORDATION.  These Third Articles of Amendment and Restatement and any amendment hereto shall be filed for record with the State Department of Assessments and Taxation of Maryland and may also be filed or recorded in such other places as the Board deems appropriate, but failure to file for record these Articles or any amendment hereto in any office other than in the State of Maryland shall not affect or impair the validity or effectiveness of these Articles or any amendment hereto.  Any Articles of Amendment and Restatement shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Articles of Incorporation and the various amendments thereto.

THIRD:  The Third Articles of Amendment and Restatement of the Charter as hereinabove set forth were duly advised the Board of Directors of the Company and approved by the stockholders of the Company as required by the MGCL.

FOURTH:  The current address of the principal office of the Company is as set forth in Article III of the foregoing Third Articles of Amendment and Restatement of the Charter.

FIFTH:  The name and address of the Company’s current resident agent are as set forth in Article III of the foregoing Third Articles of Amendment and Restatement of the Charter.

SIXTH:  As of the date of the filing of the foregoing Third Articles of Amendment and Restatement of the Charter, the number of directors of the Company and the names of those currently in office are as set forth in Section 6.1 of the foregoing Third Articles of Amendment and Restatement of the Charter.

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, Behringer Harvard Opportunity REIT II, Inc. has caused these Third Articles of Amendment and Restatement to be signed in its name and on its behalf by its President, and attested by its Secretary, on this 7th of November, 2012.

By:
	Michael J. O’Hanlon
	Chief Executive Officer and President
ATTEST
By:
	Terri Warren Reynolds
	Secretary

THE UNDERSIGNED, Chief Executive Officer and President of Behringer Harvard Opportunity REIT II, Inc., who executed on behalf of said Company the foregoing Third Articles of Amendment and Restatement, of which this certificate is made a part, hereby acknowledges the foregoing Third Articles of Amendment and Restatement to be the corporate act of said Company and, as to all matters or facts required to be verified under oath, further acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

By:
	Michael J. O’Hanlon
	Chief Executive Officer and President

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EX-3.2

Exhibit 3.2

SECOND AMENDED AND RESTATED

BYLAWS

of

BEHRINGER HARVARD

OPPORTUNITY REIT II, INC.

a Maryland Corporation

TABLE OF CONTENTS

		Page
ARTICLE I OFFICES		1
Section 1.01	Principal Offices	1
Section 1.02	Additional Offices	1
ARTICLE II MEETINGS OF STOCKHOLDERS		1
Section 2.01	Place	1
Section 2.02	Annual Meeting	1
Section 2.03	Special Meetings	1
Section 2.04	Notice for Meetings	2
Section 2.05	Scope of Notice	2
Section 2.06	Organization and Conduct	2
Section 2.07	Quorum; Adjournment	2
Section 2.08	Voting	3
Section 2.09	Proxies	3
Section 2.10	Voting of Stock by Certain Holders	3
Section 2.11	Exemption From Control Share Acquisition Statute	3
Section 2.12	Inspectors	4
Section 2.13	Nominations and Stockholder Business	4
Section 2.14	Voting by Ballot	6
ARTICLE III DIRECTORS		7
Section 3.01	General Powers	7
Section 3.02	Number, Tenure And Qualifications	7
Section 3.03	Annual And Regular Meetings	7
Section 3.04	Special Meetings	7
Section 3.05	Notice	7
Section 3.06	Quorum	7
Section 3.07	Voting	8
Section 3.08	Organization	8
Section 3.09	Action by Consent; Informal Action	8
Section 3.10	Presumption of Assent	8
Section 3.11	Telephone Meetings	9
Section 3.12	Removal	9
Section 3.13	Vacancies	9
Section 3.14	Compensation	9
Section 3.15	Loss of Deposits	9
Section 3.16	Surety Bonds	9
Section 3.17	Reliance	9
Section 3.18	Certain Rights of Directors, Officers, Employees and Agents	9
ARTICLE IV COMMITTEES		10
Section 4.01	Designation	10
Section 4.02	Number, Tenure and Qualifications	10
Section 4.03	Power	10
Section 4.04	Meetings	10
Section 4.05	Telephone Meetings	10

i

Section 4.06	Action by Consent; Informal Action	10
Section 4.07	Vacancies	10
ARTICLE V OFFICERS		11
Section 5.01	General Provisions	11
Section 5.02	Removal and Resignation	11
Section 5.03	Vacancies	11
Section 5.04	Power	11
Section 5.05	The Chairman of the Board; Vice Chairman of the Board	11
Section 5.06	The Chief Executive Officer	12
Section 5.07	The President	12
Section 5.08	The Chief Operating Officer	12
Section 5.09	The Treasurer; Chief Financial Officer	12
Section 5.10	Vice Presidents	13
Section 5.11	Assistant Treasurers	13
Section 5.12	Secretary	13
Section 5.13	Assistant Secretaries	13
Section 5.14	Compensation	13
ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS		13
Section 6.01	Contracts	13
Section 6.02	Checks and Drafts	14
Section 6.03	Deposits	14
ARTICLE VII STOCK CERTIFICATES; ISSUANCES, TRANSFERS		14
Section 7.01	Certificates	14
Section 7.02	Transfers; Registered Stockholders	14
Section 7.03	Closing of Transfer Books or Fixing of Record Date	14
Section 7.04	Stock Ledger	15
Section 7.05	Fractional Stock; Issuance of Units	15
ARTICLE VIII ACCOUNTING YEAR		15
ARTICLE IX DISTRIBUTIONS		15
Section 9.01	Authorization	15
Section 9.02	Contingencies	15
ARTICLE X INVESTMENT POLICY		16
ARTICLE XI SEAL		16
Section 11.01	Seal	16
Section 11.02	Affixing Seal	16
ARTICLE XII WAIVER OF NOTICE		16
ARTICLE XIII AMENDMENT OF BYLAWS		16

ii

SECOND AMENDED AND RESTATED

BYLAWS

of

BEHRINGER HARVARD

OPPORTUNITY REIT II, INC.

a Maryland Corporation

ARTICLE I

OFFICES

Section 1.01Principal Offices.  The principal office(s) of Behringer Harvard Opportunity REIT II, Inc. (the “Corporation”) shall be located at such place or places as the Board of Directors may designate from time to time.

Section 1.02Additional Offices.  The Corporation may have additional offices, including a principal executive office, at such places as the Board of Directors may from time to time determine or otherwise as the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.01Place.  All meetings of stockholders shall be held at a principal office of the Corporation or at such other place as shall be set by the Board of Directors and stated in the notice of the meeting.

Section 2.02Annual Meeting.  An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on such day as the Board of Directors may determine. The purpose of each annual meeting of the stockholders shall be to elect directors of the Corporation and to transact such other business as may properly come before the meeting.

Section 2.03Special Meetings.  Special meetings of the stockholders may be called by (i) the President; (ii) a majority of the Board of Directors, (iii) a majority of the Independent Directors, as defined in the Corporation’s charter (the “Charter”); or (iv) upon the written request to the Secretary of the Corporation by the holders of shares entitled to cast at least 10% of all the votes entitled to be cast at such meeting whereby such written request states the purpose of the meeting and the matters proposed to be acted upon at such meeting.  In the event of a stockholders’ meeting called in accordance with subsection (iv) above, the Secretary of the Corporation shall, within ten days of his or her receipt of the written request required in such subsection, notify, in the manner proscribed herein, each stockholder entitled to vote at meeting of the stockholders.  Notwithstanding anything to the contrary herein, such meeting shall be held not less than 15 days nor more than 60 days after the Secretary’s delivery of such notice.  Subject to the foregoing sentence, such meeting shall be held at the time and place specified in the stockholder request; provided, however, that if none is so specified, at such time and place convenient to the stockholders.

Section 2.04Notice for Meetings.  Except as provided otherwise in Section 2.03 of this Article II, the Secretary shall, not less than ten nor more than 90 days before each meeting of stockholders, give to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting, written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise required by the Maryland General Corporation Law (as amended from time to time, the “MGCL”), the purpose of the meeting.  Notice shall be deemed delivered to a stockholder upon being (i) personally delivered to the stockholder; (ii) left at the stockholder’s residence or usual place of business; (iii) mailed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, in which case such notice shall be deemed to be given when deposited in the United States mail with postage prepaid thereon; (iv) transmitted to the stockholder by electronic mail to any electronic mail address of the stockholder or by any other electronic means; or (v) delivered by any other means permitted by the MGCL.

Section 2.05Scope of Notice.  Any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except as otherwise set forth in Section 2.13(a) of this Article II and except for such business as is required by the MGCL or any other relevant statute to be stated in such notice.  No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice.

Section 2.06Organization and Conduct.  Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment, by the Chairman of the board or, in the case of a vacancy in the office or absence of the Chairman of the board, by one of the following officers present at the meeting:  the Vice Chairman of the board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy.  The Secretary, or, in the Secretary’s absence, an Assistant Secretary, or in the absence of both the Secretary and Assistant Secretaries, a person appointed by the Board of Directors or, in the absence of such appointment, an individual appointed by the chairman of the meeting shall act as secretary.  In the event that the Secretary presides at a meeting of the stockholders, an Assistant Secretary shall record the minutes of the meeting.  The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting.  The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) determining when the polls should be opened and closed; (f) maintaining order and security at the meeting; (g) removing any stockholder who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; and (h) concluding the meeting or recessing or adjourning the meeting to a later date and time and place announced at the meeting.  Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.07Quorum; Adjournment.  At any meeting of the stockholders, the presence in person or by proxy of stockholders entitled to cast forty percent (40%) of all the votes entitled to be cast at such meeting shall constitute a quorum except as otherwise provided by law, the Charter or these Bylaws.  If a quorum shall not be present at any meeting of the stockholders, the chairman of the meeting shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting.  At such adjourned meeting

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at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally noticed.

The stockholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Section 2.08Voting.  Except as otherwise required by law, the Charter or these Bylaws, a majority of the votes cast at a meeting of the stockholders duly called and at which a quorum is present shall be sufficient to approve any matter that may properly come before the meeting.  With respect to the election of directors, each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted.  Unless otherwise provided in the Charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of the stockholders.

Section 2.09Proxies.  A stockholder may cast the votes entitled to be cast by the shares of stock owned of record by the stockholder in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law.  Such proxy or evidence of authorization of such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting.  No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

Section 2.10Voting of Stock by Certain Holders.  Stock registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president, a vice president, a general partner, or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock.  Any director or other fiduciary may vote stock registered in his name as such fiduciary, either in person or by proxy.

Shares of the Corporation’s stock owned directly or indirectly by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case, subject to the terms of the Charter, they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder.  The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable.  On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification.

Section 2.11Exemption From Control Share Acquisition Statute.  Notwithstanding any other provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the MGCL, or any successor statute

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thereto, shall not apply to any acquisition by any person of shares of stock of the Corporation.  This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of “control shares,” as such term is defined in the MGCL, and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

Section 2.12Inspectors.

(a)The Board of Directors or the chairman of the meeting may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjournment thereof.  If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors.  In case any person appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting.

(b)The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders.  Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting.  If there is more than one inspector, the report of a majority shall be the report of the inspectors.  The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 2.13Nominations and Stockholder Business.

(a)Annual Meetings of Stockholders.

(1)  Nominations of individuals for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of such meeting; (B) by or at the direction of the Board of Directors; or (C) by any stockholder of the Corporation who (i) was a stockholder of record both at the time of giving of notice provided for in this Section 2.13(a) and at the time of the annual meeting in question; (ii) is entitled to vote at such meeting; and (iii) has complied with the notice procedures set forth in this Section 2.13(a).

(2)  For nominations or other business to be properly brought at an annual meeting by a stockholder pursuant to this paragraph (a)(2) or paragraph (a)(1) of this Section 2.13, the stockholder must give timely notice thereof in writing to the Secretary of the Corporation.  To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive office of the Corporation not less than 120 days nor more than 150 days prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or the 10th day following the day on which disclosure of the date of such meeting is first made.  In no event shall the public announcement of a postponement or adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.  Such stockholder’s notice shall set forth (A) as to each individual whom the stockholder proposes to nominate for election or reelection as a director (i) the name,

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age, business address, and residence address of such individual; (ii) the class and number of shares of stock of the Corporation that are beneficially owned by such individual; and (iii) all other information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such individual’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, (i) a brief description of the business desired to be brought before the meeting; (ii) the reasons for conducting such business at the meeting; and (iii) any material interest in such business of such stockholder and any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder and the Stockholder Associated Person therefrom; (C) as to the stockholder giving the notice and any Stockholder Associated Person, the class, series and number of all shares of stock of the Corporation which are owned by such stockholder and by such Stockholder Associated Person, if any, and the nominee holder for, and number of, shares owned beneficially but not of record by such stockholder and by any such Stockholder Associated Person; (D) as to the stockholder giving the notice and any Stockholder Associated Person covered by clauses (B) or (C) of this Section 2.13(a), the name and address of such stockholder, as they appear on the Corporation’s stock ledger and current name and address, if different, and of such Stockholder Associated Person; and (E) to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or reelection as a director or the proposal of other business on the date of such stockholder’s notice.

(3)  Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section 2.13 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board of Directors made by the Corporation at least 130 days prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.13(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation no later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

(4)  For purposes of this Section 2.13, “Stockholder Associated Person” of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder and (iii) any person controlling, controlled by or under common control with such Stockholder Associated Person.

(b)Special Meetings of Stockholders.  Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of said meeting.  Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation’s notice of said meeting; (ii) by or at the direction of the Board of Directors; or (iii) provided the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who (A) is a stockholder of record both at the time of giving of notice provided for in this Section 2.13(b) at the time of the special meeting; (B) is entitled to vote at the meeting; and (C) complied with the notice procedures set forth in this Section 2.13(b).  In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate an individual or individuals (as the case may be) for election to such

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position as specified in the Corporation’s notice of meeting, if the stockholder’s notice containing the information required by paragraph (a)(2) of this Section 2.13 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 150th day prior to such special meeting and not later than the close of business on the later of the 120th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.  In no event shall the public announcement of a postponement or adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

(c)General.

(1)  If information submitted pursuant to this Section 2.13 by any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall be inaccurate to a material extent, such information may be deemed not to have been provided in accordance with this Section 2.13.  Upon written request by the Secretary or the Board of Directors or any committee thereof, any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall provide, within five business days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory, in the discretion of the Board of Directors or any committee thereof or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 2.13.  If a stockholder fails to provide such written verification within such period, the information as to which written verification was requested may be deemed not to have been provided in accordance with this Section 2.13.

(2)  Only such individuals who are nominated in accordance with the procedures set forth in this Section 2.13 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.13.  The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 2.13, and, if any proposed nomination or business is not in compliance with this Section 2.13, to declare that such defective nomination or proposal, if any, be disregarded.

(3)  For purposes of this Section 2.13, (i) the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for election of directors and (ii) “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(4)  Notwithstanding the foregoing provisions of this Section 2.13, a stockholder shall also comply with all applicable requirements of state law and the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.13.  Nothing in this Section 2.13 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 2.14Voting by Ballot.  Voting on any question or in any election may be viva voce unless the presiding officer shall order, or any stockholder shall demand, that voting be by ballot.

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ARTICLE III

DIRECTORS

Section 3.01General Powers.  The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.

Section 3.02Number, Tenure And Qualifications.  At any regular meeting or at any special meeting called for that purpose, a majority of the members then serving on the Board of Directors may increase or decrease the number of directors, provided that, except as otherwise provided in the Charter, the number thereof shall never be less than the minimum number required by the MGCL or the Charter (whichever is greater), nor more than the maximum number of directors set forth in the Charter, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors.

Section 3.03Annual And Regular Meetings.  An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary.  In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors.  The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of quarterly or regular meetings of the Board of Directors without other notice than such resolution.

Section 3.04Special Meetings.  Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, President or by a majority of the Board of Directors.  The individual or individuals authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them.  The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.

Section 3.05Notice.  Notice of any special meeting of the Board of Directors shall be delivered personally, or by telephone, electronic mail, facsimile transmission, United States mail, or courier to each director at his business or residence address.  Notice by personal delivery, telephone, electronic mail, facsimile transmission or courier shall be given at least twenty four hours prior to the meeting.  Notice by United States mail shall be given at least five days prior to the meeting and shall be deemed to be given when deposited in the United States mail properly addressed, with postage prepaid thereon.  Telephone notice shall be deemed to be given when the director or his agent is personally given such notice in a telephone call to which he or his agent is a party.  Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director.  Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt.  Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed.  Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 3.06Quorum.  A majority of the directors then serving shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that, if pursuant to the Charter or these

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Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group.  The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

Section 3.07Voting.

(a)The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute or the Charter.  If enough directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute or the Charter.

(b)Any action pertaining to any transaction in which the Corporation is purchasing, selling, leasing or mortgaging any real estate asset, making a joint venture investment or engaging in any other transaction in which an advisor, sponsor, director or officer of the Corporation, any affiliated lessee or affiliated contract manager of any property of the Corporation, or any affiliate of the foregoing, has any direct or indirect interest other than as a result of their status as a director, officer, or stockholder of the Corporation, shall be approved in accordance with the applicable provisions of the laws of the State of Maryland.

Section 3.08Organization.  At each meeting of the Board of Directors, the Chairman of the board or, in the absence of the Chairman, the Vice Chairman of the board, if any, shall act as chairman.  In the absence of both the Chairman and Vice Chairman of the board, the Chief Executive Officer or in the absence of the Chief Executive Officer, the President or in the absence of the President, a director chosen by a majority of the directors present, shall act as chairman.  The Secretary or, in his or her absence, an Assistant Secretary of the Corporation, or in the absence of the Secretary and all Assistant Secretaries, an individual appointed by the Chairman, shall act as secretary of the meeting.

Section 3.09Action by Consent; Informal Action.  Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each director, and such action is filed with the minutes of proceedings of the Board of Directors.

Section 3.10Presumption of Assent.  A director of the Corporation who is present at any meeting of the Board of Directors at which action on any matter is taken shall be presumed to have assented to the action unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the individual acting as secretary of the meeting before the adjournment thereof, or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting.  Such right to dissent shall not apply to a director who voted in favor of such action.

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Section 3.11Telephone Meetings.  Directors may participate in a meeting of the Board of Directors by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.  Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 3.12Removal.  At any meeting of stockholders called expressly, but not necessarily solely, for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote on the election of directors.

Section 3.13Vacancies.  If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder (even if fewer than 3 directors remain).  Any vacancy on the Board of Directors for any cause may be filled by a majority of the remaining directors, although such majority is less than a quorum.  Notwithstanding the foregoing, a majority of the Independent Directors shall nominate replacements for vacancies among the Independent Directors’ positions.  Any individual so elected as director shall hold office until the next annual meeting of stockholders and until his or her successor is elected and qualifies.

Section 3.14Compensation.  Directors may, in the discretion of the entire Board of Directors, receive annual or monthly salary and/or equity-based compensation for their services as directors, fixed sums per meeting and/or per visit to real property or other facilities owned or leased by the Corporation, and/or for any service or activity performed or engaged in as directors on behalf of the Corporation.  Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their reasonable out-of-pocket expenses, if any, in connection with each such meeting, property visit, and/or other service or activity they performed or engaged in as directors on behalf of the Corporation.  Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

Section 3.15Loss of Deposits.  No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited.

Section 3.16Surety Bonds.  Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his duties.

Section 3.17Reliance.  Each director, officer, employee and agent of the Corporation shall, in the performance of his duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director.

Section 3.18Certain Rights of Directors, Officers, Employees and Agents.  The directors shall have no responsibility to devote their full time to the affairs of the Corporation.  Any director or officer of the Corporation, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to, or in competition with those of or relating to the Corporation, subject to the provisions of applicable law, the Charter, or the adoption of any policies relating to such interests and activities adopted by the Board of Directors.

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ARTICLE IV

COMMITTEES

Section 4.01Designation.  The Board of Directors may, by a resolution adopted by a majority of the entire Board of Directors, designate an Executive Committee, an Audit Committee, a Compensation Committee, a Leasing Committee, and any other committee it deems appropriate and in the best interest of the Corporation.

Section 4.02Number, Tenure and Qualifications.  Each committee shall be composed of one or more directors, and such committee members shall serve at the pleasure of the Board of Directors.

Section 4.03Power.  Subject to the limitations contained herein and the limitations contained in the resolution establishing such committee, to the extent permitted by law, the executive committee shall have and may exercise all of the power of the Board of Directors in the management of the business and affairs of the corporation.  Each other committee, to the extent expressly provided for in the resolution establishing such committee and except as prohibited by law, shall have and may exercise all of the power of the Board of Directors in such other matters and affairs concerning the Corporation.  Notwithstanding the foregoing, no committee shall have the power of the Board of Directors to fix the compensation of any committee member.

Section 4.04Meetings.  Notice of committee meetings shall be given in the same manner as notice for special or regular meetings of the Board of Directors.  A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee.  The act of a majority of the committee members present at a meeting shall be the act of such committee.  The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee may fix the time and place of its meeting unless the Board shall otherwise provide.  In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member.  Each committee shall keep minutes of its proceedings.

Section 4.05Telephone Meetings.  Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.  Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 4.06Action by Consent; Informal Action.  Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee.

Section 4.07Vacancies.  Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.

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ARTICLE V

OFFICERS

Section 5.01General Provisions.  The officers of the Corporation shall be elected by the Board of Directors, and shall include a President, Treasurer, Secretary, and any other officers as determined by the Board of Directors.  Such officers may include a Chairman of the Board, Vice Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, one or more Vice Presidents, one or more Assistant Treasurers, a Secretary, and/or one or more Assistant Secretaries.  In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable.  The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders, except that the Chief Executive Officer may appoint one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers.  If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient.  Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided.  Any two or more offices except president and vice president may be held by the same person.  In its discretion, the Board of Directors may leave unfilled any office except that of President, Treasurer and Secretary.  Election of an officer or agent shall not itself create contract rights between the Corporation and such officer or agent.

Section 5.02Removal and Resignation.  Any officer or agent of the Corporation may be removed by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.  Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board, the President or the Secretary.  Any resignation shall take effect immediately upon its receipt or at such later time specified in the notice of resignation.  The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.  Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 5.03Vacancies.  A vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 5.04Power.  Officers shall have such power and perform such duties in the management of the corporation as are provided in these Bylaws or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws.

Section 5.05The Chairman of the Board; Vice Chairman of the Board.  Unless otherwise designated by the Board of Directors, the Chief Executive Officer shall also be the Chairman of the Board.  The Chairman of the Board shall preside at all meetings of the stockholders, the Board of Directors and any committee on which he serves.  The Chairman in his role as an executive officer shall not have any authority with respect to the business, financial affairs or day-to-day operations of the Corporation.

The Vice Chairman of the Board shall assist the Chairman of the Board in the discharge of the Chairman’s duties as from time to time may be assigned to him by the Chairman or by the Board of Directors.  At the request of the Chairman, or in case of his absence or inability to act, unless otherwise directed by the Board of Directors, the Vice Chairman of the Board shall perform the duties of the Chairman and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the

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Chairman.  At the request of the Chairman, or in case of the Chairman and the Vice Chairman’s absence or inability to act, unless otherwise directed by the Board of Directors, the Chief Executive Officer shall perform the duties of the Chairman and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chairman.

Section 5.06The Chief Executive Officer.  Unless otherwise designated by the Board of Directors, the President shall also be the Chief Executive Officer.  The Chief Executive Officer shall be the highest ranking executive officer of the Corporation and, subject to the supervision of the Board of Directors, shall have all authority and power with respect to, and shall be responsible for, the general management of the business, financial affairs, and day-to-day operations of the Corporation, including, but not limited to, (i) the supervision and management of all other executive officers; (ii) the development of the Corporation’s long-range strategic plan and the annual operating plan; (iii) the engagement, retention and termination of employees and independent contractors of the Company, the setting of the compensation and other material terms of employment or engagement of employees and independent contractors, and the establishment of work rules for employees; (iv) the representation of the Corporation at any business or financial meeting or presentation with stockholders, lenders, affiliates, strategic or joint venture partners, financial institutions, underwriters, analysts and any other entity with which the Corporation does business; and (v) the initiation, development, and implementation of new business, markets and technologies.  The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors are carried into effect and shall perform such other duties and have such other authority and powers as the Board may from time to time prescribe.  At the request of the Chief Executive Officer, or in case of his absence or inability to act, unless otherwise directed by the Board of Directors, the President shall perform the duties of the Chief Executive Officer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chief Executive Officer.  Additionally, in the event that the Corporation has both a President and a Chief Executive Officer, any powers or duties conferred upon the President in these Bylaws shall concurrently be conferred upon the Chief Executive Officer, and in such event the powers granted to the President shall be subject to the exercise of such powers or duties by the Chief Executive Officer.

Section 5.07The President.  Unless the Board of Directors shall designate otherwise, the Chief Executive Officer shall be the President of the Corporation.  The President shall report to the Chief Executive Officer, if distinct, and shall have, subject to the control of the Chief Executive Officer and the Board, active supervision and management over the day-to-day operations of the Corporation and over its subordinate officers, assistants, agents and employees.  At the request of the President, or in case of his absence or inability to act, unless otherwise directed by the Board of Directors, the Chief Executive Officer shall perform the duties of the President and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President.

Section 5.08The Chief Operating Officer.  Unless the Board of Directors shall designate, the President shall be the Chief Operating Officer of the Corporation.  The Chief Operating Officer shall report to the President, if distinct, and shall have, subject to the control of the President and the Board, active supervision over such portion of the day-to-day operations of the Corporation and over its subordinate officers, assistants, agents and employees as delegated by the President or the Board of Directors.

Section 5.09The Treasurer; Chief Financial Officer.  Unless the Board of Directors shall designate otherwise, the Treasurer shall be the Chief Financial Officer of the Corporation.  The Treasurer shall report to the Chief Executive Officer and shall have, subject to the control of the Chief Executive Officer and the Board of Directors, the general care and custody of the funds and securities of the Corporation and the authority and power with respect to, and the responsibility for, the Corporation’s accounting, auditing, reporting and financial record-keeping methods and procedures; controls and

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procedures with respect to the receipt, tracking and disposition of the revenues and expenses of the Corporation; the establishment and maintenance of depository, checking, savings, investment and other accounts of the Corporation; relations with accountants, financial institutions, lenders, underwriters and analysts; the development and implementation of funds management and short-term investment strategies; the preparation of financial statements and all tax returns and filings of the Corporation; and the supervision and management of all subordinate officers and personnel associated with the foregoing.

Section 5.10Vice Presidents.  Each Vice President shall have such powers and duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President and (in the order as designated by the Board of Directors, or in the absence of such designation, as determined by the length of time each has held the office of Vice President continuously) shall exercise the powers of the President during that officer’s absence or inability to act.  The Board of Directors may designate one or more Vice Presidents as Executive Vice President, Senior Vice President, or as Vice President for particular areas of responsibility.

Section 5.11Assistant Treasurers.  Each Assistant Treasurer shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President.  The Assistant Treasurers (in the order as designated by the Board of Directors or, in the absence of such designation, as determined by the length of time each has held the office of Assistant Treasurer continuously) shall exercise the powers of the Treasurer during that officer’s absence or inability to act.

Section 5.12Secretary.  The Secretary shall maintain minutes of all meetings of the Board of Directors, of any committee, and of the stockholders, or consents in lieu of such minutes, in the Corporation’s minute books, and shall cause notice of such meetings to be given when requested by any person authorized to call such meetings.  The Secretary may sign with the President, in the name of the Corporation, all contracts of the Corporation and affix the seal of the Corporation thereto.  The Secretary shall have charge of the certificate books, stock transfer books, and stock papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection by any director at the office of the Corporation during business hours.  The Secretary shall perform such other duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President.

Section 5.13Assistant Secretaries.  Each Assistant Secretary shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President.  The Assistant Secretaries (in the order designated by the Board of Directors or, in the absence of such designation, as determined by the length of time each has held the office of Assistant Secretary continuously) shall exercise the powers of the Secretary during that officer’s absence or inability to act.

Section 5.14Compensation.  The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director.

ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 6.01Contracts.  The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation

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and such authority may be general or confined to specific instances.  Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Board of Directors and upon the Corporation when authorized or ratified by action of the Board of Directors and executed by an authorized person.

Section 6.02Checks and Drafts.  All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 6.03Deposits.  All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may designate.

ARTICLE VII

STOCK CERTIFICATES; ISSUANCES, TRANSFERS

Section 7.01Certificates.  Except as otherwise provided in these Bylaws, this Section shall not be interpreted to limit the power of the Board of Directors to issue some or all of the shares of any or all of its classes or series without certificates.

Section 7.02Transfers; Registered Stockholders.  The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.

Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein.

Section 7.03Closing of Transfer Books or Fixing of Record Date.  The Board of Directors may (i) set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose, (such record date, in any case, may not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken); or (ii) in lieu of fixing a record date, direct that the stock transfer books be closed for a period not greater than 20 days.  In the case of a meeting of the stockholders, the record date or the date set for the closing of the stock transfer books shall be at least ten days before the date of such meeting.

If no record date is fixed and stock transfer books are not closed for the determination of stockholders, (i) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of (a) the close of business on the day on which the notice of meeting is mailed or (b) the 30th day before the meeting; and (ii) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Board of Directors declaring the dividend or allotment of rights is adopted, provided that the payment or allotment may not be made more than 60 days after the date on which such resolution is adopted.

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When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.

Section 7.04Stock Ledger.  The Corporation shall maintain at one or more of its principal offices or at the office of its counsel, accountants, or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

Section 7.05Fractional Stock; Issuance of Units.  The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine.  Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation.  Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 9.01Authorization.  Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the Charter.  Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the Charter.

Section 9.02Contingencies.  Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve.

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ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the Charter, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 11.01Seal.  The Board of Directors may authorize the adoption of a seal by the Corporation.  The seal shall contain the name of the Corporation and the year of its incorporation and the words “Incorporated Maryland.”  The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 11.02Affixing Seal.  Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place “[SEAL]” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.  Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute.  The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE XIII

AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.  The original or certified copy of these Bylaws, including any amendments thereto, shall be kept at the Corporation’s principal office, as determined pursuant to Article I, Section 1 of these Bylaws.

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The foregoing are certified as the Second Amended and Restated Bylaws of the Company adopted by the Board of Directors as of November 7, 2012.

Secretary

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EX-10.1

Exhibit 10.1

PURCHASE AGREEMENT

BETWEEN

7900 HAMPTON BLVD, LLC,
a Delaware limited liability company

AS SELLER

AND

DEDICATED (PARROTS LANDING) LP,
a Florida limited partnership

AS PURCHASER

covering and describing

Parrots Landing Apartments

In

Broward County, Florida

PURCHASE AGREEMENT

THIS AGREEMENT is entered into as of August 27, 2012, between 7900 HAMPTON BLVD, LLC, a Delaware limited liability company (“Seller”), and DEDICATED (PARROTS LANDING) LP, a Florida limited partnership (“Purchaser”).

ARTICLE I

PURCHASE AND SALE

1.1          Agreement of Purchase and Sale. In consideration of their covenants set forth in this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, for the Purchase Price (as hereinafter defined) and on the terms and conditions set forth herein, the following:

(a)           All of the land situated in the City of North Lauderdale, the County of Broward and the State of Florida, described on Exhibit A attached hereto and made a part hereof, together with all right, title and interest of Seller in and to all benefits, privileges, easements, strips, gores, tenements, hereditaments and appurtenances thereon or appertaining thereto, and together with all right, title and interest of Seller in and to adjacent streets, alleys and rights-of-way (the “Real Estate”). To the extent that the final approved Updated Survey contains any differences from the metes and bounds legal description attached hereto as Exhibit A, upon the Title Company’s approval of such Updated Survey and agreement to insure the legal description in the Updated Survey, the metes and bounds legal description reflected on the Updated Survey shall be substituted for Exhibit “A” for all purposes under this Agreement.

(b)           All structures, buildings, improvements and fixtures, including without limitation all equipment and appliances, used in connection with the operation or occupancy thereof, such as heating and air-conditioning systems and facilities used to provide any utility services, parking services, refrigeration, ventilation, cooking, dishwashing, laundry, trash disposal or other fixtures owned by Seller and located on the Real Estate (“Improvements”).

(c)           All personal property owned by Seller located on or in the Real Estate or Improvements and used in connection with the operation, leasing and maintenance of the Real Estate or Improvements, including, but not limited to, furniture, furnishings, drapes and floor coverings, office equipment and supplies, heating, lighting, refrigeration, plumbing, ventilating, incinerating, cooking, laundry, communication, electrical, dishwashing, and air conditioning equipment, disposals, window screens, storm windows, recreational equipment, pool equipment, patio furniture, sprinklers, hoses, tools and lawn equipment (“Personal Property”), a schedule of which Personal Property is attached hereto as Schedule 1.1(c).

(d)           Seller’s interest in all leases and other agreements to occupy the Real Estate and/or the Improvements, or any portion thereof, as amended from time to time, in effect on the date of Closing, as hereinafter defined (all such leases and agreements being sometimes collectively referred to herein as “Leases”).

(e)           All intangible property owned by Seller and used in connection with the Real Estate, Improvements and Personal Property, including specifically, without limitation, all right, title and interest of Seller in and to the following: (i) the name “Parrots Landing, all logos, all trademarks and trade names used exclusively in connection with any part of the Real Estate and Improvements (specifically excluding, however, the name “Behringer Harvard,” any derivative thereof or any name which includes the words “Behringer Harvard” or any derivative thereof),

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(ii) all plans and specifications, if any, in the possession of Seller which were prepared in connection with the construction of any of the Improvements, (iii) all licenses and permits now in effect with respect to the Real Estate, Improvements and Personal Property, and (iv) all written service and maintenance contracts (“Service Contracts”), unexpired warranties, guaranties and bonds in effect at Closing (as hereinafter defined) and relating to the Property, but only to the extent that such Service Contracts, warranties, guaranties and bonds are assignable by Seller without any necessary third party consent, or to the extent that all necessary third party consents to such assignments have been obtained (provided that Seller shall not be obligated to obtain such third party consents) including without limitation all equipment leases and all rights of Seller thereunder relating to equipment or property located upon the Property, which will survive Closing and which Purchaser elects to assume pursuant to Section 5.4(c) herein (“Intangible Property”).

1.2          Property Defined. The Real Estate, Improvements, Personal Property, Leases and Intangible Property are sometimes collectively referred to herein as the “Property.”

1.3          Permitted Exceptions. The Property shall be conveyed subject to the matters which are, or are deemed to be, Permitted Exceptions pursuant to Article II hereof (herein referred to collectively as the “Permitted Exceptions”).

1.4          Purchase Price. The purchase price for the Property shall be FIFTY-SIX MILLION THREE HUNDRED THOUSAND DOLLARS ($56,300,000) (“Purchase Price”).

1.5          Payment of Purchase Price. The Purchase Price, as increased or decreased by prorations and adjustments as herein provided, shall be payable in full at Closing in cash by wire transfer of immediately available federal funds to a bank account designated by Seller in writing to Purchaser prior to the Closing.

1.6          Earnest Money. Within two (2) business days of the execution of this Agreement of the last of Seller and Purchaser, Purchaser is depositing with Chicago Title Insurance Company (the “Title Company”), having its office at 15951 SW 41st Street, Suite 800, Weston, FL 33331, Attention: Alan S. Weissman (Phone 954-315-1852, Alan.Weissmani@fnf.com) (the “Escrow Agent”), the sum of TWO HUNDRED FIFTY THOUSAND Dollars ($250,000) (the “First Deposit”) in good funds, either by certified bank or cashier’s check or by federal wire transfer. If Purchaser does not exercise the right to terminate this Agreement in accordance with Section 2.3 or Section 3.2 hereof, Purchaser shall, on or before the last date of the Inspection Period (as such term is defined in Section 3.1 hereof), deposit with the Escrow Agent the additional sum of SEVEN HUNDRED FIFTY THOUSAND Dollars ($750,000) (the “Second Deposit”) in good funds, either by certified bank or cashier’s check or by federal wire transfer as an additional deposit under this Agreement. If Purchaser has not elected to terminate this Agreement in accordance with Section 2.3 or Section 3.2 hereof and exercises it right to extend the Closing Date as provided in Section 4.1, Purchaser shall deposit with the Escrow Agent the additional sum of ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) in good funds, either by certified bank or cashier’s check or by federal wire transfer (the “Third Deposit”). Upon receipt of a W-9 (which Purchaser agrees to deliver to the Escrow Agent concurrently with the delivery of the First Deposit), the Escrow Agent shall hold the First Deposit, the Second Deposit and, if applicable, the Third Deposit in an interest-bearing account in accordance with the terms and conditions of this Agreement. The First Deposit, the Second Deposit and, if applicable, the Third Deposit together with all interest earned on such sums, are herein referred to collectively as the “Earnest Money.” All interest accruing on such sums shall become a part of the Earnest Money and shall be distributed as Earnest Money in accordance with the terms of this Agreement. If Purchaser fails to deliver the Second Deposit to the Escrow Agent within the time period specified above, this Agreement shall terminate automatically on the last day of the Inspection

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Period, Escrow Agent shall deliver the Earnest Money to Seller promptly thereafter and neither party shall have any further rights, obligations or liabilities hereunder except to the extent that any right, obligation or liability set forth herein expressly survives termination of this Agreement. Time is of the essence for the delivery of Earnest Money under this Agreement. After the expiration of the Inspection Period, the Earnest Money shall become non-refundable to Purchaser unless otherwise expressly set forth in this Agreement.  The Earnest Money shall be applied to the Purchase Price at Closing unless otherwise set forth herein.

1.7          Independent Contract Consideration. Upon the Effective Date, Purchaser shall deliver to Seller a check in the amount of Fifty Dollars ($50) (the “Independent Contract Consideration”), which amount Seller and Purchaser hereby acknowledge and agree has been bargained for and agreed to as consideration for Seller’s execution and delivery of this Agreement. The Independent Contract Consideration is in addition to and independent of any other consideration or payment provided for in this Agreement, and is nonrefundable in all events.

ARTICLE II

TITLE AND SURVEY

2.1          Title Commitment. As soon after the Effective Date as reasonably practicable through the use of good faith efforts by Seller, Seller shall cause the Title Company (through its title agent Greenberg Traurig, P.A. (the “Title Agent”)) to deliver to Purchaser, at Seller’s expense, (a) a title commitment (“Commitment”) for an owner’s policy of title insurance issued by the Title Company in the amount of the Purchase Price, and (b) legible copies of all recorded instruments referenced in Schedule B and Schedule C of the Commitment.

2.2          Survey. As soon after the Effective Date as reasonably practicable through the use of good faith efforts by Seller, Seller shall cause to be delivered to Purchaser, at Seller’s expense, the existing survey (the “Existing Survey”) of the Real Estate and Improvements. Purchaser shall, at its sole cost, be responsible for obtaining an updated survey (the “Updated Survey,” and together with the Existing Survey, the “Survey”). Purchaser shall cause a copy of the Updated Survey to be delivered to Seller promptly following completion.

2.3          Review of Commitment and Survey. Purchaser shall have until the earlier of (i) ten (10) days after the receipt of the last of the Commitment, legible copies of all instruments referred to in Schedule B and Schedule C thereof, and the Survey or (ii) five (5) days prior to the expiration of the Inspection Period (the “Title Review Period”) to notify Seller in writing of such objections as Purchaser may have to anything contained in the Commitment or the Survey; provided, however, that Purchaser shall not have the right to object to any Permitted Exceptions described in Section 2.5 below. If Purchaser fails to object in writing to any item contained in the Commitment or the Survey during the Title Review Period, Purchaser shall be deemed to have waived its right to object to such item, and such item shall thereafter be deemed a Permitted Exception. During the Title Review Period, Purchaser may order lien letters and reports and planning and zoning reports (“PZR”) (collectively, the “Title Reports”) indicating any zoning ordinances, variances, open permits, code violations or other similar matter affecting the use or development of the Property. In the event that Purchaser objects to any item contained in the Commitment, Title Reports, or the Survey within the Title Review Period (such items being herein referred to as “Title Defects”), Seller shall notify Purchaser in writing within five (5) business days following the date of Purchaser’s notice of such Title Defects (the “Cure Period”) that either (a) the Title Defects have been, or will be at or prior to Closing, removed from the Commitment or the Survey, as the case may be, or (b) Seller has failed or refuses to arrange to have the Title Defects removed.  In no event shall the failure of Seller to deliver a Commitment or a Survey satisfying the requirements of this Section 2.3 extend the period for review of such Commitment or Survey beyond the Inspection Period; and Purchaser’s sole

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remedy on account of any such failure shall be to terminate this Agreement prior to the expiration of the Inspection Period in accordance with the provisions of Section 3.3.

2.4          Failure to Cure Title Defects. If upon the expiration of the Cure Period Seller has not notified Purchaser that Seller has arranged to have the Title Defects removed, then Purchaser may elect (which election must be made in writing within five (5) days following expiration of the Cure Period) either: (a) to terminate this Agreement, in which event the Earnest Money shall be returned to Purchaser as Purchaser’s sole remedy hereunder; or (b) to take title as it then is. If Purchaser does not, within five (5) days after the expiration of the Cure Period, send written notice to Seller of its election to terminate this Agreement pursuant to clause (a) of the preceding sentence, then: (x) Purchaser shall be deemed to have elected to take title as it then is without any reduction in the Purchase Price; (y) all Title Defects not removed from the Commitment or the Survey will thenceforth be deemed Permitted Exceptions; and (z) this Agreement shall remain in full force and effect. Anything to the contrary in this Agreement notwithstanding, Seller shall have no affirmative obligation hereunder to expend any funds or incur any liabilities in order to cause any matters shown in the Commitment or the Survey to be removed, cured or insured over, except that Seller shall pay or discharge any mortgage, lien or encumbrance voluntarily created or assumed by Seller of a definite and ascertainable amount and not created by or resulting from the acts of Purchaser or other parties not related to Seller. If the Commitment (or any subsequent revision thereof) discloses exceptions other than the Permitted Exceptions, and other than those which Seller has agreed to insure against, pay or discharge, then unless Purchaser agrees to accept title as it then is without reduction of the Purchase Price, Seller may, at its option, terminate this Agreement, in which event the Earnest Money shall be returned to Purchaser as Purchaser’s sole remedy under this Agreement.

2.5          Other Permitted Exceptions. In addition to those matters shown in the Commitment and the Survey which become Permitted Exceptions pursuant to Section 2.4 above, the following shall also be deemed to be Permitted Exceptions: (a) the Leases; (b) taxes and standby fees for the year in which Closing occurs; (c) liens and encumbrances arising after the date hereof to which Purchaser consents in writing; and (d) any liens or encumbrances of a definite or ascertainable amount, provided that Seller causes such liens or encumbrances to be insured around such that same do not appear as an exception in the owner’s title insurance policy issued to Purchaser pursuant to the Commitment.

2.6          Owner Title Policy. Subject to the provisions of Section 2.4, on the Closing Date Seller shall cause the Title Company to issue an owner’s title insurance policy at Purchaser’s cost insuring fee simple title in Purchaser as of the Closing Date, in accordance with the Commitment, subject only to the Permitted Exceptions.

2.7          [Intentionally omitted].

2.8          New Title Defects. In the event that, after the delivery of the Existing Survey and after the expiration of the Title Review Period, or after the expiration of the Inspection Period and prior to Closing, a revision of the Title Commitment, Title Reports, or the Survey reveals an adverse matter objectionable to Purchaser that was not disclosed to Purchaser prior to the expiration of the Inspection Period and is not a Permitted Exception (a “New Title Defect”), Purchaser shall have five (5) days after such matter is disclosed to Purchaser to send written notice to Seller of such New Title Defect (it being agreed that if Purchaser fails to object to any New Title Defect within such five-day period, then such New Title Defect shall thereafter be deemed a Permitted Exception). Seller shall notify Purchaser in writing within five (5) days following the date of Purchaser’s notice of such New Title Defect (the “New Title Defect Cure Period”) that either (a) such New Title Defect has been, or will be at or prior to Closing, removed from the Commitment or the Survey, as the case may be, or (b) Seller has failed to arrange to have the New Title Defect removed. If, upon the expiration of the New Title Defect Cure Period, Seller has not notified Purchaser that Seller has arranged to have the New Title Defect removed, then Purchaser may

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elect (which election must be made in writing within five (5) days following expiration of the New Title Defect Cure Period) either: (i) to terminate this Agreement as Purchaser’s sole remedy hereunder (in which event the Earnest Money shall be returned to Purchaser); or (ii) to take title subject to such New Title Defect. If Purchaser does not, within five (5) days after the expiration of the New Title Defect Cure Period, send written notice to Seller of its election to terminate this Agreement pursuant to clause (i) of the preceding sentence, then (x) Purchaser shall be deemed to have elected to take title subject to such New Title Defect without any reduction in the Purchase Price; (y) such New Title Defect will thenceforth be deemed a Permitted Exception; and (z) this Agreement shall remain in full force and effect.

ARTICLE III

INSPECTION PERIOD

3.1          Property Documents. As soon after the Effective Date as reasonably practicable through the use of good faith efforts by Seller, Seller shall deliver through a secure website or make available to Purchaser at the Property, to the extent (and only to the extent) that such items are available and in Seller’s actual possession or in the actual possession of the management company engaged by Seller to manage the Property, the documents described on Exhibit B attached hereto and made a part hereof for all purposes (the “Property Documents”). Purchaser shall, if requested by Seller, execute instruments acknowledging receipt of the Property Documents delivered to Purchaser or made available to Purchaser either at the Property or via a secure website or any other document delivered or made available to Purchaser in connection with the transaction contemplated hereby. During the Inspection Period (as hereinafter defined), Purchaser may inspect the Property Documents during normal business hours and may photocopy same at Purchaser’s expense. Notwithstanding the foregoing provisions, Seller shall not be obligated to deliver to Purchaser any report listed in Exhibit B if the terms of such report restrict Seller from doing so. With respect to any report described in Exhibit B prepared by a third party or prepared from information prepared by a third party, which Seller delivers to Purchaser, Purchaser understands and agrees that (a) such report shall be delivered to Purchaser for general information purposes only, (b) Purchaser shall not have any right to rely on any report received from Seller and will not rely thereon, but rather will rely on inspections and reports performed by or on behalf of Purchaser, and (c) Seller shall have absolutely no liability for any inaccuracy in or omission from any report which it delivers to Purchaser. Any failure of Seller to timely deliver any of the Property Documents or make available any of the Additional Property Documents (as defined in Exhibit B) will not extend the Inspection Period beyond the period prescribed in Section 3.2 hereof, and Purchaser’s sole and exclusive remedy on account of any such failure will be to terminate this Agreement prior to the expiration of the Inspection Period in accordance with the provisions of Section 3.3.  Seller makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in the Property Documents or the Additional Property Documents.

3.2          Right of Inspection. During the period beginning on the Effective Date and ending at 5 p.m., Dallas, Texas time, on September 5, 2012 (the “Inspection Period”), Purchaser and its representatives (including Purchaser’s architects, engineers and consultants) shall have the right to examine the Property Documents and to make a physical inspection of the Property (including the right to conduct such soil, engineering, environmental, hazardous or toxic material, noise pollution, seismic or other physical test, study or investigation as Purchaser may desire, provided, however, that Purchaser must obtain Seller’s consent, which may be withheld in Seller’s sole discretion, to any physically invasive testing or any testing involving sampling, provided that Seller hereby consents to air sampling for radon subject to Seller’s reasonable approval of the sampling locations and provided that all such testing must be completed by the expiration of the Inspection Period). In this regard, Purchaser and its authorized agents and representatives shall be entitled to enter upon the Property at all reasonable times during the Inspection

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Period, upon reasonable prior advance notice (which may be by email) to Seller at least forty-eight (48) hour prior to the intended date of entry to permit Seller to schedule in an orderly manner Purchaser’s examination of the Property and to provide at least twenty-four (24) hours advance written notice to any affected tenants and while accompanied by a representative of Seller, subject to the rights of tenants of the Property and provided that any radon testing shall require at least two business days prior notice to Seller. Each such notice requesting access shall specify the intended date of entry and shall provide a detailed description of the proposed Purchaser inspections, including, without limitation, a list of contractors who will be performing the proposed Purchaser inspections, a copy, if applicable, of the Purchaser’s testing plan involving any test or investigation involving physical disturbance, sampling or invasive testing of any portion of the Property and such other information as Seller reasonably requires in connection with such proposed Purchaser inspection. After Seller has received advance notice as provided above and Seller has given approval of both the request and any testing plan, Purchaser or its designated Purchaser representatives may enter upon the Property during normal business hours for purposes of analysis or other tests and inspections which may be deemed necessary by Purchaser for the Purchaser’s inspection, except as limited in this Agreement. All activities by Purchaser or its representatives during the Inspection Period shall be coordinated through Seller’s designated representative, Jeff Carter, including, but not limited to, contact with tenants. Purchaser must be accompanied by Seller’s manager for the Property or another designated representative of Seller or have received Seller’s permission prior to entering upon the Property in connection with Purchaser’s inspection; provided, however, Purchaser may not enter into any space leased by any tenant without being accompanied by Seller’s manager for the Property or another designated representative of Seller.  Seller agrees to make its manager or other representative reasonably available during normal business hours. All inspections shall occur at reasonable times agreed upon by Seller and Purchaser and shall be conducted so as not to unreasonably interfere with use of the Property by Seller or tenants of the Property. In no event shall Purchaser or its representatives perform any off-site testing. Purchaser will use its best efforts to minimize any disruption or interference caused by any such testing and will repair damage caused by such testing. Purchaser shall remove from the Property any waste materials generated by or during any permitting testing and Purchaser shall be the designated generator of any such waste materials.  Before and during Purchaser inspections, Purchaser and each Purchaser representative conducting any Purchaser inspection shall maintain workers’ compensation insurance in accordance with applicable law, and Purchaser, or the applicable Purchaser representative conducting any Purchaser inspection, shall maintain (a) commercial general liability insurance with limits of at least Two Million Dollars ($2,000,000) for bodily or personal injury or death, (b) property damage insurance in the amount of at least One Million Dollars ($1,000,000), and (c) contractual liability insurance. Purchaser shall deliver to Seller evidence of such workers’ compensation insurance and a certificate evidencing the commercial general liability, property damage and contractual liability insurance before conducting any Purchaser inspection on the Property. Each such insurance policy shall be written by a reputable insurance company having a rating of at least “A:VIII” by Best’s Rating Guide (or a comparable rating by a successor rating service), and shall otherwise be subject to Seller’s prior approval.

3.3          Right of Termination Seller agrees that in the event Purchaser determines, in its sole discretion, that the Property is not suitable for its purposes, then Purchaser shall have the right (“Purchaser’s Termination Right”) to terminate this Agreement on or before the expiration of the Inspection Period. Purchaser’s Termination Right shall be exercisable only by sending written notice of termination (the “Notice of Termination”) to Seller prior to the expiration of the Inspection Period. In the event that Purchaser timely exercises Purchaser’s Termination Right, this Agreement shall terminate and the Earnest Money shall be returned to Purchaser. If Purchaser fails to send Seller a Notice of Termination prior to the expiration of the Inspection Period, Purchaser shall be deemed to have approved the Property Documents and the Property in all respects and Purchaser’s Termination Right shall automatically and irrevocably expire.

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3.4          Payment of Certain Expenses Upon Termination. Notwithstanding anything contained in this Agreement to the contrary, in the event that Purchaser exercises Purchaser’s Termination Right, Purchaser shall be responsible for payment of any escrow costs charged by the Title Company in connection with this Agreement.  In addition, to the extent not already done, Purchaser will promptly restore the Property to its original condition if damaged or changed due to the tests and inspections performed by Purchaser, free of any mechanic’s or materialman’s liens or other encumbrances arising out of any of the inspections or tests, and will provide Seller, at no cost to Seller, with a copy of the results of any tests and inspections made by Purchaser, excluding any market and economic feasibility studies or any report if the terms and conditions of such report restricts Purchaser from doing so. The provisions of this Section 3.4 shall survive any termination of this Agreement.

3.5          Indemnity and Release. Purchaser hereby indemnifies and agrees to defend and hold Seller and the Property harmless of and from any and all losses, liabilities, costs, expenses (including, without limitation, reasonable attorneys’ fees and costs of court), damages, liens, claims (including, without limitation, mechanics’ or materialmen’s liens or claims of liens), actions and causes of actions arising from or relating to Purchaser’s (or Purchaser’s agents, independent contractors, servants, employees or representatives) entering upon the Property to test, study, investigate or inspect the same or any part thereof, whether pursuant to Section 3.2 or otherwise, except to the extent arising solely from the negligence of Seller. Purchaser further waives and releases any claims, demands, damages, actions, causes of action or other remedies of any kind whatsoever against Seller for property damages or bodily and/or personal injuries to Purchaser, its agents, independent contractors, servants, employees and/or representatives arising out of the entry or use in any manner of the Property by any of the foregoing persons. If any proceeding is filed for which indemnity is required hereunder, Purchaser agrees, upon request therefor, to defend the indemnified party in such proceeding at its sole cost utilizing counsel satisfactory to the indemnified party.  The provisions of this Section 3.5 shall survive the Closing or any termination of this Agreement and are not subject to any liquidated damage limitation on remedies, notwithstanding anything to the contrary in this Agreement.

3.6          Financing Contingency. Notwithstanding the provisions of Section 3.3, provided that on or before September 5, 2012 Purchaser has delivered (i) written notice to Seller of its approval of the Property in the form of Exhibit M attached hereto (the “Approval Notice”) and (ii) evidence reasonably acceptable to Seller that Purchaser’s loan application has been submitted to Purchaser’s lender’s loan committee, then Purchaser shall have no right to terminate this Agreement EXCEPT FOR (a) failure of Purchaser to obtain a commitment for financing of its acquisition of the Property (“Financing Contingency”) by September 12, 2012 (the “Financing Contingency Date”) from Purchaser’s lender upon terms and conditions set forth in Purchaser’s loan application or such other terms as may be acceptable to Purchaser (“Purchaser’s Financing Contingency Termination Right”), or (b) as otherwise set forth in this Agreement other than in Articles II (save and except Section 2.8) and III hereof. Purchaser’s Financing Contingency Termination Right shall be exercisable only by sending written notice of termination (the “Financing Contingency Termination Notice”) to Seller on or before the Financing Contingency Date specifically stating that a commitment for a loan on substantially similar terms to those set forth in Purchaser’s loan application has not been received. In the event that Purchaser timely exercises Purchaser’s Financing Contingency Termination Right, this Agreement shall terminate and the Earnest Money shall be returned to Purchaser. If Purchaser fails to send Seller a Financing Contingency Termination Notice on or before the Financing Contingency Date, Purchaser shall be deemed to have irrevocably waived Purchaser’s Financing Contingency Termination Right in all respects and Purchaser’s Financing Contingency Termination Right shall automatically and irrevocably expire.

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ARTICLE IV

CLOSING

4.1          Time and Place. The consummation of the purchase and sale of the Property (“Closing”) shall take place at the office of the Escrow Agent, or, at Seller’s option, at the office of Seller’s outside counsel, on October 11, 2012 (the “Closing Date”) or by mail away with appropriate escrow instructions (and delivery of a Closing Protection Letter from the Title Company to Seller) through the Title Agent as agent of the Title Company. Purchaser shall have a one-time option to extend the initial Closing Date by up to an additional thirty (30) days giving written notice to Seller of such extension on or before October 1, 2012 and depositing the Third Deposit with the Escrow Agent contemporaneously with the delivery of the extension notice.  Upon delivery of such notice and deposit of the Third Deposit with the Title Company as provided above (the deposit of the Third Deposit being a condition precedent to the extension of the Closing Date), the Closing Date shall be the date specified for Closing in the Notice (provided that, subject to Section 9.17, such date may not be earlier than November 1, 2012 or later than thirty (30) days after the initial Closing Date) or, if no date is specified, subject to Section 9.17, the date that is thirty (30) days after the initial Closing Date.  At Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3 below, the performance of which obligations shall be concurrent conditions.

4.2          Seller’s Obligations at Closing. At Closing, Seller shall:

(a)           deliver to Purchaser a Special Warranty Deed (the “Deed”) in the form of Exhibit C attached hereto, executed and acknowledged by Seller and in recordable form, it being agreed that the conveyance effected by the Deed shall be subject to the Permitted Exceptions;

(b)           deliver to Purchaser a Bill of Sale in the form of Exhibit D attached hereto (the “Bill of Sale”) executed by Seller;

(c)           join with Purchaser in the execution of an Assignment of Tenant Leases and Assumption in the form of Exhibit E attached hereto;

(d)           join with Purchaser in the execution of an Assignment and Assumption Agreement in the form of Exhibit F attached hereto;

(e)           deliver to Purchaser a form of notice to all tenants at the Real Estate (the “Tenant Notice Letter”) duly executed by Seller in the form of Exhibit J attached hereto;

(f)            deliver to Purchaser an affidavit sworn by an officer of Seller in the form of Exhibit H attached hereto and made a part hereof for all purposes (the “FIRPTA Affidavit”), or in such other form as may be prescribed by federal regulations;

(g)           deliver to Purchaser a rent roll for the Property dated not earlier than two (2) business days prior to the Closing Date and certified by Seller or the property manager of the Property to the knowledge of the certifying party as true, correct and complete in all material respects as of its date;

(h)           deliver a certificate executed by Seller dated as of Closing and in the form of Exhibit I attached hereto and made a part hereof, that all of the representations and warranties of Seller contained in Section 5.1 are true and correct in all material respects as of the Closing Date, except for matters specified in such certificate (“Seller’s Closing Certificate”);

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(i)            deliver to the Title Company such reasonable and customary seller declarations, affidavits and gap and mechanic’s lien indemnities as the Title Company may require to issue to Purchaser at Closing the title policy called for under Section 2.6 and subject to the terms of Section 2.6 above and/or as the Escrow Agent has specified in the Title Commitment or any update thereto;

(j)            deliver the Title Company evidence of its capacity and authority for the closing of this transaction;

(k)           deliver to Purchaser possession of the Property subject only to the Leases and Permitted Exceptions; and

(l)            deliver such other documents as may be reasonably required to close this transaction, duly executed where required.

4.3          Purchaser’s Obligations at Closing. At Closing, Purchaser shall:

(a)           pay to Seller the Purchase Price in cash or immediately available funds, it being agreed that the Earnest Money shall be delivered to Seller at Closing and applied towards payment of the Purchase Price.

(b)           join with Seller in execution of the instruments described in Sections 4.2(c) and 4.2(d);

(c)           deliver the Tenant Notice letter duly executed by Purchaser;

(d)           deliver to Seller an Agreement Regarding Disclaimers in the form of Exhibit I attached hereto executed by Purchaser and counsel for Purchaser;

(e)           deliver to Seller such evidence as Seller’s counsel and/or the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser; and

(f)            deliver a certificate executed by Purchaser dated as of Closing and in the form of Exhibit J attached hereto and made a part hereof, that all of the representations and warranties of Seller contained in Section 5.7 are true and correct in all material respects as of the Closing Date, except for matters specified in such certificate (“Purchaser’s Closing Certificate”);

(g)           deliver such other documents as may be reasonably required to close this transaction, duly executed where required.

4.4          Prorations. The following adjustments to the Purchase Price paid hereunder shall be made between Seller and Purchaser and shall be prorated (as applicable) on a per diem basis as if Purchaser owned the Property for the entire day on the Closing Date:

(a)           All real estate taxes and installments of special assessments due and payable with respect to the calendar year of Closing. All other installments of special assessments not yet due and payable shall be paid by Purchaser. If at the time of Closing the tax rate or the assessed valuation for the current year has not yet been fixed, taxes shall be prorated based upon the tax rate and the assessed valuation established for the previous tax year; provided, however, that Seller and Purchaser agree that to the extent the actual taxes for the current year differ from the amount so apportioned at Closing, the parties hereto will make all necessary adjustments by

9

appropriate payments between themselves within ninety (90) days following the issuance of the final tax bills and this provision shall survive Closing. Seller reserves the right to meet with governmental officials and to contest any reassessment concerning or affecting Seller’s obligations under this Section 4.4(a).

(b)           Current rents, advance rentals (but only to the extent actually received by Seller) and other income from the Property shall be prorated between Seller and Purchaser at Closing based upon such amounts actually collected by Seller as of the Closing Date. Rent which is unpaid or delinquent as of the Closing Date shall not be prorated, but such unpaid or delinquent rent collected after the Closing Date shall be delivered as follows: (i) if Seller collects any unpaid or delinquent rent after the Closing Date, Seller shall deliver to Purchaser any such rent relating to the Closing Date and any period thereafter within fifteen (15) days after the receipt thereof, and (ii) if Purchaser collects any unpaid or delinquent rent after the Closing Date, Purchaser shall deliver to Seller any such rent relating to the period prior to the Closing Date within fifteen (15) days after the receipt thereof. Seller and Purchaser agree that (A) all rent received by Seller after the Closing Date shall be applied first to rent for the month of Closing, then to the then current month and then to delinquent rentals, if any, in the order of their maturity, and (B) all rent received by Purchaser after the Closing Date shall be applied first to current rentals and then to delinquent rentals, if any, in inverse order of maturity. Purchaser will make a good faith effort after Closing to collect all rents in the usual course of Purchaser’s operation of the Property, but Purchaser will not be obligated to institute any lawsuit or incur any expense to collect delinquent rents. In the event that there shall be any rents or other charges under any Leases which, although relating to a period prior to the Closing Date, do not become due and payable until on or after the Closing Date, then any rents or charges of such type received by Purchaser or its agents or Seller or its agents subsequent to the Closing Date shall, to the extent applicable to a period prior to the Closing Date, be prorated between Seller and Purchaser and Seller’s portion thereof shall be remitted to Seller by Purchaser within fifteen (15) days after the receipt thereof. Notwithstanding the foregoing provisions, Seller shall not be required to prorate any amounts collected by Seller after Closing from former tenants of the Property, it being understood and agreed that Seller may retain all amounts that Seller recovers from such former tenants.

(c)           [Intentionally omitted].

(d)           Utilities and other customarily prorated expenses, including but not limited to water, sewer, gas, electricity, trash removal and fire protection service, and any Service Contracts to be transferred to and assumed by Purchaser, to the extent paid for by Seller or required to be paid for by Seller for a period after Closing, will be prorated as of the Closing Date.  Seller and Purchaser agree that Seller shall be entitled to any and all sums actually collected from tenants for such utility expenses for services provided prior to the Closing Date (“Pre-Closing Utility Expense Sums”).  As soon as practicable but in no event later than one hundred and twenty (120) days following the Closing Date, Seller and Purchaser shall reconcile the bills for water, sewer, gas, electricity, trash removal and fire protection service and any other utilities along with receipts for tenants for same and any Pre-Closing Utility Expense shall be remitted to Seller within five (5) business days following such reconciliation.  Other expenses relating to the Property up to the Closing Date and all periods prior thereto including those required by any Service Contracts which are not to be transferred and assumed by Purchaser will be paid for by Seller and Purchaser shall not be liable therefor.  Seller will not assign to Purchaser, and Purchaser will not be entitled to, any deposits held by any utility company or other company servicing the Property; but rather such deposits will be returned to Seller and Purchaser will arrange and bear all responsibility to arrange with all utility companies to have accounts styled in Purchaser’s name beginning on the Closing Date.  The provisions of this Section 4.4(d) shall survive the Closing.

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(e)           At the Closing, Seller will, at Seller’s option, either pay to Purchaser in cash the amount of any security deposits actually paid to or received by Seller under the Leases (and not as of the Closing Date returned to or forfeited by tenants under Leases after applicable notice and cure periods, if any, required under such Leases) and any prepaid rentals actually paid to or received by Seller for periods subsequent to the Closing or provide a credit to Purchaser equal to the foregoing amounts (provided that if required by applicable law, such security deposits will be placed into an escrow account); provided, however, non-refundable payments, deposits, or fees collected by Seller shall not be prorated. As of the Closing Date, Purchaser shall assume Seller’s obligations related to such tenant security deposits, to the extent delivered or credited to Purchaser. Purchaser will indemnify, defend, and hold Seller harmless from and against all demands and claims made by tenants with respect to any security deposits that are actually transferred or credited to Purchaser and will reimburse Seller for all reasonable attorneys’ fees incurred or that may be incurred as a result of any such claims or demands as well as for all loss, expenses, verdicts, judgments, settlements, interest, costs and other expenses incurred or that may be incurred by Seller as a result of any such claims or demands by tenants. The provisions of this Section 4.4(e) shall survive the Closing.

(f)            Seller shall be responsible for the payment of all Tenant Lease Costs (as hereinafter defined) which become due and payable (whether before or after Closing) (A) as a result of any renewals of existing Leases which occur between the Effective Date of this Agreement and the date on which the Purchaser makes the Second Deposit, and (B) under any new Leases (including any amendments of existing Leases) entered into between the Effective Date of this Agreement and the date on which the Purchaser makes the Second Deposit which have been approved (or deemed approved) by Purchaser; and Purchaser shall be responsible for payment of all Tenant Lease Costs which become due and payable from and after the date on which the Purchaser makes the Second Deposit. To the extent that any Tenant Lease Costs in excess of $50.00 are to borne by Purchaser after the date on which the Purchaser makes the Second Deposit, Seller will request Purchaser’s consent prior to entering into the new or renewal Lease, provided that if Purchaser has failed to disapprove such new or renewal Lease within two (2) business days of the request for consent, Purchaser shall be deemed to have consented to such new or renewal Lease. If as of the Closing Date Seller shall have paid any Tenant Lease Costs or leasing commissions for which Purchaser is responsible pursuant to the foregoing provisions, Purchaser shall reimburse Seller therefor at Closing. Seller shall supply invoices and statements for all such Tenant Lease Costs and leasing commissions to Purchaser on or prior to the Closing Date. For purposes hereof, the term “Tenant Lease Costs” means all usual and customary finder’s fees, commissions and the like payable with respect to any Leases which are executed after the Effective date and prior to the Closing Date and any out-of-pocket payments required under a Lease to be paid by the landlord thereunder to or for the benefit of the tenant thereunder which is in the nature of a tenant Lease, including specifically, without limitation, moving allowances, but excluding “make ready” costs such as repainting or new carpeting. The term “Tenant Lease Costs” shall not include loss of income resulting from any free or reduced rental period, it being agreed that Seller shall bear the loss resulting from any free or reduced rental period until the Closing Date and that Purchaser shall bear such loss from and after the Closing Date.

(g)           Any prepaid items, including, without limitation fees for licenses which are transferred to the Purchaser at the Closing and annual permit and inspection fees shall be prorated as of the Closing.  Any up-front fees or other non-recurring payment received by Seller prior to the Effective Date at the inception of the term of any telecommunications, laundry or other contract will not be prorated, may be retained by Seller and shall not be credited to Purchaser at Closing.  Notwithstanding the foregoing, there shall be no proration of Seller’s insurance

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premiums or assignment of Seller’s insurance policies.  Purchaser shall be obligated (at its own election) to obtain any insurance coverage deemed necessary or appropriate by Purchaser.

(h)           The Personal Property is included in this sale, without further charge, except that Purchaser shall pay to Seller the amount of any and all sales or similar taxes, if any, payable in connection with the Personal Property which is to be transferred to Purchaser under this Agreement and Purchaser shall execute and deliver any tax returns required of it in connection therewith, said obligations of Purchaser to survive Closing.  Personal property taxes for 2012 will be prorated. If at the time of Closing the tax rate or the assessed valuation for the current year has not yet been fixed, personal property taxes shall be prorated based upon the tax rate and the assessed valuation established for the previous tax year; provided, however, that Seller and Purchaser agree that to the extent the actual personal property taxes for the current year differ from the amount so apportioned at Closing, the parties hereto will make all necessary adjustments by appropriate payments between themselves within ninety (90) days following the issuance of the final tax bills and this provision shall survive Closing.

(i)            All prorations described in this Section 4.4 shall be effected by increasing or decreasing, as appropriate, the amount of cash to be paid by Purchaser to Seller at Closing. . The proration of taxes described in Section 4.4(a) above shall be deemed final if no adjustment thereto is requested within ninety (90) days after receipt of the final tax bill by both Seller and Purchaser. In all other cases, all other prorations shall be deemed to be final if no adjustment thereto shall be requested within one hundred twenty (120) days after the Closing Date.  The provisions of this Section 4.4(i) shall survive the Closing.

4.5          Closing Costs. Seller shall pay (a) the fees of any counsel representing it in connection with this transaction; (b) all costs incurred to prepay and release any existing financing (including any prepayment fees, defeasance costs or penalties); (c) the cost of the Existing Survey; (d) one-half of any transfer tax, documentary stamp tax, surtax, or similar tax which becomes payable by reason of the transfer of the Property or any component thereof or the recording of the Deed; and (e) one-half (½) of any escrow fee which may be charged by the Title Company. Purchaser shall pay (u) all costs and expenses related to any financing procured by Purchaser, (v) the fees of any counsel representing Purchaser in connection with this transaction; (w) the cost of the Updated Survey; (x) the cost for the premium for the Owner’s Policy of Title Insurance to be issued to Purchaser by the Title Company at Closing (specifically including the additional premium chargeable for any endorsements requested by Purchaser, but excluding the costs of any endorsements that Seller elects or is required to obtain in order to cure any Title Defects in accordance with the provisions of Section 2.3, which endorsement cost shall be borne by Seller); (y) one-half of any transfer tax, documentary stamp tax, surtax, or similar tax which becomes payable by reason of the transfer of the Property or any component thereof or the recording of the Deed; and (z) one-half (½) of any escrow fees charged by the Title Company. All other costs and expenses incident to this transaction and the closing thereof shall be paid by the party incurring same.

4.6          Closing Statements. On or prior to the Closing Date, the Title Company shall deliver to Seller and Purchaser closing statements in the standard form in use in the State of Florida, which describe the prorations and adjustments required by this Agreement.  If Seller and Purchaser cannot reasonably agree on the final closing statements to be executed by Seller and Purchaser and deposited at Closing with the Title Company because of a dispute over the prorations and adjustments required by this Agreement, then, so long as the amount in dispute is less than $10,000 in the aggregate, the Closing nevertheless shall occur, and the amount in dispute shall be withheld from the Sales Price and held in an escrow with the Title Company, to be paid out upon the joint direction of the parties or pursuant to court order upon resolution or other final determination of the dispute.  The provisions of this Section 4.6 shall survive the Closing

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4.7          Delivery of Documents. Immediately after Closing, Seller shall direct the manager of the Property to make available at the offices of such manager all books and records of account, contracts, original Leases (to the extent such original Leases are located at the Property or in the possession of Seller) and leasing correspondence, receipts for deposits, unpaid bills, copies of all Seller’s contractor’s warranties and guaranties to extent assigned hereunder, and other papers or documents and other Property Documents listed in Exhibit B under items (c) — (e), (i) and (k) assigned hereunder and not covered above, which pertain to the operation of the Property together with all advertising materials, booklets, keys and other items, if any, used in the operation of the Property. In addition, as an accommodation to Purchaser, Seller will authorize RealPage to transfer electronic tenant data relating to tenants at the Property on the Closing Date to Purchaser’s property manager or Yardi, provided, however, that Seller is not incurring any additional liability with respect to such data transfer and shall not be obligated to incur any out-of-pocket costs relating to such data transfer, nor shall Seller or RealPage be required to reformat any data or transfer any data that cannot be transferred without making changes in the way such data is held on RealPage. Seller makes no representations regarding the existence or adequacy of such documents or items for use in management or operation of the Property or as to the accuracy or completeness of any data that may be transferred. The foregoing shall not include the separate books, records, correspondence and other documentation of Seller located at its offices, nor shall it include any computer software or computer programs used by the manager of the Property or Seller in connection with the Property, it being understood and agreed that the foregoing items are not part of the “Property” to be conveyed to Purchaser hereunder. After the Closing, Seller shall have the right upon not less than forty-eight hours prior notice to Purchaser to inspect the applicable books and records of the Property to verify that Purchaser is remitting to Seller all amounts to be remitted to Seller according to the terms of this Agreement, and for any other purpose related to Seller’s prior ownership of the Property, and this provision shall survive Closing, provided, however, that with respect to inspection and audit rights relating to Sections 4.4(b) and (d), such inspection and audit rights shall terminate 180 days following the Closing Date.

4.8          Preservation of Right to Contest. Seller reserves the right to contest after Closing taxes and assessments with respect to the Property and interest or penalties pertaining thereto, to the extent same are applicable to periods prior to Closing, and Seller shall be entitled to any refunds made with respect to such contested taxes. All taxes imposed because of a change of use or ownership of the Property after or in connection with the Closing shall be for the account of Purchaser, and Purchaser shall indemnify and hold Seller harmless of, from and against any and all costs, damages, expenses, claims, or liability arising from the imposition of any such taxes. The provisions of this Section shall survive the Closing.

4.9          Purchaser’s Right to Appeal Taxes.  Purchaser shall have the right to contest or appeal any real or personal ad valorem property taxes or assessments for the calendar year in which the Closing occurs, and Seller agrees to cooperate with Purchaser or its consultants in connection with such contest or appeal.  In the event that Seller is in the process of appealing such taxes for prior years, Seller agrees not to settle any such appeal without the prior written consent of Purchaser.  In the event that Purchaser’s consultants charge any fees or expenses in connection with successfully reducing any real or personal ad valorem property taxes for the calendar year in which the Closing occurs, said fees and expenses shall also be prorated between Seller and Purchaser as of the Closing Date within thirty (30) days after both Seller and Purchaser have received a copy of the bill from said consultants, provided that Seller shall have no obligation for any fees or expenses in excess of the amount of real or personal ad valorem tax savings allocated to Seller.  Prior to Closing, in the event that Purchaser has made the Second Deposit and requested Seller to file an appeal at least ten (10) business days prior to the filing deadline for appealing any real or personal ad valorem taxes, Seller will request its property tax consultant to file such appeal, provided, that contract with such consultant shall be a Service Contract assigned to and assumed by Purchaser at Closing.  Purchaser shall have the right to review and approve such contract prior to the engagement of the tax consultant and the filing of an appeal. The fees and expenses of such consultant

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shall be allocated as provided above in the Section 4.9. The provisions of this section shall survive Closing.

ARTICLE V

REPRESENTATIONS, WARRANTIES, AND COVENANTS

5.1                            Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser, which representations and warranties will be deemed made by Seller to Purchaser as of the Effective Date and also as of the Closing Date, no special investigation or inquiry having been made, as follows:

(a)           Seller is organized, validly existing and in good standing under the laws of the state of its formation. Seller has the limited liability company or appropriate entity right, power and authority to sell and convey the Property as provided in this Agreement and to carry out Seller’s obligations hereunder. The individuals executing this Agreement on behalf of Seller have the right, power and authority to do so and this Agreement constitutes the legal, valid and binding obligation of Seller, except as limited by bankruptcy, insolvency, reorganization, moratorium, or other laws of general application relating to the enforcement of creditors’ rights and by general principles of equity.

(b)           The execution and delivery of this Agreement and the consummation of the transaction contemplated hereby will not result in any breach of the terms, conditions or constitute a default under any instrument or obligation to which Seller is now a party.

(c)           Seller is not a “foreign person” as defined in Section 1445 of the Internal Revenue Code of 1986, as amended, and any related regulations.

(d)           There are no parties in possession of any portion of the Property except Seller and Tenants under the Leases or any subleases, laundry leases or as otherwise disclosed in the Property Documents or Additional Property Documents or shown as a Permitted Exception.

(e)           To Seller’s knowledge, the documents heretofore or hereafter delivered or otherwise made available for viewing to Purchaser prior to Closing include true and complete copies of the Leases used by Seller and Seller’s property manager in the day-to-day operation and management of the Property and the current rent roll used by Seller and Seller’s property manager in the operation of the Property.

(f)            To Seller’s knowledge, except as disclosed in the Property Documents or Additional Property Documents, Seller has received no material written notice claiming violation of any federal, state, county or municipal law, ordinance, order, regulation or requirement affecting any portion of the Property from any governmental entity that has not been corrected. Seller is not as of the date hereof, engaged in any negotiations with any governmental authority regarding any alleged violation of any applicable law, regulation or ordinance.

(g)           There is no action, suit, proceeding, claim or governmental investigation pending or, to Seller’s knowledge, threatened against the Property or any portion thereof except for any personal injury or property damage action for which there is adequate insurance coverage.

(h)           There is no pending or, to Seller’s knowledge, threatened, condemnation or similar proceeding affecting the Property or any portion thereof.

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(i)            Seller is not listed in Executive Order 13224 — Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit or Support Terrorism, as amended (“Executive Order 13224”), and Seller has no present, actual knowledge that any other persons or entities holding any legal or beneficial interest whatsoever in Seller are included in, owned by, controlled by, knowingly acting for or on behalf of, knowingly providing assistance, support, sponsorship or services of any kind to, or otherwise knowingly associated with any of the persons or entities referred to or described in Executive Order 13224, or banned or blocked person, entity, nation or transaction pursuant to any law, order, rule or regulation that is enforced or administered by the Office of Foreign Assets Control.

(j)            Seller has not received any written notice of any pending improvement liens to be made by any governmental authority with respect to the Property.

(k)           To Seller’s knowledge, all licenses and permits required to operate the Property as an apartment complex, are in full force and effect.

(l)            To Seller’s knowledge, and except as otherwise is disclosed in the Title Reports, there are no material violations of building codes and/or zoning ordinances or other governmental regulations with respect to the Property.

(m)          There are no employees of Seller located on or at the Property.

5.2          Notice of Breach.

(a)           To the extent that, before the expiration of the Inspection Period, Purchaser obtains actual knowledge or is deemed to know that Seller’s representations and warranties are inaccurate, untrue or incorrect in any way, such representations and warranties shall be deemed modified to reflect such actual or deemed knowledge as of the end of the Inspection Period. For purposes hereof, Purchaser shall be deemed to know all information set forth in the written materials delivered or made available to Purchaser in respect of the Property.

(b)           If after the expiration of the Inspection Period but prior to the Closing, Purchaser first obtains actual knowledge that any of the representations or warranties made herein by Seller are untrue, inaccurate or incorrect in any material respect, Purchaser shall give Seller written notice thereof within five (5) days after obtaining such actual knowledge (but, in any event, prior to the Closing). In such event, Seller shall have the right (but not the obligation) to attempt to cure such misrepresentation or breach and shall, at its option, be entitled to a reasonable adjournments of the Closing (not to exceed thirty (30) days) for the purpose of such cure. If Seller elects to attempt to so cure but is unable to so cure any misrepresentation or breach of warranty, then Purchaser, as its sole remedy for any and all such materially untrue, inaccurate or incorrect representations or warranties, shall elect either (i) to waive such misrepresentations or breaches of representations and warranties and consummate the transaction contemplated hereby without any reduction of or credit against the Purchase Price, or (ii) if Purchaser first obtained actual knowledge of such material misrepresentation or breach of warranty after the end of the Inspection Period, to terminate this Agreement in its entirety by written notice given to Seller on the Closing Date, in which event this Agreement shall be terminated, the Earnest Money shall be returned to Purchaser, and thereafter neither party shall have any further rights or obligations hereunder except as provided in any section hereof that by its terms expressly provides that it survives any termination of this Agreement.

5.3          Survival of Representations. It is the intent of Seller and Purchaser that the representations and warranties made by Seller in Section 5.1 above (the “Seller Obligations”) shall survive

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Closing for a period of one hundred eighty (180) days after the date of Closing (the “Survival Period”). Purchaser acknowledges that it is a sophisticated Purchaser who is familiar with the ownership and operation of real estate projects similar to the Property, and Purchaser and Seller have negotiated and agreed upon the length of the Survival Period as an adequate period of time for Purchaser to discover any and all facts that could give rise to a claim or cause of action for a breach of a representation.  Upon expiration of the Survival Period, all representations contained in this Agreement will be deemed to have merged into the instruments of Closing and shall be of no further force or effect. Accordingly, Purchaser and Seller hereby agree that, notwithstanding any provision of this Agreement or any provision of law to the contrary, any action which may be brought under this Agreement by Purchaser against Seller for breach of any Seller Obligations shall be forever barred unless Purchaser (a) delivers to Seller no later than the expiration of the Survival Period a written notice of its claim setting forth in reasonable detail the factual basis for such claim and Purchaser’s good faith estimate of its damages arising out of such claim, and (b) files a complaint or petition against Seller alleging such claim in an appropriate state or federal court in Broward County, Florida, no later than two hundred ten (210) days after the expiration of the Survival Period. In no event shall Seller be liable after the date of Closing for its breach of any Seller Obligations if such breach was actually known to Purchaser prior to the completion of Closing. Time is of the essence with respect to the foregoing time periods. With respect to any matter constituting breach of a Seller Obligation, Purchaser shall first seek any available recovery under any insurance policies prior to seeking recovery from Seller, and Seller shall not be liable to Purchaser if Purchaser’s claim is satisfied from such insurance policies. Seller’s liability for breach of any Seller Obligations shall be limited as follows: (i) Seller shall have liability for breach of Seller Obligations only if the valid claims for all such breaches collectively aggregate more than Fifty Thousand Dollars ($50,000), in which event the full amount of such claims shall be actionable (Purchaser hereby waiving any right to seek to recover any damages of Fifty Thousand Dollars ($50,000) or less), and (ii) Seller’s aggregate liability to Purchaser for breaches of the Seller Obligations shall not exceed the amount of Five Hundred Thousand Dollars ($500,000) (the “Cap”), it being agreed that in no event shall Seller’s aggregate liability for such breaches exceed the amount of the Cap. Purchaser agrees that, with respect to any alleged breach of representations of Seller under this Agreement discovered after the expiration of the Survival Period, the maximum liability of Seller for all such alleged breaches is limited to $100.  The provisions of this Section 5.3 shall survive Closing.

5.4          Covenants of Seller. Seller hereby covenants as follows:

(a)           Between the Effective Date and the Closing Date, Seller shall maintain the Property in its present condition, ordinary wear and tear excepted.  Seller shall:  (i) continue to maintain the present services to the Property and (ii) not remove any of the Personal Property except where such item of Personal Property is replaced by an item of comparable value and use;

(b)           Between the Effective Date and the Closing Date, Seller shall maintain all casualty, liability and hazard insurance currently in force with respect to the Property; and

(c)           Between the Effective Date and the Closing Date, Seller shall lease, operate, manage and enter into Service Contracts with respect to the Property, in the same manner done by Seller prior to the date hereof, maintaining present services and sufficient supplies and equipment for the operation and maintenance of the Property in the same manner as prior to the date hereof; provided, however, that Seller shall not enter into any Service Contract that cannot be terminated within thirty (30) days notice. Seller shall terminate, by giving notice at Closing, any Service Contracts that may by their terms be terminated and which Purchaser elects not to assume (which election shall be made in writing by Purchaser to Seller on or prior to the expiration of the Inspection Period), provided that Purchaser shall be responsible for any termination fees incurred in connection with the same if such fees were set forth in the Service Contracts made available by Seller for review by Purchaser or otherwise disclosed in writing to Purchaser and Purchaser shall

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be deemed to have approved and shall have no right not to elect to assume those Service Contracts that, by their terms, cannot be terminated by Seller without the payment of a penalty, termination fee, or other charge that is not paid by Purchaser The property management agreement and any leasing agreement in effect with respect to the Property and any Service Contract that is not delivered to Purchaser, shall be deemed to be rejected by Purchaser and Seller shall, at Seller’s expense, terminate such property management agreement as it effects the Property and any undelivered Service Contracts effective not later than the Closing Date.

(d)           From the Effective Date until Closing, Seller shall have the right, without Purchaser’s consent, to (i) grant any consent or waive any material rights under the Leases, as long as consistent with Seller’s then current practice and, to the extent applicable, in accordance with the leasing guidelines (the “Leasing Guidelines”) attached hereto as Exhibit L, (ii) terminate (or accept a termination) of any Lease, as long as consistent with Seller’s then current practice and, to the extent applicable, in accordance with the Leasing Guidelines, or (iii) enter into a new lease or renew, extend or modify an existing Lease, as long as in each case same is consistent with Seller’s then current practice.

5.5          Seller’s Knowledge.  As used in this Agreement, all references to “Seller’s Knowledge” or “actual knowledge” of Seller, or similar qualifications means the current actual knowledge of Luke Simpson and Jim Phelps (the “Seller Representatives”) without any investigation or inquiry and without regard to the knowledge of any former or other employees, agents or contractors of Seller.  The Seller Representatives shall not have any personal liability whatsoever for the representations made herein or for any other matters relating to this Agreement.  Purchaser acknowledges that the Seller Representatives’ current actual knowledge regarding the foregoing matters (including, without limitation, any environmental matters) may be limited.

5.6          Covenants of Purchaser. Purchaser hereby covenants as follows:

(a)           During the Inspection Period, Purchaser shall obtain a “Phase I” environmental report prepared for and at the expense of Purchaser with respect to the Property by an environmental consultant selected by Purchaser.

(b)           If requested to do so by Seller in writing, at Closing (or upon termination of this Agreement prior to Closing), Purchaser shall deliver to Seller copies of any environmental reports, engineering reports, structural reports or other non-proprietary due diligence materials prepared by third parties obtained by Purchaser with respect to the Property.

(c)           Purchaser is currently in compliance with, and shall at all times during the term of this Agreement (including any extension thereof) remain in compliance with, the regulations of OFAC and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action relating thereto.

5.7          Representations and Warranties of Purchaser.  Purchaser represents and warrants to Seller, which representations and warranties shall be deemed made by Purchaser to Seller as of the Effective Date and also as of the Closing Date as follows:

(a)           Purchaser has the full right, power and authority to purchase the Property as provided in this Agreement and to carry out Purchaser’s obligations hereunder, and that all requisite action necessary to authorize Purchaser to enter into this Agreement and to carry out Purchaser’s obligations hereunder has been taken.

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(b)           This Agreement constitutes the legal, valid and binding obligation of Purchaser, except as limited by bankruptcy, insolvency, reorganization, moratorium, or other laws of general application relating to the enforcement of creditors’ rights and by general principles of equity.

(c)           Purchaser is not listed in Executive Order 13224 — Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit or Support Terrorism, as amended (“Executive Order 13224”), and Purchaser has no present, actual knowledge that any other persons or entities holding any legal or beneficial interest whatsoever in Purchaser are included in, owned by, controlled by, knowingly acting for or on behalf of, knowingly providing assistance, support, sponsorship or services of any kind to, or otherwise knowingly associated with any of the persons or entities referred to or described in Executive Order 13224, or banned or blocked person, entity, nation or transaction pursuant to any law, order, rule or regulation that is enforced or administered by the Office of Foreign Assets Control.

(d)           Purchaser is not an employee benefit plan or a governmental plan or a party in interest of either such a plan, and that the funds being used to acquire the Property are not plan assets or subject to state laws regulating investments of and fiduciary obligations with respect to a governmental plan. As used herein, the terms “employee benefit plan,” “party in interest,” “plan assets” and “governmental plan” shall have the respective meanings assigned to such terms in ERISA, and the term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated in connection therewith.

(e)           Notwithstanding anything herein to the contrary, any breach by Purchaser on or before Closing of any of the foregoing representations or warranties shall constitute a default by Purchaser hereunder and, subject to complying with the terms of Section 6.4, Seller may thereupon, at its option, terminate this Agreement by giving written notice thereof, in which event the Earnest Money will be paid to Seller as liquidated damages, and neither Purchaser nor Seller shall have any further rights or liabilities hereunder, except as otherwise provided herein.

5.8          Use of Property. Seller has not claimed the benefit of laws permitting a special use valuation for the purposes of payment of ad valorem taxes on the Property.  If a previous owner claimed such benefit and, after the purchase is closed, Purchaser changes the use of the Property from its present use and the same results in the assessment of additional taxes, such additional taxes will be the obligation of the Purchaser, notwithstanding that some or all of such additional taxes may relate back to the period prior to Closing.

ARTICLE VI

DEFAULT; REMEDIES

6.1          Default of Purchaser. In the event Purchaser fails to perform its obligations pursuant to this Agreement for any reason except failure by Seller to perform hereunder or the permitted termination hereof by Purchaser or Seller in accordance with the express provisions hereof, Seller shall be entitled, as its sole remedy, to terminate this Agreement and recover the Earnest Money as liquidated damages and not as a penalty, in full satisfaction of claims against Purchaser hereunder. Seller and Purchaser agree that Seller’s damages resulting from Purchaser’s default are difficult, if not impossible, to determine and that the Earnest Money is a fair estimate of those damages which has been agreed to in an effort to cause the amount of said damages to be certain. Upon such payment of the Earnest Money, this Agreement shall terminate and neither party shall have any further rights or obligations pursuant to this Agreement, other than as set forth herein in the following sentence and with respect to rights or obligations which survive termination; all other remedies being herein expressly waived by Seller. In the event of Purchaser’s default

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and notwithstanding anything in this Section 6.1 to the contrary, Seller shall have all remedies available at law or in equity in the event Purchaser or any party related to or affiliated with Purchaser is asserting any claims or right to the Property that would otherwise delay or prevent Seller from having clear, indefeasible and marketable title to the Property.

6.2          Default of Seller. If the transaction contemplated hereby is not consummated by reason of Seller’s breach or other failure to timely perform all obligations and conditions to be performed by Seller, then Purchaser may, as its sole and exclusive remedy (whether at law or in equity), either (i) terminate this Agreement and receive the return of the Earnest Money from the Escrow Agent; and, thereafter, neither party shall have any further rights or obligations pursuant to this Agreement, other than as set forth herein with respect to rights or obligations which survive termination, or (ii) enforce specific performance of Seller’s obligations hereunder; all other remedies being herein expressly waived by Purchaser except as provided in Section 6.3 and Section 6.4 below.  Unless Purchaser has filed an action for specific performance, and such action is pending, Purchaser shall not have the right or authority to place a lis pendens against any portion of the Property, and Purchaser hereby waives and releases any right it may have under applicable law to file any lis pendens absent such pending action.

6.3          Post-Closing Remedies. Notwithstanding the provisions of Sections 6.1 and 6.2 above, in the event that after the termination of this Agreement or after Closing, as the case may be, a party (the “Defaulting Party”) breaches an obligation hereunder which is expressly stated herein to survive the termination of this Agreement or Closing, as the case may be, the Defaulting Party shall be liable to the other party (the “Non-Defaulting Party”) for the direct, actual damages incurred by the Non-Defaulting Party as a direct result of such breach, subject, however, to the provisions of Section 5.3. In no event shall the Non-Defaulting Party be entitled to recover from the Defaulting Party any punitive, consequential or speculative damages.

6.4          Post-Closing Remedies. Notwithstanding anything to the contrary contained in this Agreement other than as provided in Section 5.2(b), no default shall be declared unless the non-defaulting party has given the defaulting party written notice as to the existence of such default and the defaulting party has failed to cure such default within five (5) days thereafter; provided, however, the foregoing shall not apply to: (x) a failure by Purchaser to deliver any Deposit required under this Agreement or to deliver on the Closing Date the monies and documents required to be delivered by Purchaser under this Agreement, subject to and in accordance with the terms and conditions of this Agreement; or (y) a failure by Seller to deliver on the Closing Date the documents required to be delivered by Seller pursuant to Section 4.2.

ARTICLE VII

RISK OF LOSS

7.1          Minor Damage. In the event of loss or damage to the Property or any portion thereof (the “premises in question”) which is not “major” (as hereinafter defined), this Agreement shall remain in full force and effect provided Seller, at Seller’s option, shall either (i) perform any necessary repairs to restore the premises in question to substantially the same condition as of the date of this Agreement; or (ii) credit Purchaser at Closing in the amount of the applicable insurance deductible against the Purchase Price and assign to Purchaser all of Seller’s right, title and interest to any claims and proceeds Seller may have with respect to any casualty insurance policies or condemnation awards relating to the premises in question; or (iii) reduce the cash portion of the Purchase Price in an amount equal to the cost of such repairs, Seller thereby retaining all of Seller’s right, title and interest to any claims and proceeds Seller may have with respect to any casualty insurance policies or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to

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complete such repairs promptly and the date of Closing shall be extended a reasonable time in order to allow for the completion of such repairs.

7.2          Major Damage. In the event of a “major” loss or damage, either Seller or Purchaser may terminate this Agreement by written notice to the other party, in which event the Earnest Money shall be returned to Purchaser. If neither Seller nor Purchaser elects to terminate this Agreement within ten (10) days after Seller sends Purchaser written notice of the occurrence of major loss or damage, then Seller and Purchaser shall be deemed to have elected to proceed with Closing, in which event Seller shall, at Seller’s option, either (a) perform any necessary repairs, or (b) credit Purchaser in the amount of the applicable insurance deductible against the Purchase Price and assign to Purchaser all of Seller’s right, title and interest to any claims and proceeds Seller may have with respect to any casualty insurance policies or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to complete such repairs promptly and the date of Closing shall be extended a reasonable time in order to allow for the completion of such repairs. Upon Closing, full risk of loss with respect to the Property shall pass to Purchaser. For purposes of Sections 7.1 and 7.2, “major” loss or damage refers to the following: (i) loss or damage to the Property or any portion thereof such that the cost of repairing or restoring the premises in question to a condition substantially identical to that of the premises in question prior to the event of damage would be, based on the Seller’s insurance adjuster’s assessment, equal to or greater than ten percent (10%) of the Purchase Price; and (ii) any loss due to a condemnation which permanently and materially impairs the current use of the Property.

ARTICLE VIII

DISCLAIMERS AND WAIVERS

8.1          No Reliance on Documents. Except for Seller’s representations and warranties as expressly stated herein or in the documents to be delivered at Closing, Seller makes no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by Seller to Purchaser in connection with the transaction contemplated hereby (including specifically, without limitation, the Property Documents and Additional Property Documents). Purchaser acknowledges and agrees that all materials, data and information delivered by Seller to Purchaser in connection with the transaction contemplated hereby (including specifically, without limitation, the Property Documents and Additional Property Documents) are provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or information by Purchaser shall be at the sole risk of Purchaser, except as otherwise expressly stated herein. Without limiting the generality of the foregoing provisions, if any budget or similar document is delivered by Seller to Purchaser, Seller makes no representation or warranty as to the accuracy thereof, nor shall any such document be construed to impose upon Seller any duty to spend the amounts set forth in such budget or other document.

8.2          Disclaimers.

(a)         EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER’S WARRANTY OF TITLE TO BE SET FORTH IN THE DEED), ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION,

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UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY “AS IS, WHERE IS, WITH ALL FAULTS,” EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING. PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR RELATING THERETO MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, VERBALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN THIS AGREEMENT. PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER’S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER AT ANY TIME BY REASON OF OR ARISING OUT OF ANY CONSTRUCTION DEFECTS, PHYSICAL CONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING ANY ENVIRONMENTAL LAWS EXCEPT FOR ENVIRONMENTAL MATTERS CAUSED SOLELY BY SELLER (AND NOT DISCLOSED BY EITHER SELLER OR THE ENVIRONMENTAL REPORTS) DURING ITS OWNERSHIP OF THE PROPERTY) AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY. PURCHASER AGREES THAT SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED

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AFTER THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALL BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF PURCHASER EXCEPT FOR ENVIRONMENTAL MATTERS CAUSED SOLELY BY SELLER (AND NOT DISCLOSED BY EITHER SELLER OR THE ENVIRONMENTAL REPORTS) DURING ITS OWNERSHIP OF THE PROPERTY.

(b)         Except as otherwise specifically stated in this Agreement, Purchaser agrees that Seller shall not be responsible or liable to Purchaser for any construction defects, errors, omissions, or on account of any other conditions affecting the Property, as Purchaser is purchasing the Property AS IS, WHERE IS, and WITH ALL FAULTS.  Purchaser or anyone claiming by, through or under Purchaser, hereby fully releases Seller, its employees, officers, directors, representatives, attorneys and agents from any claim, cost, loss, liability, damage, expense, demand, action or cause of action arising from or related to any construction defects, errors, omissions, or other conditions affecting the Property, including, without limitation, any environmental matters or conditions affecting or migrating from or onto the Property.  Purchaser further acknowledges and agrees that this release will be given full force and effect according to each of its expressed terms and provisions, including, but not limited to, those relating to unknown and suspected claims, damages and causes of action.  This covenant releasing Seller will be a covenant running with the Property and will be binding upon Purchaser, its successors and assigns.  Subject to consummation of this Agreement, Seller hereby assigns to Purchaser, without recourse or representation of any nature, effective upon Closing, any and all claims that Seller may have against any third party for any such errors, omissions or defects in the Property.  As a material covenant and condition of this Agreement, Purchaser agrees that in the event of any such construction defects, errors, omissions or on account of any other conditions affecting the Property, Purchaser will look solely to Seller’s predecessors in title or to such contractors and consultants as may have contracted for work in connection with the Property for any redress or relief.  Upon the assignment by Seller of its claims, Purchaser releases Seller of all rights, express or implied, Purchaser may have against Seller arising out of or resulting from any errors, omissions or defects in the Property.  Purchaser further understands that some of Seller’s predecessors in title may have filed petitions under the bankruptcy code and Purchaser may have no remedy against such predecessors, contractors or consultants.  This waiver and release of claims shall survive the Closing and shall not merge into the instruments of Closing.

8.3          Effect and Survival of Disclaimers. Seller has informed Purchaser that the compensation to be paid to Seller for the Property has been decreased to take into account that the Property is being sold subject to the provisions of this Article VIII. Seller and Purchaser agree that the provisions of this Article VIII shall survive Closing.

8.4          Purchaser Acknowledgement. By signing in the space provided below in this Article VIII, Purchaser acknowledges that it has read and understands the provisions of the Article VIII.

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DEDICATED (PARROTS LANDING) LP,
a Florida limited partnership
By:	Dedicated Parrots Landing GP,
	a Canadian corporation
	its general partner
By:	/s/ Mark Zolty
Name:	Mark Zolty
Title:	Vice President

ARTICLE IX

MISCELLANEOUS

9.1          Broker. Seller and Purchaser represent each to the other that each has had no dealings with any broker, finder or other party concerning Purchaser’s purchase of the Property except Avery Klann of Apartment Realty Advisors (“Broker”). If (and only if) the transaction that is the subject of this Agreement is consummated, Seller shall pay a commission to Broker pursuant to a separate written agreement between Seller and Broker. Seller and Purchaser each hereby agree to indemnify and hold the other harmless from all loss, cost, damage or expense (including reasonable attorney’s fees) incurred by the other as a result of any claim arising out of the acts of the indemnifying party (or others on its behalf) for a commission, finder’s fee or similar compensation made by any broker, finder or any party who claims to have dealt with such party except Broker. The foregoing representations and warranties contained in this Section shall survive the Closing.

9.2          [Intentionally omitted].

9.3          Assignability. Purchaser may not assign its rights under this Agreement without the prior written consent of Seller. Purchaser may not assign its rights under this Agreement to anyone other than a Permitted Assignee (as hereinafter defined) without first obtaining Seller’s written approval which may be given or withheld in Seller’s sole discretion. Subject to the conditions set forth in this Section 9.3, Purchaser may assign its rights under this Agreement to a Permitted Assignee without the prior written consent of Seller. In the event that Purchaser desires to assign its rights under this Agreement to a Permitted Assignee, Purchaser shall send written notice to Seller at least five (5) business days but not more than ten (10) days prior to the Closing Date stating the name and, if applicable, the constituent persons or entities of the Permitted Assignee. Such assignment shall not become effective until such Permitted Assignee executes an instrument reasonably satisfactory to Seller in form and substance whereby the Permitted Assignee expressly assumes each of the obligations of Purchaser under this Agreement, including specifically, without limitation, all obligations concerning the Earnest Money. No assignment shall release or otherwise relieve Purchaser from any obligations hereunder. For purposes of this Section 9.3, the term “Permitted Assignee” shall mean an entity controlling, controlled by or under common control with Purchaser. Notwithstanding anything to the contrary contained herein, Purchaser shall not have the right to assign this Agreement to any assignee which, in the reasonable judgment of Seller, will cause the transaction contemplated hereby or any party thereto to violate the requirements of ERISA or Purchaser’s representations and warranties made herein. In order to enable Seller to make such determination, Purchaser shall cause to be delivered to Seller such information as is requested by Seller

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with respect to a proposed assignee and the constituent persons or entities of any proposed assignee, including specifically, without limitation, any pension or profit sharing plans related thereto.

9.4          Confidentiality. The information supplied to or made available to Purchaser by Seller pursuant to this Agreement shall not be released or disclosed to any other parties unless and until this transaction has closed without the prior written consent of Seller, except as required by applicable law. Seller shall not withhold its consent to disclosure of such information to Purchaser’s attorney, third parties engaged by Purchaser for the limited purpose of analyzing and investigating such information for the purpose of consummating the transaction, including engineers, accountants and financial advisors, or to any prospective lender. In the event that this transaction is not closed for any reason, then (a) Purchaser shall refrain, and shall cause its agents, representatives, contractors and accountants to refrain, from disclosing all such information to any other party, (b) Purchaser shall promptly return to Seller any statements, documents, schedules, exhibits or other written information obtained from Seller in connection with this Agreement or the transaction contemplated herein, and (c) notwithstanding anything to the contrary contained elsewhere in this Agreement, the covenant set forth in the foregoing clauses (a) and (b) shall survive any termination of this Agreement. In no event shall Purchaser or Seller issue any press releases prior to or in connection with the Closing regarding any of the terms contained herein or the transactions contemplated herein without the consent of the other party. Public filings required by applicable law or regulation, shall not constitute a “press release”, it being understood and agreed the Seller and Purchaser, and their constituent parties may make such public filings as they deem necessary to comply with applicable law in their sole and absolute discretion. In the event of a breach or threatened breach by Purchaser or its agents or representatives of this Section 9.4, Seller shall be entitled to an injunction restraining Purchaser or its agents or representatives from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Seller from pursuing any other available remedy at law or in equity for such breach or threatened breach. The provisions of this Section 9.4 will survive the Closing or any termination of this Agreement and are not subject to any liquidated damage limitation on remedies, notwithstanding anything to the contrary in this Agreement.

9.5          Notice. All notices required or permitted hereunder shall be in writing and shall be served on the parties at the following address:

If to Seller:7900 Hampton Blvd, LLC
Attn: Luke Simpson
4582 S. Ulster Street Parkway, Suite 1200
Denver, CO, 80237
Facsimile: 303.991.3143
Telephone: 720.889.9206
Email: lsimpson@grandpeaks.com

With a copy to:Behringer Harvard Opportunity OP II LP
15601 Dallas Parkway, Suite 600
Addison, TX 75001
Attn: Jeff Carter
Telephone: 214.655.1600
Fax: 469.341.2351
Email: jcarter@behringerharvard.com

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With a copy to:Powell Coleman & Arnold LLP
Attn: Michael L. McCoy
8080 North Central Expressway, Suite 1380
Dallas, TX 75001
Facsimile: 214-365-71111
Telephone: 214-890-7117
Email: mmccoy@pcallp.com

If to Purchaser:Dedicated (Parrots Landing) LP
c/o Brass Enterprises
2200 Yonce St., Suite 1302
Toronto, ON M4S2C6
Attn: Mark Zolty
Facsimile: 416-932-0660
Telephone 416-322-7999
Email: mzolty@brassenterprises.com

With a copy to:Greenberg Traurig PA
Attn: Moshe Lehrfield
333 SE 2nd Avenue
Miami, FL
Facsimile: 305-961-5768
Telephone: 305-579-0768
Email: lehrfieldm@gtlaw.com

Any notice, request, consent, approval or other communication required or permitted to be given by any provision of this Contract shall be (a) mailed by first class, United States mail, postage prepaid, certified, with return receipt requested, and addressed to the parties hereto at the addresses specified below, (b) hand delivered to the intended addressee, (c) sent by a nationally recognized receipted overnight courier, or (d) sent by electronic facsimile (“Fax”) or email if such Fax or email is followed within three business days by a hard copy of the Fax or email communication sent by one of the other three specified delivery methods, charges prepaid and addressed as provided below or to such other address as the recipient party may from time to time specify by notice to the other party given in conformance with this Section 9.5.

Any such notice shall be deemed to be delivered, given, and received for all purposes as of (A) three business days after being deposited in the United States mail, (B) the actual date of delivery or transmission, as shown on the postal or courier service receipt or on the transmittal log sheet generated by the sending Fax machine, if delivered or transmitted before 5:00 pm, recipient’s local time, on a business day (and, otherwise, on the first business day after the date of actual delivery or transmission) or (C) as of the actual date of attempted delivery (but not attempted but failed Fax transmission), if delivery is attempted but refused between the hours of 9:00 am and 5:00 pm, recipient’s local time, on a business day. The parties hereto may change their addresses set forth above by giving notice thereof to the other in conformity with this provision.

9.6          Time of Essence. Time is of the essence in this Agreement.

9.7          Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed via facsimile or by sending copies of the executed Agreement via email

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followed by regular mail  of the originals and shall be considered executed and binding upon receipt of the fax or email of the signature page of the last of the party’s signature to this Agreement.

9.8          Captions and Interpretation. The captions in this Agreement are inserted for convenience of reference and in no way define, describe or limit the scope or intent of this Agreement or any of the provisions hereof. Where required for proper interpretation, words in the singular shall include the plural, and words of any gender shall include all genders.

9.9          Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns.

9.10        Entire Agreement; Modifications. This Agreement contains the entire agreement between the parties relating to the transactions contemplated hereby and all prior or contemporaneous agreements, understandings, representations or statements, oral or written, are superseded hereby. No waiver, modification amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, waiver, amendment discharge or change is sought.

9.11        Partial Invalidity. Any provision of this Agreement which is unenforceable or invalid or the inclusion of which would affect the validity, legality or enforcement of this Agreement shall be of no effect, but all the remaining provisions of this Agreement shall remain in full force and effect. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, there will be automatically added to this Agreement a provision as similar to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

9.12        Discharge of Obligations. Except as otherwise expressly provided herein, the acceptance of the Deed by Purchaser at Closing shall be deemed to be a full performance and discharge of every representation, warranty and covenant made by Seller herein and every agreement and obligation on the part of Seller to be performed pursuant to the provisions hereof, and such representations, warranties and covenants shall be deemed to merge into the documents delivered at Closing.

9.13        Seller’s Limited Liability. Purchaser agrees that it does not have and will not have any claims or causes of action against any disclosed or undisclosed officer, director, employee, trustee, shareholder, partner, principal, parent, subsidiary or other affiliate of Seller, or any officer, director, employee, trustee, shareholder, partner or principal of any such parent, subsidiary or other affiliate (collectively, “Sellers’ Affiliates”), arising out of or in connection with this Agreement or the transactions contemplated hereby. Purchaser agrees to look solely to Seller and its assets for the satisfaction of any liability or obligation arising under this Agreement or the transactions contemplated hereby, or for the performance of any of the covenants, warranties or other agreements contained herein, and further agrees not to sue or otherwise seek to enforce any personal obligation against any of Sellers’ Affiliates with respect to any matters arising out of or in connection with this Agreement or the transactions contemplated hereby. Notwithstanding anything to the contrary contained in this Agreement, neither the negative capital account of any constituent member in or partner of Seller (or in any other constituent member or partner of Seller), nor any obligation of any constituent member in or partner of Seller (or in any other constituent member or partner of Seller) to restore a negative capital account or to contribute capital to Seller (or to any other constituent member or partner of Seller), shall at any time be deemed to be the property or an asset of Seller or any such other constituent member or partner (and neither Seller nor any of its successors or assigns shall have any right to collect, enforce or proceed against or with respect to any such negative capital account of member’s or partner’s obligations to restore or contribute).  The provisions of this Section 9.13 shall survive the termination of this Agreement and the Closing.

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9.14        No Third Party Rights. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.

9.15        Further Assurances. Both Seller and Purchaser agree that it will without further consideration execute and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by the other party to consummate more effectively the transactions contemplated hereby.

9.16        Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

9.17        Calculation of Time Periods. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday, Jewish Holiday or legal holiday under the laws of the States of Florida, Colorado and Texas, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday or legal holiday. The final day of any such period shall be deemed to end at 5 p.m., Dallas, Texas time. “Jewish Holiday” shall mean Passover (the first two days and the last two days), Shavuot, Rosh Hashanah, Yom Kippur, Sukkot (first two days), Simchat Torah (two days).

9.18        Applicable Law. THIS AGREEMENT IS PERFORMABLE IN BROWARD COUNTY, FLORIDA, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF FLORIDA. SELLER AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN BROWARD COUNTY, FLORIDA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT SITTING IN BROWARD COUNTY, FLORIDA. IF EITHER PARTY SHALL EMPLOY AN ATTORNEY TO ENFORCE OR DEFINE THE RIGHTS OF SUCH PARTY HEREUNDER, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER FROM THE NONPREVAILING PARTY ALL OF ITS REASONABLE EXPENSES, INCLUDING REASONABLE ATTORNEYS’ FEES. PURCHASER AND SELLER AGREE THAT THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT.

9.19        Radon Notification. Pursuant to Florida Statutes Section 404.056(5), Seller hereby makes, and Buyer hereby acknowledges, the following notification:

RADON GAS: RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN IT HAS ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT EXCEED FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN FLORIDA.  ADDITIONAL INFORMATION REGARDING RADON AND RADON TESTING MAY BE OBTAINED FROM YOUR COUNTY HEALTH DEPARTMENT.

9.20        Exhibits and Schedules. The following schedules or exhibits attached hereto (herein sometimes being referred to as “Exhibit”) shall be deemed to be an integral part of this Agreement:

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Exhibit A	Legal Description;
Exhibit B	Property Documents
Exhibit C	Special Warranty Deed
Exhibit D	Bill of Sale
Exhibit E	Assignment of Leases and Security Deposits
Exhibit F	Assignment and Assumption of Intangible Property and Other Rights
Exhibit G	Tenant Notice Letters
Exhibit H	FIRPTA Affidavit
Exhibit I	Agreement Regarding Disclaimers
Exhibit J	Seller’s Closing Certification
Exhibit K	Purchaser’s Closing Certification
Exhibit L	Leasing Guidelines
Exhibit M	Approval Notice
Schedule 1.1(c)	List of Personal Property

9.21        Tender of Offer. Upon execution of this Agreement by Purchaser and delivery of same to Seller, this Agreement shall constitute an offer which has been submitted by Purchaser to Seller for Seller’s approval. By executing this Agreement and submitting same to Seller, Purchaser acknowledges and agrees as follows: (a) this Agreement may be approved or disapproved by Seller in its sole and unfettered discretion, with Seller having the right to disapprove this Agreement for any reason whatsoever, and (b) Seller’s approval of this Agreement shall be evidenced only by Seller’s execution of this Agreement and delivery of a counterpart hereof executed by both Seller and Purchaser to the Title Company. Purchaser acknowledges that Purchaser has not, will not and cannot rely upon any other statement or action of Seller or its representatives as evidence of Seller’s approval of this Agreement.

9.22        Like Kind Exchange. In the event that Seller elects to sell the Property as part of a like kind exchange pursuant to Section 1031 of the Internal Revenue Code, Purchaser agrees to cooperate with Seller in connection therewith and to execute and deliver all documents which reasonably may be required to effectuate such exchange as a qualified transaction pursuant to Section 1031 of the Code; provided that: (a) the Closing shall not be delayed; (b) Purchaser incurs no additional cost or liability in connection with the like-kind exchange; (c) Seller pays all costs associated with the like-kind exchange; and (d) Purchaser is not obligated to take title to any property other than the Property.

9.23        Press Releases. All media releases, public announcements and public disclosures by Purchaser or Purchaser’s Representatives shall be coordinated with and approved in writing by Seller prior to the release thereof. Except for any announcement intended solely for internal distribution by Purchaser or any disclosure required by legal, accounting or regulatory requirements beyond the reasonable control of Purchaser, all media releases, public announcements or public disclosures (including, but not limited to, promotional or marketing material) by Purchaser or its employees or agents relating to this Agreement or its subject matter, or including the name, trade name, trade mark, or symbol of Seller or any affiliate of Seller, shall be coordinated with and approved in writing by Seller prior to the release thereof. Purchaser shall not represent directly or indirectly that any contract or any service provided by Purchaser to Seller has been approved or endorsed by Seller or include the name, trade name, trade mark, or symbol of Seller or any affiliate of Seller without Seller’s express written consent.  The provisions of this Section 9.23 shall survive the Closing or any termination of this Agreement.

9.24        Attorney’s Fees Any party to this Agreement who is the prevailing party in any legal proceeding against the other party brought under or with respect to this Agreement or transaction will be additionally entitled to recover court costs and reasonable attorneys’ fees from the non-prevailing party.

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9.25        WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OR ANY TERMINATION OF THIS AGREEMENT.

9.26        No Recording of Contract.  Neither this Agreement nor any memorandum or short form hereof shall be recorded or filed in any public land or other public records of any jurisdiction by Purchaser and any attempt to do so may be treated by Seller as a default of this Agreement thereof entitling Seller to terminate this Agreement and retain the Earnest Money pursuant to Section 10(a) hereof.  Notwithstanding any such termination under this Section 9.26, Purchaser shall be obligated to execute an instrument in recordable form releasing this Agreement, and Purchaser’s obligations pursuant to this Section 9.25 shall survive any termination of this Agreement as a surviving obligation.

9.27        Purchaser’s Limited Liability.  No constituent partner in or member of agent or Purchaser, nor any advisor, trustee, director, officer, employee, beneficiary, shareholder, participant, representative or agent of any corporation or trust that is or becomes a constituent partner in or agent or member of Purchaser shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and Seller and its successors and assigns and, without limitation, all other persons and entities, shall look solely to Purchaser’s assets for the payment of any claim or for any performance, and Seller, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability.  Notwithstanding anything to the contrary contained in this Agreement, neither the negative capital account of any constituent member in or partner of Purchaser (or in any other constituent member or partner of Purchaser), nor any obligation of any constituent member in or partner of Purchaser (or in any other constituent member or partner of Purchaser) to restore a negative capital account or to contribute capital to Purchaser (or to any other constituent member or partner of Purchaser), shall at any time be deemed to be the property or an asset of Purchaser or any such other constituent member or partner (and neither Seller nor any of its successors or assigns shall have any right to collect, enforce or proceed against or with respect to any such negative capital account of member’s or partner’s obligations to restore or contribute).  The provisions of this Section shall survive the termination of this Agreement and the Closing.

[SIGNATURES FOLLOW ON NEXT PAGE]

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

Dated: August 23, 2012	SELLER:
	7900 HAMPTON BLVD, LLC,
	a Delaware limited liability company
	By:	Hampton Peak, LLC,
		a Colorado limited liability company,
		its Managing Member
		By:	/s/ Luke C. Simpson
			Luke C. Simpson
			Manager
	PURCHASER:
Dated: August 24, 2012
	DEDICATED (PARROTS LANDING) LP,
	a Florida limited partnership
	By:	Dedicated (Parrots Landing) GP Inc.,
		a Canadian corporation,
		its general partner
		By:	/s/ Mark Zolty
			Mark Zolty, Vice President

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ACKNOWLEDGMENT BY TITLE COMPANY

The Title Company hereby acknowledges receipt of (a) a counterpart of this Agreement executed by Seller and Purchaser on the        day of August 2012, and (b) Earnest Money from Purchaser in the amount of                                          Dollars ($                ) on the        day of August 2012.

FIDELITY NATIONAL TITLE GROUP - FLORIDA AGENCY

By:

Name:

Title:

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EXHIBIT A

LEGAL DESCRIPTION

Parcel 1:

Tract No. 1 and 2, less and except the West 410.00 feet thereof (as measured at right angles to the West line of said tracts), of the Plat of The Hamptons of North Lauderdale, according to the Plat thereof recorded in Plat Book 109, Page 24, of the Public Records of Broward County, Florida.

Parcel 2:

Easement for the benefit of Parcel 1 as created by “Pedestrian Bridge Easement Agreement” dated May 28, 1987, and filed July 2, 1987, in Official Records Book 14589, at Page 3, granted for the purposes set forth in said document, over, under and across the land described as follows:

Commencing at the Southeast corner of the West 410.00 feet of Tracts No. 1 and No. 2 of the Plat entitled “The Hamptons of North Lauderdale”, as recorded in Plat Book 109, Page 24, of the Public Records of Broward County, Florida, thence North 01º39’59” West, along the East boundary of the said West 410.00 feet of Tract No. 1 and No. 2, a distance of 418.08 feet; thence South 85º17’58” East, 546.00 feet to the Westerly right-of-way line of said canal and the Point of Beginning; thence continue South 85º17’58” East 70.67 feet to the Easterly right-of-way line of said canal and a point of intersection with a curve, concave Easterly radial line through said point bears South 80º10’10” West; thence Southerly along said Easterly canal right-of-way line and the arc of said curve, having a radius of 215.00 feet and a delta of 05º26’50”, and an arc length of 20.44 feet; thence North 85º17’58” West, 71.73 feet to the Westerly right-of-way line of said canal and a point of intersection with a curve, concave Easterly; (radial line through said point bears South 87º51’37” West), thence Northerly along said Westerly canal right-of-way and the arc of a curve, having a radius of 285.00 feet, a delta of 04º04’14” and an arc length of 20.25 feet to the Point of Beginning.

Parcel 3

That part of Tract 8, of The Hamptons of North Lauderdale, according to the plat thereof, as recorded in Plat Book 109, Page 24, Public Records of Broward County, Florida, which lies South of that 70 foot Canal Right of Way as recorded in Official Records Book 4151, page 969, and as set forth on said plat

Exhibit A - Page 1

EXHIBIT B

PROPERTY DOCUMENTS

Seller shall deliver the following Property Documents to Purchaser through a secure website or otherwise deliver to Purchaser to the extent in Seller’s possession as provide in Section 3.1 of this Agreement:

(a)a standard form of Tenant Lease used with respect to the Property;

(b)A schedule and copies of all Service Contracts relating to the ownership and operation of the Property;

(c)all licenses and permits with respect to the ownership and operation of the Property, including, but not limited to, building permits and certificates of occupancy;

(d)the most current real estate and personal property tax statements with respect to the Property;

(e)all warranties and guaranties relating to the Property, or any part thereof, or to the tangible Personal Property;

(f)a rent roll as of a date not more than five (5) business days prior to the Effective Date prepared by the management company managing the Property on the standard form in use for the Property, indicating the commencement date and an accompanying security deposit schedule;

(g)an aged delinquency report;

(h)copies of any environmental inspection reports with respect to the Property in Seller’s possession or control;

(i)copies of any pending claims, notices or similar documents concerning the Property;

(j)operating reports from January 1, 20011 through the most recent month for which such operating reports have been prepared by Seller prepared by the management company managing the Property (and provided that Seller will cooperate in responding to reasonable requests from Purchaser’s lender in connection with Purchaser’s financing of the Property to deliver updated and/or additional operating and financial information with respect to the Property, provided that Seller shall not be obligated to reformat data or create new report forms and shall have no obligation to re-verify tenant employment or income);

(k)           a listing of staff at the Property and a description of their compensation and benefits;

(l)            Seller’s owner’s title policy and the Existing Survey;

(m)          copies of zoning reports and termite inspection reports.

Exhibit B - Page 1

In addition, Seller will cause to be made available to Purchaser for inspection at the Property the following (the “Additional Property Documents”), to the extent (and only to the extent) that such items are available and in Seller’s actual possession:

(i)twelve (12) most recent utility bills relating to the Property;

(ii)all Tenant Leases;

(iii)delinquency logs, tenant complaints and tenant correspondence files (as maintained in the tenant’s individual file), and repair/maintenance logs and records; and

(iv)all architectural plans and specifications, engineering plans, drawings and site plans relating to the Property.

Exhibit B - Page 2

EXHIBIT C

SPECIAL WARRANTY DEED

Recording requested by, and After recording, return to:

Instrument Prepared By:

SPECIAL WARRANTY DEED

(North Lauderdale, Florida)

KNOW ALL MEN BY THESE PRESENTS:

THAT 7900 HAMPTON BLVD, LLC, a Delaware limited liability company (“Grantor”), for and in consideration of the sum of TEN DOLLARS ($10) and other good and valuable consideration in hand paid to the undersigned by                                     , a                                           (“Grantee”), whose mailing address is                                                                      , the receipt and sufficiency of such consideration being hereby acknowledged, has granted, bargained, sold and conveyed, and by these presents does hereby grant, bargain, sell and convey unto Grantee that certain real property being more particularly described on Exhibit A attached hereto and made a part hereof for all purposes, together with all improvements and fixtures situated thereon (collectively, the “Property”); SUBJECT TO real estate taxes for the year 2012 and subsequent years; covenants, conditions, restrictions, easements, rights-of-way and other matters of record (but this reference shall not operate to reimpose any such matter that has terminated or expired); applicable laws, ordinances, statutes, orders, requirements and regulations to which the Property is subject; and all matters disclosed by an accurate survey of the Property.

TO HAVE AND TO HOLD the Property, together with all and singular the easements, tenements, hereditaments, and appurtenances thereto in anywise belonging, unto Grantee, its successors and assigns, in fee simple forever, and Grantor hereby agrees to warrant the title to the Property, subject as aforesaid, and will defend the same against the lawful claims of all persons claiming by, through, or under Grantor but not otherwise.

[SIGNATURES ON NEXT PAGE]

Exhibit C - Page 1

Executed this        day of                                2012, effective as of the        day of                                2012.

SELLER:
7900 HAMPTON BLVD, LLC,
a Delaware limited liability company
By:	Hampton Peak, LLC,
	a Colorado limited liability company,
	Managing Member
	By:
		Luke C. Simpson
		Manager

Witnesses:

First Witness

Printed Name of First Witness

Second Witness

Printed Name of Second Witness

Exhibit C - Page 2

STATE OF	§
	§
COUNTY OF	§

On                               , 20      , before me personally appeared Luke C. Simpson, personally known to me to be the person who executed the foregoing instrument as the Manager of Hampton Peak, LLC, a Colorado limited liability company, the Managing Member of 7900 Hampton Blvd, LLC, a Delaware limited liability company, and acknowledged to me that said person executed said instrument for the purposes and consideration and consideration therein expressed, and as the act of said limited liability company.

WITNESS my hand and official seal.

Notary Public – State of

Printed Name

My commission expires:

[Notary Seal]

[Notary Seal]

Exhibit C - Page 3

EXHIBIT A

LEGAL DESCRIPTION

[To be inserted]

Exhibit C - Page 4

EXHIBIT D

BILL OF SALE

Seller, [SELLER NAME ALL CAPS], a                                           (“Seller”), having its principal place of business at Denver, Colorado, in consideration of Ten Dollars ($10.00), receipt of which is hereby acknowledged, does hereby sell, assign, transfer and set over to                                         , a                                          (“Purchaser”), the following described personal property, to-wit:

All of the furniture, fixtures, equipment, machines, apparatus, supplies and personal property, of every nature and description, and all replacements thereof now owned by Seller and located in or on the real estate described on Exhibit A attached hereto and made a part hereof as listed on Exhibit B attached hereto excepting therefrom any furniture, furnishings, fixtures, business equipment or articles of personal property belonging to tenants occupying the improvements situated on said real estate.

Seller represents and warrants to Purchaser (i) that it is the owner of the property and interests described above, (ii) that it has the right to assign such property and interests and has not previously assigned its rights in and to such property and interests, and (iii) that such property is free and clear of all liens, charges and encumbrances created or agreed t by Seller other than the Permitted Exceptions as such term is defined in the Purchase Agreement dated         , 2012 between Seller and Purchaser.  Seller warrants and will defend title to the above described property to Purchaser, its successors and assigns, against any person or entity lawfully claiming, or to lawfully claim, the same or any part thereof, by, through or under Seller and not otherwise, and subject to the Permitted Exceptions. SELLER MAKES NO WARRANTY OF MERCHANTABILITY, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE IN RESPECT OF THE FOREGOING PROPERTY, AND THE SAME IS SOLD IN “AS IS, WHERE IS” CONDITION, WITH ALL FAULTS. BY EXECUTION OF THIS BILL OF SALE, PURCHASER AFFIRMS THAT IT HAS NOT RELIED ON SELLER’S SKILL OR JUDGMENT TO SELECT OR FURNISH THE FOREGOING PROPERTY FOR ANY PARTICULAR PURPOSE, THAT SELLER MAKES NO WARRANTY OF MERCHANTABILITY, QUALITY, OR FITNESS FOR ANY PARTICULAR PURPOSE, AND THAT THE FOREGOING PROPERTY IS BEING SOLD TO PURCHASER WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY EXCEPT FOR THE WARRANTY OF TITLE PROVIDED ABOVE.

THIS INSTRUMENT shall further assign to the Purchaser all assignable and unexpired manufacturers’ warranties related to the Personal Property, if any.

THIS INSTRUMENT shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

TO HAVE AND TO HOLD the Personal Property unto the Purchaser and the Purchaser’s successors and assigns forever, subject to the limitations as provided above.

By acceptance of this Assignment, Assignee assumes and agrees to pay all personal property taxes on the Personal Property for the calendar year 2012.

(Signature page follows)

Exhibit D - Page 1

IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be signed and sealed in its name by its officers thereunto duly authorized this        day of                                2012.

SELLER:

                                           ,

a

By:

Name:

Title:

[Add Exhibit A Legal Description and Exhibit B List of Personal Property]

Exhibit D - Page 2

EXHIBIT E

ASSIGNMENT OF TENANT LEASES AND ASSUMPTION

This ASSIGNMENT OF TENANT LEASES AND ASSUMPTION (this “Assignment”) is made and entered into as of                     , 20       (the “Effective Date”), by and between [ASSIGNOR NAME ALL CAPS], a                                          (“Assignor”), and                                 , a                                (“Assignee”).

AGREEMENTS:

Assignor, for good and valuable consideration, the receipt of which is hereby acknowledged, hereby GRANTS, TRANSFERS and ASSIGNS to the Assignee all of Assignor’s right, title and interest in and to (i) any and all leases, franchises, licenses, occupancy agreements, or other similar agreements (hereinafter called the Leases,” whether one or more), demising space in or otherwise relating to the improvements now existing on the land described on Exhibit A, attached hereto and made a part hereof (collectively, the land with improvements are referred to herein collectively as the “Premises”); and (ii) all security deposits held by Assignor under the Leases (collectively the items described in (i) and (ii) above are referred to herein collectively as the “Property”).

TO HAVE AND TO HOLD the Property, together with all and singular the rights, titles, and interests thereto in anywise belonging, to Assignee, its successors and assigns forever, subject to the matters to which that certain Special Warranty Deed (“Deed”) of even date herewith from Assignor to Assignee conveying the tract of land described on Exhibit A hereto is made subject as fully as if and for all purposes as if the Property were included and described in the Deed.

Assignor has executed this Assignment and has GRANTED, TRANSFERRED and ASSIGNED the Property and Assignee has accepted this Assignment and purchased the Property AS IS AND WHEREVER LOCATED, WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF WHATSOEVER NATURE, EXPRESS, IMPLIED OR STATUTORY, IT BEING THE INTENTION OF ASSIGNOR AND ASSIGNEE TO EXPRESSLY NEGATE AND EXCLUDE ALL WARRANTIES WHATSOEVER, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE, WARRANTIES CREATED BY AFFIRMATION OF FACT OR PROMISE OR BY ANY DESCRIPTION OF THE PROPERTY OR BY ANY SAMPLE OR MODEL AND ANY OTHER WARRANTIES CONTAINED IN OR CREATED BY THE UNIFORM COMMERCIAL CODE OF THE STATE IN WHICH THE PROPERTY IS LOCATED OR ANY OTHER LAW.

Assignor hereby agrees to defend, indemnify and hold harmless Assignee from and against any liability, damages, causes of action, expenses and attorneys’ fees incurred by Assignee by reason of the failure of Assignor to fulfill, perform and discharge all of the various commitments, obligations and liabilities under and by virtue of the Leases assigned hereunder, that arise prior to the Effective Date hereof.

Assignee hereby accepts the foregoing assignment and agrees to assume, fulfill, perform and discharge all the various commitments, obligations and liabilities of Assignor under and by virtue of the Leases hereby assigned that arise on or after the Effective Date hereof, including the return of security deposits to the extent that Assignee received a credit therefor at closing of the transaction of which this Assignment is a part, and hereby agrees to defend, indemnify and hold harmless Assignor from and against any liability, damages, causes of action, expenses and attorneys’ fees incurred by Assignor by reason of the failure of Assignee from and after the Effective Date hereof to fulfill, perform and discharge

Exhibit E - Page 1

all of the various commitments, obligations and liabilities under and by virtue of the Leases assigned hereunder, including the return of security deposits, that arise on or after the Effective Date hereof

All of the covenants, terms and conditions set forth herein shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

This Assignment may be executed in identical counterparts, all of which, when taken together, will constitute one and the same instrument.

(Signature page follows)

Exhibit E - Page 2

EXECUTED by the undersigned to be effective as of the Effective Date.

ASSIGNOR:

                                        ,

a

By:

Name:

Title:

ASSIGNEE:

                                        ,

a

By:

Name:

Title:

Exhibit E - Page 3

EXHIBIT A

To

Assignment of Tenant Leases and Assumption

PROPERTY DESCRIPTION

[Property description to be inserted]

Exhibit E - Page 4

EXHIBIT F

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”) is made and entered into to be effective as of                       , 20       (the “Effective Date”), by and between [ASSIGNOR NAME, ALL CAPS], a                                            (“Assignor”), and                                          , a                            (“Assignee”).

RECITALS:

A.Concurrently with the execution and delivery of this Assignment, Assignor is conveying to Assignee by Special Warranty Deed that certain real property, with the improvements located thereon, situated in                          County,                        (the “Property”) and being more particularly described on Exhibit A, which is attached hereto and made a part hereof for all purposes and the personal property more particularly described on the Bill of Sale delivered concurrently with Assignment (the “Personal Property”).

B.Assignee desires to purchase from Assignor, and Assignor desires to sell and assign to Assignee, all general intangible property owned by Assignor and used exclusively in connection with the Property.

AGREEMENTS:

NOW, THEREFORE, for and in consideration of the premises and the agreements and covenants herein set forth, together with the sum of TEN DOLLARS ($10.00) and other good and valuable consideration on this day paid and delivered by Assignee to Assignor, the receipt and sufficiency of which are hereby acknowledged and confessed by Assignor, Assignor does hereby ASSIGN, TRANSFER, SET OVER, DELIVER and CONVEY unto Assignee, its successors and assigns, all general intangible property owned by Seller and used exclusively in connection with the Property and Personal Property (collectively, the “Assigned Properties”), including specifically, without limitation, all right, title and interest of Seller in and to the following:

1.The name “Parrots Landing”, all logos,  trade names and all trademarks, if any, to the extent assignable, telephone exchanges and the business and goodwill of Assignor in connection with the Property, save and except the name/trademark “Behringer Harvard.” And any derivation thereof

2.All assignable warranties and guarantees (express or implied) issued in connection with, or arising out of (a) the purchase and repair of all furniture, fixtures, equipment, inventory, and other tangible personal property owned by Assignor and attached to and located in or used in connection with the Property; or (b) the construction of any of the improvements located on the Property.

3.All assignable bonds, licenses, certificates, permits, plans and specifications relating to the operation of the Property or any of the improvements located thereon, or both.

4.All leasing materials and brochures, ledger cards, leasing records, leasing applications, tenant credit reports and maintenance and operating records.

Exhibit F - Page 1

5.All of Assignor’s rights in the service contracts (the “Service Contracts”) described on Exhibit B, which is attached hereto and incorporated herein by reference.

By accepting this Assignment and by its execution hereof, Assignee hereby assumes and agrees to perform all of the terms, covenants, and conditions of the Service Contracts on the part of Assignor therein required to be performed, from and after the date hereof, but not prior thereto.

Subject to any limitations on damages contained in that certain Purchase Agreement between Assignor and                                                 (“Original Purchaser”) ([as amended and as assigned by Original Purchaser to Assignee,] the “Contract”), Assignor agrees that it shall indemnify, defend and hold harmless Assignee from and against any and all claims, demands, losses, liabilities, costs and expenses (including reasonable attorneys’ fees) incurred by Assignee as a result of claims or causes of action being brought against Assignee arising out of or relating to the Service Contracts and the obligations of Assignor thereunder accruing prior to the date hereof.  Assignee agrees that it shall indemnify, defend and hold harmless Assignor from and against any and all claims, demands, losses, liabilities, costs and expenses (including reasonable attorneys’ fees) incurred by Assignor as a result of claims or causes of action being brought against Assignor arising out of or relating to the Service Contracts and the obligations of Assignee thereunder accruing after the date hereof.

All of the covenants, terms and conditions set forth herein shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

This Assignment may be executed in identical counterparts, all of which, when taken together, will constitute one and the same instrument.

REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE(S) FOLLOWS.

Exhibit F - Page 2

EXECUTED by the undersigned to be effective as of the Effective Date.

ASSIGNOR:

,

a

By:

Name:

Title:

ASSIGNEE:

,

a

By:

Name:

Title:

Exhibit A - Property Description

Exhibit B - List of Service Contracts

Exhibit F - Page 3

EXHIBIT A

to
Assignment and Assumption Agreement

PROPERTY DESCRIPTION

[Property Description to be Inserted]

Exhibit F - Page 4

EXHIBIT B

to
Assignment and Assumption Agreement

LIST OF SERVICE CONTRACTS

[List of Service Contracts to be Inserted]

Exhibit F - Page 5

EXHIBIT G

TENANT NOTICE LETTER

                              , 20

[Name and Address of Tenant]

Re:Notice of Change of Ownership of the                        Apartments, [street address], North Lauderdale, Florida (the “Property”)

Dear Tenant:

We are pleased to announce that, as of                      , 20      ,                                     , a                                          , has transferred, sold, assigned, and conveyed the Property to                                                               (the “New Owner”).  The New Owner has received, and is now responsible for, your security deposit and/or pet deposit in the aggregate amount of $                      with respect to your lease at the Property.  In addition, the New Owner has assumed and agreed to perform all of the landlord’s obligations under the lease on and after the date of this letter.  Accordingly, you should pay rent and perform all of your other obligations under the lease to and for the benefit of the New Owner, and its successors and assigns.

Future rental payments with respect to your lease at the Property should be made to the New Owner by delivering to the on-site manager of the Property a check or money order payable to the order of                                                                                                                                           . In addition, all notices from you to the landlord concerning any matter relating to your tenancy should be sent to                                            at

Very truly yours,

NEW OWNER:

,

a

By:

Name:

Title:

Exhibit G - Page 1

TRANSFER ACKNOWLEDGED:

,

a

By:

Name:

Title:

Exhibit G - Page 2

EXHIBIT H

FIRPTA AFFIDAVIT

THE STATE OF COLARADO	§
	§
COUNTY OF DENVER	§

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform                                             , a                                             (“Transferee”), that withholding of tax is not required upon the disposition of a U.S. real property interest by [TRANSFEROR NAME, ALL CAPS], a                                                          (“Transferor”), the undersigned hereby certifies as follows:

1.Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

2.Transferor’s U.S. employer identification number is: #                    ;

3.Transferor’s office address is                                                             .

Transferor understands that this certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury, the undersigned, in the capacity set forth below, hereby declares that he has examined this certification and to the best of his knowledge and belief it is true, correct, and complete, and the undersigned further declares that he has authority to sign this document in such capacity.

EXECUTED to be effective as of the        day of                                20      .

TRANSFEROR:

,

By:

Name:

Title:

Exhibit H - Page 1

SWORN TO AND SUBSCRIBED BEFORE ME this        day of                                   20       by                                    ,                                    of                               , a                                 , on behalf of said                                       .

Notary Public

Exhibit H - Page 2

EXHIBIT I

AGREEMENT REGARDING DISCLAIMERS

This Agreement Regarding Disclaimers (this “Agreement”) is made to be effective as of the        day of                                  20      , by                                           , a                                             (“Purchaser”), for the benefit of [SELLER NAME, ALL CAPS], a                                      (“Seller”).

RECITALS

A.Seller and Purchaser executed that certain Purchase Agreement (herein so called) dated to be effective as of the        day of                                  20      , regarding the sale and purchase of certain property more specifically described therein (the “Property”).

B.The Purchase Agreement requires that at Closing (as defined in the Purchase Agreement) Purchaser and its counsel shall execute this Agreement;

NOW THEREFORE, Purchaser does hereby confirm and agree as follows:

1.No Reliance. Purchaser acknowledges and agrees that Purchaser has had ample opportunity to review documents concerning the Property and to conduct physical inspections of the Property, including specifically, without limitation, inspections regarding the environmental condition of the Property, the structural condition of the Property, and the compliance of the Property with the Americans with Disabilities Act of 1990, 42 U.S.C. §12101 et seq. Purchaser hereby represents, warrants and agrees that (a) Purchaser has examined the Property and is familiar with the physical condition thereof and has conducted such investigations of the Property (including without limitation the environmental condition thereof) as Purchaser has deemed necessary to satisfy itself as to the condition of the Property and the existence or nonexistence, or curative action to be taken with respect to, any hazardous or toxic substances on or discharged from the Property, (b) except as expressly set forth in Section 5.1 of the Purchase Agreement, neither Seller nor Broker (as defined in the Purchase Agreement), nor any affiliate, agent, officer, employee or representative of any of the foregoing has made any verbal or written representations, warranties, promises or guarantees whatsoever to Purchaser, express or implied, and in particular, that no such representations, warranties, guarantees or promises have been made with respect to the physical condition, operation, or any other matter or thing affecting or related to the Property or the offering or sale of the Property, and (c) Purchaser has not relied upon any representations, warranties, guarantees or promises or upon any statements made or any information provided concerning the Property provided or made by Seller or Broker, or their respective agents and representatives, and Purchaser has elected to purchase the Property after having made and relied solely on its own independent investigation, inspection, analysis, appraisal and evaluation of the Property and the facts and circumstances related thereto. Without limiting the generality of the foregoing, Purchaser acknowledges and agrees that neither Seller nor Broker has any obligation to disclose to Purchaser, and shall have no liability for its failure to disclose to Purchaser, any information known to it relating to the Property. Purchaser acknowledges and agrees that all materials, data and information delivered to Purchaser by or through Seller or Broker in connection with the transaction contemplated herein have been provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or information by Purchaser shall be at the sole risk of Purchaser.

Exhibit I - Page 1

2.Disclaimers. PURCHASER ACKNOWLEDGES AND AGREES THAT THE PROPERTY HAS BEEN SOLD AND CONVEYED TO PURCHASER AND PURCHASER HAS ACCEPTED THE PROPERTY “AS IS, WHERE IS, WITH ALL FAULTS.” EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 5.1 OF THE PURCHASE AGREEMENT AND THE LIMITED WARRANTY OF TITLE EXPRESSLY SET FORTH IN THE DEED FROM SELLER TO PURCHASER, SELLER HEREBY EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY. WITHOUT LIMITING THE GENERALITY OF THE PRECEDING SENTENCE OR ANY OTHER DISCLAIMER SET FORTH HEREIN AND EXCEPT AS SET FORTH IN SECTIONS 5.1 AND 5.3 OF THE PURCHASE AGREEMENT, SELLER AND PURCHASER HEREBY AGREE THAT SELLER HAS NOT MADE AND IS NOT MAKING ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AS TO (A) THE NATURE OR CONDITION, PHYSICAL OR OTHERWISE, OF THE PROPERTY OR ANY ASPECT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF HABITABILITY, SUITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE, (B) THE NATURE OR QUALITY OF CONSTRUCTION, STRUCTURAL DESIGN OR ENGINEERING OF THE IMPROVEMENTS OR THE STATE OF REPAIR OR LACK OF REPAIR OF ANY OF THE IMPROVEMENTS, (C) THE QUALITY OF THE LABOR OR MATERIALS INCLUDED IN THE IMPROVEMENTS, (D) THE SOIL CONDITIONS, DRAINAGE CONDITIONS, TOPOGRAPHICAL FEATURES, ACCESS TO PUBLIC RIGHTS-OF-WAY, AVAILABILITY OF UTILITIES OR OTHER CONDITIONS OR CIRCUMSTANCES WHICH AFFECT OR MAY AFFECT THE PROPERTY OR ANY USE TO WHICH PURCHASER MAY PUT THE PROPERTY, (E) ANY CONDITIONS AT OR WHICH AFFECT OR MAY AFFECT THE PROPERTY WITH RESPECT TO ANY PARTICULAR PURPOSE, USE, DEVELOPMENT POTENTIAL OR OTHERWISE, (F) THE AREA, SIZE, SHAPE, CONFIGURATION, LOCATION, CAPACITY, QUANTITY, QUALITY, CASH FLOW, EXPENSES, VALUE, MAKE, MODEL, COMPOSITION, AUTHENTICITY OR AMOUNT OF THE PROPERTY OR ANY PART THEREOF, (G) EXCEPT FOR THE LIMITED WARRANTY OF TITLE EXPRESSLY SET FORTH IN THE DEED, THE NATURE OR EXTENT OF TITLE TO THE PROPERTY, OR ANY EASEMENT, RIGHT-OF-WAY, LEASE, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONTRACT, CONDITION OR OTHERWISE THAT MAY AFFECT TITLE TO THE PROPERTY, (H) ANY ENVIRONMENTAL, GEOLOGICAL, METEOROLOGICAL, STRUCTURAL, OR OTHER CONDITION OR HAZARD OR THE ABSENCE THEREOF HERETOFORE, NOW OR HEREAFTER AFFECTING IN ANY MANNER THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE ABSENCE OF ASBESTOS OR ANY ENVIRONMENTALLY HAZARDOUS SUBSTANCE ON, IN, UNDER OR ADJACENT TO THE PROPERTY, (I) THE COMPLIANCE OF THE PROPERTY OR THE OPERATION OR USE OF THE PROPERTY WITH ANY APPLICABLE RESTRICTIVE COVENANTS, OR WITH ANY LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL BODY (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, ANY ZONING LAWS OR REGULATIONS, ANY BUILDING CODES, ANY ENVIRONMENTAL LAWS, AND THE AMERICANS WITH DISABILITIES ACT OF 1990, 42 U.S.C. 12101 ET SEQ. UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, VIOLATIONS OF ANY APPLICABLE LAWS, CONSTRUCTION DEFECTS, AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER’S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, AND EXCEPT AS SET FORTH IN SECTIONS 5.1 AND 5.3 OF THE

Exhibit I - Page 2

PURCHASE AGREEMENT,  SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER AT ANY TIME BY REASON OF OR ARISING OUT OF ANY VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING ANY ENVIRONMENTAL LAWS), CONSTRUCTION DEFECTS, PHYSICAL CONDITIONS, AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY. PURCHASER AGREES THAT SHOULD ANY WORK BE REQUIRED TO PUT THE PROPERTY IN COMPLIANCE WITH ANY APPLICABLE LAWS, OR SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED AFTER THE DATE OF CLOSING, SUCH WORK, CLEAN-UP, REMOVAL OR REMEDIATION SHALL BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF PURCHASER.

3.Survival of Disclaimers. Seller and Purchaser agree that the provisions of this Agreement shall survive Closing.

PURCHASER:

,

a

By:

Name:

Title:

Exhibit I - Page 3

EXHIBIT J

SELLER’S CLOSING CERTIFICATE

7900 Hampton Blvd, LLC, a Delaware limited liability company (“Seller”), has entered into that certain Purchase Agreement dated [insert date of Agreement] (the “Purchase Agreement”) with Dedicated (Parrots Landing) LP, a Florida limited partnership (“Purchaser”).  Seller hereby certifies to Purchaser that, as of the date of this certificate, the representations and warranties contained in Sections 5.1 of the Purchase Agreement are accurate in all material respects, except as otherwise expressly disclosed in the schedule of exceptions attached to this Certificate, if any.

SELLER:

,

a

By:

Name:

Title:

Exhibit J - Page 1

EXHIBIT K

PURCHASER’S CLOSING CERTIFICATE

Dedicated (Parrots Landing) LP, a Florida limited partnership (“Purchaser”), has entered into that certain Purchase Agreement dated [insert date of Agreement] (the “Purchase Agreement”) with 7900 Hampton Blvd, LLC, a Delaware limited liability company (“Seller”).  Purchaser hereby certifies to Seller that, as of the date of this certificate, the representations and warranties contained in Sections 5.7 of the Purchase Agreement are accurate in all material respects, except as otherwise expressly disclosed in the schedule of exceptions attached to this Certificate, if any.

PURCHASER:

,

a

By:

Name:

Title:

Exhibit K - Page 1

EXHIBIT L

LEASING GUIDELINES

Grand Peaks will follow the rent recommendations* of Yieldstar and strive to maintain no less than an 80% recommendation rate.

All applicants will have a credit rating of at least 400 and make two (2) times the amount of rent or will be required to pay an additional deposit depending upon rental history.  In addition, applicants must qualify by passing a background check (as stated in the form of Rental Criteria provided to each prospective tenant).

All leases will be for no less than 7 months in duration and will not be more than 13 months in duration.

These Leasing Parameters do not apply to the models and any employee units, provided that no more than 8 such units will be allowed at the Project at any time.

*These minimums include view charges for units with views

Exhibit L - Page 1

EXHIBIT M

APPROVAL NOTICE

September 5, 2012

7900 Hampton Blvd, LLC
Attn: Luke Simpson
4582 S. Ulster Street Parkway, Suite 1200
Denver, Colorado 80237

RE: Purchase Agreement with an Effective Date of August       , 2012 (the “Agreement”), between 7900 Hampton Blvd, LLC as Seller and Dedicated (Parrots Landing) LP as Purchaser.

Dear Mr. Simpson:

This is to advise you that after inspecting the Property described in the Agreement, Purchaser has approved all aspects of the Property, including, but not limited to, the Survey and the condition of title to the Property pursuant to the provisions of Article II and Article III of the Agreement and chooses to proceed under the terms of the Agreement, it being hereby acknowledged and agreed between Purchaser and Seller that Purchaser shall have no further right to terminate the Agreement EXCEPT FOR (i) the Financing Contingency or (ii) as may otherwise be specifically set forth in the Agreement other than in Articles II (save and except Section 2.8) and III thereof, as amended.

All capitalized terms used herein shall have the same meaning as set forth in the Agreement.

PURCHASER:
DEDICATED (PARROTS LANDING) LP,
a Florida limited partnership
By:	Dedicated (Parrots Landing) GP, Inc.,
	a Canadian corporation,
	its general partner
	By:
	Name:
	Title:

cc:Jim Fant

Exhibit M - Page 1

SCHEDULE 1.1(c)
LIST OF PERSONAL PROPERTY

[Follows]

Schedule 1.1(c) - Page 1

Parrot’s Landing Personal Property Summary

Leasing Office-Computer Equipment

Item Description

5 computers

1 printer

5 telephones

1 Copier

Leasing Office Furniture

Item Description

2 two drawer credenza

Gables display edge

1 Park Ave coffee machine

Accessories & artwork

6 vistors chairs, 5 lamps & misc silk florals

5 window levelers

Credenza and cornices

3 secretary desks

Golf Cart

1-2 drawer credenza/2 draw file

2-4draw lateral files

First aid box

Paper shredder

2 drawer file

1 metal 4 draw file

2 Secretary desks/chair

Postage meter

4 side chairs

2 pictures

2 credenza/1 cabinet

Safe

1 picture/1 lamp

5 misc accessories

2 side chairs

Lamp

Misc office items

Phase 2-Leasing Office

2 lamps

misc silk arrangements/kit table

4 wicker chairs/micro/coffee machine/wood cabinet

1 fridge/1 dishwasher

misc flower arrangement/5 wall art

2 roller chairs

1 lamp/1surround receiver

1 redwood bookcase

17’ wall unit

3 desk/1 conference table/4 roller chairs

glass table/4 chairs

4 side chairs/2 exec chairs

1 credenza/1 table

1 sofa table/2 arm chairs

Parrot’s Landing Personal Property Summary

Resident Lounge - Clubhouse

Item Description

Artwork in Bathrooms

Vanity & mirror in bathrooms

Toilet paper holder

2 rugs/area rug

2 love seats/4 pillows

2 console tables/1 cocktail table

3 end tables

Misc silk trees/artwork/mirrors

TV cabinet

2 chairs/side table

Server, 2 lamps, accent pliiows

Area rug/window treatments

Divider cabinet

Table w/4 chairs

Misc silk trees/artwork/mirrors

Fitness Center

Item Description

TV w/remote/4 pictures

2 treadmills/3 bicycles

1 elliptical/4 silk trees

4 window treatments

1 lap pull down

Misc items

Swimming Pool

Item Description

1 life ring/1 life poll

Ph 1-back pool- 21 lounges, 8 chairs, 2 tables, 1 trash can

1 life ring/1 life poll

Ph 2-16 lounges, 10 chairs, 2 trash can

1 life ring/1 life poll

Maintenance shop

Item Description

1 vacuum

1 key punch/5 golf carts

2 blowers/1 pressure washer

1 6” ladder/2 4’ladders

4 stepladders/1 heat gun

1 refrigerant scale/1 nail gun

1 vacuum pump/1 bonzing kit

1 recovery machine/2 recovery tanks

1 ent bender/1/2 1 bolt cutter

1 tree trimmer/1 snake

1 janitorial cart/1 billy goat

2 shovels/1 rake

Parrot’s Landing Personal Property Summary

2 tile cutters/1 radial arm saw

1-24’ ladder/1-15’ ladder

1 generator/1 a/c bender

1 grinder/1 a/c leak detector

Service Office/kitchen

Item Description

1 microwave

1 Fridge

2 dry erase boards

Keytrack/printer & computer

2 tables/6 chairs

1 computer

Model Ph-2

Item Description

1 glass table/2 chairs

1 sofa/3 pillows

2 end tables/1 coffee table

1 metal etagere/3 picture frames

2 lamps/8 silk tree/books

1 queen bed with head board

1 dresser

5 appliances

Kitchen misc items

Bedding/6 pillows

Artwork/mirror/misc

1 desk/chair/lamp

Silk trees/books

Window treatment/silk arrang

Model Ph-1

Item Description

TV stand/faux plasma screen

End table/cocktail table

Lamp/floor lamp

Couch/pillows

Cornice/drapes

Kitchen artwork/accessories

Rug

2 bar stools/dining table/4 dining chairs

buffet/mirror

2 lamps dining room

table set up/misc artwork

cornice/drapes in bath area

bath rug/artwork/accessories

master headboard

master bed/pillows/bedding

master night stand/desk

master chair/dresser/mirror/3 lamps

Parrot’s Landing Personal Property Summary

misc silk trees/floral

master cornice & drapes/art work/accessories

Guest bed/bedding/pillows/headboard

Guest dresser/wicker chair

Guest desk/bench/nightstand

Guest mirror/3 lamps

Guest silk plants/artwork

guest accessories/drapery

guset bath/drapes/rug

Guest bath artwork/accessories

EX-10.2

Exhibit 10.2

AMENDMENT TO PURCHASE AGREEMENT

THIS AMENDMENT TO PURCHASE AGREEMENT (this “Amendment”) is made as of September 4, 2012, by and among 7900 HAMPTON BLVD, LLC, a Delaware limited liability company (“Seller”), and DEDICATED (PARROTS LANDING) LP, a Florida limited partnership (“Purchaser”).

W H E R E A S:

A.Seller and Purchaser are the parties to that certain Purchase Agreement (the “Agreement”) dated as of August 24, 2012 with respect to certain real property located in the Broward County, Florida area, as more particularly described in Article 1 to the Agreement.

B.The parties desire to amend the Agreement in certain respects as more particularly set forth below.

NOW, THEREFORE, in consideration of the execution and delivery of the Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby further agree as follows:

1.The foregoing recitals are true and correct and are incorporated herein in their entirety.

2.This Amendment shall be deemed a part of, but shall take precedence over and supersede any provisions to the contrary contained in the Agreement.  All initial capitalized terms used in this Amendment shall have the same meaning as set forth in the Agreement unless otherwise provided.

3.Section 3.2 of the Agreement is hereby modified to provide that the Inspection Period shall expire on September 12, 2012.

4.Except as specifically modified hereby, all of the provisions of the Agreement which are not in conflict with the terms of this Amendment are hereby ratified and confirmed and shall remain unmodified and in full force and effect.

5.This Amendment may be executed in several counterparts each of which shall constitute an original, but all of which together shall constitute one instrument notwithstanding that all parties are not signatories to the same counterparts.

6.Delivery of this Amendment executed by a party by facsimile or email (pdf) transmission shall constitute delivery of the original executed Amendment.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

Seller:
7900 HAMPTON BLVD, LLC
a Delaware limited liability company
By:	Hampton Peak, LLC,
	a Colorado limited liability company,
	its Managing Member
	By:
		Luke C. Simpson, Manager
Purchaser:
DEDICATED (PARROTS LANDING) LP,
a Florida limited partnership
By:	Dedicated (Parrot Landing) GP Inc.,
	a Canadian corporation,
	its general partner
	By:
		Mark Zolty, Vice President

2

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Michael J. O’Hanlon, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Behringer Harvard Opportunity REIT II, Inc.;

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

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

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

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

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

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

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

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

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

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

Dated this 14th day of November, 2012.
	/s/ Michael J. O’Hanlon
	Michael J. O’Hanlon
	Chief Executive Officer
	Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Andrew J. Bruce, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Behringer Harvard Opportunity REIT II, Inc.;

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

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

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

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

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

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

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

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

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

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

Dated this 14th day of November, 2012.
	/s/ Andrew J. Bruce
	Andrew J. Bruce
	Chief Financial Officer
	Principal Financial Officer

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATION

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

The undersigned, who is the Chief Executive Officer of Behringer Harvard Opportunity REIT II, Inc. (the “Company”), hereby certifies, to his knowledge:

The Quarterly Report on Form 10-Q of the Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 14th day of November, 2012.

/s/ Michael J. O’Hanlon

Michael J. O’Hanlon

Chief Executive Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATION

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

The undersigned, who is the Chief Financial Officer of Behringer Harvard Opportunity REIT II, Inc. (the “Company”), hereby certifies, to his knowledge:

The Quarterly Report on Form 10-Q of the Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 14th day of November, 2012.

/s/ Andrew J. Bruce

Andrew J. Bruce

Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Real Estate Loan Receivable (Details) (PAL Loan, USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2011	Aug. 14, 2009
Real estate loan receivable
Loan agreement entered for providing second lien financing		$ 25
Interest income	$ 3.2
Hotel lodging units
Real estate loan receivable
Number of units		3,200
U.S. Army installations
Real estate loan receivable
Number of properties		10

XML

Discontinued Operations and Real Estate Held for Sale (Details) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended						0 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 item	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Archibald Business Center and the Palms of Monterrey	Sep. 30, 2011 Archibald Business Center and the Palms of Monterrey	Sep. 30, 2012 Archibald Business Center and the Palms of Monterrey	Sep. 30, 2011 Archibald Business Center and the Palms of Monterrey	Dec. 31, 2011 Archibald Business Center and the Palms of Monterrey	Dec. 22, 2011 Archibald Business Center	Jan. 05, 2012 Palms of Monterrey Subsequent event	Sep. 30, 2012 Interchange Business Center, San Bernardino, California	Oct. 18, 2012 Interchange Business Center, San Bernardino, California Subsequent event item building	Sep. 30, 2012 Parrot's Landing	Oct. 31, 2012 Parrot's Landing Subsequent event
Discontinued Operations
Sale price of discontinued operation											$ 15,000,000	$ 39,300,000		$ 7,500,000		$ 56,300,000
Number of industrial buildings sold														1
Number of industrial buildings			4											4
Number of buildings for which indebtedness paid by entity														4
Rental revenue						1,691,000	2,988,000	5,118,000	8,991,000
Expenses:
Property operating expenses						595,000	938,000	1,867,000	2,789,000
Interest expense						380,000	813,000	1,231,000	2,448,000
Real estate taxes						292,000	351,000	893,000	1,126,000
Property management fees						62,000	94,000	199,000	278,000
Asset management fees						17,000	21,000	51,000	65,000
Depreciation and amortization						384,000	836,000	1,146,000	3,239,000
Total expenses						1,730,000	3,053,000	5,387,000	9,945,000
Loss on early extinguishment of debt								(1,236,000)
Gain on sale of investment								9,264,000
Income from discontinued operations	(39,000)	(65,000)	7,759,000	(954,000)		(39,000)	(65,000)	7,759,000	(954,000)
Write-off of deferred financing fees and early termination fee								1,200,000
Land and improvements, net						14,747,000		14,747,000		6,316,000
Buildings and improvements, net						27,745,000		27,745,000		22,294,000
Furniture, fixtures and equipment, net						478,000		478,000		810,000
Assets associated with real estate held for sale	42,970,000		42,970,000		29,420,000	42,970,000		42,970,000		29,420,000
Notes payable of assets held for sale	35,675,000		35,675,000			35,675,000		35,675,000					7,036,000		28,639,000
Accrued and other liabilities						205,000		205,000		37,000
Obligations associated with real estate held for sale	$ 35,880,000		$ 35,880,000		$ 37,000	$ 35,880,000		$ 35,880,000		$ 37,000

XML

Related Party Transactions (Details) (USD $)	3 Months Ended		9 Months Ended													0 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Behringer Securities LP	Sep. 30, 2011 Behringer Securities LP	Sep. 30, 2012 Behringer Securities LP Maximum	Sep. 30, 2012 Behringer Harvard Opportunity II Management Services, LLC	Sep. 30, 2011 Behringer Harvard Opportunity II Management Services, LLC	Sep. 30, 2012 Behringer Harvard Opportunity II Management Services, LLC Minimum	Sep. 30, 2012 Advisor	Sep. 30, 2011 Advisor	Sep. 30, 2012 Advisor Minimum	Sep. 30, 2012 Advisor Maximum	Sep. 30, 2011 Advisor Maximum	Nov. 01, 2012 Behringer Harvard Europe Real Estate GmbH Subsequent event item sqft
Related party transaction
Commissions as percentage of gross offering proceeds							7.00%
Reallowance of selling commissions earned to participating broker Dealers (as a percent)					100.00%
Manager fee as percentage of gross offering proceeds							2.50%
Manager fee as percentage of gross offering proceeds to broker dealers participating in offerings							2.00%
Percentage of gross offering proceeds for marketing fees and expenses, conference fees and non Itemized, non Invoiced due diligence efforts							1.50%
Percentage of gross offering proceeds for out Of Pocket and bona fide, separately invoiced due diligence expenses incurred as fees, costs or other expenses from third parties							0.50%
Reduction in selling commissions included in additional paid-in capital					$ 400,000	$ 1,200,000
Reduction in dealer manager fees included in additional paid-in capital					200,000	400,000
Percentage of gross proceeds raised for remittance to Advisor for organization and offering expenses														1.50%
Reimbursement of organization and offering expenses as a percentage of gross proceeds raised in primary component of offerings			1.50%										1.50%
Organization and offering expenses due	3,800,000		3,800,000								3,800,000
Other payables to related parties	400,000		400,000
Organization and offering expenses incurred by advisor or its affiliates on entity's behalf											16,400,000
Organization and offering expenses incurred by advisor or its affiliates on entity's behalf reimbursed by entity											7,500,000
Acquisition and advisory fees as percentage of purchase, development, construction, or improvement of each asset acquired											2.50%
Acquisition and advisory fees as percentage of funds advanced in respect of loan or other investment											2.50%
Acquisition and advisory fees incurred											500,000	900,000
Percentage of reimbursement of acquisition expense											0.25%
Reimbursement of acquisition expense														100,000	100,000
Percentage of debt financing fee payable under loan or line of credit											1.00%
Debt financing fee payable under loan or line of credit											100,000	200,000
Property management fees as percentage of gross revenues of properties								4.50%
Oversight fee as percentage of gross revenues of property managed								0.50%
Property management fees or oversight fees incurred								900,000	200,000
Monthly asset management fee as percentage of sum of higher of cost or value of each asset											0.0833%
Asset management fees incurred	808,000	780,000	2,444,000	2,140,000							2,300,000	2,100,000
Non reimbursement of operating expenses in excess of average invested assets (as a percent)										2.00%
Non reimbursement of operating expenses in excess of net income (as a percent)										25.00%
Administrative services cost incurred and expensed											1,100,000	800,000
Rentable square feet																380
Lease term																14 months
Number of options to extend lease term																2
Additional lease term																1 year
Annualized rent																$ 80,000

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Discontinued Operations and Real Estate Held for Sale (Tables)

9 Months Ended

Sep. 30, 2012

Discontinued Operations and Real Estate Held for Sale

Schedule of discontinued operations in consolidated statements of operations

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Rental revenue	$	1,691		$	2,988		$	5,118		$	8,991
Expenses
Property operating expenses	595			938			1,867			2,789
Interest expense	380			813			1,231			2,448
Real estate taxes	292			351			893			1,126
Property management fees	62			94			199			278
Asset management fees	17			21			51			65
Depreciation and amortization	384			836			1,146			3,239
Total expenses	1,730			3,053			5,387			9,945
Loss on early extinguishment of debt (1)	—			—			(1,236		)	—
Gain on sale of real estate property	—			—			9,264			—
Income (loss) from discontinued operations	$	(39	)	$	(65	)	$	7,759		$	(954	)

(1)Loss on early extinguishment of debt for the nine months ended September 30, 2012 was approximately $1.2 million and was comprised of the write-off of deferred financing fees and an early termination fee.

Schedule of major classes of assets and liabilities associated with real estate held for sale

	September 30, 2012		December 31, 2011
Land and improvements, net	$	14,747	$	6,316
Building and improvements, net	27,745		22,294
Furniture, fixtures and equipment, net	478		810
Assets associated with real estate held for sale	$	42,970	$	29,420
Notes Payable	$	35,675	$	—
Accrued and other liabilities	205		37
Obligations associated with real estate held for sale	$	35,880	$	37

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Assets and Liabilities Measured at Fair Value (Tables)

9 Months Ended

Sep. 30, 2012

Assets and Liabilities Measured at Fair Value

Schedule of information about assets measured at fair value on a recurring basis

September 30, 2012	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	1	$	—	$	1

December 31, 2011	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	19	$	—	$	19

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Leasing Activity (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Future minimum base rental payments due to entity under non-cancelable leases
September 30, 2012 - December 31, 2012	$ 14,886
2013	14,787
2014	11,341
2015	8,664
2016	6,017
Thereafter	7,954
Total	$ 63,649
Maximum lease term	1 year

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Financial Instruments not Reported at Fair Value (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012 item	Dec. 31, 2011
Financial Instruments not Reported at Fair Value
Number of industrial buildings classified as held for sale	1
Number of industrial buildings	4
Notes Payable	$ 217.3	$ 239.8
Fair value of notes payable	$ 219.7	$ 242.2

XML

Supplemental Cash Flow Information (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Supplemental Cash Flow Information
Interest paid	$ 7,400	$ 6,266
Non-cash investing activities:
Capital expenditures for real estate in accounts payable	72	1,140
Capital expenditures for real estate in accrued liabilities	439	38
Receivable from sale of property in unconsolidated joint venture		7,108
Non-cash financing activities:
Common stock issued in distribution reinvestment plan	2,790	5,912
Accrued dividends payable		1,009	1,069
Offering costs payable to related parties	8
Offering costs receivable from related parties		$ 2,238

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

3.             Summary of Significant Accounting Policies

Described below are certain of our significant accounting policies.  The disclosures regarding several of the policies have been condensed or omitted in accordance with interim reporting regulations specified by Form 10-Q.  Please see our Annual Report on Form 10-K for a complete listing of all of our 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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates include such items as purchase price allocation for real estate acquisitions, impairment of long-lived assets, depreciation and amortization, and allowance for doubtful accounts.  Actual results could differ from those estimates.

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control.  All inter-company transactions, balances, and profits have been eliminated in consolidation.  Interests in entities acquired will be evaluated based on applicable GAAP, which includes the requirement to consolidate entities deemed to be variable interest entities (“VIE”) in which we are the primary beneficiary.  If the interest in the entity is determined not to be a VIE, then the entity will be evaluated for consolidation based on legal form, economic substance, and the extent to which we have control and/or substantive participating rights under the respective ownership agreement.  In the Notes to Condensed Consolidated Financial Statements, all dollar and share amounts in tabulation are in thousands of dollars and shares, respectively, unless otherwise noted.

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary.  The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity.  Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses.  A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

We have evaluated subsequent events for recognition or disclosure in our consolidated financial statements.

Real Estate

Upon the acquisition of real estate properties, we recognize the assets acquired, the liabilities assumed and any noncontrolling interest as of the acquisition date, measured at their fair values.  The acquisition date is the date on which we obtain control of the real estate property.  The assets acquired and liabilities assumed may consist of land, inclusive of associated rights, buildings, assumed debt, identified intangible assets and liabilities and asset retirement obligations. Identified intangible assets generally consist of above-market leases, in-place leases, in-place tenant improvements, in-place leasing commissions and tenant relationships.  Identified intangible liabilities generally consist of below-market leases. Goodwill is recognized as of the acquisition date and measured as the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree over the fair value of the identifiable net assets acquired.  Likewise, a bargain purchase gain is recognized in current earnings when the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree is less than the fair value of the identifiable net assets acquired.  Acquisition-related costs are expensed in the period incurred.  Initial valuations are subject to change until our information is finalized, which is no later than twelve months from the acquisition date.

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 fair value of these assets using discounted cash flow analyses or similar methods believed to be used by market participants.  The value of buildings is depreciated over the estimated useful life of 25 years using the straight-line method.

We determine the fair value of assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that management believes we could obtain at the date of the debt assumption.  Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan using the effective interest method.

We determine the value of above-market and below-market 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 (1) the contractual amounts to be paid pursuant to the in-place leases and (2) management’s estimate of current market lease rates for the corresponding in-place leases, measured over a period equal to (a) the remaining non-cancelable lease term for above-market leases, or (b) the remaining non-cancelable lease term plus any below-market fixed rate renewal options that, based on a qualitative assessment of several factors, including the financial condition of the lessee, the business conditions in the industry in which the lessee operates, the economic conditions in the area in which the property is located, and the ability of the lessee to sublease the property during the renewal term, are reasonably assured to be exercised by the lessee for below-market leases.  We record the fair value of above-market and below-market leases as intangible assets or intangible liabilities, respectively, and amortize them as an adjustment to rental income over the determined lease term.

The total value of identified real estate intangible assets acquired is further allocated to in-place leases, in-place tenant improvements, in-place leasing commissions and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant.  The aggregate value for tenant improvements and leasing commissions is 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 include 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, we include 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 the fair value of tenant relationships also include costs to execute similar leases including leasing commissions, legal fees and tenant improvements as well as an estimate of the likelihood of renewal as determined by management on a tenant-by-tenant basis.

We amortize the value of in-place leases, in-place tenant improvements and in-place leasing commissions to expense over the initial term of the respective leases.  The tenant relationship values are amortized to expense over the initial term and any anticipated renewal periods, but in no event does the amortization period for intangible assets or liabilities exceed the remaining depreciable life of the building.  Should a tenant terminate its lease, the unamortized portion of the acquired lease intangibles related to that tenant would be charged to expense.

Anticipated amortization expense associated with the acquired lease intangibles for each of the following five years as of September 30, 2012 is as follows:

Year	Lease / Other Intangibles
September 30, 2012 - December 31, 2012	$	394
2013	1,302
2014	795
2015	437
2016	260

Accumulated depreciation and amortization related to our consolidated investments in real estate assets and intangibles were as follows:

										Acquired
	Buildings and			Land and			Lease			Below-Market
September 30, 2012	Improvements			Improvements			Intangibles			Leases
Cost	$	215,266		$	75,585		$	14,109		$	(2,368	)
Less: depreciation and amortization	(15,024		)	(2,145		)	(8,271		)	1,300
Net (1)	$	200,242		$	73,440		$	5,838		$	(1,068	)

										Acquired
	Buildings and			Land and			Lease			Below-Market
December 31, 2011	Improvements			Improvements			Intangibles			Leases
Cost	$	228,999		$	88,292		$	16,210		$	(2,232	)
Less: depreciation and amortization	(10,160		)	(1,330		)	(7,823		)	961
Net (2)	$	218,839		$	86,962		$	8,387		$	(1,271	)

(1)   Excludes Parrot’s Landing, which was sold on October 31, 2012, and one of the four industrial buildings at Interchange Business Center, which was sold on October 18, 2012 (both classified as held for sale at September 30, 2012).

(2)   Excludes Palms of Monterrey, which was sold on January 5, 2012 (classified as held for sale at December 31, 2011).

Real Estate Held for Sale

We classify properties as held for sale when certain criteria are met, in accordance with GAAP.  At that time we present the assets and obligations of the property held for sale separately in our consolidated balance sheet and we cease recording depreciation and amortization expense related to that property.  Properties held for sale are reported at the lower of their carrying amount or their estimated fair value, less estimated costs to sell.  As of September 30, 2012, Parrot’s Landing and one of the four industrial buildings at Interchange Business Center were classified as held for sale and a sale of the properties was completed on October 31, 2012 and October 18, 2012, respectively.  As of December 31, 2011, our Palms of Monterrey property was classified as held for sale and a sale of the property was completed on January 5, 2012.

Cash and Cash Equivalents

We consider investments in highly liquid money market funds or investments 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

As required by our lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate taxes and other reserves for our consolidated properties.  Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures.  Alternatively, a lender may require its own formula for an escrow of capital reserves.

Investment Impairment

For all of our real estate and real estate related investments, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable.  Examples of the types of events and circumstances that would cause management to assess our assets for potential impairment include, but are not limited to: a significant decrease in the market price of an asset; a significant adverse change in the manner in which the asset is being used; an accumulation of costs in excess of the acquisition basis plus construction of the property; major vacancies and the resulting loss of revenues; natural disasters; a change in the projected holding period; legitimate purchase offers and changes in the global and local markets or economic conditions.  Our assets may at times be concentrated in limited geographic locations and, to the extent that our portfolio is concentrated in limited geographic locations, downturns specifically related to such regions may result in tenants defaulting on their lease obligations at a portion of our properties within a short time period, which may result in asset impairments.  When such events or changes in circumstances are present, we assess 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, we recognize an impairment loss to adjust the carrying amount of the asset to estimated fair value.  We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist.  While we believe our estimates of future cash flows are reasonable, different assumptions regarding factors such as market rents, economic conditions, and occupancy rates could significantly affect these estimates.

In evaluating our investments for impairment, management may use appraisals and make estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during our ownership, and the projected sales price of each of the properties.  A future change in these estimates and assumptions could result in understating or overstating the carrying value of our investments, which could be material to our financial statements.

We believe the carrying value of our operating real estate is currently recoverable.  Accordingly, there were no impairment charges for the nine months ended September 30, 2012 or 2011.  However, if market conditions worsen beyond our current expectations, or if changes in our strategy significantly affect any key assumptions used in our fair value calculations, we may need to take charges in future periods for impairments related to our existing investments.  Any such non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

Revenue Recognition

We recognize rental income generated from leases on real estate assets on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any.  Straight-line rental revenue of $0.1 million and $0.2 million was recognized in rental revenues for the three and nine months ended September 30, 2012, respectively, and includes amounts recognized in discontinued operations.  Straight-line rental revenue of $0.2 million and $0.3 million was recognized in rental revenues for the three and nine months ended September 30, 2011, respectively, and includes amounts recognized in discontinued operations.  Net below market lease amortization of less than $0.1 million and $0.1 million was recognized in rental revenues for the three and nine months ended September 30, 2012, respectively, and includes amounts recognized in discontinued operations.  Net below market lease amortization of less than $0.1 million and $0.3 million was recognized in rental revenues for the three and nine months ended September 30, 2011, respectively, and includes amounts recognized in discontinued operations.

Hotel revenue is derived from the operations of the Courtyard Kauai at Coconut Beach Hotel, consisting of guest room, food and beverage, and other revenue, and is recognized as the services are rendered.

Accounts Receivable

Accounts receivable primarily consist of receivables from our tenants related to our consolidated properties of $1.2 million and straight-line rental revenue receivables of $1.1 million as of September 30, 2012.  Accounts receivable primarily consisted of receivables from our tenants related to our consolidated properties of $0.4 million and straight-line rental revenue receivables of $0.9 million as of December 31, 2011.

Prepaid Expenses and Other Assets

Prepaid expenses and other assets include prepaid directors’ and officers’ insurance, as well as prepaid insurance of our consolidated properties.

Furniture, Fixtures, and Equipment

Furniture, fixtures, and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives of five to seven years.  Maintenance and repairs are charged to operations as incurred while improvements to such assets are capitalized.  Accumulated depreciation associated with our furniture, fixtures, and equipment was $2.2 million and $1.2 million as of September 30, 2012 and December 31, 2011, respectively.

Deferred Financing Fees

Deferred financing fees are recorded at cost and are amortized to interest expense of our notes payable using a straight-line method that approximates the effective interest method over the life of the related debt.  Accumulated amortization of deferred financing fees was $2 million and $1.2 million as of September 30, 2012 and December 31, 2011, respectively.

Derivative Financial Instruments

Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements or other identified risks and to minimize the variability caused by foreign currency translation risk related to our net investment in foreign real estate.  To accomplish these objectives, we use various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR.  These instruments include LIBOR-based interest rate swaps and caps.  For our net investments in foreign real estate, we may use foreign exchange put/call options to eliminate the impact of foreign currency exchange movements on our financial position.

We measure our derivative instruments and hedging activities at fair value and record them as an asset or liability, depending on our rights or obligations under the applicable derivative contract.  For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged items are recorded in earnings.  Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.  For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivatives are reported in other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged item affects earnings.  We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

As of September 30, 2012, we do not have any derivatives designated as net investment hedges or fair value hedges.  No derivatives were being used for trading or speculative purposes.  See Notes 5 and 11 for further information regarding our derivative financial instruments.

Organization and Offering Expenses

We reimbursed the Advisor and its affiliates for organization and offering expenses (other than selling commissions and the dealer manager fee) incurred on our behalf in connection with the primary offering component of the Offerings.

The Advisor will reimburse us to the extent that the total amount spent on organization and offering expenses in the Offerings (other than selling commissions and the dealer manager fee) exceeds 1.5% of the gross proceeds raised in the primary component of the Offerings.  We terminated the primary portion of the Follow-On Offering effective March 15, 2012.  Based on our current review of gross proceeds from our Offerings, we have recorded a receivable from the Advisor for approximately $3.8 million for organization and offering expenses that were previously reimbursed to the Advisor.  The receivable of $3.8 million is presented net of other payables of $0.4 million to the Advisor on our consolidated balance sheet.  We expect to receive payment from the Advisor for this receivable during the first quarter of 2013.

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 we become liable for the payment of these amounts.

Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and have qualified as a REIT since the year ended December 31, 2008.  To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our stockholders.  As a REIT, we generally will not be subject to federal income tax at the corporate level.  We are organized and operate in such a manner as to qualify for taxation as a REIT under the Code and intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REIT.

We have reviewed our tax positions under GAAP guidance that clarifies the relevant criteria and approach for the recognition and measurement of uncertain tax positions.  The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return.  A tax position may only be recognized in the financial statements if it is more likely than not that the tax position will be sustained upon examination.  We believe it is more likely than not that the tax positions taken relative to our status as a REIT will be sustained in any tax examination.

Foreign Currency Translation

For our international investment where the functional currency is other than the U.S. dollar, assets and liabilities are translated using period-end exchange rates, while the statement of operations amounts are translated using the average exchange rates for the respective period.  Gains and losses resulting from the change in exchange rates from period to period are reported separately as a component of accumulated other comprehensive income (loss) (“AOCI”).  Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations and comprehensive income (loss).

The Euro is the functional currency for the operations of Holstenplatz and Alte Jakobstraße.  We also maintain a Euro-denominated bank account that is translated into U.S. dollars at the current exchange rate at each reporting period.  For the nine months ended September 30, 2012, the foreign currency translation adjustment was a loss of $0.2 million.  For the nine months ended September 30, 2011, the foreign currency translation adjustment was a gain of $0.1 million.

Accumulated Other Comprehensive Income (Loss)

AOCI, which is reported in the accompanying consolidated statement of equity, consists of gains and losses affecting equity that are excluded from net income (loss) under GAAP.  The components of AOCI consist of cumulative foreign currency translation gains and losses and the unrealized gain on derivative instruments.

Stock-Based Compensation

We have adopted a stock-based incentive award plan for our directors and consultants and for employees, directors and consultants of our affiliates.  We have not issued any stock-based awards under the plan as of September 30, 2012.

Concentration of Credit Risk

At September 30, 2012 and December 31, 2011, we had cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels.  We have diversified our cash and cash equivalents among several banking institutions in an attempt to minimize exposure to any one of these entities.  We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk in cash and cash equivalents or restricted cash.

Noncontrolling Interest

Noncontrolling interest represents the noncontrolling ownership interest’s proportionate share of the equity in our consolidated real estate investments.  Income and losses are allocated to noncontrolling interest holders based on their ownership percentage.

Earnings per Share

Net income (loss) per share is calculated based on the weighted average number of common shares outstanding during each period.  The weighted average shares outstanding used to calculate both basic and diluted income (loss) per share were the same for the three and nine months ended September 30, 2012 and 2011, as there were no potentially dilutive securities outstanding.

Reportable Segments

GAAP establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments.  We have determined that we have one reportable segment, with activities related to the ownership, development and management of real estate assets.  Our chief operating decision maker evaluates operating performance on an individual property level.  Therefore, our properties are aggregated into one reportable segment.

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Derivative Instruments and Hedging Activities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Derivative Instruments and Hedging Activities
Interest rate derivative contract, fair value	$ 1		$ 1		$ 19
Amount of Gain or (Loss) Recognized in AOCI on Derivative (Effective Portion)	9	(104)	8	(346)
Amount of Loss Reclassified from AOCI into Income (Effective Portion)	(12)		(26)
Interest rate cap | Courtyard Kauai Coconut Beach Hotel, Kauai, Hawaii
Derivative Instruments and Hedging Activities
Notional Value	38,000		38,000
Interest Rate/ Strike Rate, low end of range (as a percent)	3.00%		3.00%
Interest Rate/ Strike Rate, high end of range (as a percent)	6.00%		6.00%
Index			30-day LIBOR
Interest rate cap | Interchange Business Center, San Bernardino, California
Derivative Instruments and Hedging Activities
Notional Value	$ 5,000		$ 5,000
Interest Rate/ Strike Rate (as a percent)	2.50%		2.50%
Index			30-day LIBOR

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Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities

Summary of notional value of derivative financial instruments

Type / Description	Notional Value		Interest Rate / Strike Rate	Index	Maturity
Cash Flow Hedges
Interest rate cap - Courtyard Kauai Coconut Beach Hotel	$	38,000	3.00% - 6.00%	30-day LIBOR	October 15, 2014
Interest rate cap - Interchange Business Center	$	5,000	2.50%	30-day LIBOR	December 1, 2013

Summary of fair value of derivative financial instruments

Derivatives designated as	Balance Sheet	Asset Derivatives
hedging instruments:	Location	September 30, 2012		December 31, 2011
Interest rate derivative contracts	Prepaid expenses and other assets	$	1	$	19

Summary of effect of derivative financial instruments on consolidated statements of operations

Derivatives in Cash Flow Hedging Relationships
Amount of Gain or (Loss)					Amount of Gain or (Loss)
Recognized in AOCI on					Recognized in AOCI on
Derivative (Effective Portion)					Derivative (Effective Portion)
Three Months Ended September 30,					Nine Months Ended September 30,
2012		2011			2012		2011
$	9	$	(104	)	$	8	$	(346	)

Derivatives in Cash Flow Hedging Relationships
Amount of Loss Reclassifed from AOCI into Income (Effective Portion)					Amount of Loss Reclassifed from AOCI into Income (Effective Portion)
Three Months Ended September 30,					Nine Months Ended September 30,
2012			2011		2012			2011
$	(12	)	$	—	$	(26	)	$	—

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Leasing Activity (Tables)

9 Months Ended

Sep. 30, 2012

Leasing Activity

Future minimum base rental payments of our office and industrial properties due to us under non-cancelable leases

September 30, 2012 - December 31, 2012	$	14,886
2013	14,787
2014	11,341
2015	8,664
2016	6,017
Thereafter	7,954
Total	$	63,649

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Commitments and Contingencies (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 building	Sep. 30, 2011
Commitments and Contingencies
Number of buildings acquired in connection with purchase of MOB Portfolio			8
Term of ground lease			50 years
Extended term of ground lease			25 years
Percentage increase in annual payment for each ground lease			10.00%
Number of years for which annual payment for each ground lease increases			5 years
Ground leases	$ 100,000	$ 100,000	$ 200,000	$ 200,000
Future minimum lease payments for all operating leases
September 30, 2012 - December 31, 2012	73,000		73,000
2013	293,000		293,000
2014	293,000		293,000
2015	301,000		301,000
2016	301,000		301,000
Thereafter	21,528,000		21,528,000
Total	$ 22,789,000		$ 22,789,000

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies

Future minimum lease payments for all operating leases

September 30, 2012 - December 31, 2012	$	73
2013	293
2014	293
2015	301
2016	301
Therafter	21,528
Total	$	22,789

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Distributions (Tables)

9 Months Ended

Sep. 30, 2012

Distributions

Information pertaining to sources of recent distributions

	September 30,
	2012		2011
Total Distributions Paid	$	17,326	$	8,811
Principal Sources of Funding:
Distribution Reinvestment Plan	$	2,790	$	5,912
Cash flow provided by (used in) operating activities	$	4,044	$	4,711
Cash available at the beginning of the period (1)	$	80,130	$	49,375

(1)Represents the cash available at the beginning of the reporting period primarily attributable to excess funds raised from the issuance of common stock and borrowings, after the impact of historical operating activities, other investing and financing activities.

Schedule of distributions declared for both common stock and noncontrolling interests

								Cash Flow			Total		Declared
		Distributions Paid						Provided by (used in)			Distributions		Distribution
	2012	Cash		Reinvested		Total		Operations			Declared		Per Share
Third quarter	Regular distribution	$	—	$	—	$	—	$	3,550		$	—	$	—
Second quarter	Regular distribution	388		716		1,104		1,325			—		—
Second quarter	Special cash distribution	13,048		—		13,048		—			—		—
First quarter	Regular distribution	1,100		2,074		3,174		(831		)	3,209		0.125
First quarter	Special cash distribution (a)	—		—		—		—			13,048		0.500
		$	14,536	$	2,790	$	17,326	$	4,044		$	16,257	$	0.625

								Cash Flow					Declared
		Distributions Paid						Provided by (used in)			Distributions		Distribution
	2011	Cash		Reinvested		Total		Operations			Declared		Per Share
Third quarter	Regular distribution	$	1,026	$	2,049	$	3,075	$	5,716		$	3,090	$	0.126
Second quarter	Regular distribution	972		1,991		2,963		(593		)	2,976		0.125
First quarter	Regular distribution	901		1,872		2,773		(412		)	2,815		0.123
		$	2,899	$	5,912	$	8,811	$	4,711		$	8,881	$	0.374

(a)         Declared amount is based upon number of stockholders as of April 3, 2012.

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Interim Unaudited Financial Information

9 Months Ended

Sep. 30, 2012

Interim Unaudited Financial Information

Interim Unaudited Financial Information

2.             Interim Unaudited Financial Information

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on March 28, 2012.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted 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 condensed consolidated balance sheet as of September 30, 2012, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2012 and 2011 and condensed consolidated statements of equity and cash flows for the nine months ended September 30, 2012 and 2011 have not been audited by our independent registered public accounting firm.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to fairly present our condensed consolidated financial position as of September 30, 2012 and December 31, 2011 and our condensed consolidated results of operations and cash flows for the periods ended September 30, 2012 and 2011.  Such adjustments are of a normal recurring nature.

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2012

Supplemental Cash Flow Information

Schedule of supplemental cash flow information

	Nine months ended September 30,
	2012		2011
Interest paid	$	7,400	$	6,266
Non-cash investing activities:
Capital expenditures for real estate in accounts payable	$	72	$	1,140
Capital expenditures for real estate in accrued liabilities	$	439	$	38
Receivable from sale of property in unconsolidated joint venture	$	—	$	7,108
Non-cash financing activities:
Common stock issued in distribution reinvestment plan	$	2,790	$	5,912
Accrued dividends payable	$	—	$	1,009
Offering costs payable to related parties	$	8	$	—
Offering costs receivable from related parties	$	—	$	2,238

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Notes Payable (Details) (USD $)	9 Months Ended			0 Months Ended		1 Months Ended		9 Months Ended						9 Months Ended				9 Months Ended						9 Months Ended										9 Months Ended
	Sep. 30, 2012 item	Dec. 31, 2011	Sep. 30, 2012 Interchange Business Center	Oct. 18, 2012 Interchange Business Center Subsequent event item	Sep. 30, 2012 Parrot's Landing	Oct. 31, 2012 Parrot's Landing Subsequent event	Oct. 31, 2012 Interchange Business Center and Parrot's Landing Subsequent event	Sep. 30, 2012 1875 Lawrence	Sep. 30, 2012 Interchange Business Center	Sep. 30, 2012 Notes payable	Sep. 30, 2012 Notes payable 1875 Lawrence	Dec. 31, 2011 Notes payable 1875 Lawrence	Sep. 30, 2012 Notes payable 1875 Lawrence Maximum	Sep. 30, 2012 Notes payable Interchange Business Center	Dec. 31, 2011 Notes payable Interchange Business Center	Sep. 30, 2012 Notes payable Holstenplatz	Dec. 31, 2011 Notes payable Holstenplatz	Sep. 30, 2012 Notes payable Courtyard Kauai at Coconut Beach Hotel	Dec. 31, 2011 Notes payable Courtyard Kauai at Coconut Beach Hotel	Sep. 30, 2012 Notes payable Florida MOB Portfolio - Palmetto Building	Dec. 31, 2011 Notes payable Florida MOB Portfolio - Palmetto Building	Sep. 30, 2012 Notes payable Florida MOB Portfolio - Victor Farris Building	Dec. 31, 2011 Notes payable Florida MOB Portfolio - Victor Farris Building	Sep. 30, 2012 Notes payable Palms of Monterrey	Dec. 31, 2011 Notes payable Palms of Monterrey	Sep. 30, 2012 Notes payable Parrot's Landing	Dec. 31, 2011 Notes payable Parrot's Landing	Sep. 30, 2012 Notes payable Florida MOB Portfolio - Gardens Medical Pavilion	Dec. 31, 2011 Notes payable Florida MOB Portfolio - Gardens Medical Pavilion	Sep. 30, 2012 Notes payable River Club and the Townhomes at River Club (formerly referred to as the UGA Portfolio)	Dec. 31, 2011 Notes payable River Club and the Townhomes at River Club (formerly referred to as the UGA Portfolio)	Sep. 30, 2012 Notes payable Babcock Self Storage	Dec. 31, 2011 Notes payable Babcock Self Storage	Sep. 30, 2012 Notes payable Lakes of Margate	Dec. 31, 2011 Notes payable Lakes of Margate	Sep. 30, 2012 Notes payable Arbors Harbor Town	Dec. 31, 2011 Notes payable Arbors Harbor Town	Sep. 30, 2012 Notes payable Alte Jakobstrabe, Berlin, Germany
Notes Payable
Notes payable	$ 181,593,000	$ 239,757,000									$ 15,056,000	$ 21,016,000		$ 9,883,000	$ 19,619,000	$ 10,009,000	$ 10,084,000	$ 38,000,000	$ 38,000,000	$ 6,114,000	$ 6,222,000	$ 12,324,000	$ 12,542,000		$ 19,700,000		$ 29,013,000	$ 14,468,000	$ 14,713,000	$ 25,200,000	$ 25,200,000	$ 2,236,000	$ 2,265,000	$ 15,234,000	$ 15,383,000	$ 26,000,000	$ 26,000,000	$ 7,069,000
Notes payable of assets held for sale	35,675,000		7,036,000		28,639,000
Variable rate basis									30-day LIBOR		30-day LIBOR			30-day LIBOR				30-day LIBOR						30-day LIBOR
Variable interest rate (as a percent)			5.00%								2.50%			5.00%				0.95%						3.35%
Variable rate (as a percent)											0.21%
Interest rate (as a percent)																3.887%				4.55%		4.55%				4.23%		4.90%		5.26%		5.80%				3.985%		2.30%
Minimum interest rate (as a percent)											6.25%																							5.49%
Maximum interest rate (as a percent)																								7.00%										5.92%
Minimum reference rate (as a percent)														2.50%
Number of industrial buildings sold				1
Number of industrial buildings	4			4
Amount of unconditional guarantee for payment of notes payable													11,750,000
Percentage of amount advanced under loan agreement for providing unconditional guarantee for payment of notes payable													50.00%
Amount of unconditional guarantee for payment of notes payable on percentage of total amount advanced under loan agreement													23,500,000
Extended period of maturity of debt										1 year
Payment of principal amount				7,000,000		28,600,000	35,700,000	5,900,000
Net proceeds from the sale	$ 38,684,000			$ 7,000,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Real estate
Land and improvements, net	$ 73,440	$ 86,962
Buildings and improvements, net	200,242	218,839
Real estate under development	443	105
Total real estate	274,125	305,906
Assets associated with real estate held for sale	42,970	29,420
Cash and cash equivalents	60,916	80,130
Restricted cash	5,948	5,616
Accounts receivable, net	2,637	1,704
Receivable from related party	3,350	3,485
Prepaid expenses and other assets	1,862	1,596
Furniture, fixtures and equipment, net	7,044	7,219
Deferred financing fees, net	3,511	4,533
Lease intangibles, net	5,838	8,387
Total assets	408,201	447,996
Liabilities and Equity
Notes payable	181,593	239,757
Accounts payable	2,732	3,718
Acquired below-market leases, net	1,068	1,271
Distributions payable		1,069
Accrued and other liabilities	8,641	5,140
Obligations associated with real estate held for sale	35,880	37
Total liabilities	229,914	250,992
Commitments and contingencies
Equity
Preferred stock, $.0001 par value per share; 50,000,000 shares authorized, none outstanding
Convertible stock, $.0001 par value per share; 1,000 shares authorized, 1,000 outstanding
Common stock, $.0001 par value per share; 350,000,000 shares authorized, 26,065,533 and 25,267,048 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	3	3
Additional paid-in capital	233,324	225,968
Accumulated distributions and net loss	(63,682)	(43,657)
Accumulated other comprehensive income	(103)	83
Total Behringer Harvard Opportunity REIT II, Inc. equity	169,542	182,397
Noncontrolling interest	8,745	14,607
Total equity	178,287	197,004
Total liabilities and equity	$ 408,201	$ 447,996

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Distributions (Details) (USD $)	1 Months Ended	3 Months Ended						9 Months Ended		34 Months Ended
	Mar. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Distributions
Declared Distribution Per Share, Regular (in dollars per share)				$ 0.125	$ 0.126	$ 0.125	$ 0.123
Declared Distribution Per Share, Special (in dollars per share)	$ 0.50
Total Distributions Paid								$ 17,326,000	$ 8,811,000
Principal Sources of Funding:
Distribution Reinvestment Plan			716,000	2,074,000	2,049,000	1,991,000	1,872,000	2,790,000	5,912,000
Cash flow provided by (used in) operating activities		3,550,000	1,325,000	(831,000)	5,716,000	(593,000)	(412,000)	4,044,000	4,711,000
Cash available at the beginning of the period		60,916,000			81,320,000			60,916,000	81,320,000		80,130,000	49,375,000
Distributions Paid
Regular distribution, Cash			388,000	1,100,000	1,026,000	972,000	901,000	4,300,000	2,899,000
Special cash distribution, Cash			13,048,000					13,048,000
Regular distribution, Reinvested			716,000	2,074,000	2,049,000	1,991,000	1,872,000	2,790,000	5,912,000
Regular distribution, Total			1,104,000	3,174,000	3,075,000	2,963,000	2,773,000		8,811,000
Special cash distribution, Total			13,048,000
Total Cash Distributions, Paid								14,536,000
Total Reinvested Distributions, Paid								2,790,000
Total, Paid								17,326,000	8,811,000
Regular distributions, Declared				3,209,000	3,090,000	2,976,000	2,815,000	16,257,000	8,881,000
Special cash distribution, Declared				13,048,000
Declared Distribution Per Share, Regular (in dollars per share)				$ 0.125	$ 0.126	$ 0.125	$ 0.123
Declared Distribution Per Share, Special (in dollars per share)	$ 0.50
Total Distributions Declared								$ 16,257,000
Declared Distribution Per Share (in dollars per share)								$ 0.625	$ 0.374
Annualized distribution rate (as a percent)										5.00%
Share purchase price (in dollars per share)	$ 10			$ 10						$ 10
Declared daily regular distribution rate of common stock (in dollars per share)										$ 0.0013699

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net loss	$ (4,017)	$ (6,893)
Adjustments to reconcile net income (loss) to net cash flows used in operating activities:
Depreciation and amortization	12,262	11,484
Amortization of deferred financing fees	800	1,008
Equity in losses of unconsolidated joint venture		(2,681)
Gain on sale of discontinued operations	(9,264)
Loss on early extinguishment of debt	1,236
Change in operating assets and liabilities:
Accounts receivable	(932)	(301)
Interest receivable-real estate loan receivable		2,227
Prepaid expenses and other assets	(261)	(1,182)
Accounts payable	1,024	(250)
Accrued and other liabilities	3,428	2,007
Net receivables to related parties	104	(152)
Addition of lease intangibles	(336)	(556)
Cash provided by operating activities	4,044	4,711
Cash flows from investing activities:
Purchases of real estate	(11,039)	(37,381)
Proceeds from sale of discontinued operations	38,684
Additions to property and equipment	(11,701)	(8,975)
Repayment of real estate loans receivable		25,000
Change in restricted cash	(332)	4,861
Cash provided by (used in) investing activities	15,612	(16,495)
Cash flows from financing activities:
Financing costs	(1,015)	(728)
Proceeds from notes payable	7,401	30,626
Payments on notes payable	(29,761)	(1,212)
Issuance of common stock	6,142	17,934
Redemptions of common stock	(990)	(1,573)
Offering costs	(553)	(1,647)
Distributions	(14,536)	(2,899)
Contributions from noncontrolling interest holders	1,543	3,648
Distributions to noncontrolling interest holders	(7,157)	(497)
Cash provided by (used in) financing activities	(38,926)	43,652
Effect of exchange rate changes on cash and cash equivalents	56	77
Net change in cash and cash equivalents	(19,214)	31,945
Cash and cash equivalents at beginning of period	80,130	49,375
Cash and cash equivalents at end of period	$ 60,916	$ 81,320

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Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		9 Months Ended			0 Months Ended					9 Months Ended				9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 segment item	Sep. 30, 2011	Dec. 31, 2011	Oct. 18, 2012 Interchange Business Center Subsequent event item	Sep. 30, 2012 Lease Intangibles	Dec. 31, 2011 Lease Intangibles	Sep. 30, 2012 Acquired Below-Market Leases	Dec. 31, 2011 Acquired Below-Market Leases	Sep. 30, 2012 Buildings and Improvements	Dec. 31, 2011 Buildings and Improvements	Sep. 30, 2012 Land and Improvements	Dec. 31, 2011 Land and Improvements	Sep. 30, 2012 Furniture, Fixtures and Equipment Maximum	Sep. 30, 2012 Furniture, Fixtures and Equipment Minimum
Real Estate
Period for change in initial valuations from acquisition date			12 months
Anticipated amortization expense associated with acquired lease intangibles
September 30, 2012 - December 31, 2012	$ 394,000		$ 394,000
2013	1,302,000		1,302,000
2014	795,000		795,000
2015	437,000		437,000
2016	260,000		260,000
Real Estate
Estimated useful lives											25 years				7 years	5 years
Real estate
Cost											215,266,000	228,999,000	75,585,000	88,292,000
Less: depreciation and amortization											(15,024,000)	(10,160,000)	(2,145,000)	(1,330,000)
Total real estate	274,125,000		274,125,000		305,906,000						200,242,000	218,839,000	73,440,000	86,962,000
Accumulated depreciation and amortization related to consolidated investments in real estate intangibles
Cost							14,109,000	16,210,000	(2,368,000)	(2,232,000)
Less: depreciation and amortization							(8,271,000)	(7,823,000)	1,300,000	961,000
Net	5,838,000		5,838,000		8,387,000		5,838,000	8,387,000	(1,068,000)	(1,271,000)
Number of industrial buildings sold						1
Furniture, Fixtures, and Equipment
Estimated useful lives											25 years				7 years	5 years
Accumulated depreciation associated with furniture, fixtures, and equipment	2,200,000		2,200,000		1,200,000
Real Estate Held for Sale
Number of industrial buildings classified as held for sale			1
Number of industrial buildings			4			4
Revenue Recognition
Straight-line rental revenue	100,000	200,000	200,000	300,000
Market lease amortization included in rental revenue	100,000	100,000	100,000	300,000
Accounts Receivable
Accounts receivable from tenants related to consolidated properties	1,200,000		1,200,000		400,000
Straight-line rental revenue	1,100,000		1,100,000		900,000
Deferred Financing Fees
Accumulated amortization, deferred financing fees	2,000,000		2,000,000		1,200,000
Organization and Offering Expenses
Reimbursement of organization and offering expenses as a percentage of gross proceeds raised in primary component of offerings			1.50%
Organization and offering expense receivables net of other payables	3,800,000		3,800,000
Other payables to related parties	400,000		400,000
Income Taxes
Required minimum percentage distribution of ordinary taxable income to stockholders to qualify as a REIT			90.00%
Foreign Currency Translation
Gain (loss) on foreign currency translation adjustment			$ (200,000)	$ 100,000
Reporting Segments
Number of reportable segments			1

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Discontinued Operations and Real Estate Held for Sale

9 Months Ended

Sep. 30, 2012

Discontinued Operations and Real Estate Held for Sale

Discontinued Operations and Real Estate Held for Sale

16.Discontinued Operations and Real Estate Held for Sale

On December 22, 2011, we sold Archibald Business Center for a contract price of $15 million.  On January 5, 2012, we sold the Palms of Monterrey for a contract sales price of $39.3 million, and on October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center for a contract sales price of approximately $7.5 million, excluding transaction costs.  The proceeds from the sale were used to satisfy a portion of the existing indebtedness associated with the four buildings.  The building sold had been vacant since the initial date of acquisition.  On October 31, 2012, we sold Parrot’s Landing for a contract sales price of $56.3 million.

We have classified the results of operations for the properties discussed above into discontinued operations in the accompanying condensed consolidated statements of operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Rental revenue	$	1,691		$	2,988		$	5,118		$	8,991
Expenses
Property operating expenses	595			938			1,867			2,789
Interest expense	380			813			1,231			2,448
Real estate taxes	292			351			893			1,126
Property management fees	62			94			199			278
Asset management fees	17			21			51			65
Depreciation and amortization	384			836			1,146			3,239
Total expenses	1,730			3,053			5,387			9,945
Loss on early extinguishment of debt (1)	—			—			(1,236		)	—
Gain on sale of real estate property	—			—			9,264			—
Income (loss) from discontinued operations	$	(39	)	$	(65	)	$	7,759		$	(954	)

(1)Loss on early extinguishment of debt for the nine months ended September 30, 2012 was approximately $1.2 million and was comprised of the write-off of deferred financing fees and an early termination fee.

The major classes of assets and liabilities associated with the real estate held for sale as of September 30, 2012 and December 31, 2011was as follows:

	September 30, 2012		December 31, 2011
Land and improvements, net	$	14,747	$	6,316
Building and improvements, net	27,745		22,294
Furniture, fixtures and equipment, net	478		810
Assets associated with real estate held for sale	$	42,970	$	29,420
Notes Payable	$	35,675	$	—
Accrued and other liabilities	205		37
Obligations associated with real estate held for sale	$	35,880	$	37

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Assets and Liabilities Measured at Fair Value (Details) (Recurring, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Level 2
Assets
Derivative financial instruments	$ 1	$ 19
Total
Assets
Derivative financial instruments	$ 1	$ 19

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies

Schedule of anticipated amortization expense associated with acquired lease intangibles

Year	Lease / Other Intangibles
September 30, 2012 - December 31, 2012	$	394
2013	1,302
2014	795
2015	437
2016	260

Schedule of accumulated depreciation and amortization related to entity's consolidated investments in real estate assets and intangibles

										Acquired
	Buildings and			Land and			Lease			Below-Market
September 30, 2012	Improvements			Improvements			Intangibles			Leases
Cost	$	215,266		$	75,585		$	14,109		$	(2,368	)
Less: depreciation and amortization	(15,024		)	(2,145		)	(8,271		)	1,300
Net (1)	$	200,242		$	73,440		$	5,838		$	(1,068	)

										Acquired
	Buildings and			Land and			Lease			Below-Market
December 31, 2011	Improvements			Improvements			Intangibles			Leases
Cost	$	228,999		$	88,292		$	16,210		$	(2,232	)
Less: depreciation and amortization	(10,160		)	(1,330		)	(7,823		)	961
Net (2)	$	218,839		$	86,962		$	8,387		$	(1,271	)

(1)   Excludes Parrot’s Landing, which was sold on October 31, 2012, and one of the four industrial buildings at Interchange Business Center, which was sold on October 18, 2012 (both classified as held for sale at September 30, 2012).

(2)   Excludes Palms of Monterrey, which was sold on January 5, 2012 (classified as held for sale at December 31, 2011).

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Business and Organization

9 Months Ended

Sep. 30, 2012

Business and Organization

Business and Organization

1.             Business and Organization

Business

Behringer Harvard Opportunity REIT II, Inc. (which may be referred to as the “Company,” “we,” “us,” or “our”) was organized as a Maryland corporation on January 9, 2007 and has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes.

We acquire and operate commercial real estate and real estate-related assets.  In particular, we focus generally on acquiring commercial properties with significant possibilities for short-term capital appreciation, such as those requiring development, redevelopment, or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who are distressed or face time-sensitive deadlines.  In addition, our opportunistic investment strategy also includes investments in real estate-related assets that present opportunities for higher current income.  Such investments may have capital gain characteristics, whether as a result of a discount purchase or related equity participations.  We may acquire a wide variety of commercial properties, including office, industrial, retail, hospitality, recreation and leisure, single-tenant, multifamily, and other real properties.  These properties may be existing, income-producing properties, newly constructed properties, or properties under development or construction.  They may include multifamily properties purchased for conversion into condominiums and single-tenant properties that may be converted for multi-tenant use.  We may invest in real estate-related securities, including securities issued by other real estate companies, either for investment or in change of control transactions completed on a negotiated basis or otherwise.  Further, we also may originate or invest in collateralized mortgage-backed securities and mortgage, bridge or mezzanine loans, or in entities that make investments similar to the foregoing.  We expect to make our investments in or in respect of real estate assets located in the United States and other countries based on our view of existing market conditions.  We completed our first property acquisition, an office building located in Denver, Colorado, on October 28, 2008.  As of September 30, 2012, we had 11 real estate investments, all of which were consolidated into our condensed consolidated financial statements (including Parrot’s Landing classified as held for sale).

Substantially all of our business is conducted through Behringer Harvard Opportunity OP II LP, a limited partnership organized in Delaware on January 12, 2007 (“Behringer Harvard Opportunity OP II”).  As of September 30, 2012, our wholly-owned subsidiary, BHO II, Inc., a Delaware corporation, was the sole general partner of Behringer Harvard Opportunity OP II and owned a 0.1% partnership interest in Behringer Harvard Opportunity OP II.  As of September 30, 2012, our wholly-owned subsidiary, BHO Business Trust II, a Maryland business trust, was the sole limited partner of Behringer Harvard Opportunity OP II and owned the remaining 99.9% interest in Behringer Harvard Opportunity OP II.

We are externally managed and advised by Behringer Harvard Opportunity Advisors II, LLC, a Texas limited liability company that was formed on March 16, 2010 (the “Advisor”) when Behringer Harvard Opportunity Advisors II LP, a Texas limited partnership formed in January 2007, was converted to a limited liability company.  The Advisor is responsible for managing our day-to-day affairs and for identifying and making acquisitions and investments on our behalf.

Organization

On February 26, 2007, we filed a Registration Statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer up to 125,000,000 shares of common stock for sale to the public (the “Initial Offering”), of which 25,000,000 shares were being offered pursuant to our distribution reinvestment plan (the “DRP”).  On July 3, 2011, the Initial Offering terminated in accordance with its terms.

Prior to termination of the Initial Offering, on September 13, 2010, we filed a second Registration Statement on Form S-11 with the SEC to register a follow-on public offering of up to 75,000,000 shares of our common stock for sale to the public (the “Follow-On Offering” and, together with the Initial Offering, the “Offerings”), of which 25,000,000 shares were being offered pursuant to the DRP.  We terminated the primary portion of the Follow-On Offering effective March 15, 2012 and the DRP portion of the Follow-On Offering effective April 3, 2012. Through September 30, 2012, we raised gross offering proceeds of approximately $265.3 million from the sale of approximately 26.7 million shares under the Offerings, including shares sold under the DRP.

In connection with our initial capitalization, on January 19, 2007, we issued 22,471 shares of our common stock and 1,000 shares of our convertible stock to Behringer Harvard Holdings.  Behringer Harvard Holdings transferred its shares of convertible stock to the Advisor on April 2, 2010.  As of September 30, 2012, we had 26.1 million shares of common stock outstanding, including the 22,471 shares issued to Behringer Harvard Holdings.  As of September 30, 2012, we had 1,000 shares of convertible stock issued and outstanding to the Advisor.

We commenced operations on April 1, 2008 upon satisfaction of the conditions of our escrow agreement and our acceptance of initial subscriptions of common stock in the Initial Offering. Upon admission of new stockholders, subscription proceeds for the primary offerings were used for payment of dealer manager fees and selling commissions and could be utilized in the Offerings as consideration for investments and the payment or reimbursement of offering expenses and operating expenses.  Until required for such purposes, net offering proceeds are held in short-term, liquid investments. We used the net proceeds from the Offerings primarily to acquire real estate and real estate-related assets consistent with our opportunistic investment strategy.  As of September 30, 2012, we had issued 26.7 million shares of our common stock, including 22,471 shares owned by Behringer Harvard Holdings and 2.2 million shares issued through the DRP.  As of September 30, 2012, we had redeemed 0.6 million shares of our common stock.

Our common stock is not currently listed on a national securities exchange.  Depending upon then prevailing market conditions, it is our intention to consider beginning the process of liquidating our assets and distributing the net proceeds to our stockholders within three to six years after the termination of the Initial Offering.  If we do not begin an orderly liquidation within that period, we may seek to have our shares listed on a national securities exchange.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares outstanding	0	0
Convertible stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Convertible stock, shares authorized	1,000	1,000
Convertible stock, shares outstanding	1,000	1,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	26,065,533	25,267,048
Common stock, shares outstanding	26,065,533	25,267,048

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Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

11.Derivative Instruments and Hedging Activities

We may be exposed to the risk associated with variability of interest rates that might impact our cash flows and the results of operations.  The hedging strategy of entering into interest rate caps and swaps, therefore, is to eliminate or reduce, to the extent possible, the volatility of cash flows.

In October 2010, we entered into a new interest rate cap agreement related to the debt on the Courtyard Kauai Coconut Beach Hotel, and in November 2010, we entered into an interest rate cap agreement related to our debt on Interchange Business Center.

Derivative instruments classified as assets were reported at their combined fair values of less than $0.1 million in prepaid expenses and other assets at September 30, 2012 and December 31, 2011.  During the nine months ended September 30, 2012 and 2011, we recorded an unrealized gain of less than $0.1 million and an unrealized loss of $0.3 million to AOCI in our statement of equity to adjust the carrying amount of the interest rate caps qualifying as hedges at September 30, 2012 and 2011, respectively.

The following table summarizes the notional values of our derivative financial instruments.  The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate, or market risks:

Type / Description	Notional Value		Interest Rate / Strike Rate	Index	Maturity
Cash Flow Hedges
Interest rate cap - Courtyard Kauai Coconut Beach Hotel	$	38,000	3.00% - 6.00%	30-day LIBOR	October 15, 2014
Interest rate cap - Interchange Business Center	$	5,000	2.50%	30-day LIBOR	December 1, 2013

The table below presents the fair value of our derivative financial instruments, as well as their classification on the consolidated balance sheets as of September 30, 2012 and December 31, 2011:

Derivatives designated as	Balance Sheet	Asset Derivatives
hedging instruments:	Location	September 30, 2012		December 31, 2011
Interest rate derivative contracts	Prepaid expenses and other assets	$	1	$	19

The table below presents the effect of our derivative financial instruments on the consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011:

Derivatives in Cash Flow Hedging Relationships
Amount of Gain or (Loss)					Amount of Gain or (Loss)
Recognized in AOCI on					Recognized in AOCI on
Derivative (Effective Portion)					Derivative (Effective Portion)
Three Months Ended September 30,					Nine Months Ended September 30,
2012		2011			2012		2011
$	9	$	(104	)	$	8	$	(346	)

Derivatives in Cash Flow Hedging Relationships
Amount of Loss Reclassifed from AOCI into Income (Effective Portion)					Amount of Loss Reclassifed from AOCI into Income (Effective Portion)
Three Months Ended September 30,					Nine Months Ended September 30,
2012			2011		2012			2011
$	(12	)	$	—	$	(26	)	$	—

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Document and Entity Information
Entity Registrant Name	Behringer Harvard Opportunity REIT II, Inc.
Entity Central Index Key	0001387061
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		26,065,533
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies

Commitments and Contingencies

12.Commitments and Contingencies

Our operating leases consist of ground leases on each of eight buildings acquired in connection with the purchase of the Original Florida MOB Portfolio.  Each ground lease is for a term of 50 years, with a 25-year extension option.  The annual payment for each ground lease increases by 10% every five years.  For the three and nine months ended September 30, 2012, we incurred $0.1 million and $0.2 million, respectively, in lease expense related to our ground leases.  For the three and nine months ended September 30, 2011, we incurred less than $0.1 million and $0.2 million, respectively, in lease expense related to our ground leases.  Future minimum lease payments for all operating leases from September 30, 2012 are as follows:

September 30, 2012 - December 31, 2012	$	73
2013	293
2014	293
2015	301
2016	301
Therafter	21,528
Total	$	22,789

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenues
Rental revenue	$ 8,407	$ 6,332	$ 25,007	$ 17,098
Hotel revenue	3,073	1,865	7,980	4,856
Interest income from real estate loan receivable		444		2,926
Total revenues	11,480	8,641	32,987	24,880
Expenses:
Property operating expenses	5,793	4,479	16,673	12,178
Interest expense	2,319	1,741	6,901	4,769
Real estate taxes	1,218	895	3,548	2,557
Property management fees	428	225	1,233	771
Asset management fees	808	780	2,444	2,140
General and administrative	850	613	2,241	1,667
Acquisition expense	10	331	739	1,786
Depreciation and amortization	3,455	3,066	11,185	8,564
Total expenses	14,881	12,130	44,964	34,432
Interest income, net	30	24	105	111
Other income	17	821	96	821
Loss from continuing operations before income taxes and equity in losses of unconsolidated joint ventures	(3,354)	(2,644)	(11,776)	(8,620)
Equity in earnings of unconsolidated joint ventures		2,989		2,681
Income (loss) from continuing operations	(3,354)	345	(11,776)	(5,939)
Income (loss) from discontinued operations	(39)	(65)	7,759	(954)
Net income (loss)	(3,393)	280	(4,017)	(6,893)
Noncontrolling interest in continuing operations	275	376	978	1,158
Noncontrolling interest in discontinued operations	17	40	(729)	193
Net (income) loss attributable to the noncontrolling interest	292	416	249	1,351
Net income (loss) attributable to the Company	(3,101)	696	(3,768)	(5,542)
Amounts attributable to the Company
Continuing operations	(3,079)	721	(10,798)	(4,781)
Discontinued operations	(22)	(25)	7,030	(761)
Net income (loss) attributable to the Company	(3,101)	696	(3,768)	(5,542)
Weighted average shares outstanding:
Basic (in shares)	26,069	24,508	25,962	23,739
Diluted (in shares)	26,069	24,508	25,962	23,739
Net income (loss) per share
Continuing operations (in dollars per share)	$ (0.12)	$ 0.03	$ (0.42)	$ (0.20)
Discontinued operations (in dollars per share)			$ 0.27	$ (0.03)
Basic and diluted income (loss) per share (in dollars per share)	$ (0.12)	$ 0.03	$ (0.15)	$ (0.23)
Comprehensive income (loss):
Net income (loss)	(3,393)	280	(4,017)	(6,893)
Other comprehensive income (loss):
Unrealized losses on interest rate derivatives	9	(104)	8	(346)
Foreign currency translation gain (loss)	161	(169)	(193)	87
Total other comprehensive loss	170	(273)	(185)	(259)
Comprehensive income (loss)	(3,223)	7	(4,202)	(7,152)
Comprehensive income (loss) attributable to noncontrolling interest	292	437	248	1,420
Comprehensive income (loss) attributable to the Company	$ (2,931)	$ 444	$ (3,954)	$ (5,732)

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Financial Instruments not Reported at Fair Value

9 Months Ended

Sep. 30, 2012

Financial Instruments not Reported at Fair Value

Financial Instruments not Reported at Fair Value

6.Financial Instruments not Reported at Fair Value

We determined the following disclosure of estimated fair values using available market information and appropriate valuation methodologies.  However, considerable judgment is necessary to interpret market data and develop the related estimates of fair value.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

As of September 30, 2012 and December 31, 2011, management estimated that the carrying value of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, other liabilities, payables/receivables from related parties, and distributions payable were at amounts that reasonably approximated their fair value based on their highly-liquid nature and/or short-term maturities.  The notes payable, including the loans classified as obligations associated with real estate held for sale at September 30, 2012 secured by Parrot’s Landing and one of the four industrial buildings at Interchange Business Center, totaling $217.3 million and $239.8 million as of September 30, 2012 and December 31, 2011, respectively, have a fair value of approximately $219.7 million and $242.2 million as of September 30, 2012 and December 31, 2011, respectively, based upon interest rates for debt with similar terms and remaining maturities that management believes we could obtain.  The fair value of the notes payable is categorized as a Level 2 basis.  The fair value is estimated using a discounted cash flow analysis valuation on the borrowing rates currently available for loans with similar terms and maturities.  The fair value of the notes payable was determined by discounting the future contractual interest and principal payments by a market rate.  Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, 2012 and December 31, 2011.

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Assets and Liabilities Measured at Fair Value

9 Months Ended

Sep. 30, 2012

Assets and Liabilities Measured at Fair Value

Assets and Liabilities Measured at Fair Value

5.Assets and Liabilities Measured at Fair Value

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability.  As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy) has been established.

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access.  Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.  Level 3 inputs are unobservable inputs for the asset or liability that are typically based on an entity’s own assumptions, as there is little, if any, related market activity.  In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.  Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Recurring Fair Value Measurements

Currently, we use interest rate swaps and caps to manage our interest rate risk.  The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, implied volatilities, and foreign currency exchange rates.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties.  However, as of September 30, 2012, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.  As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The following fair value hierarchy table presents information about our assets measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011.

September 30, 2012	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	1	$	—	$	1

December 31, 2011	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	19	$	—	$	19

Derivative financial instruments classified as assets are included in prepaid expenses and other assets on the balance sheet.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates include such items as purchase price allocation for real estate acquisitions, impairment of long-lived assets, depreciation and amortization, and allowance for doubtful accounts.  Actual results could differ from those estimates.

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control.  All inter-company transactions, balances, and profits have been eliminated in consolidation.  Interests in entities acquired will be evaluated based on applicable GAAP, which includes the requirement to consolidate entities deemed to be variable interest entities (“VIE”) in which we are the primary beneficiary.  If the interest in the entity is determined not to be a VIE, then the entity will be evaluated for consolidation based on legal form, economic substance, and the extent to which we have control and/or substantive participating rights under the respective ownership agreement.  In the Notes to Condensed Consolidated Financial Statements, all dollar and share amounts in tabulation are in thousands of dollars and shares, respectively, unless otherwise noted.

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary.  The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity.  Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses.  A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

We have evaluated subsequent events for recognition or disclosure in our consolidated financial statements.

Real Estate

Real Estate

Upon the acquisition of real estate properties, we recognize the assets acquired, the liabilities assumed and any noncontrolling interest as of the acquisition date, measured at their fair values.  The acquisition date is the date on which we obtain control of the real estate property.  The assets acquired and liabilities assumed may consist of land, inclusive of associated rights, buildings, assumed debt, identified intangible assets and liabilities and asset retirement obligations. Identified intangible assets generally consist of above-market leases, in-place leases, in-place tenant improvements, in-place leasing commissions and tenant relationships.  Identified intangible liabilities generally consist of below-market leases. Goodwill is recognized as of the acquisition date and measured as the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree over the fair value of the identifiable net assets acquired.  Likewise, a bargain purchase gain is recognized in current earnings when the aggregate fair value of the consideration transferred and any noncontrolling interests in the acquiree is less than the fair value of the identifiable net assets acquired.  Acquisition-related costs are expensed in the period incurred.  Initial valuations are subject to change until our information is finalized, which is no later than twelve months from the acquisition date.

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 fair value of these assets using discounted cash flow analyses or similar methods believed to be used by market participants.  The value of buildings is depreciated over the estimated useful life of 25 years using the straight-line method.

We determine the fair value of assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that management believes we could obtain at the date of the debt assumption.  Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan using the effective interest method.

We determine the value of above-market and below-market 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 (1) the contractual amounts to be paid pursuant to the in-place leases and (2) management’s estimate of current market lease rates for the corresponding in-place leases, measured over a period equal to (a) the remaining non-cancelable lease term for above-market leases, or (b) the remaining non-cancelable lease term plus any below-market fixed rate renewal options that, based on a qualitative assessment of several factors, including the financial condition of the lessee, the business conditions in the industry in which the lessee operates, the economic conditions in the area in which the property is located, and the ability of the lessee to sublease the property during the renewal term, are reasonably assured to be exercised by the lessee for below-market leases.  We record the fair value of above-market and below-market leases as intangible assets or intangible liabilities, respectively, and amortize them as an adjustment to rental income over the determined lease term.

The total value of identified real estate intangible assets acquired is further allocated to in-place leases, in-place tenant improvements, in-place leasing commissions and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant.  The aggregate value for tenant improvements and leasing commissions is 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 include 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, we include 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 the fair value of tenant relationships also include costs to execute similar leases including leasing commissions, legal fees and tenant improvements as well as an estimate of the likelihood of renewal as determined by management on a tenant-by-tenant basis.

We amortize the value of in-place leases, in-place tenant improvements and in-place leasing commissions to expense over the initial term of the respective leases.  The tenant relationship values are amortized to expense over the initial term and any anticipated renewal periods, but in no event does the amortization period for intangible assets or liabilities exceed the remaining depreciable life of the building.  Should a tenant terminate its lease, the unamortized portion of the acquired lease intangibles related to that tenant would be charged to expense.

Anticipated amortization expense associated with the acquired lease intangibles for each of the following five years as of September 30, 2012 is as follows:

Year	Lease / Other Intangibles
September 30, 2012 - December 31, 2012	$	394
2013	1,302
2014	795
2015	437
2016	260

Accumulated depreciation and amortization related to our consolidated investments in real estate assets and intangibles were as follows:

										Acquired
	Buildings and			Land and			Lease			Below-Market
September 30, 2012	Improvements			Improvements			Intangibles			Leases
Cost	$	215,266		$	75,585		$	14,109		$	(2,368	)
Less: depreciation and amortization	(15,024		)	(2,145		)	(8,271		)	1,300
Net (1)	$	200,242		$	73,440		$	5,838		$	(1,068	)

										Acquired
	Buildings and			Land and			Lease			Below-Market
December 31, 2011	Improvements			Improvements			Intangibles			Leases
Cost	$	228,999		$	88,292		$	16,210		$	(2,232	)
Less: depreciation and amortization	(10,160		)	(1,330		)	(7,823		)	961
Net (2)	$	218,839		$	86,962		$	8,387		$	(1,271	)

(1)   Excludes Parrot’s Landing, which was sold on October 31, 2012, and one of the four industrial buildings at Interchange Business Center, which was sold on October 18, 2012 (both classified as held for sale at September 30, 2012).

(2)   Excludes Palms of Monterrey, which was sold on January 5, 2012 (classified as held for sale at December 31, 2011).

Real Estate Held for Sale

Real Estate Held for Sale

We classify properties as held for sale when certain criteria are met, in accordance with GAAP.  At that time we present the assets and obligations of the property held for sale separately in our consolidated balance sheet and we cease recording depreciation and amortization expense related to that property.  Properties held for sale are reported at the lower of their carrying amount or their estimated fair value, less estimated costs to sell.  As of September 30, 2012, Parrot’s Landing and one of the four industrial buildings at Interchange Business Center were classified as held for sale and a sale of the properties was completed on October 31, 2012 and October 18, 2012, respectively.  As of December 31, 2011, our Palms of Monterrey property was classified as held for sale and a sale of the property was completed on January 5, 2012.

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider investments in highly liquid money market funds or investments 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

Restricted Cash

As required by our lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real estate taxes and other reserves for our consolidated properties.  Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures.  Alternatively, a lender may require its own formula for an escrow of capital reserves.

Investment Impairment

Investment Impairment

For all of our real estate and real estate related investments, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable.  Examples of the types of events and circumstances that would cause management to assess our assets for potential impairment include, but are not limited to: a significant decrease in the market price of an asset; a significant adverse change in the manner in which the asset is being used; an accumulation of costs in excess of the acquisition basis plus construction of the property; major vacancies and the resulting loss of revenues; natural disasters; a change in the projected holding period; legitimate purchase offers and changes in the global and local markets or economic conditions.  Our assets may at times be concentrated in limited geographic locations and, to the extent that our portfolio is concentrated in limited geographic locations, downturns specifically related to such regions may result in tenants defaulting on their lease obligations at a portion of our properties within a short time period, which may result in asset impairments.  When such events or changes in circumstances are present, we assess 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, we recognize an impairment loss to adjust the carrying amount of the asset to estimated fair value.  We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist.  While we believe our estimates of future cash flows are reasonable, different assumptions regarding factors such as market rents, economic conditions, and occupancy rates could significantly affect these estimates.

In evaluating our investments for impairment, management may use appraisals and make estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during our ownership, and the projected sales price of each of the properties.  A future change in these estimates and assumptions could result in understating or overstating the carrying value of our investments, which could be material to our financial statements.

We believe the carrying value of our operating real estate is currently recoverable.  Accordingly, there were no impairment charges for the nine months ended September 30, 2012 or 2011.  However, if market conditions worsen beyond our current expectations, or if changes in our strategy significantly affect any key assumptions used in our fair value calculations, we may need to take charges in future periods for impairments related to our existing investments.  Any such non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

Revenue Recognition

Revenue Recognition

We recognize rental income generated from leases on real estate assets on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any.  Straight-line rental revenue of $0.1 million and $0.2 million was recognized in rental revenues for the three and nine months ended September 30, 2012, respectively, and includes amounts recognized in discontinued operations.  Straight-line rental revenue of $0.2 million and $0.3 million was recognized in rental revenues for the three and nine months ended September 30, 2011, respectively, and includes amounts recognized in discontinued operations.  Net below market lease amortization of less than $0.1 million and $0.1 million was recognized in rental revenues for the three and nine months ended September 30, 2012, respectively, and includes amounts recognized in discontinued operations.  Net below market lease amortization of less than $0.1 million and $0.3 million was recognized in rental revenues for the three and nine months ended September 30, 2011, respectively, and includes amounts recognized in discontinued operations.

Hotel revenue is derived from the operations of the Courtyard Kauai at Coconut Beach Hotel, consisting of guest room, food and beverage, and other revenue, and is recognized as the services are rendered.

Accounts Receivable

Accounts Receivable

Accounts receivable primarily consist of receivables from our tenants related to our consolidated properties of $1.2 million and straight-line rental revenue receivables of $1.1 million as of September 30, 2012.  Accounts receivable primarily consisted of receivables from our tenants related to our consolidated properties of $0.4 million and straight-line rental revenue receivables of $0.9 million as of December 31, 2011.

Prepaid Expenses and Other Assets

Prepaid Expenses and Other Assets

Prepaid expenses and other assets include prepaid directors’ and officers’ insurance, as well as prepaid insurance of our consolidated properties.

Furniture, Fixtures, and Equipment

Furniture, Fixtures, and Equipment

Furniture, fixtures, and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives of five to seven years.  Maintenance and repairs are charged to operations as incurred while improvements to such assets are capitalized.  Accumulated depreciation associated with our furniture, fixtures, and equipment was $2.2 million and $1.2 million as of September 30, 2012 and December 31, 2011, respectively.

Deferred Financing Fees

Deferred Financing Fees

Deferred financing fees are recorded at cost and are amortized to interest expense of our notes payable using a straight-line method that approximates the effective interest method over the life of the related debt.  Accumulated amortization of deferred financing fees was $2 million and $1.2 million as of September 30, 2012 and December 31, 2011, respectively.

Derivative Financial Instruments

Derivative Financial Instruments

Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements or other identified risks and to minimize the variability caused by foreign currency translation risk related to our net investment in foreign real estate.  To accomplish these objectives, we use various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR.  These instruments include LIBOR-based interest rate swaps and caps.  For our net investments in foreign real estate, we may use foreign exchange put/call options to eliminate the impact of foreign currency exchange movements on our financial position.

We measure our derivative instruments and hedging activities at fair value and record them as an asset or liability, depending on our rights or obligations under the applicable derivative contract.  For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged items are recorded in earnings.  Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.  For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivatives are reported in other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged item affects earnings.  We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

As of September 30, 2012, we do not have any derivatives designated as net investment hedges or fair value hedges.  No derivatives were being used for trading or speculative purposes.  See Notes 5 and 11 for further information regarding our derivative financial instruments.

Organization and Offering Expenses

Organization and Offering Expenses

We reimbursed the Advisor and its affiliates for organization and offering expenses (other than selling commissions and the dealer manager fee) incurred on our behalf in connection with the primary offering component of the Offerings.

The Advisor will reimburse us to the extent that the total amount spent on organization and offering expenses in the Offerings (other than selling commissions and the dealer manager fee) exceeds 1.5% of the gross proceeds raised in the primary component of the Offerings.  We terminated the primary portion of the Follow-On Offering effective March 15, 2012.  Based on our current review of gross proceeds from our Offerings, we have recorded a receivable from the Advisor for approximately $3.8 million for organization and offering expenses that were previously reimbursed to the Advisor.  The receivable of $3.8 million is presented net of other payables of $0.4 million to the Advisor on our consolidated balance sheet.  We expect to receive payment from the Advisor for this receivable during the first quarter of 2013.

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 we become liable for the payment of these amounts.

Income Taxes

Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and have qualified as a REIT since the year ended December 31, 2008.  To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our stockholders.  As a REIT, we generally will not be subject to federal income tax at the corporate level.  We are organized and operate in such a manner as to qualify for taxation as a REIT under the Code and intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REIT.

We have reviewed our tax positions under GAAP guidance that clarifies the relevant criteria and approach for the recognition and measurement of uncertain tax positions.  The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return.  A tax position may only be recognized in the financial statements if it is more likely than not that the tax position will be sustained upon examination.  We believe it is more likely than not that the tax positions taken relative to our status as a REIT will be sustained in any tax examination.

Foreign Currency Translation

Foreign Currency Translation

For our international investment where the functional currency is other than the U.S. dollar, assets and liabilities are translated using period-end exchange rates, while the statement of operations amounts are translated using the average exchange rates for the respective period.  Gains and losses resulting from the change in exchange rates from period to period are reported separately as a component of accumulated other comprehensive income (loss) (“AOCI”).  Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations and comprehensive income (loss).

The Euro is the functional currency for the operations of Holstenplatz and Alte Jakobstraße.  We also maintain a Euro-denominated bank account that is translated into U.S. dollars at the current exchange rate at each reporting period.  For the nine months ended September 30, 2012, the foreign currency translation adjustment was a loss of $0.2 million.  For the nine months ended September 30, 2011, the foreign currency translation adjustment was a gain of $0.1 million.

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

AOCI, which is reported in the accompanying consolidated statement of equity, consists of gains and losses affecting equity that are excluded from net income (loss) under GAAP.  The components of AOCI consist of cumulative foreign currency translation gains and losses and the unrealized gain on derivative instruments.

Stock-Based Compensation

Stock-Based Compensation

We have adopted a stock-based incentive award plan for our directors and consultants and for employees, directors and consultants of our affiliates.  We have not issued any stock-based awards under the plan as of September 30, 2012.

Concentration of Credit Risk

Concentration of Credit Risk

At September 30, 2012 and December 31, 2011, we had cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels.  We have diversified our cash and cash equivalents among several banking institutions in an attempt to minimize exposure to any one of these entities.  We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk in cash and cash equivalents or restricted cash.

Noncontrolling Interest

Noncontrolling Interest

Noncontrolling interest represents the noncontrolling ownership interest’s proportionate share of the equity in our consolidated real estate investments.  Income and losses are allocated to noncontrolling interest holders based on their ownership percentage.

Earnings per Share

Earnings per Share

Net income (loss) per share is calculated based on the weighted average number of common shares outstanding during each period.  The weighted average shares outstanding used to calculate both basic and diluted income (loss) per share were the same for the three and nine months ended September 30, 2012 and 2011, as there were no potentially dilutive securities outstanding.

Reportable Segments

Reportable Segments

GAAP establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments.  We have determined that we have one reportable segment, with activities related to the ownership, development and management of real estate assets.  Our chief operating decision maker evaluates operating performance on an individual property level.  Therefore, our properties are aggregated into one reportable segment.

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Distributions

9 Months Ended

Sep. 30, 2012

Distributions

Distributions

13.Distributions

Distributions are authorized at the discretion of our board of directors based on its analysis of our performance over the previous period and expectations of performance for future periods.  These analyses may include actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for our portfolio, capital expenditure needs, general financial and market conditions and other factors that our board deems relevant.  The board’s decision will be influenced, in substantial part, by its obligation to ensure that we maintain our status as a REIT.  In light of the continued uncertainty in the global financial and real estate markets, we cannot provide assurance that we will be able to achieve expected cash flows necessary to pay distributions at any particular level, or at all.  On March 20, 2012, our board of directors declared a special distribution of $0.50 per share of common stock payable to our stockholders of record as of April 3, 2012 and determined to cease regular, monthly distributions in favor of payment of periodic distributions from excess proceeds from asset dispositions or from other sources as necessary to maintain our REIT tax status.  The special distribution payment was made on May 10, 2012.

Until our investments are generating sufficient operating cash flow to fully fund the payment of distributions to our stockholders, we have paid and may in the future pay some or all of our distributions from sources other than operating cash flow.  We have, for example, generated cash to pay distributions from financing activities, components of which may include proceeds from the Offerings and borrowings (including borrowings secured by our assets) in anticipation of future operating cash flow.  We have also utilized cash from refinancings and dispositions, the components of which may represent a return of capital and/or the gains on sale.  In addition, from time to time, our Advisor may agree to waive or defer all or a portion of the acquisition, asset management or other fees or incentives due to it, pay general administrative expenses, or otherwise supplement investor returns in order to increase the amount of cash that we have available to pay distributions to our stockholders.

We paid no distributions to stockholders during the three months ended September 30, 2012.  Total distributions paid to stockholders during the nine months ended September 30, 2012 were $17.3 million and consisted of the special cash distribution of $13 million and the regular distributions of $4.3 million.  A portion of the $4.3 million regular distributions to stockholders was funded from cash flow provided by operations.  Total distributions of $8.8 million were paid to stockholders during the nine months ended September 30, 2011.  Distributions funded through the issuance of shares under the DRP during the nine months ended September 30, 2011 were $5.9 million.  Accordingly, cash amounts distributed to stockholders during the nine months ended September 30, 2011 were $2.9 million and were funded from cash flow provided by operations.  Future distributions declared and paid may exceed cash flow from operating activities until such time as we invest in additional real estate or real estate-related assets at favorable yields and our investments reach stabilization.

Distributions paid to stockholders were funded through various sources, including cash flow from operating activities, proceeds raised as part of our Offerings, reinvestment through our DRP and additional borrowings.  The following summarizes certain information related to the sources of recent distributions:

	September 30,
	2012		2011
Total Distributions Paid	$	17,326	$	8,811
Principal Sources of Funding:
Distribution Reinvestment Plan	$	2,790	$	5,912
Cash flow provided by (used in) operating activities	$	4,044	$	4,711
Cash available at the beginning of the period (1)	$	80,130	$	49,375

(1)Represents the cash available at the beginning of the reporting period primarily attributable to excess funds raised from the issuance of common stock and borrowings, after the impact of historical operating activities, other investing and financing activities.

Distributions for the first three quarters of 2012 and 2011 were as follows ($ in thousands, except per share amounts):

								Cash Flow			Total		Declared
		Distributions Paid						Provided by (used in)			Distributions		Distribution
	2012	Cash		Reinvested		Total		Operations			Declared		Per Share
Third quarter	Regular distribution	$	—	$	—	$	—	$	3,550		$	—	$	—
Second quarter	Regular distribution	388		716		1,104		1,325			—		—
Second quarter	Special cash distribution	13,048		—		13,048		—			—		—
First quarter	Regular distribution	1,100		2,074		3,174		(831		)	3,209		0.125
First quarter	Special cash distribution (a)	—		—		—		—			13,048		0.500
		$	14,536	$	2,790	$	17,326	$	4,044		$	16,257	$	0.625

								Cash Flow					Declared
		Distributions Paid						Provided by (used in)			Distributions		Distribution
	2011	Cash		Reinvested		Total		Operations			Declared		Per Share
Third quarter	Regular distribution	$	1,026	$	2,049	$	3,075	$	5,716		$	3,090	$	0.126
Second quarter	Regular distribution	972		1,991		2,963		(593		)	2,976		0.125
First quarter	Regular distribution	901		1,872		2,773		(412		)	2,815		0.123
		$	2,899	$	5,912	$	8,811	$	4,711		$	8,881	$	0.374

(a)         Declared amount is based upon number of stockholders as of April 3, 2012.

Distributions declared per share assume the share was issued and outstanding each day during the period.  Beginning June 2009 through March 2012, the declared daily regular distribution rate was $0.0013699 per share of common stock, which was equivalent to an annualized distribution rate of 5.0% assuming the share was purchased for $10.00.

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Notes Payable

9 Months Ended

Sep. 30, 2012

Notes Payable

Notes Payable

9.Notes Payable

The following table sets forth information on our notes payable as of September 30, 2012 and December 31, 2011:

	Notes Payable as of				Interest	Maturity
Description	September 30, 2012		December 31, 2011		Rate	Date
1875 Lawrence	$	15,056	$	21,016	30-day LIBOR + 2.5% (1)(2)	12/31/12
Interchange Business Center	9,883		19,619		30-day LIBOR + 5% (1)(3)	12/01/13
Holstenplatz	10,009		10,084		3.887%	04/30/15
Courtyard Kauai at Coconut Beach Hotel	38,000		38,000		30-day LIBOR + .95% (1)	11/09/15
Florida MOB Portfolio - Palmetto Building	6,114		6,222		4.55%	01/01/16
Florida MOB Portfolio - Victor Farris Building	12,324		12,542		4.55%	01/01/16
Palms of Monterrey	—		19,700		30-day LIBOR + 3.35% (1)(4)	07/01/17
Parrot’s Landing	—		29,013		4.23%	10/01/17
Florida MOB Portfolio - Gardens Medical Pavilion	14,468		14,713		4.9%	01/01/18
River Club and the Townhomes at River Club	25,200		25,200		5.26%	05/01/18
Babcock Self Storage	2,236		2,265		5.80%	08/30/18
Lakes of Margate	15,234		15,383		5.49% and 5.92%	01/01/20
Arbors Harbor Town	26,000		26,000		3.985%	01/01/19
Alte Jakobstraße	7,069		—		2.3%	12/30/15
	$	181,593	$	239,757
Notes Payable included with Obligations associated with real estate held for sale:
Interchange Business Center (5)	$	7,036			30-day LIBOR + 5% (1)(3)	12/01/13
Parrot’s Landing (6)	28,639				4.23%	10/01/17
	$	35,675

(1)30-day LIBOR was 0.21% at September 30, 2012.

(2)The loan has a minimum interest rate of 6.25%.

(3)The 30-day LIBOR rate is set at a minimum value of 2.5%.

(4)The loan has a maximum interest rate of 7%.

(5)On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center to an unaffiliated third party.  Based on the loan agreement, the net proceeds from the sale of approximately $7 million (classified as obligations associated with real estate held for sale on our condensed consolidated balance sheet as of September 30, 2012) were used to satisfy a portion of the existing indebtedness associated with the four buildings.

(6)On October 31, 2012, we sold Parrot’s Landing to an unaffiliated third party. We classified the note payable as obligations associated with real estate held for sale on our condensed consolidated balance sheet as of September 30, 2012.

At September 30, 2012, our notes payable balance, including the loans classified as obligations associated with real estate held for sale secured by Parrot’s Landing and one of the four industrial buildings at Interchange Business Center, was $217.3 million and consisted of the notes payable related to our consolidated properties.  We have unconditionally guaranteed payment of the note payable related to 1875 Lawrence for an amount not to exceed the lesser of (i) $11.75 million and (ii) 50% of the total amount advanced under the loan agreement if the aggregate amount advanced is less than $23.5 million.  We currently intend to refinance the note payable or exercise the one-year extension option pursuant to the terms under the loan agreement.  We have guaranteed payment of certain recourse liabilities with respect to certain customary nonrecourse carveouts as set forth in the guaranties in favor of the unaffiliated lenders with respect to the Courtyard Kauai at Coconut Beach Hotel notes payable.  For the nine months ended September 30, 2012, we sold one asset to an unaffiliated third party and used a portion of the proceeds from the sale to fully satisfy the existing indebtedness of $19.7 million associated with the property.  Furthermore, we made a principal payment of $5.9 million on the loan related to 1875 Lawrence.  During October 2012, we sold one asset and one of the four industrial buildings at Interchange Business Center to an unaffiliated third party and used the proceeds from the sale to satisfy the existing indebtedness of $35.7 million (classified as obligations associated with real estate held for sale). See footnote 16, Discontinued Operations and Real Estate Held for Sale for further details.

We are subject to customary affirmative, negative, and financial covenants and representations, warranties and borrowing conditions, all as set forth in our loan agreements.  As of September 30, 2012, we believe we were in compliance with the covenants under our loan agreements.

The following table summarizes our contractual obligations for principal payments excluding obligations associated with real estate held for sale as of September 30, 2012:

Year	Amount Due
October 1, 2012 - December 31, 2012	$	15,711
2013	11,870
2014	2,585
2015	55,953
2016	18,677
Thereafter	76,797
	$	181,593

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Real Estate and Real Estate-Related Investments

9 Months Ended

Sep. 30, 2012

Real Estate and Real Estate-Related Investments

Real Estate and Real Estate-Related Investments

7.Real Estate and Real Estate-Related Investments

As of September 30, 2012, we consolidated 11 real estate investments.  The following table presents certain information about our consolidated investments as of September 30, 2012:

Property Name	Location	Date Acquired	Ownership Interest
1875 Lawrence	Denver, CO	October 28, 2008	100	%
Holstenplatz	Hamburg, Germany	June 30, 2010	100	%
Parrot’s Landing (1)	North Lauderdale, Florida	September 17, 2010	90	%
Florida MOB Portfolio (2)	South Florida	October 8, 2010/October 20, 2010 (2)	90	%(3)
Courtyard Kauai Coconut Beach Hotel	Kauai, Hawaii	October 20, 2010	80	%
Interchange Business Center (4)	San Bernardino, California	November 23, 2010	80	%
River Club and the Townhomes at River Club	Athens, Georiga	April 25, 2011	85	%
Babcock Self Storage	San Antonio, Texas	August 30, 2011	85	%
Lakes of Margate	Margate, Florida	October 19, 2011	92.5	%
Arbors Harbor Town	Memphis, Tennessee	December 20, 2011	94	%
Alte Jakobstraße	Berlin, Germany	April 5, 2012	99.7	%

(1) Classified as held for sale on our condensed consolidated balance sheet as of September 30, 2012.  On October 31, 2012, we sold Parrot’s Landing to an unaffiliated third party for a contract price of approximately $56.3 million, excluding transaction costs.

(2) We acquired a portfolio of eight medical office buildings, known as the Original Florida MOB Portfolio on October 8, 2010.  We acquired a medical office building known as Gardens Medical Pavilion on October 20, 2010.  Collectively, the Original Florida MOB Portfolio and Gardens Medical Pavilion are referred to as the Florida MOB Portfolio.

(3) The Florida MOB Portfolio consists of nine Medical Office Buildings.  We own 90% of each of eight of the buildings. We own 90% of a 90% JV interest in the ninth building, Gardens Medical Pavilion.

(4) On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center. The building is classified as held for sale on our condensed consolidated balance sheet as of September 30, 2012.

Real Estate Asset Acquisitions

Alte Jakobstraße

On April 5, 2012, we acquired Alte Jakobstraße 79-80 (“Alte Jakobstraße”), a multi-tenant office building located in Berlin, Germany, from an unaffiliated third party.  The purchase price for Alte Jakobstraße, excluding closing costs, was approximately €8.4 million or approximately $11.1 million based on the exchange rate in effect on April 5, 2012.  We funded the purchase price with proceeds from the Follow-On Offering and financing activities.  In connection with the acquisition of Alte Jakobstraße, on April 5, 2012, we entered into a loan for €5.9 million or approximately $7.8 million ($7.3 million was funded as of September 30, 2012) based on the exchange rate in effect on April 5, 2012 (the “AJS Loan”) with an unaffiliated third party.  The AJS Loan bears interest at a fixed annual rate of approximately 2.3% for three years and must be repaid in the amount of 4% annually of the original loan amount plus interest.  The AJS Loan must be repaid in its entirety by December 30, 2015.  The AJS Loan is secured by Alte Jakobstraße, including the leases and rents.

Alte Jakobstraße contributed rental revenue of $0.6 million and a GAAP net loss of $0.1 million to our condensed consolidated statements of operations for the period from April 5, 2012 through September 30, 2012.  The following unaudited pro forma summary presents consolidated information as if the business combination had occurred on January 1, 2011:

	Pro Forma for the Nine Months Ended September 30,
	2012			2011
Revenue	$	33,299		$	25,635
Net loss	$	(3,819	)	$	(7,832	)
Net loss per share	$	(0.15	)	$	(0.33	)

These pro forma amounts have been calculated after applying our accounting policies and adjusting the results of Alte Jakobstraße to reflect additional depreciation and amortization that would have been charged assuming the fair value adjustments to the tangible and intangible assets had been applied from January 1, 2011.  Included in the pro forma net loss for both the nine months ended September 30, 2012 and September 30, 2011 is depreciation and amortization expense of $0.3 million.

During the nine months ended September 30, 2012, we incurred $0.5 million in acquisition expenses related to the acquisition of Alte Jakobstraße.  The following table summarizes the amounts of identified assets acquired at the acquisition date:

	Alte Jakobstraße
Land	$	2,367
Buildings	8,523
Lease intangibles, net	333
Acquired below-market leases, net	(184		)
Total identifiable net assets	$	11,039

Real Estate Asset Dispositions

Palms of Monterrey

On January 5, 2012, we sold the Palms of Monterrey for a contract sales price of $39.3 million, excluding transaction costs.  A portion of the proceeds from the sale was used to fully satisfy the existing indebtedness of $19.7 million associated with the property.  The Palms of Monterrey was classified as held for sale on our consolidated balance sheet as of December 31, 2011.

Parrot’s Landing

On October 31, 2012, we sold Parrot’s Landing for a contract sales price of approximately $56.3 million, excluding transaction costs, of which approximately $28.6 million was used to fully satisfy the existing indebtness, resulting in net sales proceeds to us of approximately $18.5 million.  Parrot’s Landing was classified as held for sale on our consolidated balance sheet as of September 30, 2012.  See Note 16 for further information regarding discontinued operations.

Interchange Business Center

On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center for a contract sales price of approximately $7.5 million, excluding transaction costs.  The proceeds from the sale were used to satisfy a portion of the existing indebtedness associated with the four buildings.  The building sold had been vacant since the initial date of acquisition and was classified as held for sale on our consolidated balance sheet as of September 30, 2012.

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Real Estate Loan Receivable

9 Months Ended

Sep. 30, 2012

Real Estate Loan Receivable

Real Estate Loan Receivable

8.Real Estate Loan Receivable

PAL Loan

On August 14, 2009, we entered into a loan agreement with an unaffiliated third party borrower to provide up to $25 million of second lien financing for the privatization of, and improvements to, approximately 3,200 hotel lodging units on ten U.S. Army installations.  On August 15, 2011, the debtor associated with the PAL Loan exercised its option to prepay the entire balance of the loan.  We had no investments in real estate loans receivable as of September 30, 2012 and December 31, 2011.  During the nine months ended September 30, 2011, we earned $3.2 million in interest income from the PAL Loan.

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Leasing Activity

9 Months Ended

Sep. 30, 2012

Leasing Activity

Leasing Activity

10.Leasing Activity

Future minimum base rental payments of our office and industrial properties due to us under non-cancelable leases in effect as of September 30, 2012 for our consolidated properties are as follows:

September 30, 2012 - December 31, 2012	$	14,886
2013	14,787
2014	11,341
2015	8,664
2016	6,017
Thereafter	7,954
Total	$	63,649

The schedule above does not include rental payments due to us from our multifamily, hotel, student housing, and self-storage properties, as leases associated with these properties typically are for periods of one year or less.  As of September 30, 2012, none of our tenants accounted for 10% or more of our aggregate annual rental revenues from our consolidated properties.

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Business and Organization (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended			9 Months Ended			1 Months Ended	9 Months Ended			1 Months Ended
	Sep. 30, 2012 asset	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Minimum	Sep. 30, 2012 Maximum	Sep. 30, 2012 Behringer Harvard Opportunity Advisors II, LLC	Feb. 28, 2007 Initial Offering	Sep. 30, 2012 Initial Offering	Sep. 30, 2012 Initial Capitalization Behringer Harvard Holdings	Jan. 19, 2007 Initial Capitalization Behringer Harvard Holdings	Sep. 30, 2010 Follow-On Offering
Business and Organization
Number of Real Estate Investments	11
Percentage of ownership interest by BHO II, Inc	0.10%
Percentage of remaining ownership interest held by BHO Business Trust II	99.90%
Organization
Common stock for sale to public (in shares)							125,000,000
Common stock for sale to public (in shares)											75,000,000
Common stock being offered pursuant to reinvestment plan (in shares)							25,000,000	2,200,000
Common stock being offered pursuant to reinvestment plan (in shares)											25,000,000
Gross offering proceeds	$ 8,346	$ 24,436						$ 265,300
Common stock, shares issued	26,065,533		25,267,048							22,471
Common stock, shares outstanding	26,065,533		25,267,048					26,700,000	22,471
Convertible stock issued (in shares)						1,000				1,000
Convertible stock outstanding (in shares)	1,000		1,000			1,000
Redemption of common stock (in shares)	600,000
Liquidation period of assets and distribution of net proceeds to stockholders				3 years	6 years

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2012

Supplemental Cash Flow Information

Supplemental Cash Flow Information

15.Supplemental Cash Flow Information

Supplemental cash flow information is summarized below:

	Nine months ended September 30,
	2012		2011
Interest paid	$	7,400	$	6,266
Non-cash investing activities:
Capital expenditures for real estate in accounts payable	$	72	$	1,140
Capital expenditures for real estate in accrued liabilities	$	439	$	38
Receivable from sale of property in unconsolidated joint venture	$	—	$	7,108
Non-cash financing activities:
Common stock issued in distribution reinvestment plan	$	2,790	$	5,912
Accrued dividends payable	$	—	$	1,009
Offering costs payable to related parties	$	8	$	—
Offering costs receivable from related parties	$	—	$	2,238

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Real Estate and Real Estate-Related Investments (Tables)

9 Months Ended

Sep. 30, 2012

Real Estate and Real Estate-Related Investments

Schedule of information pertaining to consolidated investments

Property Name	Location	Date Acquired	Ownership Interest
1875 Lawrence	Denver, CO	October 28, 2008	100	%
Holstenplatz	Hamburg, Germany	June 30, 2010	100	%
Parrot’s Landing (1)	North Lauderdale, Florida	September 17, 2010	90	%
Florida MOB Portfolio (2)	South Florida	October 8, 2010/October 20, 2010 (2)	90	%(3)
Courtyard Kauai Coconut Beach Hotel	Kauai, Hawaii	October 20, 2010	80	%
Interchange Business Center (4)	San Bernardino, California	November 23, 2010	80	%
River Club and the Townhomes at River Club	Athens, Georiga	April 25, 2011	85	%
Babcock Self Storage	San Antonio, Texas	August 30, 2011	85	%
Lakes of Margate	Margate, Florida	October 19, 2011	92.5	%
Arbors Harbor Town	Memphis, Tennessee	December 20, 2011	94	%
Alte Jakobstraße	Berlin, Germany	April 5, 2012	99.7	%

(1) Classified as held for sale on our condensed consolidated balance sheet as of September 30, 2012.  On October 31, 2012, we sold Parrot’s Landing to an unaffiliated third party for a contract price of approximately $56.3 million, excluding transaction costs.

(2) We acquired a portfolio of eight medical office buildings, known as the Original Florida MOB Portfolio on October 8, 2010.  We acquired a medical office building known as Gardens Medical Pavilion on October 20, 2010.  Collectively, the Original Florida MOB Portfolio and Gardens Medical Pavilion are referred to as the Florida MOB Portfolio.

(3) The Florida MOB Portfolio consists of nine Medical Office Buildings.  We own 90% of each of eight of the buildings. We own 90% of a 90% JV interest in the ninth building, Gardens Medical Pavilion.

(4) On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center. The building is classified as held for sale on our condensed consolidated balance sheet as of September 30, 2012.

Schedule of unaudited pro forma

	Pro Forma for the Nine Months Ended September 30,
	2012			2011
Revenue	$	33,299		$	25,635
Net loss	$	(3,819	)	$	(7,832	)
Net loss per share	$	(0.15	)	$	(0.33	)

Schedule of amounts of identified assets acquired at acquisition date

	Alte Jakobstraße
Land	$	2,367
Buildings	8,523
Lease intangibles, net	333
Acquired below-market leases, net	(184		)
Total identifiable net assets	$	11,039

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Notes Payable (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Contractual obligations for principal payments
September 30, 2012 - December 31, 2012	$ 15,711
2013	11,870
2014	2,585
2015	55,953
2016	18,677
Thereafter	76,797
Notes payable	$ 181,593	$ 239,757

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Condensed Consolidated Statements of Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total USD ($)	Common Stock USD ($)	Additional Paid-in Capital USD ($)	Accumulated Distributions and Net (Loss) USD ($)	Accumulated Other Comprehensive Income (loss) USD ($)	Noncontrolling Interest USD ($)	Convertible Stock
Balance at Dec. 31, 2010	$ 182,211	$ 2	$ 195,149	$ (23,883)	$ 410	$ 10,533
Balance (in shares) at Dec. 31, 2010		22,330					1
Increase (Decrease) in Stockholders' Equity
Issuance of common stock, net	24,436		24,436
Issuance of common stock, net (in shares)		2,420,000
Redemption of common stock	(1,573)		(1,573)
Redemption of common stock (in shares)		(174,000)
Distributions declared on common stock	(8,881)			(8,881)
Contributions from noncontrolling interest	3,648					3,648
Distributions to noncontrolling interest	(497)					(497)
Other comprehensive income (loss):
Unrealized gains (losses) on interest rate derivatives	(346)				(277)	(69)
Foreign currency translation gain (loss)	87				87
Net loss	(6,893)			(5,542)		(1,351)
Balance at Sep. 30, 2011	192,192	2	218,012	(38,306)	220	12,264
Balance (in shares) at Sep. 30, 2011		24,576					1
Balance at Dec. 31, 2011	197,004	3	225,968	(43,657)	83	14,607
Balance (in shares) at Dec. 31, 2011		25,267					1
Increase (Decrease) in Stockholders' Equity
Issuance of common stock, net	8,346		8,346
Issuance of common stock, net (in shares)		910,000
Redemption of common stock	(990)		(990)
Redemption of common stock (in shares)		(111,000)
Distributions declared on common stock	(16,257)			(16,257)
Contributions from noncontrolling interest	1,543					1,543
Distributions to noncontrolling interest	(7,157)					(7,157)
Other comprehensive income (loss):
Unrealized gains (losses) on interest rate derivatives	8				7	1
Foreign currency translation gain (loss)	(193)				(193)
Net loss	(4,017)			(3,768)		(249)
Balance at Sep. 30, 2012	$ 178,287	$ 3	$ 233,324	$ (63,682)	$ (103)	$ 8,745
Balance (in shares) at Sep. 30, 2012		26,066					1

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New Accounting Pronouncements

9 Months Ended

Sep. 30, 2012

New Accounting Pronouncements

New Accounting Pronouncements

4.New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (the “FASB”) issued updated guidance for fair value measurements.  The guidance amends existing guidance to provide common fair value measurements and related disclosure requirements between GAAP and International Financial Reporting Standards.  This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The adoption of this guidance did not have an impact on our financial statements except for disclosures.

In June 2011, the FASB issued updated guidance related to comprehensive income.  The guidance requires registrants to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  Additionally, registrants will be required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.  This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Due to our early adoption, this guidance did not have a material impact on our financial statements.

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2012

Notes Payable

Schedule of information on notes payable

	Notes Payable as of				Interest	Maturity
Description	September 30, 2012		December 31, 2011		Rate	Date
1875 Lawrence	$	15,056	$	21,016	30-day LIBOR + 2.5% (1)(2)	12/31/12
Interchange Business Center	9,883		19,619		30-day LIBOR + 5% (1)(3)	12/01/13
Holstenplatz	10,009		10,084		3.887%	04/30/15
Courtyard Kauai at Coconut Beach Hotel	38,000		38,000		30-day LIBOR + .95% (1)	11/09/15
Florida MOB Portfolio - Palmetto Building	6,114		6,222		4.55%	01/01/16
Florida MOB Portfolio - Victor Farris Building	12,324		12,542		4.55%	01/01/16
Palms of Monterrey	—		19,700		30-day LIBOR + 3.35% (1)(4)	07/01/17
Parrot’s Landing	—		29,013		4.23%	10/01/17
Florida MOB Portfolio - Gardens Medical Pavilion	14,468		14,713		4.9%	01/01/18
River Club and the Townhomes at River Club	25,200		25,200		5.26%	05/01/18
Babcock Self Storage	2,236		2,265		5.80%	08/30/18
Lakes of Margate	15,234		15,383		5.49% and 5.92%	01/01/20
Arbors Harbor Town	26,000		26,000		3.985%	01/01/19
Alte Jakobstraße	7,069		—		2.3%	12/30/15
	$	181,593	$	239,757
Notes Payable included with Obligations associated with real estate held for sale:
Interchange Business Center (5)	$	7,036			30-day LIBOR + 5% (1)(3)	12/01/13
Parrot’s Landing (6)	28,639				4.23%	10/01/17
	$	35,675

(1)30-day LIBOR was 0.21% at September 30, 2012.

(2)The loan has a minimum interest rate of 6.25%.

(3)The 30-day LIBOR rate is set at a minimum value of 2.5%.

(4)The loan has a maximum interest rate of 7%.

(5)On October 18, 2012, we sold one of the four industrial buildings at Interchange Business Center to an unaffiliated third party.  Based on the loan agreement, the net proceeds from the sale of approximately $7 million (classified as obligations associated with real estate held for sale on our condensed consolidated balance sheet as of September 30, 2012) were used to satisfy a portion of the existing indebtedness associated with the four buildings.

(6)On October 31, 2012, we sold Parrot’s Landing to an unaffiliated third party. We classified the note payable as obligations associated with real estate held for sale on our condensed consolidated balance sheet as of September 30, 2012.

Contractual obligations for principal payments

Year	Amount Due
October 1, 2012 - December 31, 2012	$	15,711
2013	11,870
2014	2,585
2015	55,953
2016	18,677
Thereafter	76,797
	$	181,593

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Real Estate and Real Estate-Related Investments (Details)	3 Months Ended		9 Months Ended		1 Months Ended		1 Months Ended	0 Months Ended	9 Months Ended									9 Months Ended				1 Months Ended		6 Months Ended	9 Months Ended
	Sep. 30, 2012 USD ($) item	Sep. 30, 2011 USD ($)	Sep. 30, 2012 USD ($) item	Sep. 30, 2011 USD ($)	Jan. 30, 2012 Palms of Monterrey USD ($)	Jan. 05, 2012 Palms of Monterrey Subsequent event USD ($)	Oct. 31, 2012 Parrot's Landing Subsequent event USD ($)	Oct. 18, 2012 Interchange Business Center San Bernardino Subsequent event USD ($) building item	Sep. 30, 2012 1875 Lawrence, Denver, CO USD ($)	Sep. 30, 2012 Holstenplatz, Hamburg, Germany	Sep. 30, 2012 Parrot's Landing, North Lauderdale, Florida	Sep. 30, 2012 Florida MOB Portfolio, South Florida property	Sep. 30, 2012 Original Florida MOB Portfolio, South Florida property	Sep. 30, 2012 Gardens Medical Pavilion, South Florida	Sep. 30, 2012 Courtyard Kauai Coconut Beach Hotel, Kauai, Hawaii	Sep. 30, 2012 Interchange Business Center, San Bernardino, California	Oct. 18, 2012 Interchange Business Center, San Bernardino, California Subsequent event USD ($)	Sep. 30, 2012 River Club and the Townhomes at River Club, Athens, Georgia	Sep. 30, 2012 Babcock Self Storage, San Antonio, Texas	Sep. 30, 2012 Lakes of Margate, Margate, Florida	Sep. 30, 2012 Arbors Harbor Town, Memphis, Tennessee	Apr. 30, 2012 Alte Jakobstrabe, Berlin, Germany USD ($)	Apr. 30, 2012 Alte Jakobstrabe, Berlin, Germany EUR (€)	Sep. 30, 2012 Alte Jakobstrabe, Berlin, Germany USD ($)	Sep. 30, 2012 Alte Jakobstrabe, Berlin, Germany USD ($)	Sep. 30, 2011 Alte Jakobstrabe, Berlin, Germany USD ($)	Apr. 05, 2012 Alte Jakobstrabe, Berlin, Germany USD ($)	Apr. 05, 2012 Alte Jakobstrabe, Berlin, Germany EUR (€)	Apr. 05, 2012 Alte Jakobstrabe, Berlin, Germany Lease intangibles, net USD ($)	Apr. 05, 2012 Alte Jakobstrabe, Berlin, Germany Acquired below-market leases, net USD ($)
Real Estate and Real Estate-Related Investments
Number of real estate assets consolidated	11		11
Number of properties												9	8
Ownership Interest (as a percent)									100.00%	100.00%	90.00%	90.00%	90.00%		80.00%	80.00%		85.00%	85.00%	92.50%	94.00%				99.70%
Sale price of discontinued operation						$ 39,300,000	$ 56,300,000	$ 7,500,000									$ 7,500,000
Net Sales proceeds from sale of real estate asset							18,500,000
Ownership interest through joint venture (as a percent)														90.00%
Number of buildings for which indebtedness paid by entity								4
Number of industrial buildings sold								1
Number of industrial buildings			4					4
Sale of real estate asset					39,300,000
Satisfaction of indebtedness					19,700,000		28,600,000	7,000,000	5,900,000
Purchase price, excluding closing costs																											11,100,000	8,400,000
Amount of loan entered in connection with acquisition																						7,800,000	5,900,000
Proceeds from notes payable			7,401,000	30,626,000																					7,300,000
Fixed annual rate of interest (as a percent)																								2.30%	2.30%
Period for which fixed annual rate of interest is applied																						3 years	3 years
Repayment of loan as a percentage of original loan amount plus interest																									4.00%
Rental revenue	8,407,000	6,332,000	25,007,000	17,098,000																				600,000
Net loss	(3,393,000)	280,000	(4,017,000)	(6,893,000)																				100,000
Pro forma information
Revenue																									33,299,000	25,635,000
Net loss																									(3,819,000)	(7,832,000)
Net loss per share (in dollars per share)																									$ (0.15)	$ (0.33)
Depreciation and amortization expense included in the pro forma net loss																									300,000	300,000
Acquisition expenses																								500,000	500,000
Amounts of identified assets acquired at acquisition date
Land																											2,367,000
Buildings																											8,523,000
Intangibles																													333,000	(184,000)
Total identifiable net assets																											$ 11,039,000

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Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions

Related Party Transactions

14.Related Party Transactions

The Advisor and certain of its affiliates will receive fees and compensation in connection with the Offerings, and in connection with the acquisition, management, and sale of our assets.

Pursuant to a Dealer Manager Agreement, we engaged Behringer Securities LP (“Behringer Securities”) to act as our dealer manager in connection with the Offerings.  The Follow-On Offering terminated as to the primary portion on March 15, 2012 and we terminated the DRP portion of the Follow-On Offering effective April 3, 2012.  The terms of the Dealer Manager Agreement were the same in all material respects as the terms of the agreement entered with Behringer Securities dated January 4, 2008 pursuant to which Behringer Securities acted as the dealer manager for the Initial Offering.

Behringer Securities received commissions of up to 7% of gross primary offering proceeds.  Behringer Securities reallowed 100% of selling commissions earned to participating broker-dealers.  In addition, we paid Behringer Securities a dealer manager fee of up to 2.5% of gross offering proceeds.  Pursuant to separately negotiated agreements, Behringer Securities reallowed a portion of its dealer manager fee in an aggregate amount up to 2% of gross offering proceeds to broker-dealers participating in the Offerings; provided, however, that Behringer Securities reallowed, in the aggregate, no more than 1.5% of gross offering proceeds for marketing fees and expenses, conference fees and non-itemized, non-invoiced due diligence efforts and no more than 0.5% of gross offering proceeds for out-of-pocket and bona fide, separately invoiced due diligence expenses incurred as fees, costs or other expenses from third parties.  Further, in special cases pursuant to separately negotiated agreements and subject to applicable limitations imposed by the Financial Industry Regulatory Authority, Behringer Securities used a portion of its dealer manager fee to reimburse certain broker-dealers participating in the Offerings for technology costs and expenses associated with the Offerings and costs and expenses associated with the facilitation of the marketing and ownership of our shares by such broker-dealers’ customers.  No selling commissions, dealer manager fees or organization and offering expenses were paid for sales under the DRP.  For the nine months ended September 30, 2012, Behringer Securities earned selling commissions and dealer manager fees of $0.4 million and $0.2 million, respectively, which were recorded as a reduction to additional paid-in capital.  For the nine months ended September 30, 2011, Behringer Securities earned selling commissions and dealer manager fees of $1.2 million and $0.4 million, respectively, which were recorded as a reduction to additional paid-in capital.

We reimbursed the Advisor and its affiliates for organization and offering expenses (other than selling commissions and the dealer manager fee) incurred on our behalf in connection with the primary offering component of the Offerings.  The total we were required to remit to the Advisor for organization and offering expenses (other than selling commissions and the dealer manager fee) was limited to 1.5% of the gross proceeds raised in the completed primary offering components of the Offerings as determined upon completion of the Offerings.  The Advisor or its affiliates determined the amount of organization and offering expenses owed based on specific invoice identification, as well as an allocation of costs to us and other Behringer Harvard programs, based on respective equity offering results of those entities in offering.

The Advisor is required to reimburse us to the extent that the total amount spent on organization and offering expenses (other than selling commissions and the dealer manager fee) in the Offerings exceeds 1.5% of the gross proceeds raised in the primary component of the Offerings.  Based on the gross proceeds from our Offerings, we have recorded a receivable from the Advisor for approximately $3.8 million of organization and offering expenses that were previously reimbursed to the Advisor.  The receivable of $3.8 million is presented net of other payables of $0.4 million to the Advisor on our consolidated balance sheet.  We expect to receive payment from the Advisor for this receivable during the first quarter of 2013.

Since our inception through September 30, 2012, approximately $16.4 million of organization and offering expenses was incurred by the Advisor or its affiliates on our behalf.  Of this amount, $7.5 million has been reimbursed by us.  As of September 30, 2012, we had no amounts payable to the Advisor for organization and offering expenses.

The Advisor or its affiliates will also receive acquisition and advisory fees of 2.5% of the amount paid and/or in respect of the purchase, development, construction, or improvement of each asset we acquire, including any debt attributable to those assets.  The Advisor and its affiliates will also receive acquisition and advisory fees of 2.5% of the funds advanced in respect of a loan investment.  We incurred acquisition and advisory fees payable to the Advisor of $0.5 million for the nine months ended September 30, 2012.  We incurred acquisition and advisory fees payable to the Advisor of $0.9 million for the nine months ended September 30, 2011.

The Advisor or its affiliates also receive an acquisition expense reimbursement in the amount of 0.25% of (i) the funds paid for purchasing an asset, including any debt attributable to the asset, (ii) the funds budgeted for development, construction, or improvement in the case of assets that we acquire and intend to develop, construct, or improve, and (iii) the funds advanced in respect of a loan investment.  In addition, to the extent the Advisor or its affiliates directly provide services formerly provided or usually provided by third parties, including, without limitation, accounting services related to the preparation of audits required by the SEC, property condition reports, title services, title insurance, insurance brokerage or environmental services related to the preparation of environmental assessments in connection with a completed investment, the direct employee costs and burden to the Advisor of providing these services will be acquisition expenses for which we will reimburse the Advisor.  We also pay third parties, or reimburse the Advisor or its affiliates, for any investment-related expenses due to third parties in the case of a completed investment, including, but not limited to, legal fees and expenses, travel and communication expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance, premium expenses, and other closing costs.  In addition, acquisition expenses for which we will reimburse the Advisor, include any payments made to (i) a prospective seller of an asset, (ii) an agent of a prospective seller of an asset, or (iii) a party that has the right to control the sale of an asset intended for investment by us that are not refundable and that are not ultimately applied against the purchase price for such asset.  Except as described above with respect to services customarily or previously provided by third parties, the Advisor is responsible for paying all of the expenses it incurs associated with persons employed by the Advisor to the extent that they are dedicated to making investments for us, such as wages and benefits of the investment personnel.  The Advisor and its affiliates are also responsible for paying all of the investment-related expenses that we or the Advisor or its affiliates incur that are due to third parties or related to the additional services provided by the Advisor as described above with respect to investments we do not make, other than certain non-refundable payments made in connection with any acquisition.  For the nine months ended September 30, 2012 and 2011, we incurred acquisition expense reimbursements of less than $0.1 million and $0.1 million, respectively.

We pay the Advisor or its affiliates a debt financing fee of 1% of the amount available under any loan or line of credit made available to us.  It is anticipated that the Advisor will pay some or all of these fees to third parties with whom it subcontracts to coordinate financing for us.  We incurred debt financing fees of $0.1 million and $0.2 million for the nine months ended September 30, 2012 and 2011, respectively.

We pay the Advisor or its affiliates a development fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project if such affiliate provides the development services and if a majority of our independent directors determines that such development fee is fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties.  We incurred no such fees for the nine months ended September 30, 2012 or 2011.

We pay our property manager and affiliate of the Advisor, Behringer Harvard Opportunity II Management Services, LLC (“BHO II Management”), or its affiliates, fees for the management, leasing, and construction supervision of our properties.  Property management fees are 4.5% of the gross revenues of the properties managed by BHO II Management or its affiliates, plus leasing commissions based upon the customary leasing commission applicable to the same geographic location of the respective property.  In the event that we contract directly with a third-party property manager in respect of a property, BHO II Management or its affiliates receives an oversight fee equal to 0.5% of the gross revenues of the property managed.  In no event will BHO II Management or its affiliates receive both a property management fee and an oversight fee with respect to any particular property.  In the event we own a property through a joint venture that does not pay BHO II Management directly for its services, we will pay BHO II Management a management fee or oversight fee, as applicable, based only on our economic interest in the property.  We incurred and expensed property management fees or oversight fees to BHO II Management of approximately $0.9 million and $0.2 million for the nine months ended September 30, 2012 and 2011, respectively.

We pay the Advisor or its affiliates a monthly asset management fee of one-twelfth of 1.0% of the sum of the higher of the cost or value of each asset.  For the nine months ended September 30, 2012 and 2011, we expensed $2.3 million and $2.1 million, respectively, of asset management fees.

We reimburse the Advisor or its affiliates for all expenses paid or incurred by the Advisor in connection with the services provided to us, subject to the limitation that we will not reimburse the Advisor for any amount by which our operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of:  (A) 2% of our average invested assets, or (B) 25% of our net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of our assets for that period.  Notwithstanding the above, we may reimburse the Advisor for expenses in excess of this limitation if a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the nine months ended September 30, 2012 and 2011, we incurred and expensed such costs for administrative services of $1.1 million and $0.8 million, respectively.

We are dependent on Behringer Securities, the Advisor, and BHO II Management for certain services that are essential to us, including 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 us with their respective services, we would be required to obtain such services from other sources.

On November 1, 2012, we, through a wholly-owned subsidiary of our operating partnership, entered into a lease agreement with Behringer Harvard Europe Real Estate GmbH, to lease approximately 380 rentable square meters at Holstenplatz.  The lease commenced on November 1, 2012 for a 14-month term with two options to extend the lease for an additional one-year terms.  The annualized rent is approximately $80,000.  Our management and board of directors determined that the lease was fair and reasonable to us and on terms and conditions that are no less favorable to us than can be obtained from unaffiliated third parties for comparable transactions or services in the same location.