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 June 30, 2015

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 organization)	(I.R.S. Employer 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 ý 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 ý 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 (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes o No ý

As of July 31, 2015, Behringer Harvard Opportunity REIT II, Inc. had 25,654,986 shares of common stock outstanding.

BEHRINGER HARVARD OPPORTUNITY REIT II, INC.

FORM 10-Q

Quarter Ended June 30, 2015

		Page
PART I
FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2015 and 2014	4
	Condensed Consolidated Statements of Equity for the Six Months Ended June 30, 2015 and 2014	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	42
Signature		43

2

PART I

FINANCIAL INFORMATION

Item 1.                 Financial Statements.

Behringer Harvard Opportunity REIT II, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except shares)

(unaudited)

	June 30, 2015			December 31, 2014
Assets
Real estate
Land and improvements, net	$	57,300		$	60,374
Buildings and improvements, net	216,820			228,650
Real estate under development	589			274
Total real estate	274,709			289,298
Assets associated with real estate held for sale	9,581			12,951
Cash and cash equivalents	47,985			72,949
Restricted cash	4,891			4,199
Accounts receivable, net	2,530			2,208
Prepaid expenses and other assets	842			1,402
Investment in unconsolidated joint venture	14,222			13,973
Furniture, fixtures and equipment, net	7,384			8,244
Deferred financing fees, net	2,204			2,617
Lease intangibles, net	320			1,850
Total assets	$	364,668		$	409,691
Liabilities and Equity
Notes payable	$	206,152		$	216,294
Accounts payable	594			702
Payables to related parties	389			466
Acquired below-market leases, net	88			210
Distributions payable to noncontrolling interest	20			19
Income taxes payable	1,648			—
Accrued and other liabilities	8,029			6,232
Obligations associated with real estate held for sale	95			9,212
Total liabilities	217,015			233,135
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, 25,691,443 and 25,801,669 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	3			3
Additional paid-in capital	230,480			231,240
Accumulated distributions and net loss	(90,342		)	(62,477		)
Accumulated other comprehensive income	(22		)	(246		)
Total Behringer Harvard Opportunity REIT II, Inc. equity	140,119			168,520
Noncontrolling interest	7,534			8,036
Total equity	147,653			176,556
Total liabilities and equity	$	364,668		$	409,691

See Notes to Unaudited 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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues
Rental revenue	$	8,465		$	7,889		$	16,951		$	15,770
Hotel revenue	4,314			4,138			9,142			8,502
Total revenues	12,779			12,027			26,093			24,272
Expenses
Property operating expenses	2,767			2,625			5,664			5,349
Hotel operating expenses	3,116			2,988			6,274			6,010
Interest expense, net	1,746			2,055			3,567			4,118
Real estate taxes	1,572			1,352			3,156			2,765
Property management fees	418			403			864			830
Asset management fees	717			98			1,442			1,068
General and administrative	790			1,098			1,711			1,957
Acquisition expense	—			25			—			25
Depreciation and amortization	3,949			3,400			8,402			7,062
Total expenses	15,075			14,044			31,080			29,184
Interest income, net	29			54			79			100
Loss on early extinguishment of debt	—			(454		)	(119		)	(454		)
Other loss	(130		)	(3		)	(169		)	(3		)
Loss before gain on sale of real estate and income tax benefit (expense)	(2,397		)	(2,420		)	(5,196		)	(5,269		)
Gain on sale of real estate	—			11,445			5,320			11,445
Income tax benefit (expense)	519			—			(1,664		)	—
Net income (loss)	(1,878		)	9,025			(1,540		)	6,176
Net (income) loss attributable to the noncontrolling interest	(82		)	159			(593		)	124
Net income (loss) attributable to the Company	$	(1,960	)	$	9,184		$	(2,133	)	$	6,300
Weighted average shares outstanding:
Basic and diluted	25,704			25,993			25,740			26,002
Basic and diluted income (loss) per share	$	(0.07	)	$	0.35		$	(0.08	)	$	0.24
Distributions declared per common share	$	—		$	—		$	1.00		$	—
Comprehensive income (loss):
Net income (loss)	$	(1,878	)	$	9,025		$	(1,540	)	$	6,176
Other comprehensive income (loss):
Reclassification of unrealized loss on interest rate derivatives to net income	—			20			—			37
Reclassification of unrealized loss on currency translation to net income	—			—			596			—
Foreign currency translation gain (loss)	397			(54		)	(372		)	(27		)
Total other comprehensive income (loss)	397			(34		)	224			10
Comprehensive income (loss)	(1,481		)	8,991			(1,316		)	6,186
Comprehensive income (loss) attributable to noncontrolling interest	(82		)	155			(593		)	117
Comprehensive income (loss) attributable to the Company	$	(1,563	)	$	9,146		$	(1,909	)	$	6,303

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

Behringer Harvard Opportunity REIT II, Inc.

Condensed Consolidated Statements of Equity

(in thousands)

(unaudited)

	Convertible Stock			Common Stock							Accumulated Distributions and Net Income(Loss)			Accumulated Other Comprehensive Income (Loss)
	Number of Shares	Par Value		Number of Shares		Par Value		Additional Paid-in Capital									Noncontrolling Interest			Total Equity
Balance at January 1, 2014	1	$	—	26,016		$	3	$	232,903		$	(49,520	)	$	498		$	8,905		$	192,789
Net income											6,300						(124		)	6,176
Redemption of common stock				(27	)			(233		)										(233		)
Contributions from noncontrolling interest																	53			53
Distributions to noncontrolling interest																	(495		)	(495		)
Other comprehensive income:
Reclassification of unrealized loss on interest rate derivatives to net income														31			6			37
Foreign currency translation loss														(27		)				(27		)
Balance at June 30, 2014	1	$	—	25,989		$	3	$	232,670		$	(43,220	)	$	502		$	8,345		$	198,300
Balance at January 1, 2015	1	$	—	25,802		$	3	$	231,240		$	(62,477	)	$	(246	)	$	8,036		$	176,556
Net loss											(2,133		)				593			(1,540		)
Redemption of common stock				(110	)			(760		)										(760		)
Distributions declared on common stock											(25,732		)							(25,732		)
Contributions from noncontrolling interest																	154			154
Distributions to noncontrolling interest																	(1,249		)	(1,249		)
Other comprehensive income (loss):
Reclassification of unrealized loss on currency translation to net income														596						596
Foreign currency translation loss														(372		)				(372		)
Balance at June 30, 2015	1	$	—	25,692		$	3	$	230,480		$	(90,342	)	$	(22	)	$	7,534		$	147,653

See Notes to Unaudited Condensed Consolidated Financial Statements.

5

Behringer Harvard Opportunity REIT II, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six months ended June 30,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	(1,540	)	$	6,176
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization	8,292			7,006
Amortization of deferred financing fees	370			415
Gain on sale of real estate	(5,320		)	(11,445		)
Loss on early extinguishment of debt	119			454
Loss on derivatives	15			159
Change in operating assets and liabilities:
Accounts receivable	330			356
Prepaid expenses and other assets	544			156
Accounts payable	(107		)	444
Income taxes payable	1,705			—
Accrued and other liabilities	771			(893		)
Payables to related parties	(76		)	(97		)
Addition of lease intangibles	(6		)	(87		)
Cash provided by operating activities	5,097			2,644
Cash flows from investing activities:
Acquisition deposits reimbursed	—			500
Investment in unconsolidated joint venture	(249		)	(249		)
Proceeds from sale of real estate	18,244			46,290
Additions of property and equipment	(1,617		)	(4,267		)
Change in restricted cash	(692		)	(38		)
Cash provided by investing activities	15,686			42,236
Cash flows from financing activities:
Financing costs	(107		)	(101		)
Payments on notes payable	(17,716		)	(16,682		)
Redemptions of common stock	(760		)	(233		)
Distributions paid on common stock	(25,732		)	—
Contributions from noncontrolling interest holders	154			53
Distributions to noncontrolling interest holders	(1,249		)	(443		)
Cash used in financing activities	(45,410		)	(17,406		)
Effect of exchange rate changes on cash and cash equivalents	(337		)	14
Net change in cash and cash equivalents	(24,964		)	27,488
Cash and cash equivalents at beginning of period	72,949			94,877
Cash and cash equivalents at end of period	$	47,985		$	122,365

See Notes to Unaudited 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 were formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic and value-add basis. In particular, we have focused generally on acquiring commercial properties with significant possibilities for 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.  We have acquired a wide variety of commercial properties, including office, industrial, retail, hospitality and multifamily.  We have purchased existing, income-producing properties and newly-constructed properties. We have also invested in a mortgage loan and a mezzanine loan. We are not actively seeking to purchase additional assets at this time, but may invest capital in our current assets in order to position them for sale in the normal course of business. We intend to hold the various real properties in which we have invested until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. As of June 30, 2015, we had 11 real estate investments, ten of which were consolidated in our condensed consolidated financial statements (two wholly owned and eight properties consolidated through investments in joint ventures). We sold Babcock Self Storage (“Babcock”) and Alte Jakobstraße (“AJS”) on January 8, 2015 and February 21, 2015, respectively. We entered into a Purchase and Sale Agreement (“PSA”) effective July 16, 2015 to sell Holstenplatz, an office building located in Hamburg, Germany. Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet at June 30, 2015.

Substantially all of our business is conducted through Behringer Harvard Opportunity OP II LP, a limited partnership organized in Delaware (“Behringer Harvard Opportunity OP II”).  As of June 30, 2015, our wholly-owned subsidiary, BHO II, Inc., a Delaware corporation, owned a 0.1% partnership interest in Behringer Harvard Opportunity OP II as its sole general partner.  As of June 30, 2015, 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 (the “Advisor”).  The Advisor is responsible for managing our day-to-day affairs and for identifying and making investments on our behalf.

Organization

In connection with our initial capitalization, we issued 22,471 shares of our common stock and 1,000 shares of our convertible stock to Behringer Harvard Holdings, LLC (“Behringer”) on January 19, 2007.  Behringer transferred its shares of convertible stock to one of its affiliates on April 2, 2010.

As of June 30, 2015, we had issued 26.7 million shares of our common stock, including 22,471 shares owned by Behringer and 2.2 million shares issued through the distribution reinvestment plan.  As of June 30, 2015, we had redeemed 1 million shares of our common stock and had 25.7 million shares of common stock outstanding.  As of June 30, 2015, we had 1,000 shares of convertible stock outstanding held by an affiliate of Behringer.

Our common stock is not currently listed on a national securities exchange.  The timing of a liquidity event will depend upon then prevailing market conditions. We currently intend to consider the process of disposing assets, liquidating, and distributing the net proceeds to our stockholders no later than six years after the termination of our initial public offering of common stock, which occurred on July 3, 2011.  Economic or market conditions may, however, result in different holding periods for different assets.

7

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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, 2014, which was filed with the SEC on March 20, 2015.  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 June 30, 2015, the condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2015 and 2014 and condensed consolidated statements of equity and cash flows for the six months ended June 30, 2015 and 2014 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 June 30, 2015 and December 31, 2014 and our condensed consolidated results of operations and cash flows for the periods ended June 30, 2015 and 2014.  Such adjustments are of a normal recurring nature.

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.

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 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, or substantive participating rights or both under the respective ownership agreement.  For entities in which we have less than a controlling interest or entities which we are not deemed to be the primary beneficiary, we account for the investment using the equity method of accounting.

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.

8

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 hotels and all other buildings is depreciated over the estimated useful lives of 39 years and 25 years, respectively, 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 existing 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 existing 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.  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.

9

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Anticipated amortization expense associated with the acquired lease intangibles for each of the following five years as of June 30, 2015 was as follows: 

Year	Lease / Other Intangibles
July 1, 2015 - December 31, 2015	$	18
2016	36
2017	20
2018	(14		)
2019	(12		)

_________________________

(1) Excludes Holstenplatz which was classified as held for sale as of June 30, 2015. The anticipated amortization expense of Holstenplatz over the next five years is $0.2 million.

As of June 30, 2015 and December 31, 2014, accumulated depreciation and amortization related to our consolidated investments in real estate assets and intangibles were as follows: 

June 30, 2015	Buildings and Improvements			Land and Improvements			Lease Intangibles			Acquired Below-Market Leases
Cost(1)	$	244,605		$	59,759		$	3,023		$	(184	)
Less: depreciation and amortization(1)	(27,785		)	(2,459		)	(2,703		)	96
Net	$	216,820		$	57,300		$	320		$	(88	)

______________________________________________

(1) Excludes Holstenplatz, which was classified as held for sale as of June 30, 2015. We entered into a PSA effective July 16, 2015 to sell Holstenplatz, an office building located in Germany. Net book values included in assets associated with real estate held for sale on the condensed consolidated balance sheet were buildings and improvements of $6.8 million, land and improvements of $2.5 million, lease intangibles of $0.4 million, and acquired below-market leases of less than $0.1 million. See Note 8, Real Estate Held for Sale.

December 31, 2014	Buildings and Improvements			Land and Improvements			Lease Intangibles			Acquired Below-Market Leases
Cost(1)	$	252,812		$	62,447		$	4,551		$	(469	)
Less: depreciation and amortization(1)	(24,162		)	(2,073		)	(2,701		)	259
Net	$	228,650		$	60,374		$	1,850		$	(210	)

______________________________________________

(1) Excludes Babcock and AJS, which were classified as held for sale as of December 31, 2014. These two properties sold on January 8, 2015 and February 21, 2015, respectively. Net book values included in assets associated with real estate held for sale in the consolidated balance sheet were buildings and improvements of $9.6 million, land and improvements of $3.2 million, lease intangibles of $0.2 million, and acquired below-market leases of less than $0.1 million. See Note 8, Real Estate Held for Sale.

Real Estate Held for Sale and Discontinued Operations

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 June 30, 2015, we were in active negotiations for the disposal of Holstenplatz, and on July 16, 2015, we entered into a PSA to sell Holstenplatz, an office building located in Germany and our only remaining foreign operation at June 30, 2015. The prospective buyer has substantially completed the due diligence process and we believe the sale is probable within the next twelve months. Therefore, we classified Holstenplatz as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015. During the fourth quarter of 2014, we entered into PSAs for Babcock, a self storage facility in Texas, and AJS, an office building located in Germany, and classified Babcock and AJS as real estate held for sale in our consolidated balance sheet at December 31, 2014. We sold Babcock on January 8, 2015 and AJS on February 21, 2015.

10

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Effective as of April 1, 2014, we adopted the revised guidance in Accounting Standards Update No. 2014-08 regarding discontinued operations. For sales of real estate or assets classified as held for sale after April 1, 2014, we will evaluate whether a disposal transaction meets the criteria of a strategic shift and will have a major effect on our operations and financial results to determine if the results of operations and gains on sale of real estate will be presented as part of our continuing operations or as discontinued operations in our consolidated statements of operations. If the disposal represents a strategic shift, it will be classified as discontinued operations for all periods presented; if not, it will be presented in continuing operations.

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 those 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.  These projected cash flows are prepared internally by the Advisor and reflect in-place and projected leasing activity, market revenue and expense growth rates, market capitalization rates, discount rates, and changes in economic and other relevant conditions. The Company’s principal executive officer and principal financial officer, as well as a panel of asset managers and a financial analyst of the Advisor, review these projected cash flows to assure that the valuation is prepared using reasonable inputs and assumptions that are consistent with market data or with assumptions that would be used by a third-party market participant and assume the highest and best use of the investment. We consider trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. 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.  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. In addition, we may incur impairment charges on assets classified as held for sale in the future if the carrying amount of the asset upon classification as held for sale exceeds the estimated fair value, less costs to sell.

We also evaluate our investments in unconsolidated joint ventures at each reporting date.  If we believe there is an other than temporary decline in market value, we will record an impairment charge based on these evaluations.  We assess potential impairment by comparing our portion of estimated future undiscounted operating cash flows expected to be generated by the joint venture over the life of the joint venture’s assets to the carrying amount of the joint venture.  In the event that the carrying amount exceeds our portion of estimated future undiscounted operating cash flows, we recognize an impairment loss to adjust the carrying amount of the joint venture to its estimated fair value.

We believe the carrying value of our operating real estate is currently recoverable. Accordingly, there were no impairment charges for the three and six months ended June 30, 2015 and 2014.  However, if market conditions worsen unexpectedly 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.

11

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Investment in Unconsolidated Joint Venture

We provide funding to third-party developers for the acquisition, development, and construction of real estate (“ADC Arrangement”).  Under the ADC Arrangement, we may participate in the residual profits of the project through the sale or refinancing of the property.  We evaluate this arrangement to determine if it has characteristics similar to a loan or if the characteristics are more similar to a joint venture or partnership such as participating in the risks and rewards of the project as an owner or an investment partner.  When we determine that the characteristics are more similar to a jointly-owned investment or partnership, we account for the arrangement as an investment in an unconsolidated joint venture under the equity method of accounting or a direct investment (consolidated basis of accounting) instead of applying loan accounting. The ADC Arrangement is reassessed at each reporting period. See Note 9, Investment in Unconsolidated Joint Venture, for further discussion.

Revenue Recognition

We recognize rental income generated from leases of our operating properties on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any.  Straight-line rent was income of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2015. Straight-line rent was a charge of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2014. Leases associated with our multifamily, student housing, and hotel assets are generally short-term in nature, and thus have no straight-line rent. Net below-market lease amortization was income of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2015. Net above-market lease amortization was a charge of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2014.

Hotel revenue is derived from the operations of the Courtyard Kauai Coconut Beach Hotel and consists primarily of guest room, food and beverage, and other ancillary revenues such as laundry and parking. Hotel revenue is recognized as the services are rendered.

Accounts Receivable

Accounts receivable primarily consist of receivables related to our consolidated properties of $2.5 million and $2.2 million as of June 30, 2015 and December 31, 2014, respectively, and included straight-line rental revenue receivables of $0.4 million and $0.6 million as of June 30, 2015 and December 31, 2014, respectively. 

Furniture, Fixtures, and Equipment

Furniture, fixtures, and equipment are recorded at cost and are depreciated according to the Company’s capitalization policy, which uses the straight-line method over their estimated useful lives of five to seven years.  Furniture, fixtures and equipment associated with properties classified as held for sale are not depreciated. Maintenance and repairs are charged to operations as incurred.  Accumulated depreciation associated with our furniture, fixtures, and equipment was $7.7 million and $6.4 million as of June 30, 2015 and December 31, 2014, 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 $2.3 million and $2.2 million as of June 30, 2015 and December 31, 2014, respectively.

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. Taxable income from non-REIT activities managed through a taxable REIT subsidiary (“TRS”) is subject to applicable federal, state, and local income and margin taxes. We have no taxable income associated with a TRS. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level.

12

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company recorded a provision for income tax of approximately $2.2 million in the first quarter of 2015 as a result of estimated foreign income tax related to the sale of AJS which is located in Berlin, Germany. The foreign income tax was calculated on gains recognized at the exchange rate in effect on the sale date of February 21, 2015 and calculated using current tax rates. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS.

We have reviewed our tax positions under GAAP guidance that clarify 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 federal tax status as a REIT will be sustained in any tax examination.

Foreign Currency Translation

For our international investments 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 other comprehensive income (loss) (“OCI”) as a separate component. 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 AJS. We sold AJS in the first quarter of 2015. 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 three and six months ended June 30, 2015, the foreign currency translation adjustment was a gain of $0.4 million and a loss of $0.4 million, respectively. For the three and six months ended June 30, 2014, the foreign currency translation adjustment was a loss of less than $0.1 million.

When the Company has substantially liquidated its investment in a foreign entity, the cumulative translation adjustment (“CTA”) balance is required to be released into earnings. During the first quarter of 2015, we recognized a CTA of approximately $0.6 million as a reduction to the gain on sale of our AJS office building which we sold on February 21, 2015. Our wholly owned investment in the Holstenplatz office building, located in Hamburg, Germany, is our only remaining foreign operation and is classified as real estate held for sale at June 30, 2015. The cumulative balance of our foreign currency translation for Holstenplatz is a gain of $0.3 million at June 30, 2015. In accordance with ASU 2013-05, upon disposal of the property, we would recognize the CTA as an adjustment to the gain on sale.

Concentration of Credit Risk

At June 30, 2015 and December 31, 2014, 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.

Geographic and Asset Type Concentration

Our investments in target assets may at times be concentrated in certain asset types that are subject to higher risk of foreclosure, or secured by assets concentrated in a limited number of geographic locations. For the six months ended June 30, 2015, excluding Holstenplatz, which was classified as real estate held for sale at June 30, 2015, and Babcock and AJS which were sold in the first quarter of 2015, 36% and 20% of our total revenues were derived from our properties located in Hawaii and Florida, respectively. Additionally, excluding Holstenplatz, Babcock, and AJS, 44%, 36%, and 16% of our total revenues for the six months ended June 30, 2015 were from our multifamily, hotel, and student housing investments, respectively. To the extent that our portfolio is concentrated in limited geographic regions or types of assets, downturns relating generally to such region or type of asset may result in defaults on a number of our investments within a short time period, which may reduce our net income and the value of our common stock and accordingly limit our ability to fund our operations.

13

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 generally on their ownership percentage.  In certain instances, our joint venture agreement provides for liquidating distributions based on achieving certain return metrics (“promoted interest”).  If a property reaches a defined return threshold, then it will result in distributions to noncontrolling interest which is different from the standard pro-rata allocation 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 loss per share were the same for each of the three and six months ended June 30, 2015 and 2014, as there were no potentially dilutive securities outstanding.

Subsequent Events

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

4. New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an update (“ASU 2014-09”) to ASC Topic 606, Revenue from Contracts with Customers.  ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance.  ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.  ASU 2014-09 is effective for public companies for interim and annual reporting periods beginning after December 15, 2017. This effective date is adjusted for a one-year deferral of the new revenue standard which was confirmed by FASB in the July 2015 meeting. In addition, early adoption will be permitted as of the original effective date in ASU 2014-09, which for public companies was annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods. Either full retrospective adoption or modified retrospective adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

In February 2015, the FASB issued an update (“ASU No. 2015-02”) to ASC Topic 810, Amendments to the Consolidation Analysis. ASU 2015-02 makes several modifications to the consolidation guidance for VIEs and general partners’ investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities. The amendments in ASU 2015-02 are effective for public companies in interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

In April 2015, the FASB issued an update (“ASU 2015-03”) to ASC Topic 835, Interest - Imputation of Interest, Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts, instead of being presented as a deferred charge. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this updated guidance. ASU 2015-03 is effective for public companies in interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The new guidance requires retrospective application. As of June 30, 2015, we have $2.2 million of net deferred financing costs that would be reclassified from a long-term asset to a reduction in the carrying amount of our debt.

14

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 June 30, 2015, 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 June 30, 2015 and December 31, 2014:

June 30, 2015	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	5	$	—	$	5

December 31, 2014	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	28	$	—	$	28

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

15

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 June 30, 2015 and December 31, 2014, 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 to noncontrolling interests were at amounts that reasonably approximated their fair value based on their highly-liquid nature and/or short-term maturities.  The notes payable of $206.2 million as of June 30, 2015 and $216.3 million, excluding $9.1 million of contractual obligations on real estate held for sale as of December 31, 2014, have a fair value of approximately $205.9 million and $217.1 million as of June 30, 2015 and December 31, 2014, 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 June 30, 2015 and December 31, 2014. 

7.Real Estate and Real Estate-Related Investments

As of June 30, 2015, we consolidated ten real estate assets, including Holstenplatz, which was classified as real estate held for sale in our condensed consolidated balance sheet. The following table presents certain information about our consolidated investments as of June 30, 2015:

Property Name	Description	Location	Date Acquired	Ownership Interest
Holstenplatz(1)	Office building	Hamburg, Germany	June 30, 2010	100%
Gardens Medical Pavilion(2)	Medical office building	Palm Beach Gardens, Florida	October 20, 2010	80.4%
Courtyard Kauai Coconut Beach Hotel	Hotel	Kauai, Hawaii	October 20, 2010	80%
River Club and the Townhomes at River Club	Student housing	Athens, Georgia	April 25, 2011	85%
Lakes of Margate	Multifamily	Margate, Florida	October 19, 2011	92.5%
Arbors Harbor Town	Multifamily	Memphis, Tennessee	December 20, 2011	94%
Wimberly at Deerwood (“Wimberly”)	Multifamily	Jacksonville, Florida	February 19, 2013	95%
22 Exchange	Student housing	Akron, Ohio	April 16, 2013	90%
Parkside Apartments (“Parkside”)	Multifamily	Sugar Land, Texas	August 8, 2013	90%
Lakewood Flats	Multifamily	Dallas, Texas	October 10, 2014	100%

_________________________________________

(1) We entered into a PSA effective July 16, 2015 to sell Holstenplatz, an office building located in Hamburg, Germany. Holstenplatz is classified as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015.

(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 were referred to as the Florida MOB Portfolio.  The Florida MOB Portfolio consisted of nine medical office buildings.  On September 20, 2013, we sold the Original Florida MOB Portfolio. As of June 30, 2015, we own approximately 80.4% of the ninth building, Gardens Medical Pavilion.

16

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Real Estate Asset Dispositions

Babcock Self Storage

On January 8, 2015, we sold Babcock for a contract sales price of approximately $5.4 million. We recorded a gain on sale of real estate of $2.0 million and loss on early extinguishment of debt of less than $0.1 million, which was composed of the write-off of deferred financing fees and an early termination fee. A portion of the proceeds from the sale were used to pay off in full the existing indebtedness of approximately $2.1 million associated with the storage facility. Babcock was classified as held for sale on our consolidated balance sheet at December 31, 2014.

Alte Jakobstraße

On February 21, 2015, we sold AJS, which is located in Berlin, Germany, for a contract sales price of approximately €12.4 million (approximately $14.1 million).  We recorded a gain on sale of real estate of approximately $3.3 million which is net of a CTA of approximately $0.6 million. We recognized a loss on early extinguishment of debt of less than $0.1 million, which was composed of the write-off of deferred financing fees and an early termination fee. A portion of the proceeds from the sale were used to fully satisfy the existing indebtedness associated with the property of approximately €5.7 million (approximately $6.5 million). The Company recorded a provision for income tax of approximately $2.2 million during the first quarter of 2015 as a result of foreign income tax related to the sale. The foreign income tax was calculated on gains recognized at the exchange rate in effect on the sale date of February 21, 2015 and calculated using current tax rates. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS. All U.S. dollar amounts related to the AJS sale are based on the exchange rate in effect on February 21, 2015. AJS was classified as held for sale on our consolidated balance sheet at December 31, 2014.

Sales of Real Estate Reported in Continuing Operations

The Company does not view the disposals of Babcock and AJS in the first quarter of 2015 or the disposal of 1875 Lawrence in the second quarter of 2014 as a strategic shift. Therefore, the results of operations for Babcock and AJS are presented in continuing operations in the consolidated statements of operations for the six months ended June 30, 2015 and the results of operations for all three investments are presented in continuing operations in the consolidated statements of operations for the three and six months ended June 30, 2014.

The following table presents our sales of real estate for the six months ended June 30, 2015 ($ in millions):

Date of Sale	Property	Ownership Interest	Sales Contract Price		Net Cash Proceeds(1)		Gain on Sale of Real Estate
January 8, 2015	Babcock Self Storage	85%	$	5.4	$	5.2	$	2.0
February 21, 2015	Alte Jakobstraße	99.7%	$	14.1	$	13.0	$	3.3

______________________________________

(1) A portion of the net cash proceeds was used to pay off the property-associated debt of $8.6 million.

In addition, we sold our 1875 Lawrence office building on May 30, 2014, which is included in continuing operations for the three and six months ended June 30, 2014.

The following table presents net income attributable to the Company for the three and six months ended June 30, 2015 and 2014 related to Holstenplatz (classified as Real Estate Held for Sale at June 30, 2015, see Note 8), Babcock, AJS, and 1875 Lawrence. Net income for the three and six months ended June 30, 2014 includes the gain on sale of 1875 Lawrence of $11.4 million. Net income for the six months ended June 30, 2015 includes the gain on sale of AJS and Babcock for a total of $5.3 million (in millions):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Description	2015		2014		2015		2014
Net income attributable to the Company	$	0.5	$	10.6	$	2.9	$	9.9

17

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

8.Real Estate Held for Sale

As of June 30, 2015, Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet. As of December 31, 2014, Babcock and AJS were classified as real estate held for sale on our consolidated balance sheet. We sold Babcock and AJS in the first quarter of 2015.

In 2010, we acquired Holstenplatz, an office building located in Hamburg, Germany, with the investment objective of increasing net operating income through longer lease terms and increased rents. On July 16, 2015, we entered into a PSA to sell Holstenplatz to an unaffiliated third party for a contract sales price of approximately €16.5 million or approximately $18.1 million based on the exchange rate in effect on July 16, 2015. The prospective buyer has substantially completed the due diligence process and we believe the sale is probable within the next twelve months. Therefore, we classified Holstenplatz as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015.

The classification of Holstenplatz as real estate held for sale as of June 30, 2015 did not represent a strategic shift and did not have a major effect on the Company’s operations and financial results. Therefore, the results of operations for Holstenplatz are presented in continuing operations in the consolidated statements of operations for the three and six months ended June 30, 2015 and 2014. See Note 7, Real Estate and Real Estate-Related Investments, for total net income included in continuing operations for Holstenplatz, Babcock, AJS and 1875 Lawrence for the three and six months ended June 30, 2015 and 2014.

The major classes of assets and liabilities associated with our real estate held for sale as of June 30, 2015 and December 31, 2014 were as follows:

	Real Estate Held for Sale as of
Description	June 30, 2015		December 31, 2014
Land and improvements, net	$	2,456	$	3,195
Building and improvements, net	6,761		9,581
Lease intangibles, net	351		175
Furniture, fixtures and equipment, net	13		—
Assets associated with real estate held for sale	$	9,581	$	12,951
Notes payable(1)	$	—	$	9,122
Other	95		90
Obligations associated with real estate held for sale	$	95	$	9,212

___________________________

(1) We paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015, its maturity date.

On July 20, 2015, we entered into a PSA to sell Wimberly to an unaffiliated third party for a contract sales price of approximately $43.5 million. We acquired Wimberly on February 19, 2013. As of June 30, 2015, we were still in active negotiations and the due diligence process was not complete. In addition, at the time of filing this report on Form 10-Q, we cannot give any assurances that the closing of this sale is probable within the next twelve months. Therefore, we determined Wimberly did not meet the requirements to be classified as held for sale at June 30, 2015.

18

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

9.Investment in Unconsolidated Joint Venture

On May 24, 2013, we (the “Lender”) provided mezzanine financing totaling $13.7 million (the “Initial Advance”) to an unaffiliated third-party entity (the “Borrower”) that owns an apartment complex under development in Denver, Colorado (“Prospect Park”).  The Borrower also has a senior construction loan with a third-party construction lender (the “Senior Lender”) in an aggregate original principal amount of $35.6 million.  The senior construction loan is guaranteed by the owners of the developer.  We also have a personal guaranty from the owners of the developer guaranteeing completion of the project and payment of cost overruns. Our mezzanine loan is secured by all of the membership interests of the Borrower and is subordinate to the senior construction loan. Our Initial Advance has an annual stated interest rate of 10% for the first three years of the term, followed by twoone-year extension options at which point the annual interest rate would increase to 14%. We evaluated this ADC Arrangement and determined that the characteristics are similar to a jointly-owned investment or partnership. Accordingly, the investment was accounted for as an unconsolidated joint venture under the equity method of accounting instead of loan accounting since we will participate in the residual interests through the sale or refinancing of the property. 

As a result of projected cost overruns, an event of default was declared by the Senior Lender on April 28, 2014, and we declared an event of default under the mezzanine loan agreement on May 5, 2014. The events of default were cured by the Borrower and developer agreeing to cover cost overruns totaling $6.6 million, increasing our financing by $1.5 million (the “Additional Advance”) at an annual interest rate of 18%, and the Senior Lender increasing their loan to $40 million. The terms of our Initial Advance remained the same under the amended loan agreement.

We considered the impact of these events on the accounting treatment and determined the ADC Arrangement will continue to be accounted for as an unconsolidated joint venture under the equity method of accounting. We will continue to monitor this situation and any impact these events might have on our ability to ultimately realize our investment. The ADC Arrangement is reassessed at each reporting period.

As of June 30, 2015, the outstanding principal balance under our mezzanine loan was $15.2 million. Interest capitalized for the three and six months ended June 30, 2015 was $0.1 million and $0.2 million, respectively. Interest capitalized for the three and six months ended June 30, 2014 was $0.1 million and $0.2 million, respectively.  For the three and six months ended June 30, 2015 and 2014, we recorded no equity in earnings (losses) of unconsolidated joint venture related to our investment in Prospect Park.

The following table sets forth our ownership interest in Prospect Park: 

	Ownership Interest		Carrying Amount
Property Name	June 30, 2015	December 31, 2014	June 30, 2015	December 31, 2014
Prospect Park	N/A	N/A	$14,222	$13,973

19

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

10.Notes Payable

The following table sets forth information on our notes payable as of June 30, 2015 and December 31, 2014:

	Notes Payable as of
Description	June 30, 2015		December 31, 2014		Interest Rate		Maturity Date
Holstenplatz(2)	n/a		$	9,125	3.887%		4/30/2015
Courtyard Kauai Coconut Beach Hotel	38,000		38,000		30-day LIBOR + .95%	(1)	11/9/2015
Florida MOB Portfolio - Gardens Medical Pavilion	13,491		13,678		4.9%		1/1/2018
River Club and the Townhomes at River Club	24,482		24,664		5.26%		5/1/2018
Lakes of Margate	14,617		14,723		5.49% and 5.92%		1/1/2020
Arbors Harbor Town	25,362		25,591		3.985%		1/1/2019
Wimberly	26,551		26,685		30-day LIBOR + 2.28%	(1)	3/1/2023
22 Exchange	19,500		19,500		3.93%		5/5/2023
Parkside(3)	10,649		10,828		5%		6/1/2018
Lakewood Flats	33,500		33,500		30-day LIBOR + 1.5%	(1)	11/5/2019
	$	206,152	$	216,294
Notes payable in obligations associated with real estate held for sale:
Holstenplatz(2)	$	—	n/a		3.887%		4/30/2015
Babcock Self Storage(4)	—		2,137		5.8%		8/30/2018
Alte Jakobstraße(4)	—		6,985		2.3%		12/30/2015
	$	—	$	9,122
Total notes payable obligations	$	206,152	$	225,416

_________________________________

(1) 30-day London Interbank Offer Rate (“LIBOR”) was 0.19% at June 30, 2015.

(2) We paid off the balance of the Holstenplatz debt on April 30, 2015. As of June 30, 2015, Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet.

(3) Includes approximately $0.5 million of unamortized premium related to debt we assumed at acquisition.

(4) As of December 31, 2014, Babcock and AJS were classified as real estate held for sale on our consolidated balance sheet. The properties were sold in the first quarter of 2015 and a portion of the sales proceeds for each property was used to pay off the existing indebtedness in full.

At June 30, 2015, our notes payable balance was $206.2 million and consisted of the notes payable related to our consolidated properties.  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 Coconut Beach Hotel, Wimberly, 22 Exchange, and Parkside notes payable. Interest capitalized for the three and six months ended June 30, 2015 was $0.1 million and $0.2 million, respectively, in connection with our equity method investment in Prospect Park. Interest capitalized for the three and six months ended June 30, 2014 was $0.1 million and $0.2 million, respectively.

On January 8, 2015, we sold our Babcock property to an unaffiliated third party. We used a portion of the proceeds from the sale to fully satisfy the existing indebtedness of approximately $2.1 million. On February 21, 2015, we sold AJS, located in Berlin, Germany, to an unaffiliated third party and used a portion of the proceeds from the sale to payoff in full the existing indebtedness of approximately €5.7 million, or approximately $6.5 million based on the exchange rate in effect on February 21, 2015. Babcock and AJS were classified as held for sale on our consolidated balance sheet as of December 31, 2014.

We paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015.

20

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

We are subject to customary affirmative, negative, and financial covenants and representations, warranties, and borrowing conditions, all as set forth in our loan agreements, including, among other things, maintaining minimum debt service coverage ratios, loan to value ratios and liquidity. As of June 30, 2015, we believe we were in compliance with the covenants under our loan agreements.

The following table summarizes our contractual obligations for principal payments as of June 30, 2015:  

Year	Amount Due
July 1, 2015 - December 31, 2015	$	39,082
2016	2,447
2017	2,670
2018	47,393
2019	58,345
Thereafter	55,724
Total contractual obligations for principal payments	$	205,661
Unamortized premium	491
Total notes payable	$	206,152

Our debt secured by Courtyard Kauai Coconut Beach Hotel, with a balance of $38 million at June 30, 2015, matures on November 9, 2015. The loan has an 18-month renewal option to extend the term to May 9, 2017.

11.Leasing Activity

Future minimum base rental payments of our office properties due to us under non-cancelable leases in effect as of June 30, 2015 are as follows: 

Year	Amount Due
July 1, 2015 - December 31, 2015	$	566
2016	1,156
2017	1,028
2018	716
2019	646
Thereafter	2,992
Total	$	7,104

The schedule above does not include rental payments due to us from our multifamily, hotel, and student housing properties, as leases associated with these properties typically are for periods of one year or less. We have two remaining office properties at June 30, 2015, Holstenplatz, located in Germany and Gardens Medical Pavilion, located in Florida. We have excluded Holstenplatz from the schedule above as it was classified as held for sale at June 30, 2015. The future minimum base rental payments of our Holstenplatz property over the next 5 years is $3.6 million and the total for years 2020 through 2028 is $1.7 million.

21

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

12.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.  As of June 30, 2015, none of our derivative instruments were designated as hedging instruments. We have two interest rate caps as of June 30, 2015.

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 June 30, 2015 and December 31, 2014. During the six months ended June 30, 2014, we recorded a reclassification of unrealized loss to interest expense of less than $0.1 million to adjust the carrying amount of the interest rate caps. During the six months ended June 30, 2015, we had no reclassification of unrealized loss to interest expense.  The reclassification out of OCI in our statement of equity for the six months ended June 30, 2014 was due to all derivatives being designated as non-hedging instruments as of January 1, 2013.

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 Date
Not Designated as Hedging Instruments
Interest rate cap - Courtyard Kauai Coconut Beach Hotel	$	38,000	3.00%	30-day LIBOR	October 15, 2016
Interest rate cap - Wimberly	26,685		4.56%	30-day LIBOR	March 1, 2018

The table below presents the fair value of our derivative financial instruments, as well as their classification on the consolidated balance sheets as of June 30, 2015 and December 31, 2014: 

Derivatives not designated as hedging instruments:		Asset Derivatives
	Balance Sheet Location	June 30, 2015		December 31, 2014
Interest rate derivative contracts	Prepaid expenses and other assets	$	5	$	28

The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014: 

Derivatives Not Designated as Hedging Instruments
Amount of Loss
Three months ended June 30,				Six months ended June 30,
2015		2014		2015		2014
$	—	$	103	$	15	$	159

13.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, proceeds from asset sales 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 federal tax status as a REIT. We cannot provide assurance that we will pay distributions at any particular level, or at all. We expect that any future distributions authorized by our board of directors will be periodic, special distributions as opposed to regular monthly or quarterly distributions.

22

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

On March 18, 2015, our board of directors authorized a special cash distribution of $1.00 per share of common stock payable to stockholders of record as of March 30, 2015. The total special cash distribution of $25.7 million, which represents a portion of proceeds from asset sales, was paid on March 31, 2015. We did not pay any distributions to stockholders during the three months ended June 30, 2015 or during the three and six months ended June 30, 2014.

We have paid, and may in the future pay, some or all of our distributions from sources other than operating cash flow. For example, we have generated cash to pay special distributions from sales activities and financing activities, components of which included proceeds from our 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, which may increase the amount of cash that we have available to pay distributions to our stockholders.

Future special distributions authorized and paid at the discretion of the board of directors, are expected to be funded with proceeds from asset sales. Therefore, future special distributions may exceed cash flow from operating activities or funds from operations.

14.Related Party Transactions

Advisor

The Advisor and certain of its affiliates may receive fees and compensation in connection with the acquisition, management, and sale of our assets based on the advisory management agreement, as amended and restated.

Fourth Amended and Restated Advisory Management Agreement

On June 6, 2014, we entered into the Fourth Amended and Restated Advisory Management Agreement (the “Fourth Advisory Agreement”) with our Advisor to, among other things, revise the acquisition and advisory fees, asset management fee, and the debt financing fee that may be paid to the Advisor and to fix certain expense reimbursement provisions. The Fourth Advisory Agreement was effective as of January 1, 2014. Effective as of June 6, 2015, we entered into the First Amendment to Fourth Amended and Restated Advisory Management Agreement to (i) reduce the administrative services fee to be paid to the Advisor for calendar year 2015 from $1.8 million to $1.5 million and (ii) reimburse the Advisor for certain due diligence services provided in connection with asset dispositions or debt financings separately from the administrative services fee. In addition, we renewed the term of the Fourth Advisory Agreement by one year. As amended, the Fourth Advisory Agreement will expire on June 6, 2016.  In all other material respects, the terms of the Fourth Advisory Agreement remain unchanged. The following discussion reflects the terms of the Fourth Advisory Agreement, as amended, and the fees and expenses paid or reimbursed to the Advisor thereunder since January 1, 2014.

The Advisor or its affiliates receive acquisition and advisory fees of 1.5% of the amount paid in respect of the purchase, development, construction, or improvement of each asset we acquire, including any debt attributable to those assets. In addition, the Advisor and its affiliates will also receive acquisition and advisory fees of 1.5% of the funds advanced in respect of a loan investment. We incurred acquisition and advisory fees payable to the Advisor of less than $0.1 million for the six months ended June 30, 2015 and 2014 as a result of improvements made to our assets. During the six months ended June 30, 2015 and 2014, we had no acquisitions.

The Advisor or its affiliates also receive an acquisition expense reimbursement in the amount of (i) 0.25% of the funds paid for purchasing an asset, including any debt attributable to the asset, plus 0.25% of the funds budgeted for development, construction, or improvement in the case of assets that we acquire and intend to develop, construct, or improve or (ii) 0.25% of the funds advanced in respect of a loan investment. 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 approved in advance by our board of directors 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. Previously, to the extent the Advisor or its affiliates directly provided services, formerly provided or usually provided by third parties, including, without limitation, accounting services related to the

23

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

preparation of audits required by the Securities and Exchange Commission, 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 was included as acquisition expenses for which we reimbursed the Advisor. Pursuant to the Fourth Advisory Agreement, effective January 1, 2014, such services will no longer be included as acquisition expenses for which the Company will reimburse the Advisor.

In addition, 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 six months ended June 30, 2015 and 2014, we incurred less than $0.1 million in acquisition expense reimbursements.

Beginning January 1, 2014, we pay the Advisor or its affiliates a debt financing fee of 0.5% of the amount available under any loan or line of credit made available to us and will pay directly all third-party costs associated with obtaining the debt financing. We incurred no debt financing fees for the six months ended June 30, 2015 and 2014.

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 to us.  We incurred no such fees for the six months ended June 30, 2015 and 2014.

Pursuant to the Fourth Advisory Agreement, we pay the Advisor or its affiliates a monthly asset management fee which, effective January 1, 2014, was reduced to one-twelfth of 0.7% of the value of each asset. The value of our assets will be the value as determined in connection with the establishment and publication of an estimated value per share unless the asset was acquired after our publication of an estimated value per share (in which case the value of the asset will be the contract purchase price of the asset). In addition, pursuant to the Fourth Advisory Agreement, the Advisor agreed to waive asset management fees previously accrued during the period from August 2013 to December 2013 of $0.3 million. Therefore, we reversed this accrual in the second quarter of 2014. In addition, we reversed approximately $0.1 million in the second quarter of 2014 to reflect the reduction in the fee structure related to the first quarter of 2014. For the six months ended June 30, 2015 and 2014, we expensed $1.3 million and $1 million, respectively, of asset management fees payable to the Advisor. The totals for the six months ended June 30, 2015 and 2014 include asset management fees related to our disposed properties.

Under the Fourth Advisory Agreement, beginning January 1, 2014, instead of reimbursing the Advisor for specific expenses paid or incurred in connection with providing services to us, we pay the Advisor an administrative services fee based on a budget of expenses prepared by the Advisor. The administrative services fee is intended to reimburse for all costs associated with providing services to us under the Fourth Advisory Agreement. On June 6, 2015, we amended the Fourth Advisory Agreement to reduce the administrative services fee from $1.8 million for calendar year 2014 to $1.5 million for calendar year 2015. The administrative services fee is payable in four equal quarterly installments within 45 days of the end of each calendar quarter. For the six months ended June 30, 2015 and 2014, we incurred and expensed such costs for administrative services of approximately $0.8 million and $0.9 million, respectively. In addition, effective January 1, 2015, the amended Fourth Advisory Agreement includes a provision to reimburse the Advisor for certain due diligence services provided in connection with asset dispositions or debt financings separately from the administrative services fee. The expense of $0.8 million for the six months ended June 30, 2015, includes less than $0.1 million of due diligence service costs.

Notwithstanding the fees and cost reimbursements payable to our Advisor pursuant to the Fourth Advisory Agreement, under our charter we may 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:  (i) 2% of our average invested assets, or (ii) 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 unless a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the four fiscal quarters ended June 30, 2015, our total operating expenses (including the asset management fee) were not excessive.

24

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Property Manager

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.  Effective January 1, 2014, we entered into the First Amendment to the Amended and Restated Property Management and Leasing Agreement, which reduced the property management fee paid to 4.0% of gross revenues of the properties managed by BHO II Management or its affiliates. We pay BHO II Management or its affiliates an oversight fee equal to 0.5% of the gross revenues of the property managed for any property for which we contract directly with a third-party property manager.  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 $0.3 million for the six months ended June 30, 2015 and 2014.

We pay the Advisor or its affiliates a construction management fee in an amount not to exceed 5% of all hard construction costs incurred in connection with, but not limited to capital repairs and improvements, major building reconstruction and tenant improvements, if such affiliate supervises construction performed by or on behalf of us or our affiliates. We incurred no construction management fees for the six months ended June 30, 2015. We incurred less than $0.1 million of construction management fees for the six months ended June 30, 2014.

We are dependent on 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.

15.Supplemental Cash Flow Information

Supplemental cash flow information is summarized below:  

	Six months ended June 30,
Description	2015		2014
Interest paid, net of amounts capitalized	$	3,252	$	3,915
Income tax paid, net	35		196
Non-cash investing and financing activities:
Proceeds held in escrow through sale of real estate interests	912		—
Capital expenditures for real estate in accrued liabilities	583		393
Accrued distributions to noncontrolling interest holder	20		72

25

Behringer Harvard Opportunity REIT II, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

16. Subsequent Events

Holstenplatz - Purchase and Sale Agreement

On July 16, 2015, we entered into a PSA to sell Holstenplatz to an unaffiliated third party for a contract sales price of approximately €16.5 million, or approximately $18.1 million based on the exchange rate in effect on July 16, 2015. Holstenplatz was classified as real estate held for sale as of June 30, 2015. See Note 8, Real Estate Held for Sale.

Wimberly - Purchase and Sale Agreement

On July 20, 2015, we entered into a PSA to sell Wimberly to an unaffiliated third party for a contract sales price of approximately $43.5 million. We did not classify Wimberly as held for sale as of June 30, 2015. See Note 8, Real Estate Held for Sale.

Share Redemption Program

On August 11, 2015, our board of directors approved redemptions for the third quarter of 2015 totaling 36,457 shares with an aggregate redemption payment of approximately $0.2 million . See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” for a full description of the price at which we redeem shares under our share redemption program.

******

26

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated 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, to sell our assets when we believe advantageous to achieve our investment objectives, our anticipated capital expenditures, the amount and timing of anticipated future special 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 20, 2015 and the factors described below: 

• 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 investments are located;

• the availability of cash flow from operating activities for special distributions, if any;

• conflicts of interest arising out of our relationships with 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;

• our level of debt and the terms and limitations imposed on us by our debt agreements;

• the availability of credit generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions and requirements of that debt;

• our ability to make accretive investments in a diversified portfolio of assets; 

• future changes in market factors that could affect the ultimate performance of our development or redevelopment projects, including but not limited to construction costs, plan or design changes, schedule delays, availability of construction financing, performance of developers, contractors and consultants and growth in rental rates and operating costs;

• our ability to secure leases at favorable rental rates;

• our ability to sell our assets at a price and on a timeline consistent with our investment objectives;

• unfavorable changes in laws or regulations impacting our business, our assets or our key relationships; 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.

27

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 and value-add basis.  In particular, we have focused generally on acquiring commercial properties with significant possibilities for 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 were distressed or faced time-sensitive deadlines.  In addition, our opportunistic and value-add investment strategy has included investments in real estate-related assets that present opportunities for higher current income. We have acquired a wide variety of commercial properties, including office, industrial, retail, hospitality, and multifamily. We have purchased existing, income-producing properties and newly constructed properties. We have also invested in a mortgage loan and a mezzanine loan. We have made 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. While we acquired one property in 2014, we are not actively seeking to purchase additional assets at this time.

Liquidity and Capital Resources

We had unrestricted cash and cash equivalents of $48 million at June 30, 2015. Our principal demands for funds going forward will be for the payment of (a) operating expenses, (b) interest and principal on our outstanding indebtedness, and (c) special distributions. 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 and to fund special distributions from our proceeds from asset sales. To the extent that our cash flow from operations is not sufficient to cover our operating expenses, interest on our outstanding indebtedness, redemptions or special distributions, we expect to use borrowings and asset sales to fund such needs.

We are not actively seeking to purchase additional properties, but may invest capital in our current assets in order to position them for sale in the normal course of business. We intend to hold the various real properties in which we have invested until such time as our Advisor determines that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. We sold one property in 2014 and two properties in 2015. We entered into a PSA to sell Holstenplatz to an unaffiliated third party on July 16, 2015 for a contract sales price of approximately €16.5 million, or approximately $18.1 million based on the exchange rate in effect on July 16, 2015. As of June 30, 2015, Holstenplatz is classified as real estate held for sale on our condensed consolidated balance sheet. On July 20, 2015, we entered into a PSA to sell Wimberly, a multifamily community located in Jacksonville, Florida, to an unaffiliated third party for a contract sales price of approximately $43.5 million. As of June 30, 2015, we were still in active negotiations and the due diligence process was not complete. In addition, as of June 30, 2015, we do not believe the sale of Wimberly was probable within the next twelve months. Therefore, we determined Wimberly did not meet the requirements to be classified as held for sale at June 30, 2015.

We anticipate we will complete the disposition phase in 2017 or 2018. On March 31, 2015, we paid a special cash distribution, which represents a portion of proceeds from asset sales, of $25.7 million, or $1.00 per share of common stock.

We continually evaluate our liquidity and ability to fund future operations and debt obligations.  As of June 30, 2015, we had a $38 million loan associated with the Courtyard Kauai Coconut Beach Hotel that matures in the next twelve months. The loan contains a renewal option to extend the term to May 2017. The next debt maturity for the Company is January 2018. In addition to our debt obligations, we consider other factors in evaluating our liquidity. For example, to the extent our portfolio is concentrated in certain geographic regions and types of assets, downturns relating generally to such regions and assets 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 the six months ended June 30, 2015, excluding Holstenplatz, which is classified as real estate held for sale at June 30, 2015, and Babcock and AJS which were sold in the first quarter of 2015, 36% and 20% of our total revenues were derived from our properties located in Hawaii and Florida, respectively. Additionally, excluding Holstenplatz, Babcock, and AJS, 44% and 36% of our total revenues for the six months ended June 30, 2015 were from our multifamily and hotel properties, respectively.

28

We may, but are not required to, establish capital reserves from cash flow generated by operating properties and other investments, or net sales 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 have borrowed money to acquire properties and make other investments.  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.

Commercial real estate debt markets may experience volatility and uncertainty as a result of certain related factors, including the tightening of underwriting standards by lenders and credit rating agencies, macro-economic issues related to fiscal, tax and regulatory policies, and global financial issues.  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 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 special distributions to our stockholders.  In addition, disruptions in the debt markets may reduce the amount of capital that is available to finance real estate, which in turn could: (i) lead to a decline in real estate values generally; (ii) slow real estate transaction activity; (iii) reduce the loan to value ratio upon which lenders are willing to extend debt; and (iv) result 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.

Debt Financings

From time to time, we have obtained mortgage, bridge or mezzanine loans for acquisitions and investments, as well as property development. In the future, we may obtain financing for property development or at such time as determined to be necessary for our existing real estate assets, depending on multiple factors.

At June 30, 2015, our notes payable balance was $206.2 million and had a weighted average interest rate of 3.3% compared to a balance of $216.3 million, excluding $9.1 million of contractual obligations on real estate held for sale, and a weighted average interest rate of 3.3% at December 31, 2014. 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 Coconut Beach Hotel, Wimberly, 22 Exchange, and Parkside notes payable.

On January 8, 2015, we sold our Babcock property to an unaffiliated third party and used a portion of the proceeds from the sale to pay off in full the existing indebtedness of approximately $2.1 million. On February 21, 2015, we sold AJS, located in Berlin, Germany, to an unaffiliated third party and used a portion of the proceeds from the sale to payoff in full the existing indebtedness of approximately €5.7 million, or approximately $6.5 million based on the exchange rate in effect on February 21, 2015. The debt secured by our AJS property was scheduled to mature on December 30, 2015. We paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015, its maturity date.

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, loan to value ratios, and liquidity.  As of June 30, 2015, we believe we were in compliance with the debt covenants under our loan agreements.

29

One of our principal short-term and long-term liquidity requirements includes the repayment of maturing debt.  The following table provides information with respect to the contractual maturities and scheduled principal repayments of our indebtedness as of June 30, 2015. Interest payments on variable rate debt are based on rates in effect as of June 30, 2015. The table does not represent any extension options (in thousands):

	Payments Due by Period(1)
	July 1, 2015 -December 31, 2015		2016		2017		2018		2019		Thereafter		Total
Principal payments - fixed rate debt	$	814	$	1,911	$	2,135	$	46,857	$	24,309	$	31,585	$	107,611
Principal payments - variable rate debt	38,268		536		535		536		34,036		24,139		98,050
Interest payments - fixed rate debt	2,562		5,052		4,941		3,308		1,579		2,449		19,891
Interest payments - variable rate debt	813		1,228		1,210		1,198		1,137		1,891		7,477
Total(2)	$	42,457	$	8,727	$	8,821	$	51,899	$	61,061	$	60,064	$	233,029

_________________________________

(1)  Does not include approximately $0.5 million of unamortized premium related to debt we assumed on our acquisition of Parkside.

(2) Does not include assumptions for any available extension options.

30

Results of Operations

As of June 30, 2015, we had 11 real estate investments, ten of which were consolidated, including Holstenplatz, which was classified as real estate held for sale in our condensed consolidated financial statements, (two wholly owned and eight properties consolidated through investments in joint ventures). As of June 30, 2014, we had 12 real estate investments, 11 of which were consolidated (one wholly owned and ten properties consolidated through investments in joint ventures). Babcock and AJS were classified as held for sale as of December 31, 2014. We sold Babcock on January 8, 2015 and AJS on February 21, 2015. On May 30, 2014, we sold 1875 Lawrence. The results of operations for Holstenplatz, Babcock, AJS, and 1875 Lawrence will remain in continuing operations based on the new accounting treatment for discontinued operations which we adopted in April 2014. We made no acquisitions during the six months ended June 30, 2015 and 2014, and completed one acquisition during the fourth quarter of 2014.

Three months ended June 30, 2015 as compared to the three months ended June 30, 2014.

The following table provides summary information about our results of operations for the three months ended June 30, 2015 and 2014 ($ in thousands):

	Three Months Ended June 30,
	2015		2014		Increase (Decrease)			Percentage Change		$ Change due to Acquisition(1)		$ Change due to Dispositions(2)			$ Change due to Same Store (3)			$ Change due to Held for Sale(4)
Rental revenue	$	8,465	$	7,889	$	576		7.3	%	$	1,566	$	(932	)	$	18		$	(76	)
Hotel revenue	4,314		4,138		176			4.3	%	—		—			176			—
Property operating expenses	2,767		2,625		142			5.4	%	338		(363		)	168			(1		)
Hotel operating expenses	3,116		2,988		128			4.3	%	—		—			128			—
Interest expense, net	1,746		2,055		(309		)	(15.0	)%	170		(301		)	(105		)	(73		)
Real estate taxes	1,572		1,352		220			16.3	%	374		(119		)	(27		)	(8		)
Property management fees	418		403		15			3.7	%	45		(29		)	(1		)	—
Asset management fees(5)	717		98		619			631.6	%	106		(39		)	533			19
General and administrative	790		1,098		(308		)	(28.1	)%	n/a		n/a			n/a			n/a
Depreciation and amortization	3,949		3,400		549			16.1	%	839		(423		)	156			(23		)
Gain on sale of real estate	—		11,445		(11,445		)	100.0	%	—		(11,445		)	—			—

______________________

(1) Represents the dollar amount increase for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 related to Lakewood Flats which we acquired on October 10, 2014.

(2) Represents the dollar amount decrease for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 related to the dispositions of Babcock on January 8, 2015, AJS on February 21, 2015 and 1875 Lawrence on May 30, 2014.

(3) Represents the dollar amount increase (decrease) for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 with respect to real estate and real estate-related investments owned by us during the entire periods presented (“Same Store”). Same Store for the periods ended June 30, 2015 and 2014 include Gardens Medical Pavilion, River Club and the Townhomes at River Club, Lakes of Margate, Arbors Harbor Town, Courtyard Kauai Coconut Beach Hotel, Wimberly, 22 Exchange, and Parkside.

(4) Represents the dollar amount increase (decrease) for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 related to Holstenplatz, which was classified as real estate held for sale as of June 30, 2015.

(5) Total asset management fees above include fees associated with any property owned during a particular period, including those related to our disposed properties.

31

The following table reflects rental revenue and property operating expenses for the three months ended June 30, 2015 and 2014 for: (i) our Same Store operating portfolio; (ii) our acquisition of Lakewood Flats in 2014; (iii) our dispositions of 1875 Lawrence on May 30, 2014, Babcock on January 8, 2015, and AJS on February 21, 2015; and (iv) Holstenplatz, our property in real estate held for sale at June 30, 2015 (in thousands):

	Three Months Ended June 30,
Description	2015			2014		Change
Rental revenue
Same Store	$	6,531		$	6,513	$	18
Acquisition	1,566			—		1,566
Dispositions	(1		)	931		(932		)
Real Estate Held for Sale	369			445		(76		)
Total rental revenue	$	8,465		$	7,889	$	576
Property operating expenses
Same Store	$	2,259		$	2,091	$	168
Acquisition	338			—		338
Dispositions	55			418		(363		)
Real Estate Held for Sale	115			116		(1		)
Total property operating expenses	$	2,767		$	2,625	$	142

The tables below reflect occupancy and effective monthly rental rates for our Same Store operating properties and occupancy and average daily rate (“ADR”) for Courtyard Kauai Coconut Beach Hotel:

	Occupancy (%)		Effective Monthly Rent per Square Foot/Unit/Bed ($)(2)
	As of June 30,		As of June 30,
Property(1)	2015	2014	2015	2014
Gardens Medical Pavilion	60%	80%	2.08	2.29	per sq ft
River Club and the Townhomes at River Club	93%	75%	368.57	397.66	per bed
Lakes of Margate	93%	94%	1,171.74	1,160.86	per unit
Arbors Harbor Town	90%	90%	1,171.57	1,179.65	per unit
Wimberly	96%	93%	1,031.58	980.19	per unit
22 Exchange	80%	85%	535.88	542.88	per bed
Parkside	84%	87%	1,062.86	1,013.88	per unit

______________________________

(1) Occupancy and effective monthly rental rates for Holstenplatz, our held for sale property as of June 30, 2015, were as follows: 100% and 100% and $1.11 per square foot and $1.33 per square foot at June 30, 2015 and 2014, respectively. The exchange rates in effect on June 30, 2015 and 2014 were $1.11 and $1.36, respectively.

(2) Effective monthly rent is calculated as in-place contracted monthly rental revenue, including any premiums due for short-term or month-to-month leases, less any concessions or discounts.

	Occupancy (%)(1)				ADR ($)
	Three Months Ended June 30,				Three Months Ended June 30,
Property	2015		2014		2015		2014
Courtyard Kauai Coconut Beach Hotel	81	%	80	%	$	137.84	$	137.13

_______________________________________

(1) Represents average occupancy for the three months ended June 30. The Courtyard Kauai Coconut Beach Hotel has 311 rooms and approximately 6,200 square feet of meeting space. Occupancy is for the entire three-month period and is based on standard industry metrics, including rooms available for rent.

32

Our results of operations for the respective periods presented primarily reflect decreases in most categories due to the disposition of 1875 Lawrence in May 2014 and the dispositions of Babcock and AJS in January and February 2015, respectively, partially offset by the acquisition of Lakewood Flats in October 2014. Management expects decreases in most categories in the future as we dispose of additional real estate and real estate-related assets. Although we acquired one property in 2014, we are not actively seeking to purchase additional assets at this time, but may invest capital in our current assets in order to position them for sale in the normal course of business.

Revenues.  Revenues for the three months ended June 30, 2015, including Courtyard Kauai Coconut Beach Hotel, were $12.8 million, an increase of approximately $0.8 million from the three months ended June 30, 2014.  Same Store rental revenue, including our hotel revenue, for the three months ended June 30, 2015 and 2014 was approximately $10.8 million and $10.7 million, respectively, while rental revenue from our acquisition in October 2014 was $1.6 million for the three months ended June 30, 2015. Rental revenue from the dispositions of Babcock, AJS, and 1875 Lawrence was $0.9 million for the three months ended June 30, 2014. Rental revenue from Holstenplatz, which was classified as real estate held for sale as of June 30, 2015, was $0.4 million for the three months ended June 30, 2015 and 2014.

The change in revenue is primarily due to:

• an increase in rental revenue of $1.6 million as a result of our 2014 acquisition of Lakewood Flats. This increase was partially offset by a decrease of approximately $0.9 million related to our dispositions in 2014 and 2015; and

• an increase in hotel revenue of $0.2 million, or 4%, at the Courtyard Kauai Coconut Beach Hotel due to a 1% increase in occupancy rate and a nominal increase in ADR, resulting in a 2% increase in revenue per available room period-over-period. These improvements are primarily the result of improved operating performance.

Property Operating Expenses.    Property operating expenses for the three months ended June 30, 2015 and 2014 were $2.8 million and $2.6 million, respectively. The increase of approximately $0.1 million was primarily due to increases of $0.3 million and $0.2 million for the acquisition of Lakewood Flats and our Same Store operations, respectively. These increases were partially offset by a decrease of $0.4 million related to our 2014 and 2015 dispositions.

Hotel Operating Expenses.  Hotel operating expenses for the three months ended June 30, 2015 and 2014 were approximately $3.1 million and $3 million, respectively.

Interest Expense, net.   Interest expense for the three months ended June 30, 2015 and 2014 was $1.7 million and $2 million, respectively.  The $0.3 million decrease was primarily due to a decrease of $0.3 million related to our dispositions in 2014 and 2015 and a decrease of $0.1 million related to our Same Store operations. These decreases were partially offset by an increase of $0.2 million related to our acquisition of Lakewood Flats in the fourth quarter of 2014. For the three months ended June 30, 2015 and 2014, we capitalized interest of $0.1 million in connection with our equity method investment in Prospect Park.

Real Estate Taxes.  Real estate taxes were $1.6 million and $1.4 million for the three months ended June 30, 2015 and 2014, respectively. Our 2014 acquisition accounted for an increase of $0.4 million in real estate taxes while the three dispositions in 2014 and 2015 accounted for a $0.1 million decrease.

Property Management Fees.   Property management fees, which are based on revenues, were $0.4 million for the three months ended June 30, 2015 and 2014, and were composed of property management fees paid to unaffiliated third parties and our Property Manager or its affiliates.

Asset Management Fees.   Asset management fees for the three months ended June 30, 2015 and 2014 were $0.7 million and $0.1 million, respectively, and were composed of asset management fees paid to our Advisor and third parties with respect to our investments. Our monthly asset management fees payable to the Advisor were one-twelfth of 1.0% and based on the higher of cost or value for each asset in 2013. Pursuant to the Fourth Advisory Agreement, effective January 1, 2014, our monthly asset management fees payable to the Advisor are one-twelfth of 0.7% and based on the value for each asset as determined in connection with our establishment and publication of an estimated value per share. Assets acquired after the publication of an estimated value per share will be valued at the contract purchase price of the asset plus amounts expended in connection with the development, construction or improvement of an asset. The $0.6 million increase in asset management fees for the quarter ended June 30, 2015 was primarily due to $0.3 million of fees waived by the Advisor in the second quarter of 2014 for fees previously accrued during 2013 and an adjustment of approximately $0.1 million from the first quarter of 2014 as a result of the change in the fee structure pursuant to the Fourth Advisory Agreement. Without these one-time adjustments, asset management fees for the quarter ended June 30, 2014 would have been approximately $0.5 million under the revised fee structure. Asset management fees for the three months ended June 30, 2014 include fees related to our disposed properties. We expensed less than $0.1 million in asset management fees related to disposed properties during the three months ended June 30, 2014. We did not incur any asset management fees related to disposed properties in the three months ended June 30, 2015.

33

General and Administrative Expenses.   General and administrative expenses for the three months ended June 30, 2015 and 2014 were $0.8 million and $1.1 million, respectively, and were composed of audit fees, legal fees, board of directors’ fees, and other administrative expenses.  The decrease of $0.3 million during the second quarter of 2015 was primarily due to a decrease of $0.2 million in administrative service fees payable to the Advisor pursuant to the Advisory Agreement as amended in June 2015.

Depreciation and Amortization.   Depreciation and amortization for the three months ended June 30, 2015 and 2014 was approximately $3.9 million and $3.4 million, respectively.  The increase of $0.5 million during the second quarter of 2015 was primarily due to a $0.8 million increase for the acquisition of Lakewood Flats in October 2014 and a $0.2 million increase related to our Same Store operations. These increases were partially offset by a period-over-period decrease of $0.4 million due to the three dispositions in 2014 and 2015.

Gain on Sale of Real Estate. We did not sell any real estate during the three months ended June 30, 2015. During the three months ended June 30, 2014, we recorded a gain on sale of approximately $11.4 million for 1875 Lawrence which was sold on May 30, 2014. As discussed in Note 7, Real Estate and Real Estate-Related Investments, the Company did not view the disposal of 1875 Lawrence as a strategic shift and the results of operations are presented in continuing operations.

Six months ended June 30, 2015 as compared to the six months ended June 30, 2014.

The following table provides summary information about our results of operations for the six months ended June 30, 2015 and 2014 ($ in thousands):

	Six Months Ended June 30,
	2015			2014		Increase (Decrease)			Percentage Change		$ Change due to Acquisition(1)		$ Change due to Dispositions(2)			$ Change due to Same Store(3)			$ Change due to Held for Sale(4)
Rental revenue	$	16,951		$	15,770	$	1,181		7.5	%	$	3,136	$	(1,790	)	$	(24	)	$	(141	)
Hotel revenue	9,142			8,502		640			7.5	%	—		—			640			—
Property operating expenses	5,664			5,349		315			5.9	%	701		(745		)	346			13
Hotel operating expenses	6,274			6,010		264			4.4	%	—		—			264			—
Interest expense, net	3,567			4,118		(551		)	(13.4	)%	340		(641		)	(155		)	(95		)
Real estate taxes	3,156			2,765		391			14.1	%	747		(319		)	(25		)	(12		)
Property management fees	864			830		34			4.1	%	94		(66		)	12			(6		)
Asset management fees(5)	1,442			1,068		374			35.0	%	212		(173		)	328			7
General and Administrative	1,711			1,957		(246		)	(12.6	)%	n/a		n/a			n/a			n/a
Depreciation and amortization	8,402			7,062		1,340			19.0	%	2,204		(964		)	144			(44		)
Gain on sale of real estate	5,320			11,445		(6,125		)	(53.5	)%	—		(6,125		)	—			—
Income tax expense	(1,664		)	—		(1,664		)	(100.0	)%	—		(1,664		)	—			—

_______________________________________

(1) Represents the dollar amount increase for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 related to Lakewood Flats which we acquired on October 10, 2014.

(2) Represents the dollar amount decrease for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 related to the dispositions of 1875 Lawrence on May 30, 2014, Babcock on January 8, 2015, and AJS on February 21, 2015.

(3) Represents the dollar amount increase (decrease) for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 with respect to real estate and real estate-related investments owned by us during the entire periods presented (“Same Store”). Same Store for the periods ended June 30, 2015 and 2014 include Gardens Medical Pavilion, River Club and the Townhomes at River Club, Lakes of Margate, Arbors Harbor Town, Courtyard Kauai Coconut Beach Hotel, Wimberly, 22 Exchange, and Parkside.

(4) Represents the dollar amount increase (decrease) for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 related to Holstenplatz which was classified as real estate held for sale as of June 30, 2015.

(5) Total asset management fees above include fees associated with any property owned during a particular period, including those related to our disposed properties.

34

The following table reflects rental revenue and property operating expenses for the six months ended June 30, 2015 and 2014 for: (i) our Same Store operating portfolio; (ii) our acquisition of Lakewood Flats in 2014; (iii) our dispositions of 1875 Lawrence on May 30, 2014, Babcock on January 8, 2015, and AJS on February 21, 2015; and (iv) Holstenplatz, our property in real estate held for sale at June 30, 2015 (in thousands):

	Six Months Ended June 30,
Description	2015		2014		Change
Rental revenue
Same Store	$	12,917	$	12,941	$	(24	)
Acquisition	3,136		—		3,136
Dispositions	168		1,958		(1,790		)
Real Estate Held for Sale	730		871		(141		)
Total rental revenue	$	16,951	$	15,770	$	1,181
Property operating expenses
Same Store	$	4,566	$	4,220	$	346
Acquisition	701		—		701
Dispositions	142		887		(745		)
Real Estate Held for Sale	255		242		13
Total property operating expenses	$	5,664	$	5,349	$	315

The tables below reflect occupancy and effective monthly rental rates for our Same Store operating properties and occupancy and ADR for Courtyard Kauai Coconut Beach Hotel:

	Occupancy (%)		Effective Monthly Rent per Square Foot/Unit/Bed ($)(2)
	As of June 30,		As of June 30,
Property(1)	2015	2014	2015	2014
Gardens Medical Pavilion	60%	80%	2.08	2.29	per sq ft
River Club and the Townhomes at River Club	93%	75%	368.57	397.66	per bed
Lakes of Margate	93%	94%	1,171.74	1,160.86	per unit
Arbors Harbor Town	90%	90%	1,171.57	1,179.65	per unit
Wimberly	96%	93%	1,031.58	980.19	per unit
22 Exchange	80%	85%	535.88	542.88	per bed
Parkside	84%	87%	1,062.86	1,013.88	per unit

______________________________

(1) Occupancy and effective monthly rental rates for Holstenplatz, our held for sale property as of June 30, 2015, were as follows: 100% and 100% and $1.11 per square foot and $1.33 per square foot at June 30, 2015 and 2014, respectively. The exchange rates in effect on June 30, 2015 and 2014 were $1.11 and $1.36, respectively.

(2) Effective monthly rent is calculated as in-place contracted monthly rental revenue, including any premiums due for short-term or month-to-month leases, less any concessions or discounts.

	Occupancy (%)(1)				ADR ($)
	Six Months Ended June 30,				Six Months Ended June 30,
Property	2015		2014		2015		2014
Courtyard Kauai Coconut Beach Hotel	86	%	85	%	$	141.73	$	136.80

_______________________________________

(1) Represents average occupancy for the six months ended June 30. The Courtyard Kauai Coconut Beach Hotel has 311 rooms and approximately 6,200 square feet of meeting space. Occupancy is for the entire six-month period and is based on standard industry metrics, including rooms available for rent.

35

Our results of operations for the respective periods presented primarily reflect decreases in most categories due to the disposition of 1875 Lawrence in 2014 and the dispositions of Babcock and AJS in 2015, respectively, partially offset by the acquisition of Lakewood Flats in October 2014. Management expects decreases in most categories in the future as we dispose of additional real estate and real estate-related assets. Although we acquired one property in 2014, we are not actively seeking to purchase additional assets at this time, but may invest capital in our current assets in order to position them for sale in the normal course of business.

Revenues.  Revenues for the six months ended June 30, 2015, including Courtyard Kauai Coconut Beach Hotel, were $26.1 million, an increase of $1.8 million from the six months ended June 30, 2014.  Same Store rental revenue (including our hotel revenue) for the six months ended June 30, 2015 and 2014 was approximately $22.1 million and $21.4 million, respectively, while rental revenue from our acquisition in 2014 was $3.1 million for the six months ended June 30, 2015. Rental revenue from Babcock and AJS disposed of in 2015 and 1875 Lawrence disposed of in 2014 was $0.2 million and $2 million for the six months ended June 30, 2015 and 2014, respectively. Rental revenue from Holstenplatz, which was classified as real estate held for sale as of June 30, 2015, was $0.7 million and $0.9 million for the six months ended June 30, 2015 and 2014, respectively.

The change in revenue is primarily due to:

• an increase in rental revenue of $3.1 million as a result of our 2014 acquisition of Lakewood Flats. This increase was partially offset by a decrease of approximately $1.8 million related to our dispositions in 2014 and 2015 and a decrease of $0.1 million for our investment in Holstenplatz.

• an increase in hotel revenue of $0.6 million, or 8%, at the Courtyard Kauai Coconut Beach Hotel due to a 1% increase in occupancy rate and a 4% increase in ADR, resulting in a 5% increase in revenue per available room period-over-period. These improvements are primarily the result of improved operating performance.

Property Operating Expenses.    Property operating expenses for the six months ended June 30, 2015 and 2014 were approximately $5.7 million and $5.4 million, respectively. The increase of $0.3 million was primarily due to increases of $0.7 million and $0.3 million for the acquisition of Lakewood Flats and our Same Store operations, respectively. These increases were partially offset by a decrease of $0.7 million related to our 2014 and 2015 dispositions.

Hotel Operating Expenses.  Hotel operating expenses for the six months ended June 30, 2015 and 2014 were approximately $6.3 million and $6 million, respectively. The increase in hotel operating expenses was due to additional costs as a result of increased occupancy at the Courtyard Kauai Coconut Beach Hotel.

Interest Expense, net.   Interest expense for the six months ended June 30, 2015 and 2014 was $3.6 million and $4.1 million, respectively.  The approximate $0.5 million decrease was primarily due to a decrease of $0.6 million related to our dispositions in 2014 and 2015 and a decrease of $0.2 million related to our Same Store operations. These decreases were partially offset by an increase of $0.3 million related to our acquisition of Lakewood Flats in the fourth quarter of 2014. For the six months ended June 30, 2015 and 2014, we capitalized interest of $0.2 million in connection with our equity method investment in Prospect Park.

Real Estate Taxes.  Real estate taxes were $3.2 million and $2.8 million for the six months ended June 30, 2015 and 2014, respectively. Our 2014 acquisition accounted for an increase of $0.7 million in real estate taxes while the three dispositions in 2014 and 2015 accounted for a $0.3 million decrease.

Property Management Fees.   Property management fees, which are based on revenues, were $0.9 million and $0.8 million for the six months ended June 30, 2015 and 2014, respectively, and were composed of property management fees paid to unaffiliated third parties and our Property Manager or its affiliates.

Asset Management Fees.   Asset management fees for the six months ended June 30, 2015 and 2014 were $1.4 million and $1.1 million, respectively, and were composed of asset management fees paid to our Advisor and third parties with respect to our investments. Our monthly asset management fees payable to the Advisor were one-twelfth of 1.0% and based on the higher of cost or value for each asset in 2013. Pursuant to the Fourth Advisory Agreement, effective January 1, 2014, our monthly asset management fees payable to the Advisor are one-twelfth of 0.7% and based on the value for each asset as determined in connection with our establishment and publication of an estimated value per share. Assets acquired after the publication of an estimated value per share will be valued at the contract purchase price of the asset plus amounts expended in connection with the development, construction or improvement of an asset. The $0.3 million increase in asset management fees for the six months ended June 30, 2015 was primarily due to $0.3 million of fees waived by the Advisor in the second quarter of 2014 for fees previously accrued during 2013. Without this one-time adjustment, asset management fees for the six months ended June 30, 2014 would have been approximately $1.4 million. Asset management fees for the six months ended

36

June 30, 2015 and 2014 include fees related to our disposed properties. We expensed less than $0.1 million and $0.2 million in asset management fees related to disposed properties during the six months ended June 30, 2015 and 2014, respectively.

General and Administrative Expenses.   General and administrative expenses for the six months ended June 30, 2015 and 2014 were approximately $1.7 million and $2 million, respectively, and were composed of audit fees, legal fees, board of directors’ fees, and other administrative expenses.  The decrease of approximately $0.3 million during the first six months of 2015 was primarily due to decreases of $0.1 million in legal fees and administrative service fees payable to the Advisor.

Depreciation and Amortization.   Depreciation and amortization for the six months ended June 30, 2015 and 2014 was approximately $8.4 million and $7.1 million, respectively.  The increase of $1.3 million during the six months ended June 30, 2015 was primarily due to a $2.2 million increase for the acquisition of Lakewood Flats in October 2014 and an increase of $0.1 million related to our Same Store operations. These increases were partially offset by a period-over-period decrease of $1 million due to the dispositions of 1875 Lawrence in May 2014 and Babcock and AJS in January and February 2015, respectively.

Gain on Sale of Real Estate. During the six months ended June 30, 2015, we recorded gains on sale of $2 million for Babcock and $3.3 million for AJS which were sold on January 8, 2015 and February 21, 2015, respectively. The gain on sale of AJS, which is located in Berlin, Germany, is net of a CTA of $0.6 million. During the six months ended June 30, 2014, we recorded a gain on sale of approximately $11.4 million for 1875 Lawrence which was sold on May 30, 2014. As discussed in Note 7, Real Estate and Real Estate-Related Investments, the Company did not view the disposals of Babcock, AJS and 1875 Lawrence as a strategic shift and the results of operations are presented in continuing operations.

Income Tax Expense. During the first quarter of 2015, we recorded a provision for income tax of approximately $2.2 million as a result of foreign income tax related to the sale of AJS. The foreign income tax was calculated on gains recognized at the exchange rate in effect on the sale date of February 21, 2015 and calculated using current tax rates. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS. We had no income tax expense in the first six months of 2014.

Cash Flow Analysis

Six months ended June 30, 2015 as compared to the six months ended June 30, 2014.

During the six months ended June 30, 2015, net cash provided by operating activities was $5.1 million compared to $2.6 million for the six months ended June 30, 2014. The primary reasons for the increase in cash flow from operating activities were the increase in total revenues and changes in working capital.

During the six months ended June 30, 2015, net cash provided by investing activities was $15.7 million compared to $42.2 million for the six months ended June 30, 2014. The year over year difference is primarily due to $18.2 million of proceeds from the sales of Babcock and AJS during the first six months of 2015 compared to $46.3 million of proceeds from the sale of 1875 Lawrence during the first six months of 2014.

During the six months ended June 30, 2015, net cash used in financing activities was $45.4 million compared to net cash used of $17.4 million for the same period of 2014. On March 30, 2015, we paid a special cash distribution to stockholders totaling $25.7 million. During the six months ended June 30, 2015, we paid off the existing indebtedness totaling approximately $8.7 million associated with the Babcock and AJS investments, with proceeds from the sales of the two investments. In addition, we paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015. During the six months ended June 30, 2014, we paid off the existing indebtedness of approximately $15.6 million from the sale of 1875 Lawrence.

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 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).

37

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 special 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 six months ended June 30, 2015 and 2014 is presented below ($ in thousands except per share amounts):  

	Three Months Ended June 30,												Six Months Ended June 30,
	2015						2014						2015						2014
	Amount			Per Share			Amount			Per Share			Amount			Per Share			Amount			Per Share
Net income (loss) attributable to the Company	$	(1,960	)	$	(0.07	)	$	9,184		$	0.35		$	(2,133	)	$	(0.08	)	$	6,300		$	0.24
Adjustments for:
Real estate depreciation and amortization(1)	3,653			0.14			2,793			0.11			7,682			0.30			6,360			0.25
Gain on sale of real estate(2)	—			—			(11,445		)	(0.44		)	(4,700		)	(0.18		)	(11,445		)	(0.44		)
Income tax expense associated with real estate sale(3)	(519		)	(0.02		)	—			—			1,615			0.06			—			—
Funds from operations (FFO) attributable to the Company	$	1,174		$	0.05		$	532		$	0.02		$	2,464		$	0.10		$	1,215		$	0.05
GAAP weighted average shares:
Basic and diluted				25,704						25,993						25,740						26,002

_________________________________

(1) Includes our consolidated amount, 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.

(2) For the six months ended June 30, 2015, includes our proportionate share of the gain on sale of real estate related to the Babcock and AJS investments. The gain on sale of AJS is net of a cumulative foreign currency translation loss of approximately $0.6 million due to the substantial liquidation of AJS. For the three and six months ended June 30, 2014, includes the gain on the sale of real estate related to the 1875 Lawrence office building.

(3) During the first quarter of 2015, we recorded an estimated provision for income tax of approximately $2.2 million for the six months ended June 30, 2015 as a result of foreign income tax related to the sale of AJS. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS.

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

• Straight-line rental revenue was income of less than $0.1 million for the three and six months ended June 30, 2015. Straight-line rent was a charge of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2014. The noncontrolling interest portion of straight-line rental revenue for the six months ended June 30, 2015 and 2014 was income of less than $0.1 million and a charge of less than $0.1 million, respectively.

• Net below-market lease amortization of less than $0.1 million was recognized as an increase to rental revenue for the three and six months ended June 30, 2015. Net above-market lease amortization of less than $0.1 million was recognized as a decrease to rental revenue for the three and six months ended June 30, 2014. The noncontrolling

38

interest portion of the net below-market lease amortization for the six months ended June 30, 2015 and the net above-market lease amortization for the six months ended June 30, 2014 was less than $0.1 million.

• Amortization of deferred financing costs of $0.2 million and $0.4 million was recognized as interest expense for our notes payable for the three and six months ended June 30, 2015, respectively. Amortization of deferred financing costs of $0.2 million and $0.4 million was recognized as interest expense for our notes payable for the three and six months ended June 30, 2014, respectively.

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 special distributions 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, proceeds from asset sales 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 federal tax status as a REIT. We cannot provide assurance that we will pay distributions at any particular level, or at all. We expect that any future distributions authorized by our board of directors will be periodic, special distributions as opposed to regular monthly or quarterly distributions.

On March 18, 2015, our board of directors authorized a special cash distribution of $25.7 million, or $1.00 per share of common stock, payable to stockholders of record as of March 30, 2015. The special cash distribution, which represents a portion of proceeds from asset sales, was paid on March 31, 2015. We did not pay any distributions to stockholders during the six months ended June 30, 2014. 

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 special distributions from sales activities and financing activities, components of which included proceeds from our 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 which may increase the amount of cash that we have available to pay distributions to our stockholders.

Future special distributions authorized and paid at the discretion of the board of directors, are expected to be funded with proceeds from asset sales; however, future special distributions may exceed cash flow from operating activities or funds from operations.

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.

Our critical accounting policies and estimates have not changed significantly from the discussion found in the Management Discussion and Analysis and Results of Operations in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2015.

39

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

As of June 30, 2015, we maintained approximately $3.8 million in Euro-denominated accounts at European financial institutions.  After the sale of AJS in February 2015, we have one investment remaining in Europe, Holstenplatz, which is classified as real estate held for sale at June 30, 2015. As the cash is held in the same currency as the real estate assets, we believe that we are not materially exposed to any significant foreign currency fluctuations related to these accounts as it relates to ongoing property operations.  Material movements in the exchange rate of Euros could materially impact distributions from our remaining foreign investment.

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 rateswaps, 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 $206.2 million in notes payable at June 30, 2015, $98.1 million represented debt subject to variable 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 $1 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 June 30, 2015.  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 less than $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 principal executive officer and principal financial officer, evaluated, as of June 30, 2015, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e) using the criteria established in Internal Control-New Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective, as of June 30, 2015, 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 principal executive officer and principal 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 system 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 June 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

40

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, 2014. 

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, subject to the significant conditions and limitations of the program.  Our board of directors can amend the provisions of our share redemption program at any time 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”). Pursuant to the Third Amended and Restated Share Redemption Program, effective May 15, 2014, the cash available for redemptions was increased from $1 million to no more than $10 million in any twelve-month period. The redemption limitations apply to all redemptions, whether Ordinary Redemptions or Exceptional Redemptions.

The per share redemption price for Ordinary Redemptions and Exceptional Redemptions is equal to the lesser of 80% and 90%, respectively, of (i) the current estimated per share value and (ii) the average price per share the investor paid for all of his shares (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock) less the Special Distributions (as defined in the share redemption program). 

On November 21, 2014, our board of directors approved an estimated value per share of $9.72.  As of March 30, 2015, the estimated value per share of our common stock was reduced by $1.00 per share in accordance with our valuation policy to take into account the special cash distribution authorized by our board of directors on March 18, 2015. For a full description of the methodologies used to estimate the value of our common stock as of October 31, 2014, see Part II, Item 5, “Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Market Information” included in our Annual Report on Form 10-K for the year ended December 31, 2014.

Notwithstanding the redemption prices set forth above, our board of directors may determine the redemption price of the shares, pursuant to formulas or processes approved or set by them, which may differ between Ordinary Redemptions and Exceptional Redemptions. 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.  In addition, the cash available for redemptions is limited to no more than $10 million in any twelve-month period.  The redemption limitations apply to all redemptions, whether Ordinary Redemptions or Exceptional Redemptions.

Any redemption requests are honored pro rata among all requests received based on funds available and are not honored on a first come, first served basis. During the three months ended June 30, 2015, our board of directors redeemed all 21 Ordinary Redemption requests received that complied with the applicable requirements and guidelines of the share redemption program for an aggregate of 37,994 shares redeemed for $0.2 million (approximately $6.35 per share).  All redemptions were funded with cash on hand.

41

During the three months ended June 30, 2015, our board of directors redeemed the two Exceptional Redemption requests received that complied with the applicable requirements and guidelines of the share redemption program for an aggregate of 2,867 shares redeemed for less than $0.1 million (approximately $7.16 per share).  All redemptions were funded with cash on hand.

During the second quarter ended June 30, 2015, we redeemed shares as follows (including both Ordinary Redemptions and Exceptional Redemptions):

2015	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
April	—	$	—	—
May	40,861	6.41		40,861	(1)
June	—	—		—
	40,861	$	6.41	40,861

_______________________________

(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 Disclosures.

None.

Item 5.Other Information.

None. 

Item 6.Exhibits.

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

42

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: August 13, 2015	By:	/s/ S. Jason Hall
		S. Jason Hall
		Chief Financial Officer
		Principal Financial Officer

43

Index to Exhibits

Exhibit Number	Description
3.1	Third Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to Form 10-Q filed on November 14, 2012
3.2	Second Amended and Restated Bylaws, as amended by Amendment No. 1. (incorporated by reference to Exhibit 3.2 to Form 10-Q filed on November 13, 2013)
4.1	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 4.1 to Form 10-K filed on March 28, 2013)
10.1*	First Amendment to Fourth Amended and Restated Advisory Management Agreement by and between Behringer Harvard Opportunity REIT II, Inc. and Behringer Harvard Opportunity Advisors II, LLC, dated June 6, 2015, effective as of January 1, 2015
10.2*	Contract of Sale by and between Behringer Harvard 9727 Touchton Road, LLC, as seller, and WW Deerwood LLC, as purchaser, dated July 20, 2015
99.1	Third Amended and Restated Share Redemption Program of Behringer Harvard Opportunity REIT II, Inc. adopted as of May 15, 2014 (incorporated by reference to Exhibit 99.2 to Form 8-K filed on May 16, 2014)
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**
101*	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 13, 2015, 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 or furnished 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.

44

EX-10.1

Exhibit 10.1

FIRST AMENDMENTTOFOURTH AMENDED AND RESTATED ADVISORY MANAGEMENT AGREEMENT

This First Amendment to The Fourth Amended And Restated Advisory Management Agreement (the “Amendment”) is entered into effective as of the 6^th day of June, 2015 by and between Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation (the “Company”), and Behringer Harvard Opportunity Advisors II, LLC, a Texas limited liability company (the “Advisor”).

RECITALS

WHEREAS, the Company and the Advisor previously entered into that certain Fourth Amended and Restated Advisory Management Agreement dated June 6, 2014 (the “Agreement”).

WHEREAS, pursuant to Section 6.07 of the Agreement, the Company and the Advisor desire to amend the Agreement, among other things, to reduce the Administrative Services Fee (as defined below) and to provide that compensation for RETA Services (as defined below) will be charged in addition to the Administrative Services Fee.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto, intending to be legally bound hereby, do hereby agree as follows:

1.    Defined Terms. Any term used herein that is not otherwise defined herein shall have the meaning ascribed to such term as provided in the Agreement.

2.    Amendments to Article I. Effective as of January 1, 2015, Article I is hereby amended by replacing the definition “Administrative Services Fee” and “Construction Fees” with the definitions of “Administrative Services Fee” and “Construction Fees” set forth below and adding the following definitions:

Administrative Services Fee. Fee payable to the Advisor for providing the Administrative Services pursuant to Section 3.02(e). The Administrative Services Fee is in addition to the Asset Management Fee, Debt Financing Fee, the Acquisition Fee and Development Fee and is intended to reimburse for all costs associated with providing the Administrative Services, including without limitation the Fully Burdened Compensation, Hard Costs and Business Operations Infrastructure Costs attributable to Advisor Personnel (other than RETA Personnel and Advisor Personnel providing services for which the Advisor is paid an Asset Management Fee, Debt Financing Fee, Acquisition Fee or Development Fee) performing services for the Company pursuant to this Agreement.

Advisor Personnel. Any person employed by the Advisor or any Affiliate of the Advisor who performs services on behalf of the Advisor for the Company.

Business Operations Infrastructure Costs. The costs associated with maintaining business operations infrastructure that can be shared between the Company and other investment funds sponsored by Affiliates of the Advisor to achieve operational cost

_{First Amendment to Fourth Amended and Restated Advisory Management Agreement}  

efficiency, including: (1) network infrastructure, computers and information technology; (2) business center costs; (3) office management services; (4) human resource services; (5) office space costs; (6) rent for office space for shared service functions; (7) office furniture and equipment; (8) telephone and communications; (9) general office supplies costs; and (10) kitchen food and beverage costs.

Construction Fee. 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 pursuant to the Amended and Restated Property Management and Leasing Agreement, dated August 13, 2008, by and among the Company, Behringer Harvard Opportunity OP II LP, and Behringer Harvard Opportunity I Management Services, LLC, as amended from time to time.

Fully Burdened Compensation. Direct costs associated with salaries and wages and the related employment taxes and benefits for Advisor Personnel who are generally associated within a specific department or group whose job duties and responsibilities are aligned.

Hard Costs.  The actual costs of goods, services, and materials incurred by the Advisor, including: (1) mobile phones and personal communication costs; (2) travel and hotel expenses; (3) meals and entertainment; (4) conference fees and related charges; (5) employee recruiting fees; (6) employee relocation costs; (7) employee gifts and other; (8) contract labor; (9) education and training; (10) dues, subscriptions and licenses; (11) office supplies; (12) printing costs; (13) computer accessories and software and licensing costs; (14) postage, shipping and courier expenses.

HPT. Harvard Property Trust, LLC, an Affiliate of the Advisor and the legal employer of Advisor Personnel.

RETA Personnel. Advisor Personnel who are regularly assigned to the Real Estate Transaction Administration department of HPT. RETA Personnel are a subset of Advisor Personnel and provide services to the Advisor, its Affiliates and other investment funds sponsored by or associated with HPT in connection with asset acquisition, financing, and disposition of assets.

RETA Services. Services provided by RETA Personnel in connection with the acquisition, financing, or disposition of Assets. RETA Services include management of the acquisition, financing, and disposition processes, and performance of services in support of acquisition, financing, and disposition transactions, including (1) review and preparation of due diligence materials associated with the transactions, (2) supervision or performance of site visits and tenant interviews, (3) review of rent rolls, (4) verification of leases and other contracts relating to the ownership, capital structure or operations of an Asset, and (5) review of environmental and property condition reports.

3.    Amendment to Section 3.01(e). Effective as of January 1, 2015, Section 3.01(e) of the Agreement is hereby deleted in its entirety and replaced with the following:

(e)Administrative Services Fee. The Company shall pay the Advisor an Administrative Services Fee in the amount of $1,450,000 per calendar year, payable in four equal quarterly installments within 45 days of the end of each calendar quarter beginning with calendar year 2015. Notwithstanding anything to the contrary, including Section 3.02

2

_{First Amendment to Fourth Amended and Restated Advisory Management Agreement} 

of this Agreement, no additional fees or expense reimbursement shall be payable to the Advisor in connection with the provision of the Administrative Services (whether or not paid to a third party) without the prior consent of the Board.

4.    Amendment to Section 3.02(a). Effective as of January 1, 2015, Section 3.02(a) of the Agreement is hereby deleted in its entirety and replaced with the following:

(a)    In addition to the compensation paid to the Advisor pursuant to Section 3.01, the Company shall pay directly or reimburse the Advisor for the following costs and expenses paid or incurred by the Advisor:

(i)    Acquisition Expenses;

(ii)    costs associated with insurance required in connection with the business of the Company or by the Board;

(iii)    third-party expenses connected with payments of Distributions in cash or otherwise made or caused to be made by the Company to the Stockholders;

(iv)    expenses of any third-party transfer agent for the Shares and third-party expenses of maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(v)    if the Board of Directors of the Company has preapproved the provision of RETA Services with respect to an Asset, the Company shall reimburse the Advisor for any Personnel Costs, Hard Costs and Business Infrastructure Costs (as determined by the Advisor based on its review of the time sheets or other billing records and receipts of the Advisor Personnel) attributable to the RETA Personnel while performing the preapproved RETA Services; and

(vi)    other expenses incurred by the Advisor and approved by the Board.

5.    Amendment to Section 3.02. Effective as of January 1, 2015, Section 3.02 is hereby amended by adding the following subsection (e):

(e)    For the avoidance of doubt, the Company shall not reimburse the Advisor for any Fully Burdened Compensation, Hard Costs and Business Operations Infrastructure Costs attributable to Advisor Personnel providing services for which the Advisor is paid an Asset Management Fee, Debt Financing Fee, Acquisition Fee or Development Fee.

6.    Amendment to Section 4.01. The Company and the Advisor desire to renew the Agreement for a one-year term commencing on June 6, 2015. Therefore, Section 4.01 of the Agreement is hereby deleted in its entirety and replaced with the following:

4.01    Term; Renewal. Subject to Section 4.02 below, this Agreement shall continue in force until June 6, 2016. Thereafter, this Agreement may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. It is the duty of the Board to evaluate the performance of the Advisor annually before renewing the Agreement, and each such renewal shall be for a term of no more than one year.

3

_{First Amendment to Fourth Amended and Restated Advisory Management Agreement} 

7.    Deletion of Schedule A. Effective as of January 1, 2015, the Agreement is hereby amended by deleting Schedule A.

8.    Continuing Effect. Except as otherwise set forth in this Amendment, the terms of the Agreement shall continue in full force and effect and shall not be deemed to have otherwise been amended, modified, revised or altered.

9.    Counterparts. The parties agree that this Amendment has been or may be executed in multiple counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Amendment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. This Amendment, to the extent signed and delivered by means of electronic mail or a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were an original signed version thereof delivered in person. No party to this Amendment shall raise the use of electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation or enforceability of a contract and each party hereto forever waives any such defense.

[Signature Page Follows]

4

_{First Amendment to Fourth Amended and Restated Advisory Management Agreement} 

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date first written above.

Behringer Harvard Opportunity REIT II, Inc.
By:	/s/ Andreas K. Bremer
	Andreas K. Bremer
	Its authorized signatory
Behringer Harvard Opportunity Advisors II, LLC
By:	/s/ Robert S. Aisner
	Robert S. Aisner
	President and Chief Executive Officer

5

_{First Amendment to Fourth Amended and Restated Advisory Management Agreement} 

EX-10.2

Exhibit 10.2

CONTRACT OF SALE
WIMBERLY AT DEERWOOD APARTMENTS, JACKSONVILLE, FLORIDA

This CONTRACT OF SALE (this “Contract”) is made and entered as of the Effective Date (as hereinafter defined) by and between 9727 Touchton Road, LLC,a Delaware limited liability company (“Seller”), and WW Deerwood LLC, a Delaware limited liability company (“Buyer”).

For and in consideration of the mutual covenants and agreements contained in this Contract and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

1. PURCHASE AND SALE: Seller agrees to sell and convey to Buyer, and Buyer agrees to buy from Seller, the Property (as hereinafter defined) for the consideration and upon and subject to the terms, provisions and conditions hereinafter set forth. The “Property” means:

(a) The land situated in Duval County, Florida, more particularly described in Exhibit A to this Contract (the “Land”), together with (i) the improvements situated on the Land commonly known as Wimberly at Deerwood Apartments and all other structures, fixtures, buildings and improvements situated on the Land (such buildings, structures, fixtures and improvements being herein called the “Improvements”), (ii) any and all rights, titles, powers, privileges, easements, licenses, rights-of-way and interests appurtenant to the Land and the Improvements, (iii) all rights, titles, powers, privileges, licenses, easements, rights-of-way and interests, if any, of Seller, either at law or in equity, in possession or in expectancy, in and to any real estate lying in the streets, highways, roads, alleys, rights-of-way or sidewalks, open or proposed; in front of, above, over, under, through or adjoining the Land and in and to any strips or gores of real estate adjoining the Land, and (iv) all rights, titles, powers, privileges, interests, licenses, easements and rights-of-way appurtenant or incident to any of the foregoing;

(b) All equipment, fixtures, appliances, inventory and other personal property of whatever kind or character owned by Seller and attached to or installed or located on or in the Land or the 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 (the “Personal Property”);

(c) All of Seller’s right, title and interest in and to all agreements, leases and other agreements which relate to or affect the Land, the Improvements, the Personal Property or the operation thereof, including, without limitation, tenant leases (“Tenant Leases”) and all deposits (security, pet or otherwise) actually paid to or received by Seller in connection therewith (and not as of the Closing Date returned to or forfeited by tenants under Tenant Leases), service and maintenance contracts

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

(“Service Contracts”), warranties, guaranties and bonds, 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); and

(d) All of Seller’s right, title and interest, if any, in and to all trademarks, trade names or symbols pertaining to “Wimberly at Deerwood” or under which the Land or the Improvements (or any part thereof) is otherwise operated (the “Trade Name”), excluding any trademark, name or symbol incorporating the name “Behringer”.

2. CONTRACT SALES PRICE: The total purchase price for the Property (the “Sales Price”) shall be FORTY-THREE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($43,500,000), payable in cash at Closing (as hereinafter defined). Payment in cash shall mean by cashier’s check or certified check drawn on a national banking association acceptable to Seller or by wire transfer of immediately available federal funds (the foregoing types of funds are hereinafter referred to as “Immediately Available Funds”).

3. EARNEST MONEY: Not later than three (3) business days after the Effective Date, Buyer shall deliver to Republic Title of Texas, Inc., 2626 Howell Street, 10^th Floor, Dallas, Texas 75204, Attention: Chase Evans (the “Title Company”), as escrow agent, FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000) (by Immediately Available Funds) as earnest money (the “Earnest Money”), which funds shall be deposited and held by the Title Company in an interest bearing account. If Buyer does not timely deliver the Earnest Money as provided in this Section 3, or if the Title Company is unable to immediately cash the check representing the Earnest Money and obtain the proceeds thereof, this Contract shall be null and void, and neither party shall have any right or obligation hereunder. The Earnest Money shall be invested in an interest-bearing account at one or more federally insured national banking institutions, provided Buyer satisfies the Title Company’s requirements with respect thereto. The term “Earnest Money” as used herein shall include the amount required to be initially deposited with the Title Company and any interest earned thereon. In the event the transaction contemplated by this Contract is closed, at Buyer’s option, the Earnest Money will be either applied in payment of the Sales Price to be paid at Closing or refunded to Buyer. In the event the transaction is not closed, the Earnest Money shall be disbursed in accordance with the provisions of this Contract. Notwithstanding anything in this Contract to the contrary, One Hundred Dollars ($100.00) of the Earnest Money (the “Independent Consideration”) shall be paid to Seller and considered completely nonrefundable to Buyer in all events, it being the intent of the parties to recognize that such amount has been bargained for and agreed to as independent consideration for Buyer’s exclusive right to purchase the Property and the Feasibility Period (as defined below) provided hereunder, and for Seller’s execution and delivery of this Contract.

4. CLOSING:

(a) Closing Date. The closing of the sale of the Property to Buyer (the “Closing”) shall take place at the Title Company on the date (the “Closing Date”) that is no later than

-2-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

September 9, 2015. The parties may effect the Closing by making their Closing deliveries into escrow with Title Company pursuant to escrow instructions that do not conflict with the terms of this Contract.

(b) Seller’s Closing Deliveries. At the Closing, Seller shall deliver to Buyer, at Seller’s sole cost and expense (except as otherwise provided in this Section 4(b) and Section 4(d)), the following:

(i) a Special Warranty Deed duly executed and acknowledged by Seller, in the form attached as Exhibit B, subject only to any and all Permitted Exceptions (as hereinafter defined) and any others approved by Buyer in writing;

(ii) a Bill of Sale duly executed by Seller, in the form attached as Exhibit C;

(iii) an Assignment and Assumption Agreement (the “Assignment and Assumption Agreement”) duly executed by Seller, in the form attached as Exhibit D;

(iv) an Assignment of Tenant Leases and Assumption (the “Assignment of Leases”) duly executed by Seller, in the form attached as Exhibit E;

(v) an Owner’s Policy of Title Insurance (the “Owner’s Title Policy”), issued in the standard form in use in the State of Florida, to be issued by the Title Company in due course after Closing, in the full amount of the Sales Price, dated as of the Closing Date, insuring Buyer’s fee simple title to the Land and Improvements to be good and indefeasible subject only to Permitted Exceptions and others approved by Buyer in writing, and the standard printed exceptions;

(vi) possession of the Property, subject only to the Tenant Leases and the Permitted Exceptions;

(vii) a non-foreign affidavit as permitted by Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder;

(viii) evidence of its capacity and authority for the closing of this transaction;

(ix) a form of notice to all tenants of the Property (“Tenant Notice Letter”) duly executed by Seller, in the form attached as Exhibit F;

(x) the most current rent roll for the Property not dated more than three (3) business days prior to Closing and certified to Buyer as true and complete in all material respects by Seller;

(xi) all keys, combinations, access codes, tenant leases, tenant histories, tenant files and other non-confidential or non-proprietary documentation pertaining to the Property that are in Seller’s or its property manager’s possession;

-3-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

(xii) evidence reasonably satisfactory to Buyer that all units vacant seven (7) or more days before the Closing Date are in rent-ready condition on the Closing Date; and

(xiii) such other documents as may be reasonably required to close this transaction.

(c) Buyer’s Closing Deliveries. At the Closing, Buyer shall perform and deliver, at Buyer’s sole cost and expense, the following:

(i) the Sales Price in Immediately Available Funds (reduced by the amount, if any, of the Earnest Money applied for that purpose and by any other amounts to be credited or debited to Buyer at the Closing pursuant to the provisions of this Contract);

(ii) the Assignment and Assumption Agreement duly executed by Buyer;

(iii) the Assignment of Leases duly executed by Buyer;

(iv) the Tenant Notice Letter duly executed by Buyer;

(v) evidence of its capacity and authority for the closing of the transaction contemplated herein; and

(vi) such other documents as may be reasonably required to close this transaction.

(d) Closing Statements. Prior to the Closing Date, the Title Company shall deliver to Seller and Buyer closing statements in the standard form in use in the State of Florida, which describe the prorations and adjustments required by this Contract. If Seller and Buyer cannot reasonably agree on the final closing statements to be executed and deposited at Closing with the Title Company because of a dispute over the prorations and adjustments required by this Contract, 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(d) shall survive the Closing.

(e) Closing Costs. Seller shall pay: the base premium for the Owner’s Title Policy, except for any endorsements requested by Buyer, which shall be paid by Buyer; the documentary transfer tax and/or any other transfer taxes related to Buyer’s acquisition of the Property; one-half (1/2) of any escrow fee; costs of tax certificates; fees for preparation of the conveyance documentation; Seller’s attorneys’ fees; and other expenses stipulated to be paid by Seller under other provisions of this Contract. Buyer shall pay: the cost of any endorsements to the Owner’s Title Policy that are requested by Buyer; costs and expenses for updating the existing survey, if any; one-half (1/2) of any escrow fee; the documentary tax and intangible tax on any financing

-4-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

obtained by Buyer; Buyer’s attorneys’ fees; recording fees; and other expenses stipulated to be paid by Buyer under other provisions of this Contract. Any other costs or expenses incident to this transaction and the closing hereof not expressly provided for above or otherwise in this Contract shall be allocated between and paid by the parties in accordance with custom and practice in Duval County, Florida.

(f) Proration of Assessments, Taxes, and Rents. Assessments, current taxes, rents and maintenance fees will be prorated as of the Closing Date; provided, however, no prorations will be made for delinquent rents existing as of the Closing. If ad valorem taxes for the year in which the sale is closed are not available on the Closing Date, proration of taxes will be made on the basis of taxes assessed in the previous year, with a subsequent cash adjustment of such proration to be made between Seller and Buyer, if necessary, when actual tax figures are available. If any other such charges, expenses, and income are unavailable at the precise Closing Date, then a readjustment of these items shall be made within thirty (30) days after the Closing. With respect to any delinquent rentals, Buyer will make a reasonable attempt (but shall not be obligated) to collect the same for Seller’s benefit after the Closing in the usual course of the operation of the Property and such collection, if any, will be remitted to Seller promptly upon receipt by Buyer. Nothing contained herein shall operate to require Buyer to institute any lawsuit or other collection procedure to collect such delinquent rentals or to prohibit Seller from any such collection. Any sums received by Buyer from any tenants owing delinquent rentals will first be applied to the then-current portion of such tenant’s rent and then (and only then) to delinquent rentals owed with respect to the period before Closing. Buyer additionally agrees to pay or reimburse all usual and customary finder’s fees, commissions and the like payable with respect to any Tenant Leases which are executed after the Effective Date and prior to the Closing Date. At the Closing, Seller will pay to Buyer in cash the amount of any security deposits actually paid to or received by Seller under the Tenant Leases (and not as of the Closing Date returned to or forfeited by tenants under Tenant Leases) and any prepaid rentals actually paid to or received by Seller for periods subsequent to the Closing; provided, however, non-refundable payments, deposits, or fees collected by Seller shall not be prorated. In making the prorations required by this Section 4, the economic burdens and benefits of ownership of the Property for the Closing Date shall be allocated to Buyer. The provisions of this Section 4(f) shall survive the Closing.

(g) Proration of Utilities. 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 Buyer, 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. 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 Buyer will be paid for by Seller and Buyer shall not be liable therefor. Seller will not assign to Buyer, and Buyer will not be entitled to, any deposits held by any utility company or other

-5-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

company servicing the Property; but rather such deposits will be returned to Seller and Buyer will arrange and bear all responsibility to arrange with all utility companies to have accounts styled in Buyer’s name beginning on the Closing Date. Despite the foregoing provisions of this section, in the event that there is a ratio utility billing system of any kind whatsoever (“RUBS”) applicable to the Property for any of the following categories of utilities and other reimbursements: (u) electricity, (v) gas, (w) water / sewer, (x) trash, (y) pest control or (z) other reimbursements, then the amount of RUBS attributable to the uncollected or trailing collections of up two (2) calendar months prior to Closing will be reflected as a credit to Seller at Closing and will be calculated for closing purposes on the uncollected or trailing collections monthly periods based on the monthly average actual trailing RUBS for three (3) months prior to Closing according to the operating statements prepared by Seller and provided to Buyer. A subsequent cash adjustment of RUBS between Seller and Buyer will be made when actual figures are available, but in all events within one hundred twenty (120) days after the Closing Date and Seller and Buyer each agree to provide the other such information as the other may reasonably request regarding RUBS and the billing, collection, and payment thereof. The provisions of this Section 4(g) shall survive the Closing.

(h) No Proration of Insurance. There shall be no proration of Seller’s insurance premiums or assignment of Seller’s insurance policies. Buyer shall be obligated (at its own election) to obtain any insurance coverage deemed necessary or appropriate by Buyer.

(i) Prepaid Items. Any prepaid items, including, without limitation fees for licenses which are transferred to the Buyer 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 Buyer at Closing.

(j) Contingency. Notwithstanding anything herein to the contrary, Seller has informed Buyer and Buyer has acknowledged that the sale of the Property by Seller is contingent upon Seller obtaining the approval of the board of directors of Behringer Harvard Opportunity REIT II, Inc. for the disposition of the Property to Buyer in accordance with the terms of this Contract (“Board Approval”). Seller will use commercially reasonable efforts to obtain the Board Approval on or prior to August 6, 2015. In the event that the Board Approval is not obtained, this Contract may be terminated by either party, the Earnest Money will be promptly returned to Buyer, Seller will promptly reimburse Buyer up to an amount of Fifty-Five Thousand and No/100 Dollars ($55,000.00) for Buyer’s actual out-of-pocket expenses (including, without limitation travel and lodging expenses of its employees) and its third party due diligence costs and its reasonable attorneys’ fees for negotiation of this Contract and related legal work, and neither party shall have any further right or obligation hereunder other than as set forth herein with respect to rights or obligations which

-6-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

survive termination. The foregoing rights and obligations for the return of the Earnest Money and Seller’s payment of expenses shall survive the termination of this Contract until the same are completed.

5. FEASIBILITY STUDY, INSPECTION, AND SERVICE CONTRACTS:

(a) Feasibility Study and Buyer’s Termination Right.

(xiv) Buyer is granted the right to conduct engineering and/or market and economic feasibility studies of the Property and a physical inspection of the Property, including studies or inspections to determine the existence of any environmental hazards or conditions (collectively, the “Feasibility Study”) during the period (the “Feasibility Period”) commencing on the Effective Date and ending at 5:00 p.m., Central Standard Time, on August 7, 2015. Any Feasibility Study shall be conducted during the normal business hours of the Property, unless Seller otherwise approves in writing and upon appropriate notice to tenants as permitted or required under any Tenant Leases. Buyer shall deliver to Seller’s designated representatives, Jeff Carter and Donna Wilkins, a written request to enter the Property at least two full business days prior to the intended date of entry. Each such request shall specify the intended date of entry and shall provide a detailed description of the proposed Feasibility Study, including, without limitation, a list of contractors who will be performing the proposed Feasibility Study, a copy, if applicable, of Buyer’s testing plan as described in this Section 5(a)(i) and such other information as Seller reasonably requires in connection with such proposed Feasibility Study. Neither Buyer nor any of Buyer’s Related Parties shall enter the Property until Seller has given written approval of both the request and any testing plan. Before conducting any test or investigation involving physical disturbance, sampling or invasive testing of any portion of the Property, Buyer shall provide Seller with a reasonably detailed testing plan outlining the tests Buyer intends to perform. No such tests shall be conducted without Seller’s prior written approval of the testing plan and the specific test or investigation.

(xv) Buyer must be accompanied by Seller’s manager for the Property or another designated representative of Seller or have received Seller’s written permission prior to entering upon the Property in connection with Buyer’s Feasibility Study; provided, however, Buyer 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. Buyer will not alter the physical condition of the Property without notifying Seller of its requested tests, and obtaining the written consent of Seller to any physical alteration of the Property. Buyer will exercise its best efforts to conduct or cause to be conducted all inspections

-7-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

and tests in a manner and at times which will not unreasonably interfere with any tenant’s use and occupancy of the Property. Neither Buyer nor any of Buyer’s Related Parties shall injure or otherwise cause bodily harm to Seller, the property manager, or their respective guests, agents, invitees, contractors and employees or any tenant of the Property or their guests or invitees or cause damage to any part of the Property or any personal property owned or held by such parties.

(xvi) Neither Buyer nor any of Buyer’s Related Parties have authority to do anything that may result in a lien or encumbrance against the Property in connection with any Feasibility Study. Without limiting the foregoing, however, Buyer agrees to promptly pay when due all costs associated with any Feasibility Study and not to cause, permit or suffer any lien or encumbrance to be asserted against the Property related to any Feasibility Study. Buyer shall comply with all federal, state and local laws, rules, regulations and ordinances which might in any way relate to any Feasibility Study.

(xvii) If requested to do so by Seller, Buyer will promptly deliver to Seller copies of any and all reports, studies, environmental audits, environmental assessments, or other documents or information prepared by or for Buyer or any of Buyer’s Related Parties or obtained by Buyer or any of Buyer’s Related Parties with respect to the Property.

(xviii) If Buyer determines, in its sole judgment, that Buyer does not desire to purchase the Property for any reason or for no reason whatsoever, then Buyer may terminate this Contract by written notice to Seller prior to expiration of the Feasibility Period, in which case the Earnest Money will be returned to Buyer, and neither party shall have any further right or obligation hereunder other than as set forth herein with respect to rights or obligations which survive termination. If this Contract is not terminated in the manner and within the time provided in this Section 5(a)(v), Buyer’s right to terminate this Contract pursuant to this Section 5(a)(v) and any and all objections with respect to the Feasibility Study will be deemed to have been waived by Buyer for all purposes. The Feasibility Study will be at Buyer’s expense.

(b) Restoration of Property. Buyer, at its own expense, will promptly fill and compact any holes, and otherwise promptly restore the Property to its original condition if damaged or changed due to the tests and inspections performed by Buyer, 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 Buyer, excluding any market and economic feasibility studies. The provisions of this Section 5(b) shall survive the Closing or any termination of this Contract and are not subject to any liquidated

-8-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

damage limitation on remedies, notwithstanding anything to the contrary in this Contract.

(c) Indemnity and Release. Buyer hereby indemnifies and holds Seller harmless from all claims, liabilities, damages, losses, costs, expenses (including, without limitation, reasonable attorneys’ fees), actions and causes of action arising out of or in any way relating to the Feasibility Study performed by Buyer, its agents, independent contractors, servants and/or employees, including, without limitation, claims made by any tenant against Seller for Buyer’s entry into such tenant’s premises or any interference with any tenant’s use or damage to its premises or property in connection with Buyer’s Feasibility Study and those arising in whole or in part from the negligence of Seller, its agents, independent contractors, servants and/or employees. Buyer 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 Buyer, its agents, independent contractors, servants and/or employees arising out of the Feasibility Study or use in any manner of the Property. The foregoing indemnity and waiver expressly excludes any such claims, demands, liabilities, damages, losses, costs, expenses (including, without limitation, reasonable attorneys’ fees), actions and causes of action or other remedies arising out of or in any way relating to or arising in whole or in part from the gross negligence or willful misconduct of Seller, its agents, independent contractors, servants and/or employees. The provisions of this Section 5(c) shall survive the Closing or any termination of this Contract and are not subject to any liquidated damage limitation on remedies, notwithstanding anything to the contrary in this Contract.

(d) Required Insurance. Buyer shall procure and continue in force from and after the date Buyer first enters the Property, and continuing throughout the term of this Contract, shall maintain workers’ compensation insurance in accordance with applicable law, and Buyer, or the applicable Buyer’s Related Parties conducting any Feasibility Study by or on behalf of Buyer, shall maintain (i) commercial general liability insurance with limits of at least One Million Dollars ($1,000,000.00) for bodily or personal injury or death, (ii) property damage insurance in the amount of at least One Million Dollars ($1,000,000.00), and (iii) contractual liability insurance with respect to Buyer’s obligations hereunder. Buyer 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 any Feasibility Study is conducted on the Property by or on behalf of Buyer. Each such insurance policy shall be written by a reputable insurance company having a rating of at least “A+:VII” by Best’s Rating Guide (or a comparable rating by a successor rating service), and shall otherwise be subject to Seller’s prior approval. Such insurance policies shall name as additional insureds Seller, Seller’s lender and such other parties holding insurable interests as Seller may designate. Such insurance shall include:  (i) personal injury liability with employee and contractual exclusions removed; and (ii) a waiver of subrogation in favor of Seller without exception for

-9-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

the negligence of any additional insured. Buyer will not be permitted to come onto the Property unless and until Buyer has provided to Seller a certificate of insurance evidencing such coverage, the additional insured status of Seller, and such waiver of subrogation.

(e) Confidential Information. All information and material furnished or made available by Seller to Buyer in accordance with this Contract or obtained by Buyer in the course of its investigation and Feasibility Study that is not generally known to the public will be treated as confidential information (the “Confidential Information”) by Buyer and shall be used solely for the purpose of Buyer’s evaluation of the condition of the Property. Prior to the purchase of the Property by Buyer, and if this Contract does not close, neither Buyer nor any of Buyer’s Related Parties shall reveal, disclose, disseminate, publish or communicate to any other persons, parties or entities any Confidential Information, without the prior written consent of Seller, which shall be given or withheld in Seller’s sole discretion, other than to Buyer’s partners, employees, consultants, attorneys, engineers, licensees, prospective investors, and lenders involved in this transaction who are responsible for determining the feasibility of Buyer’s acquisition of the Property and who have agreed to preserve the confidentiality of such information as required hereby (collectively, “Buyer’s Related Parties”). Buyer shall be responsible for ensuring that any and all of Buyer’s Related Parties (and any other person for whom Buyer has responsibility hereunder) complies with the provisions of this Section 5(e). At any time and from time to time, within two business days after Seller’s request, Buyer shall deliver to Seller a list of all parties to whom Buyer has provided any Submission Matters (defined below) or Additional Submission Matters (defined below) or any information taken from the Submission Matters or the Additional Submission Matters. Buyer shall not divulge the contents of the Submission Matters, the Additional Submission Matters or other Confidential Information except in connection with a court order or other legal process otherwise in strict accordance with the confidentiality standards set forth in this Section 5(e). In permitting Buyer and Buyer’s Related Parties to review the Submission Matters, the Additional Submission Matters or any other Confidential Information, Seller has not waived any privilege or claim of confidentiality with respect thereto, and no third party benefits or relationships of any kind, either express or implied, have been offered, intended or created. The provisions of this Section 5(e) shall survive the termination of this Contract. Other than research of public records and databases, neither Buyer nor any of Buyer’s Related Parties shall communicate with any regulatory agencies or their individual employees concerning the Property, without the prior written consent of Seller, which shall be given or withheld in Seller’s sole discretion. Buyer shall not contact any tenant, occupant, leasing agent or property manager of the Property or any governmental agent regarding the Property. Buyer shall also promptly notify Seller in writing of requests for confidential information from any third party or regulatory agency.

(f) Return of Documents. In the event this Contract does not close, Buyer will deliver to Seller all Submission Matters or Additional Submission Matters and all copies

-10-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

made of materials and information pertaining to the Property furnished or made available to Buyer (excluding any market and economic feasibility studies). The provisions of this Section 5(f) will survive the Closing or any termination of this Contract and are not subject to any liquidated damage limitation on remedies, notwithstanding anything to the contrary in this Contract.

(g) Service Contracts. During the Feasibility Period, Buyer shall review all Service Contracts provided by Seller. Buyer shall notify Seller prior to the expiration of the Feasibility Period of those Service Contracts which it disapproves, and Seller shall, at Seller’s expense, terminate such disapproved Service Contracts effective not later than the Closing Date. The property management agreement in effect with respect to the Property, along with any Service Contract that is not delivered to Buyer, shall be deemed to be disapproved by Buyer, and Seller shall, at Seller’s expense, terminate such property management agreement and undelivered Service Contracts effective not later than the Closing Date. All other delivered Service Contracts not disapproved or deemed disapproved by Buyer during the Feasibility Period shall be deemed to have been approved by Buyer, and Buyer shall assume and be liable for any and all obligations under the respective Service Contracts accruing on or after the Closing Date. Notwithstanding the foregoing, Buyer shall be deemed to have approved and shall have no right to reject those Service Contracts that, by their terms, cannot be terminated by Seller without the payment of a penalty, termination fee, or other charge.

6. TITLE REVIEW AND APPROVAL:

(a) Seller shall deliver to Buyer within ten (10) days after the Effective Date (i) a Commitment for Title Insurance with copies of all recorded instruments affecting the Property and recited as exceptions in said Commitment for Title Insurance (collectively, the “Commitment”) and (ii) a current survey (or an update of an existing survey) (the “Survey”) of the Property made on the ground by a registered professional land surveyor which conforms to the requirements of an ALTA land title survey according to the latest promulgated standards of the ALTA/ACSM Minimum Standard Detail Requirements. If Buyer has an objection to items disclosed in the Commitment or Survey, Buyer will have five (5) days after receipt of both the Commitment and Survey (whichever is later received) to give Seller written notice of its objections. If Buyer gives timely written notice of its objections, Seller shall have the opportunity, but not an obligation, for five (5) days from the date of Buyer’s notice to cure the same. Seller will utilize reasonable diligence to cure any errors in the Commitment, provided Seller shall have no obligation to expend any money, to incur any contractual or other obligations, or to institute any litigation in pursuing such efforts. If any objection is not satisfied within such time period, Buyer will elect within three (3) days of the expiration of Seller’s cure period, but in any event prior to expiration of the Feasibility Period, as its sole and exclusive remedy to either (i) terminate this Contract, in which case the Earnest Money will be refunded to Buyer, and neither party shall have any further rights or obligations pursuant to this

-11-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

Contract, other than as set forth herein with respect to rights or obligations which survive termination, or (ii) waive the unsatisfied objection (which will thereupon become a Permitted Exception) and proceed to Closing. Any exception to title not objected to by Buyer in the manner and within the time period specified in this Section 6 will be deemed accepted by Buyer. The phrase “Permitted Exceptions” shall mean those exceptions to title set forth in the Commitment or Survey and which have been accepted or deemed accepted by Buyer. In no event shall the failure of Seller to deliver a Commitment or a Survey satisfying the requirements of this Section 6(a) extend the period for review of such Commitment or Survey beyond the Feasibility Period; and Buyer’s sole remedy on account of any such failure shall be to terminate this Contract prior to the expiration of the Feasibility Period in accordance with the provisions of Section 5(a)(v). Buyer will notify Seller in writing of any failure of the Commitment or Survey to satisfy the requirements of this Section 6(a) within five (5) days after the Commitment and Survey are received by Buyer; and if Buyer fails to do so, they will be deemed to satisfy such requirements.

(b) After the Effective Date, Seller will not intentionally or deliberately place on the Property any lien, encumbrance or other exception other than the Permitted Exceptions. If after the expiration of the Feasibility Period, and prior to the Closing Date, title to the Property becomes subject to any lien, encumbrance or other exception other than the Permitted Exceptions and said encumbrance was not caused by Seller’s intentional or deliberate actions and Seller elects not to discharge such lien or encumbrance, then, if there is no default by Buyer under this Contract, Buyer will have the right to terminate this Contract by written notice to Seller whereupon the Earnest Money will be returned to Buyer, and neither party will have any right or obligation hereunder other than as set forth herein with respect to rights or obligations which survive termination. If Buyer fails to so terminate, then Buyer will be deemed to waive the exception (which will thereupon become one of the Permitted Exceptions) and proceed to Closing.

7. SUBMISSION MATTERS: Seller shall use reasonable diligence to attempt to deliver or make available to Buyer pursuant to an electronic datasite within five (5) days after the Effective Date, copies of the following (the “Submission Matters”), 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 Seller’s management company:

(a) a standard form of lease for the rental of apartment units used with respect to the Property;

(b) all Service Contracts relating to the ownership and operation of the Property;

(c) all licenses, permits, entitlements and governmental authorizations with respect to the ownership and operation of the Property, including, but not limited to, building permits and certificates of occupancy;

-12-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

(d) 2013 and 2014 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 thirty (30) days prior to the Effective Date prepared by the management company managing the Property on the standard form in use for the Property;

(g) operating report statements for year-to-date 2015, both monthly and year-to-date, and annual statements as of the end of the calendar or fiscal year for the years of 2014 and 2013 for the Property;

(h) the environmental report dated December 17, 2012 prepared by CBRE, Inc.;

(i) current leasing criteria for apartment units in the Property;

(j) copies of all bank statements for accounts related to the Property for the current year-to-date and for the prior year; and

(k) a list of all Personal Property.

In addition, Seller will cause to be made available to Buyer for inspection at the Property the following (the “Additional Submission Matters”), 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 Seller’s management company:

(i) twelve (12) most recent monthly utility bills relating to the Property;

(ii) all Tenant Leases;

(iii) delinquency logs, tenant complaint logs, repair/maintenance logs and records;

(iv) copies of any and all unresolved written notices of code or zoning violations affecting the Property by all governmental authorities having jurisdiction over the Property; and

(v) copies of documents relating to any pending or threatened liens, lawsuits or condemnations relating to Seller or the Property (provided however, any such threatened matters are limited to those which have been made in writing and delivered to Seller).

Any failure of Seller to timely deliver any of the Submission Matters or make available any of the Additional Submission Matters will not extend the Feasibility Period beyond the period prescribed in Section 5(a)(i) hereof, and Buyer’s sole and exclusive remedy on

-13-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

account of any such failure will be to terminate this Contract prior to the expiration of the Feasibility Period in accordance with the provisions of such Section 5(a)(v). Seller makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in the Submission Matters or the Additional Submission Matters.

8. BROKER’S FEE: Buyer and Seller represent and warrant to each other that no real estate commissions, finders’ fees, or brokers’ fees have been or will be incurred in connection with the sale of the Property by Seller to Buyer other than a commission payable by Seller to CBRE, Inc. (“Broker”) pursuant to a separate written agreement between Seller and Broker. Such commission will be deemed earned and will be due and payable only if, as and when the sale contemplated by this Contract is consummated. Buyer and Seller will indemnify, defend and hold each other harmless from any claim, liability, obligation, cost or expense (including attorneys’ fees and expenses) for fees or commissions relating to Buyer’s purchase of the Property asserted against either party by any broker or other person (other than the Broker) claiming by, through or under the indemnifying party or whose claim is based on the indemnifying party’s acts. The terms and provisions hereof supersede in their entirety any conflicting terms in prior agreements or understandings of any kind or character between Seller and Broker with respect to the payment of a commission, finder’s fee or other sum in connection with the sale of the Property. Buyer acknowledges that Broker may be an entity related to Seller. The provision of this Section 8 shall survive the Closing or any termination of this Contract and are not subject to any liquidated damage limitation on remedies, notwithstanding anything to the contrary in this Contract.

9. LIMITATION OF SELLER’S REPRESENTATIONS AND WARRANTIES:

(a) EXCEPT AS OTHERWISE SPECIFICALLY STATED IN THIS CONTRACT, SELLER HEREBY SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (i) THE NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, AND THE SUITABILITY THEREOF AND OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY ELECT TO CONDUCT THEREON, AND THE EXISTENCE OF ANY ENVIRONMENTAL HAZARDS OR CONDITIONS THEREON (INCLUDING THE PRESENCE OF ASBESTOS) OR COMPLIANCE WITH ANY OR ALL APPLICABLE LAWS, RULES OR REGULATIONS; (ii) EXCEPT FOR ANY WARRANTIES CONTAINED IN THE SPECIAL WARRANTY DEED TO BE DELIVERED BY SELLER AT THE CLOSING, THE NATURE AND EXTENT OF ANY RIGHT-OF-WAY, LEASE, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHERWISE; AND (iii) THE COMPLIANCE OF THE PROPERTY OR ITS OPERATION IN COMPLIANCE WITH ANY LAWS, ORDINANCES, ORDERS, RULES OR REGULATIONS OF ANY GOVERNMENTAL OR QUASI-GOVERNMENTAL AUTHORITY HAVING JURISDICTION OVER THE PROPERTY OR ANY PORTION THEREOF. BUYER ACKNOWLEDGES THAT IT WILL INSPECT THE

-14-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

PROPERTY AND BUYER WILL RELY SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. BUYER FURTHER ACKNOWLEDGES THAT THE INFORMATION PROVIDED AND TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND SELLER (i) HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION; AND (ii) DOES NOT MAKE ANY REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN “AS IS,” “WHERE IS” BASIS AND WITH ALL FAULTS, AND BUYER EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE AGREEMENTS OF SELLER HEREIN, EXCEPT AS OTHERWISE SPECIFIED HEREIN AND EXCEPT FOR THE WARRANTIES OF TITLE TO BE SET FORTH IN THE SPECIAL WARRANTY DEED TO BE EXECUTED BY SELLER AT CLOSING, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, TENANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT OF THE PROPERTY. BUYER FURTHER ACKNOWLEDGES THAT SOME IF NOT ALL OF THE SUBMISSION MATTERS, THE ADDITIONAL SUBMISSION MATTERS AND ANY OTHER DOCUMENTS PROVIDED TO BUYER OR BUYER’S RELATED PARTIES BY OR ON BEHALF OF SELLER WERE PREPARED BY THIRD PARTIES OTHER THAN SELLER. SELLER EXPRESSLY DISCLAIMS ANY AND ALL LIABILITY FOR REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, STATEMENTS OF FACT AND OTHER MATTERS CONTAINED IN SUCH INFORMATION, OR FOR OMISSIONS FROM THE SUBMISSION MATTERS, THE ADDITIONAL SUBMISSION MATTERS AND ANY OTHER DOCUMENTS PROVIDED TO BUYER OR BUYER’S RELATED PARTIES BY OR ON BEHALF OF SELLER, OR IN ANY OTHER WRITTEN OR ORAL COMMUNICATIONS TRANSMITTED OR MADE AVAILABLE TO BUYER OR BUYER’S RELATED PARTIES. BUYER SHALL RELY SOLELY UPON BUYER’S OWN INVESTIGATION WITH RESPECT TO THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE PROPERTY’S PHYSICAL, ENVIRONMENTAL OR ECONOMIC CONDITION, COMPLIANCE OR LACK OF COMPLIANCE WITH ANY ORDINANCE, ORDER, PERMIT OR REGULATION OR ANY OTHER ATTRIBUTE OR MATTER RELATING THERETO. SELLER HAS NOT UNDERTAKEN ANY INDEPENDENT INVESTIGATION AS TO THE TRUTH, ACCURACY OR COMPLETENESS OF THE SUBMISSION MATTERS, THE ADDITIONAL SUBMISSION MATTERS OR ANY OTHER DOCUMENTS PROVIDED TO BUYER OR BUYER’S RELATED PARTIES BY OR ON BEHALF OF SELLER AND SELLER IS PROVIDING THE SUBMISSION MATTERS, THE ADDITIONAL SUBMISSION MATTERS AND ANY OTHER DOCUMENTS PROVIDED TO

-15-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

BUYER BY OR ON BEHALF OF SELLER SOLELY AS AN ACCOMMODATION TO BUYER.

(b) EXCEPT AS OTHERWISE SPECIFICALLY STATED IN THIS CONTRACT, BUYER AGREES THAT SELLER SHALL NOT BE RESPONSIBLE OR LIABLE TO BUYER FOR ANY CONSTRUCTION DEFECTS, ERRORS, OMISSIONS, OR ON ACCOUNT OF ANY OTHER CONDITIONS AFFECTING THE PROPERTY, AS BUYER IS PURCHASING THE PROPERTY AS IS, WHERE IS, AND WITH ALL FAULTS. BUYER OR ANYONE CLAIMING BY, THROUGH OR UNDER BUYER, 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. BUYER 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 BUYER, ITS SUCCESSORS AND ASSIGNS. SUBJECT TO CONSUMMATION OF THIS CONTRACT, SELLER HEREBY ASSIGNS TO BUYER, 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 CONTRACT, BUYER AGREES THAT IN THE EVENT OF ANY SUCH CONSTRUCTION DEFECTS, ERRORS, OMISSIONS OR ON ACCOUNT OF ANY OTHER CONDITIONS AFFECTING THE PROPERTY, BUYER 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 SELLER’S CONVEYANCE OF THE PROPERTY TO BUYER OR BUYER’S PERMITTED ASSIGNEE, BUYER ON BEHALF OF ITSELF AND ANY PERMITTED ASSIGNEE RELEASES SELLER OF ALL RIGHTS, EXPRESS OR IMPLIED, BUYER OR ITS PERMITTED ASSIGNEE MAY HAVE AGAINST SELLER ARISING OUT OF OR RESULTING FROM ANY ERRORS, OMISSIONS OR DEFECTS IN THE PROPERTY. BUYER FURTHER UNDERSTANDS THAT SOME OF SELLER’S PREDECESSORS IN TITLE MAY HAVE FILED PETITIONS UNDER THE BANKRUPTCY CODE AND BUYER MAY HAVE NO REMEDY AGAINST SUCH PREDECESSORS,

-16-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

CONTRACTORS OR CONSULTANTS. THIS WAIVER AND RELEASE OF CLAIMS SHALL SURVIVE THE CLOSING AND SHALL NOT MERGE INTO THE INSTRUMENTS OF CLOSING.

10. DEFAULT:

(a) Default by Buyer. Unless otherwise provided for herein, if the transaction contemplated hereby is not consummated by reason of Buyer’s breach or other failure to timely perform all obligations and conditions to be performed by Buyer, then Seller may, as its sole and exclusive remedy (whether at law or in equity), terminate this Contract and receive the Earnest Money as liquidated damages; Buyer and Seller hereby agree that actual damages would be difficult or impossible to ascertain and such amount is a reasonable estimate of the damages for such breach or failure. Upon such payment of the Earnest Money, this Contract shall terminate and neither party shall have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations which survive termination; all other remedies being herein expressly waived by Seller.

(b) Default by 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 Buyer may, as its sole and exclusive remedy (whether at law or in equity), either (i) terminate this Contract and receive the Earnest Money and neither party shall have any further rights or obligations pursuant to this Contract, 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 by filing an action for specific performance within thirty (30) days of the occurrence of Seller’s breach; all other remedies being herein expressly waived by Buyer. Unless Buyer has filed an action for specific performance within thirty (30) days of the occurrence of Seller’s breach, and such action is pending, Buyer shall not have the right or authority to place a lis pendens against any portion of the Property, and Buyer hereby waives and releases any right it may have under applicable law to file any lis pendens absent such pending action. The provisions of this Section 10(b) shall survive the Closing or any termination of this Contract notwithstanding anything to the contrary in this Contract.

11. ATTORNEYS’ FEES: Any party to this Contract who is the prevailing party in any legal proceeding against the other party brought under or with respect to this Contract or transaction will be additionally entitled to recover court costs and reasonable attorneys’ fees from the non-prevailing party.

12. REPRESENTATIONS AND WARRANTIES OF SELLER: Seller hereby represents and warrants to Buyer, which representations and warranties will be deemed made by Seller to Buyer as of the Effective Date and also as of the Closing Date, that to Seller’s Knowledge (as hereinafter defined), no special investigation or inquiry having been made (except with respect to the representation and warranty made in Section 12(b), which is not qualified by Seller’s Knowledge):

-17-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

(a) There are no parties in possession of any portion of the Property except Seller and tenants under Tenant Leases;

(b) Subject to receipt of Board Approval, Seller has or will have the power and authority to sell and convey the Property as provided in this Contract and to carry out Seller’s obligations hereunder, and that all requisite action necessary to authorize Seller to enter into this Contract and to carry out Seller’s obligations hereunder has been, or on the Closing Date will have been, taken.

(c) Except as disclosed in the Submission Matters and Additional Submission Matters, Seller has received no written notice either (i) claiming violation of any federal, state, county or municipal law, ordinance, order, regulation or requirement affecting any portion of the Land, Improvements or Personal Property, or (ii) requiring or calling attention to the need for any work, repairs, construction, alterations or installation in connection with the Land and Improvements which is required in order to comply with any law, ordinance, order, regulation or restrictive covenant, has been issued by any governmental authority. Seller will provide to Buyer copies of any notices of such violations it may receive following the Effective Date of this Contract.

(d) There is no action, suit, proceeding or claim affecting Seller or the Land, Improvements or Personal Property or any portion thereof relating to or arising out of the ownership, operation, use or occupancy of the Property pending or being prosecuted in any court or by or before any federal, state, county or municipal department, commission, board, bureau or agency or other governmental instrumentality.

(e) Seller has not received any written notice of any pending condemnation or similar proceeding affecting the Land, Improvements or Personal Property or any portion thereof.

(f) 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.

(g) To Seller’s knowledge, the rent roll dated June 26, 2015 delivered by Seller to Buyer is true and complete in all material respects as of June 26, 2015. Except as expressly disclosed to Buyer in writing on the rent roll dated June 26, 2015, no rental under any Tenant Lease has been collected in advance of the current month, and except as so disclosed to the Buyer in writing on such rent roll, there are no concessions,

-18-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

bonuses, free month’s rentals, rebates, or other matters affecting the rental for any tenant thereunder. Notwithstanding anything to the contrary contained in this Contract, Seller does not represent or warrant that any particular Tenant Lease will be in force or effect at Closing or that the tenants under the Tenant Leases will have performed their obligations thereunder. The termination of any Tenant Lease prior to Closing by reason of a tenant’s default or for any other reason not constituting a default by Seller under this Agreement shall not constitute a breach of this representation and warranty by Seller and shall not affect the obligations of Buyer under this Agreement in any manner or entitle Buyer to an abatement of or credit against the Sales Price or give rise to any other claim on the part of Buyer.

13. LIMITATIONS ON LIABILITY:

(a) Seller’s Knowledge. As used in this Contract, “Seller’s Knowledge” means the current actual knowledge of Anthony Strauser, Vice President - Asset Management (the “Seller Representative”) without any investigation or inquiry and without regard to the knowledge of any former or other employees, agents or contractors of Seller. The Seller Representative shall not have any personal liability whatsoever for the representations made herein or for any other matters relating to this Contract. Buyer acknowledges that the Seller Representative’s current actual knowledge regarding the foregoing matters (including, without limitation, any environmental matters) may be limited.

(b) Pre-Closing Breach. If any representation or warranty above is actually known by Buyer prior to Closing to be untrue and is not remedied by Seller prior to Closing, then Buyer may as Buyer’s sole and exclusive remedy either: (i) terminate this Contract whereupon the Earnest Money shall be refunded to Buyer, and neither party shall have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination; or (ii) waive its objections and close the transaction.

(c) Post-Closing Liability. The representations contained in this Contract shall survive the Closing for a period of six (6) months (the “Survival Period”). Buyer acknowledges that it is a sophisticated buyer who is familiar with the ownership and operation of real estate projects similar to the Property, and Buyer and Seller have negotiated and agreed upon the length of the Survival Period as an adequate period of time for Buyer 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 Contract will be deemed to have merged into the instruments of Closing and shall be of no further force or effect. Buyer must notify Seller in writing of any claim or cause of action for a breach of any representation not later than the expiration of the Survival Period, and any claim or cause of action brought with respect to a breach any representation (each, a “Recovery Action”) must be asserted not later than three (3) months after the expiration of the Survival Period. Time is of the essence with respect to the foregoing time periods,

-19-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

and any claim or cause of action not timely raised in a notice and asserted shall be barred. Buyer waives its right to bring a Recovery Action unless the damage to Buyer on account of such breach (individually or when combined with damages from other breaches) equals or exceeds $50,000. Buyer agrees that, with respect to any alleged breach of representations in this Contract discovered during the Survival Period, the maximum liability of Seller for all such alleged breaches is limited to $250,000. The provisions of this Section 13(c) shall survive the Closing. The remedies for any breach of a representation or warranty that occurs prior to Closing shall be governed by Sections 10 and 13(b).

14. COVENANTS OF SELLER: From the Effective Date until Closing, Seller will (i) maintain and operate the Property in its current state and condition, reasonable wear and tear and damage from casualty excepted, (ii) continue all insurance policies relative to the Property in full force and effect, (iii) not remove any item of Personal Property from the Land or Improvements unless replaced by a comparable item of Personal Property, except for any dead landscaping, which Seller will have no obligation to replace, (iv) shall perform, when due, all material obligations under any and all agreements relating to the Property and otherwise in accordance with applicable laws, ordinances, rules, and regulations, (v) enter into any new Service Contracts or amend, modify, extend or renew any existing Service Contracts without the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed, unless such Service Contract is terminable by Seller or Buyer as Seller’s successor-in-interest upon thirty (30) days’ notice without payment of a premium, cancellation fee, penalty or any other consideration in connection with same, (vi) make rent-ready condition in accordance with substantially the same rent ready standards as Seller currently practices all apartment units at the Property which have been vacant for at least seven (7) days, and (vii) operate the Property as an apartment complex in the same manner, in accordance with the same standards, with the same diligence, and with the same care as it is currently doing.

15. TENANT LEASES: From the Effective Date until Closing, Seller shall have the right, without Buyer’s consent, to (i) grant any consent or waive any material rights under the Tenant Leases, as long as consistent with Seller’s then current practice, (ii) terminate (or accept a termination) of any Tenant Lease, as long as consistent with Seller’s then current practice, or (iii) enter into a new lease or renew, extend or modify an existing Tenant Lease, as long as in each case same is consistent with Seller’s then current practice. From and after the date of expiration of the Feasibility Period, any Tenant Lease, whether a new lease or an amended, modified, extended or renewed lease, shall be made in accordance with Seller’s current leasing criteria. Furthermore, without Buyer’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned, for any Tenant Lease, new or amended, modified, extended or renewed, (i) Seller shall not reduce the rent for any apartment units below an amount equal to ninety five percent (95%) of the rent shown on the rent roll dated June 26, 2015 delivered to Buyer pursuant to this Contract, and (ii) shall not offer any discounts, incentive or free rent for any period which is greater than the amount of rent for one calendar month and, to the extent that such discount, incentive or free rent complies with the foregoing and is applicable to a period on or after the Closing Date, Buyer

-20-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

will assume the pro rata portion of same applicable to the period on or after the Closing Date.

16. 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, Buyer 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 Buyer, notwithstanding that some or all of such additional taxes may relate back to the period prior to Closing.

17. CONDEMNATION: If prior to the Closing Date condemnation proceedings are commenced against any material portion of the Property, then this Contract will terminate and the Earnest Money will be refunded to Buyer and neither party will have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations which survive termination. A “material portion of the Property” as used herein shall mean at least five percent (5%) of the square footage of the structural Improvements or any taking which would materially limit, restrict or impair access to the Property. If prior to the Closing Date condemnation proceedings are commenced against less than a material portion of the Property, then this Contract will not terminate, but at Closing Seller will assign to Buyer any condemnation award and the Sales Price will not be reduced.

18. DAMAGE TO PROPERTY: Seller agrees to give Buyer prompt notice of any fire or other casualty affecting the Land, the Improvements or the Personal Property between the Effective Date and the Closing. Buyer or its designated agents may enter upon the Property from time to time during normal business hours and upon advance notice to Seller in accordance with this Contract for the purpose of inspecting any such casualty. Seller and Buyer hereby agree that the provisions of this Contract shall govern the parties’ obligations in the event of any damage or destruction to the Property or the taking of all or any part of the Property, as applicable, and to the extent permitted by law, Seller and Buyer each expressly waive any other rights or obligations available to the parties under applicable law in the event of any damage or destruction to the Property or the taking of all or any part of the Property.

(a) If prior to the Closing there shall occur damage to the Property caused by fire or other casualty which would cost $500,000.00 or more to repair, then in any such event, Buyer may, at its option, elect to terminate this Contract by written notice to Seller within twenty (20) days after the date of Sellers’ notice to Buyer of the casualty or at the Closing, whichever is earlier, in which case the Earnest Money will be refunded to Buyer, and neither party will have any further rights or obligations hereunder, other than as set forth herein with respect to rights and obligations which survive termination. If Buyer fails to timely make its election to terminate this Contract, then the Closing will take place as provided herein without reduction of the Sales Price except for a credit in the amount of the applicable insurance deductible, and there will be assigned to Buyer at the Closing all interest of Seller in and to any casualty insurance proceeds, specifically excluding the proceeds of any business interruption or loss of rental insurance.

-21-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

(b) If prior to the Closing there shall occur damage to the Property caused by fire or other casualty which would cost less than $500,000.00 to repair, then in any such event Buyer will have no right to terminate this Contract, the Closing will take place as provided herein without reduction of the Sales Price except for a credit in the amount of the applicable insurance deductible, and there will be assigned to Buyer at the Closing all interest of Seller in and to any casualty insurance proceeds, specifically excluding the proceeds of any business interruption or loss of rental insurance.

(c) Seller and Buyer both agree to use Seller’s insurance adjuster’s assessment to determine the amount of damages.

19. REPRESENTATIONS AND WARRANTIES OF BUYER: Buyer represents and warrants to Seller, which representations and warranties shall be deemed made by Buyer to Seller as of the Effective Date and also as of the Closing Date that Buyer has the full right, power and authority to purchase the Property as provided in this Contract and to carry out Buyer’s obligations hereunder, and that all requisite action necessary to authorize Buyer to enter into this Contract and to carry out Buyer’s obligations hereunder has been taken. Buyer 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 Buyer has no present, actual knowledge that any other persons or entities holding any legal or beneficial interest whatsoever in Buyer 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. Notwithstanding anything herein to the contrary, any breach by Buyer of any of the foregoing representations or warranties shall constitute a default by Buyer hereunder, and Seller may thereupon, at its option, terminate this Contract by giving written notice thereof, in which event the Earnest Money will be paid to Seller as liquidated damages, and neither Buyer nor Seller shall have any further rights or liabilities hereunder, except as otherwise provided herein.

20. ASSIGNMENT: Buyer may not assign this Contract without Seller’s prior written consent, such consent to be given or denied in Seller’s sole and absolute discretion. Notwithstanding the foregoing, Buyer may (at or immediately prior to Closing but not earlier), without Seller’s consent, assign its right, title and interest in and to this Contract to an entity controlling, controlled by, or under common control with Buyer so long as Buyer provides the name of such assignee and evidence of such assignee’s relationship with Buyer to Seller at least ten (10) days prior to Closing.

21. EFFECTIVE DATE: The “Effective Date” of this Contract shall be the date an original of this Contract (or original counterparts of this Contract) are executed by both Seller and Buyer.

-22-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

22. NOTICE TO TENANTS: Within ten (10) days after Closing, Buyer shall deliver to each tenant of the Property a completed copy of the Tenant Notice Letter, providing an exact dollar amount of each tenant’s security deposit. Buyer hereby assumes all liability for all such security deposits that are transferred from Seller to Buyer regardless of whether notice is given to the tenants of the Property in accordance with the provisions of this Section 22. Buyer shall indemnify and defend Seller from and against all liability for such security deposits. The provisions of this Section 22 shall survive the Closing.

23. EXCHANGE: Seller and Buyer, or either of them, may consummate the sale of the Property as part of a like kind exchange (an “Exchange”) pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), and, in connection therewith may assign its rights under this Contract to a qualified intermediary pursuant to an assignment that satisfies the requirements of the Code. Each party will reasonably cooperate with the other in that regard, provided that Seller shall pay any additional costs that would not otherwise have been incurred by Buyer or Seller had Seller not consummated its purchase through an Exchange, and Buyer shall pay any additional costs that would not otherwise have been incurred by Seller or Buyer had Buyer not consummated its purchase through an Exchange. In connection with an Exchange by Buyer, Seller shall not (a) have its rights under this Contract affected or diminished in any manner including but not limited to any delay in Closing, (b) be responsible for compliance with or be deemed to have warranted to Buyer that the Exchange in fact complies with Section 1031 of the Code, or (c) appear in the chain of title of any other property. In connection with an Exchange by Seller, Buyer shall not (i) have its rights under this Contract affected or diminished in any manner, (ii) be responsible for compliance with or be deemed to have warranted to Seller that the Exchange in fact complies with Section 1031 of the Code, or (iii) appear in the chain of title of any other property.

24. LIMITATION OF SELLER’S LIABILITY. Notwithstanding any other provision of this Contract, any agreement contemplated by this Contract, or any rights which Buyer might otherwise have at law, equity, or by statute, whether based on contract or some other claim, any liability of Seller to Buyer will be satisfied only from Seller’s interest in the Property and the proceeds thereof. Without limiting the generality of the foregoing, the members, managers, officers, employees, agents or affiliates of Seller will not in any manner be personally or individually liable for the obligations of Seller hereunder or for any claims related to this Contract, any agreement contemplated by this Contract, or the Property. The provisions of this Section 24 shall survive Closing.

-23-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

25. MISCELLANEOUS:

(a) Any notice required or permitted to be delivered hereunder will be in writing and will be deemed to be delivered and received when actually received by telecopy or personal delivery or, if earlier and regardless whether actually received or not, will be deemed to be delivered and received upon deposit with a nationally recognized overnight courier, for next business day delivery, charges prepaid. For purposes of this Section 25(a), the addresses of each party will be that set forth below the signature of such party hereto with a copy to the other addressees set forth below the signature of such party. Either party may change its address for notice from time to time by delivery of at least ten (10) days prior written notice of such change to the other party hereto in the manner prescribed herein.

(b) This Contract will be construed under and in accordance with the laws of the State of Florida, and all obligations of the parties created hereunder are performable in Duval County, Florida.

(c) This Contract will be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns.

(d) In case any one or more of the provisions contained in this Contract shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability will not affect any other provision hereof, and this Contract will be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, there will be automatically added to this Contract a provision as similar to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(e) This Contract constitutes the sole and only agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior understandings or written or oral agreements between the parties respecting the subject matter hereof and cannot be changed except by their written consent.

(f) Time is of the essence with this Contract.

(g) Words of any gender used in this Contract shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

(h) The covenants, indemnification obligations and the waiver and release by Buyer set forth in Sections 5(b), 5(c), 5(e), 5(f), 9(b), 22 and 25(l) and the covenants and indemnification obligations of Buyer and Seller set forth in Sections 4(d), 4(f), 4(g), 8 and 10 shall survive consummation of Closing or any termination or cancellation of this Contract.

-24-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

(i) The parties may execute this Contract in one or more identical counterparts, all of which when taken together will constitute one and the same instrument.

(j) The parties hereto acknowledge that the parties and their respective counsel have each reviewed and revised this Contract, and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Contract or any amendments or exhibits hereto.

(k) Whenever any determination is to be made or action to be taken on a date specified in this Contract, if such date shall fall upon a Saturday, Sunday or holiday observed by federal savings banks in the State of Florida, the date for such determination or action will be extended to the first business day immediately thereafter.

(l) Neither this Contract nor any memorandum or short form hereof shall be recorded or filed in any public land or other public records of any jurisdiction by Buyer and any attempt to do so may be treated by Seller as a default of this Contract thereof entitling Seller to terminate this Contract and retain the Earnest Money pursuant to Section 10(a) hereof. Notwithstanding any such termination, Buyer shall be obligated to execute an instrument in recordable form releasing this Contract, and Buyer’s obligations pursuant to this Section 25(l) shall survive any termination of this Contract as a surviving obligation.

26. Property Disclosures.

(a) Pursuant to Section 404.056(5) of the Florida Statutes, Seller hereby provides the following notice to Buyer:

RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantity, 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 the county public health unit of the county in which the Property is located.

(b) Pursuant to Section 553.996 of the Florida Statutes, Seller hereby provides the following notice to Buyer:

ENERGY-EFFICIENCY RATING. Buyer is advised that Buyer may have the energy-efficiency rating of the buildings located at the Property in Florida determined. Buyer acknowledges that, with the execution of this Contract, Buyer has independently obtained, a copy of an information brochure regarding energy-efficiency rating prepared and provided by the Florida Department of Community Affairs.

-25-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

(c) If applicable, pursuant to Section 161.57(2) of the Florida Statutes, Buyer waives the right to obtain from Seller an affidavit with respect to, or a survey meeting the requirements of Chapter 472 of the Florida Statues delineating, the location of the coastal construction control line on the Property.

(d) Buyer is advised to verify by survey and with appropriate government agencies which flood zone the Property is in, whether flood insurance is required and what restrictions apply to improving the Property and rebuilding in the event of casualty. Buyer hereby agrees that Buyer accepts the existing elevation of the buildings and zone designation of the Property unless Buyer terminates the Contract prior to the expiration of the Feasibility Period.

(e) Pursuant to Section 689.261 of the Florida Statutes, Seller hereby provides the following notice to Buyer:

BUYER SHOULD NOT RELY ON SELLER’S CURRENT PROPERTY TAXES AS THE AMOUNT OF PROPERTY TAXES THAT BUYER MAY BE OBLIGATED TO PAY IN THE YEAR SUBSEQUENT TO PURCHASE. A CHANGE OF OWNERSHIP OR PROPERTY IMPROVEMENTS TRIGGERS REASSESSMENTS OF THE PROPERTY THAT COULD RESULT IN HIGHER PROPERTY TAXES. IF YOU HAVE ANY QUESTIONS CONCERNING VALUATION, CONTACT THE COUNTY PROPERTY APPRAISER’S OFFICE FOR FURTHER INFORMATION.

(f) EVERY BUYER OF ANY INTEREST IN RESIDENTIAL REAL PROPERTY ON WHICH A RESIDENTIAL DWELLING WAS BUILT PRIOR TO 1978 IS NOTIFIED THAT SUCH PROPERTY MAY PRESENT EXPOSURE TO LEAD FROM LEAD-BASED PAINT THAT MAY PLACE YOUNG CHILDREN AT RISK OF DEVELOPING LEAD POISONING. LEAD POISONING IN YOUNG CHILDREN MAY PRODUCE PERMANENT NEUROLOGICAL DAMAGE, INCLUDING LEARNING DISABILITIES, REDUCED INTELLIGENCE QUOTIENT, BEHAVIORAL PROBLEMS, AND IMPAIRED MEMORY. LEAD POISONING ALSO POSES A PARTICULAR RISK TO PREGNANT WOMEN. THE SELLER OF ANY INTEREST IN RESIDENTIAL REAL PROPERTY IS REQUIRED TO PROVIDE THE BUYER WITH ANY INFORMATION ON LEAD-BASED PAINT HAZARDS FROM RISK ASSESSMENTS OR INSPECTIONS IN THE SELLER’S POSSESSION AND NOTIFY THE BUYER OF ANY KNOWN LEAD-BASED PAINT HAZARDS. A RISK ASSESSMENT OR INSPECTION FOR POSSIBLE LEAD-BASED PAINT HAZARDS IS RECOMMENDED PRIOR TO PURCHASE.

By its execution of this Contract, Buyer acknowledges that (a) it has read and understands the foregoing Lead Warning Statement, (b) it has reviewed, or during the Feasibility Period will review, any information concerning lead-based paint or lead-based paint hazards located on the Property, and (c) it has independently obtained a lead hazard information pamphlet in the form prescribed by the Environmental Protection Agency under Section 406 of the Toxic Substances

-26-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

Control Act. Buyer shall conduct such studies and tests for lead-based paint during the Feasibility Period as Buyer deems appropriate.

27. Exclusivity. Seller agrees not to negotiate with any other persons or entities until the earlier of (i) July 15, 2015 or (ii) Buyer’s written notice that it is no longer interested in acquiring the Property.

28. Contract As Offer. The execution of this Contract by the first party to do so constitutes an offer to purchase or sell the Property. Unless within two (2) business days after the date of execution of this Contract by the first party, this Contract is accepted by the other party by signing the offer and delivering a fully executed copy to the first party, the offer of this Contract shall be deemed automatically withdrawn, and the Earnest Money, if any, shall be promptly returned to Buyer.

REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE(S) FOLLOWS.

-27-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXECUTED on the dates set forth below to be effective as of the Effective Date.

SELLER:

9727 TOUCHTON ROAD, LLC,

a Delaware limited liability company

By: 9727 Touchton Road Holding, LLC,
a Delaware limited liability company,
its Managing Member

By: /s/ S. Jason Hall
Name: S. Jason Hall

Title: SVP, Treasurer

Date signed: July 20, 2015

Address: 9727 Touchton Road, LLC
15601 Dallas Parkway, Suite 600
Dallas, Texas 75001
Attention: Anthony Strauser
Telephone: 214.655.1600
Facsimile: 214.655.1610

with a copy to:

9727 Touchton Road, LLC
15601 Dallas Parkway, Suite 600
Dallas, Texas 75001
Attention: Jeff Carter
Telephone: 214.655.1600Facsimile: 214.655.1610

with a copy to:

9727 Touchton Road, LLC
15601 Dallas Parkway, Suite 600
Dallas, Texas 75001
Attention: Donna Wilkins
Telephone: 214.655.1600Facsimile: 214.655.1610

-28-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

with a copy to:

Jones Day
2727 N. Harwood Street
Dallas, Texas 75201
Attention: Michelle Brown
Telephone: 214.969.3673
Facsimile: 214.969.5100

-29-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

BUYER:

WW DEERWOOD LLC,
a Delaware limited liability company

By: WW Deerwood Investors LLC,
a Texas limited liability company
its Member

By: /s/ W. Chandler Wonderly

Name: W. Chandler Wonderly

Title: Manager

Date signed: July 16, 2015

Address: WW Deerwood LLC
500 Throckmorton Street, Suite 300
Fort Worth, Texas 76102-3745
Attention: Chandler Wonderly
Telephone: 817.795.4900
Facsimile: 817.795.4901

with a copy to:

Cherry Petersen Landry Albert LLP
8350 North Central Expressway, Suite 1500
Dallas, Texas 75206
Attention: Jon G. Petersen
Telephone: 214.265.5085
Facsimile: 214.265.7008

-30-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

BROKER:

Broker executes this Contract for the sole purpose of acknowledging and consenting to Section 8. Broker will not be a necessary party to any amendment of this Contract.

CBRE, INC.

By:     

Name:     

Title:     

Date signed: July 20, 2015

-31-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

TITLE COMPANY:

Receipt of $500,000 Earnest Money is acknowledged in the form of ____________________________________________________________________________________

REPUBLIC TITLE OF TEXAS, INC.

By:     

Name:     

Title:     

Date signed:     

EXHIBITS:

A – Property Description

B – Special Warranty Deed

C – Bill of Sale

D – Assignment and Assumption Agreement

E – Assignment of Tenant Leases and Assumption

F – Tenant Notice Letter

-32-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXHIBIT A

to
Contract of Sale

PROPERTY DESCRIPTION

ALL THAT CERTAIN PIECE, PARCEL OR TRACT OF LAND SITUATE, LYING AND BEING IN THE COUNTY OF DUVAL AND STATE OF FLORIDA AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL OF PARCELS “P” AND “Q” TOGETHER WITH A PART OF PARCELS “M”, “S”, “R” AND “T”, ALL IN DEERWOOD PARK NORTH REPLAT NUMBER ONE, AS RECORDED IN PLAT BOOK 51, PAGES 6 AND 6A THROUGH 6N OF THE PUBLIC RECORDS OF DUVAL COUNTY, FLORIDA, ALL MORE PARTICULARLY DESCRIBED AS FOLLOWS: FOR A POINT OF BEGINNING COMMENCE AT A POINT ON THE NORTHEASTERLY RIGHT-OF-WAY LINE OF TOUCHTON ROAD (A 100 FOOT RIGHT-OF-WAY AS NOW ESTABLISHED), SAID POINT BEING COMMON TO AFOREMENTIONED PARCELS “P” AND “S”; THENCE N. 58 DEGREES 33 MINUTES 53 SECONDS W. ALONG SAID NORTHEASTERLY RIGHT-OF-WAY LINE, A DISTANCE OF 404.45 FEET TO A POINT COMMON TO PARCELS “O” AND “P”; THENCE N. 31 DEGREES 26 MINUTES 07 SECONDS E., ALONG THE LINE DIVIDING SAID PARCELS “0” AND “P” AND ITS NORTHEASTERLY PROJECTION, A DISTANCE OF 652.89 FEET TO A POINT ON THE NORTH LINE OF AFORESAID PARCEL “M”; THENCE S. 78 DEGREES 34 MINUTES 33 SECONDS E. A DISTANCE OF 115.92 FEET; THENCE S. 80 DEGREES 55 MINUTES 05 SECONDS E., ALONG A NORTHERLY LINE OF PARCEL “P”, A DISTANCE OF 409.87 FEET TO THE SOUTHWEST CORNER OF AFORESAID PARCEL “Q”; THENCE N. 09 DEGREES 58 MINUTES 54 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q”, A DISTANCE OF 465.04 FEET TO AN ANGLE POINT IN SAID WESTERLY LINE; THENCE N. 00 DEGREES 28 MINUTES 10 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q” A DISTANCE OF 75.59 FEET TO THE NORTHWEST CORNER OF SAID PARCEL “Q”; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., ALONG THE NORTH LINE OF SAID PARCELS “Q” AND “P”, A DISTANCE OF 1383.74 FEET, THENCE N. 03 DEGREES 56 MINUTES 48 SECONDS W., A DISTANCE OF 18.31 FEET; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., A DISTANCE OF 63.45 FEET; THENCE DUE SOUTH A DISTANCE OF 618.44 FEET TO A POINT ON A NORTHERLY LINE OF AFOREMENTIONED PARCEL “S”; THENCE WESTERLY ALONG THE NORTHERLY LINES OF SAID PARCEL “S” THE FOLLOWING FIVE (5) COURSES: 1) S. 86 DEGREES 30 MINUTES 29 SECONDS W. A DISTANCE OF 31.50 FEET, 2) S. 82 DEGREES 29 MINUTES 58 SECONDS WEST A DISTANCE OF 70.80 FEET; 3) N 89 DEGREES 32 MINUTES 23 SECONDS W. A DISTANCE OF 111.26 FEET; 4) S. 88 DEGREES 05 MINUTES 20 SECONDS W. A DISTANCE OF 109.55 FEET; 5) S. 73 DEGREES 00 MINUTES 45 SECONDS W., A DISTANCE OF 100.17 FEET; THENCE N. 83 DEGREES 00 MINUTES 08 SECONDS W., A DISTANCE OF 267.63 FEET; THENCE S. 79 DEGREES 02 MINUTES 17 SECONDS W., A DISTANCE OF 490.78 FEET; THENCE S. 40 DEGREES 09 MINUTES 23 SECONDS W., A DISTANCE OF 133.35 FEET; THENCE S. 83 DEGREES 59 MINUTES 10 SECONDS W., A DISTANCE OF 162.01 FEET; THENCE SOUTH 16° 29’ 38” EAST, A DISTANCE OF 153.93

-33-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

FEET; THENCE SOUTH 68° 33’ 52” EAST, A DISTANCE OF 24.67 FEET; THENCE SOUTH 21° 53’ 57” WEST, A DISTANCE OF 61.55 FEET; THENCE NORTH 66° 51’ 16” WEST, A DISTANCE OF 15.33 FEET; THENCE SOUTH 20° 50’ 25” WEST, A DISTANCE OF 410.61 FEET TO A POINT ON THE AFOREMENTIONED NORTHEASTERLY RIGHT OF WAY LINE OF TOUCHTON ROAD, THE SAME BEING A CURVE CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 800.00 FEET; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE, A DISTANCE OF 147.89 FEET, SAID ARC BEING SUBTENDED BY A CHORD BEARING OF NORTH 63° 51’ 49” WEST AND A CHORD DISTANCE OF 147.68 FEET TO THE POINT TANGENCY OF SAID CURVE; THENCE NORTH 58° 33’ 53” WEST, CONTINUING ALONG SAID NORTHEASTERLY RIGHT OF WAY LINE, A DISTANCE OF 253.93 FEET TO THE AFOREMENTIONED POINT OF BEGINNING.

-34-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXHIBIT B

to
Contract of Sale

This Instrument Was Prepared By

and after Recording Return To:

__________________________

__________________________

__________________________

Property Appraiser Grantees’ Tax

Identification No. Identification Nos.

SPECIAL WARRANTY DEED

STATE OF FLORIDA    §

§    KNOW ALL PERSONS BY THESE PRESENTS:

COUNTY OF DUVAL    §

That 9727 TOUCHTON ROAD, LLC, a Delaware limited liability company (“Grantor”), for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration to it in hand paid by WW DEERWOOD LLC, a Delaware limited liability company, whose address is 500 Throckmorton Street, Suite 300, Fort Worth, Texas 76102-3745 (hereinafter, whether one or more, referred to as “Grantee”), the receipt and sufficiency of which are hereby acknowledged and confessed, and subject to the exceptions, liens, encumbrances, terms and provisions to conveyance and warranty hereinafter set forth and described, has GRANTED, BARGAINED, SOLD and CONVEYED, and by these presents does hereby GRANT, BARGAIN, SELL and CONVEY, unto Grantee all of the real property situated in Duval County, Florida, described on Exhibit A, which is attached hereto and made a part hereof for all purposes, together with all and singular the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon or in anywise appertaining thereto, and together with all buildings and improvements located thereon and any right, title, and interest of Grantor in and to adjacent streets, alleys, strips, gores, and rights-of-way (such land, rights, benefits, privileges, easements, tenements, hereditaments, appurtenances, improvements, and interests being hereinafter referred to as the “Property”).

This conveyance is made and accepted subject and subordinate to those encumbrances and exceptions (the “Permitted Encumbrances”) set forth on Exhibit B, which is attached hereto and made a part hereof for all purposes, but only to the extent that they affect or relate to the Property.

TO HAVE AND TO HOLD the Property, subject to the Permitted Encumbrances, unto Grantee, its successors and assigns, forever; and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same,

-35-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

or any part thereof, except as to the exceptions to conveyance and warranty contained herein, by, through or under Grantor, but not otherwise.

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN A WRITTEN INSTRUMENT SIGNED BY BOTH GRANTOR AND GRANTEE, GRANTOR HEREBY SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (i) THE NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, AND THE SUITABILITY THEREOF AND OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY ELECT TO CONDUCT THEREON, AND THE EXISTENCE OF ANY ENVIRONMENTAL HAZARDS OR CONDITIONS THEREON (INCLUDING THE PRESENCE OF ASBESTOS) OR COMPLIANCE WITH ANY OR ALL APPLICABLE LAWS, RULES OR REGULATIONS; (ii) THE NATURE AND EXTENT OF ANY RIGHT-OF-WAY, LEASE, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHERWISE; AND (iii) THE COMPLIANCE OF THE PROPERTY OR ITS OPERATION IN COMPLIANCE WITH ANY LAWS, ORDINANCES, ORDERS, RULES OR REGULATIONS OF ANY GOVERNMENTAL OR QUASIGOVERNMENTAL AUTHORITY HAVING JURISDICTION OVER THE PROPERTY OR ANY PORTION THEREOF. GRANTEE ACKNOWLEDGES THAT IT WILL INSPECT THE PROPERTY AND GRANTEE WILL RELY SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR. THE SALE OF THE PROPERTY IS MADE ON AN “AS IS,” “WHERE IS” BASIS AND WITH ALL FAULTS, AND GRANTEE EXPRESSLY ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN A WRITTEN INSTRUMENT SIGNED BY BOTH GRANTOR AND GRANTEE, GRANTOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, TENANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT OF THE PROPERTY, except that the foregoing shall not be construed to negate the special warranty of title herein set forth.

Grantee, by its acceptance hereof, hereby assumes and agrees to pay any and all standby fees, taxes, and assessments by any taxing authority for the calendar year 2015, and subsequent years.

REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.

-36-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXECUTED by the undersigned to be effective as of July 20, 2015.

-37-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

WITNESSES:	GRANTOR:
_____________________________ Witness Signature _____________________________ Printed Name _____________________________ Witness Signature _____________________________ Printed Name	9727 TOUCHTON ROAD, LLC, a Delaware limited liability company By: 9727 Touchton Road Holding, LLC, a Delaware limited liability company, its Managing Member By: /s/ S. Jason Hall  Name: S. Jason Hall Title: SVP, Treasurer

STATE OF TEXAS    §

§

COUNTY OF DALLAS    §

The foregoing instrument was acknowledged before me on this 20 day of July 2015, by _________________, _______________ of 9727 Touchton Road Holding, LLC, a Delaware limited liability company, the managing member of 9727 Touchton Road, LLC, a Delaware limited liability company, on behalf of said company. He/she is personally known to me.

__________________________________________

Printed Name:     

Notary Public in and for the State of Texas

My Commission Expires:     

(SEAL)

Doc Stamps: ______________

Recording Fee: ____________

-38-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXHIBIT A

to
Special Warranty Deed

PROPERTY DESCRIPTION

ALL THAT CERTAIN PIECE, PARCEL OR TRACT OF LAND SITUATE, LYING AND BEING IN THE COUNTY OF DUVAL AND STATE OF FLORIDA AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL OF PARCELS “P” AND “Q” TOGETHER WITH A PART OF PARCELS “M”, “S”, “R” AND “T”, ALL IN DEERWOOD PARK NORTH REPLAT NUMBER ONE, AS RECORDED IN PLAT BOOK 51, PAGES 6 AND 6A THROUGH 6N OF THE PUBLIC RECORDS OF DUVAL COUNTY, FLORIDA, ALL MORE PARTICULARLY DESCRIBED AS FOLLOWS: FOR A POINT OF BEGINNING COMMENCE AT A POINT ON THE NORTHEASTERLY RIGHT-OF-WAY LINE OF TOUCHTON ROAD (A 100 FOOT RIGHT-OF-WAY AS NOW ESTABLISHED), SAID POINT BEING COMMON TO AFOREMENTIONED PARCELS “P” AND “S”; THENCE N. 58 DEGREES 33 MINUTES 53 SECONDS W. ALONG SAID NORTHEASTERLY RIGHT-OF-WAY LINE, A DISTANCE OF 404.45 FEET TO A POINT COMMON TO PARCELS “O” AND “P”; THENCE N. 31 DEGREES 26 MINUTES 07 SECONDS E., ALONG THE LINE DIVIDING SAID PARCELS “0” AND “P” AND ITS NORTHEASTERLY PROJECTION, A DISTANCE OF 652.89 FEET TO A POINT ON THE NORTH LINE OF AFORESAID PARCEL “M”; THENCE S. 78 DEGREES 34 MINUTES 33 SECONDS E. A DISTANCE OF 115.92 FEET; THENCE S. 80 DEGREES 55 MINUTES 05 SECONDS E., ALONG A NORTHERLY LINE OF PARCEL “P”, A DISTANCE OF 409.87 FEET TO THE SOUTHWEST CORNER OF AFORESAID PARCEL “Q”; THENCE N. 09 DEGREES 58 MINUTES 54 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q”, A DISTANCE OF 465.04 FEET TO AN ANGLE POINT IN SAID WESTERLY LINE; THENCE N. 00 DEGREES 28 MINUTES 10 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q” A DISTANCE OF 75.59 FEET TO THE NORTHWEST CORNER OF SAID PARCEL “Q”; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., ALONG THE NORTH LINE OF SAID PARCELS “Q” AND “P”, A DISTANCE OF 1383.74 FEET, THENCE N. 03 DEGREES 56 MINUTES 48 SECONDS W., A DISTANCE OF 18.31 FEET; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., A DISTANCE OF 63.45 FEET; THENCE DUE SOUTH A DISTANCE OF 618.44 FEET TO A POINT ON A NORTHERLY LINE OF AFOREMENTIONED PARCEL “S”; THENCE WESTERLY ALONG THE NORTHERLY LINES OF SAID PARCEL “S” THE FOLLOWING FIVE (5) COURSES: 1) S. 86 DEGREES 30 MINUTES 29 SECONDS W. A DISTANCE OF 31.50 FEET, 2) S. 82 DEGREES 29 MINUTES 58 SECONDS WEST A DISTANCE OF 70.80 FEET; 3) N 89 DEGREES 32 MINUTES 23 SECONDS W. A DISTANCE OF 111.26 FEET; 4) S. 88 DEGREES 05 MINUTES 20 SECONDS W. A DISTANCE OF 109.55 FEET; 5) S. 73 DEGREES 00 MINUTES 45 SECONDS W., A DISTANCE OF 100.17 FEET; THENCE N. 83 DEGREES 00 MINUTES 08 SECONDS W., A DISTANCE OF 267.63 FEET; THENCE S. 79 DEGREES 02 MINUTES 17 SECONDS W., A DISTANCE OF 490.78 FEET; THENCE S. 40 DEGREES 09 MINUTES 23 SECONDS W., A DISTANCE OF 133.35 FEET; THENCE S. 83 DEGREES 59 MINUTES 10 SECONDS W., A DISTANCE OF 162.01 FEET; THENCE SOUTH 16° 29’ 38” EAST, A DISTANCE OF 153.93

-39-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

FEET; THENCE SOUTH 68° 33’ 52” EAST, A DISTANCE OF 24.67 FEET; THENCE SOUTH 21° 53’ 57” WEST, A DISTANCE OF 61.55 FEET; THENCE NORTH 66° 51’ 16” WEST, A DISTANCE OF 15.33 FEET; THENCE SOUTH 20° 50’ 25” WEST, A DISTANCE OF 410.61 FEET TO A POINT ON THE AFOREMENTIONED NORTHEASTERLY RIGHT OF WAY LINE OF TOUCHTON ROAD, THE SAME BEING A CURVE CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 800.00 FEET; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE, A DISTANCE OF 147.89 FEET, SAID ARC BEING SUBTENDED BY A CHORD BEARING OF NORTH 63° 51’ 49” WEST AND A CHORD DISTANCE OF 147.68 FEET TO THE POINT TANGENCY OF SAID CURVE; THENCE NORTH 58° 33’ 53” WEST, CONTINUING ALONG SAID NORTHEASTERLY RIGHT OF WAY LINE, A DISTANCE OF 253.93 FEET TO THE AFOREMENTIONED POINT OF BEGINNING.

[Appraiser’s parcel identification number to be inserted]

-40-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXHIBIT B

to
Special Warranty Deed

PERMITTED ENCUMBRANCES

[List of Permitted Encumbrances to be Inserted]

-41-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXHIBIT C

to
Contract of Sale

BILL OF SALE

STATE OF FLORIDA    §

§    KNOW ALL PERSONS BY THESE PRESENTS:

COUNTY OF DUVAL    §

THAT 9727 TOUCHTON ROAD, LLC, a Delaware limited liability company(“Seller”), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration to Seller in hand paid by WW DEERWOOD LLC, a Delaware limited liability company (“Buyer”), the receipt of which is hereby acknowledged, has Bargained, Sold, Delivered and Assigned, and by these presents does Bargain, Sell, Deliver and Assign, unto Buyer all equipment, fixtures, appliances, inventory and other personal property of whatever kind or character owned by Seller and attached to or installed or located on or in that certain real property situated in Duval County, Florida, and the improvements situated thereon, such tract of land being described on Exhibit A, attached hereto and made a part hereof for all purposes, 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 (collectively, the “Property”).

Seller has executed this Bill of Sale and BARGAINED, SOLD, DELIVERED and ASSIGNED the Property and Buyer has accepted this Bill of Sale 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 SELLER AND BUYER 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 FLORIDA UNIFORM COMMERCIAL CODE OR ANY OTHER LAW, except that the foregoing shall not be construed to negate the special warranty of title hereinafter set forth.

Subject to the matters set forth herein, Seller does hereby bind itself, its successors and assigns, to forever Warrant and Defend title to the Property unto Buyer, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Seller, but not otherwise. The sale, delivery and assignment of the Property is, however, subject to the matters to which that certain Special Warranty Deed (“Deed”) of even date herewith from Seller to Buyer 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.

-42-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXECUTED by the undersigned to be effective as of __________, 2015.

SELLER:

9727 TOUCHTON ROAD, LLC,

a Delaware limited liability company

By: 9727 Touchton Road Holding, LLC,
a Delaware limited liability company,
its Managing Member

By: /s/ S. Jason Hall
Name: S. Jason Hall
Title: SVP, Treasurer

-43-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EXHIBIT A

to
Bill of Sale

LAND DESCRIPTION

ALL THAT CERTAIN PIECE, PARCEL OR TRACT OF LAND SITUATE, LYING AND BEING IN THE COUNTY OF DUVAL AND STATE OF FLORIDA AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL OF PARCELS “P” AND “Q” TOGETHER WITH A PART OF PARCELS “M”, “S”, “R” AND “T”, ALL IN DEERWOOD PARK NORTH REPLAT NUMBER ONE, AS RECORDED IN PLAT BOOK 51, PAGES 6 AND 6A THROUGH 6N OF THE PUBLIC RECORDS OF DUVAL COUNTY, FLORIDA, ALL MORE PARTICULARLY DESCRIBED AS FOLLOWS: FOR A POINT OF BEGINNING COMMENCE AT A POINT ON THE NORTHEASTERLY RIGHT-OF-WAY LINE OF TOUCHTON ROAD (A 100 FOOT RIGHT-OF-WAY AS NOW ESTABLISHED), SAID POINT BEING COMMON TO AFOREMENTIONED PARCELS “P” AND “S”; THENCE N. 58 DEGREES 33 MINUTES 53 SECONDS W. ALONG SAID NORTHEASTERLY RIGHT-OF-WAY LINE, A DISTANCE OF 404.45 FEET TO A POINT COMMON TO PARCELS “O” AND “P”; THENCE N. 31 DEGREES 26 MINUTES 07 SECONDS E., ALONG THE LINE DIVIDING SAID PARCELS “0” AND “P” AND ITS NORTHEASTERLY PROJECTION, A DISTANCE OF 652.89 FEET TO A POINT ON THE NORTH LINE OF AFORESAID PARCEL “M”; THENCE S. 78 DEGREES 34 MINUTES 33 SECONDS E. A DISTANCE OF 115.92 FEET; THENCE S. 80 DEGREES 55 MINUTES 05 SECONDS E., ALONG A NORTHERLY LINE OF PARCEL “P”, A DISTANCE OF 409.87 FEET TO THE SOUTHWEST CORNER OF AFORESAID PARCEL “Q”; THENCE N. 09 DEGREES 58 MINUTES 54 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q”, A DISTANCE OF 465.04 FEET TO AN ANGLE POINT IN SAID WESTERLY LINE; THENCE N. 00 DEGREES 28 MINUTES 10 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q” A DISTANCE OF 75.59 FEET TO THE NORTHWEST CORNER OF SAID PARCEL “Q”; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., ALONG THE NORTH LINE OF SAID PARCELS “Q” AND “P”, A DISTANCE OF 1383.74 FEET, THENCE N. 03 DEGREES 56 MINUTES 48 SECONDS W., A DISTANCE OF 18.31 FEET; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., A DISTANCE OF 63.45 FEET; THENCE DUE SOUTH A DISTANCE OF 618.44 FEET TO A POINT ON A NORTHERLY LINE OF AFOREMENTIONED PARCEL “S”; THENCE WESTERLY ALONG THE NORTHERLY LINES OF SAID PARCEL “S” THE FOLLOWING FIVE (5) COURSES: 1) S. 86 DEGREES 30 MINUTES 29 SECONDS W. A DISTANCE OF 31.50 FEET, 2) S. 82 DEGREES 29 MINUTES 58 SECONDS WEST A DISTANCE OF 70.80 FEET; 3) N 89 DEGREES 32 MINUTES 23 SECONDS W. A DISTANCE OF 111.26 FEET; 4) S. 88 DEGREES 05 MINUTES 20 SECONDS W. A DISTANCE OF 109.55 FEET; 5) S. 73 DEGREES 00 MINUTES 45 SECONDS W., A DISTANCE OF 100.17 FEET; THENCE N. 83 DEGREES 00 MINUTES 08 SECONDS W., A DISTANCE OF 267.63 FEET; THENCE S. 79 DEGREES 02 MINUTES 17 SECONDS W., A DISTANCE OF 490.78 FEET; THENCE S. 40 DEGREES 09 MINUTES 23 SECONDS W., A DISTANCE OF 133.35 FEET; THENCE S. 83 DEGREES 59 MINUTES 10 SECONDS W., A DISTANCE OF 162.01 FEET; THENCE SOUTH 16° 29’ 38” EAST, A DISTANCE OF 153.93

-44-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

FEET; THENCE SOUTH 68° 33’ 52” EAST, A DISTANCE OF 24.67 FEET; THENCE SOUTH 21° 53’ 57” WEST, A DISTANCE OF 61.55 FEET; THENCE NORTH 66° 51’ 16” WEST, A DISTANCE OF 15.33 FEET; THENCE SOUTH 20° 50’ 25” WEST, A DISTANCE OF 410.61 FEET TO A POINT ON THE AFOREMENTIONED NORTHEASTERLY RIGHT OF WAY LINE OF TOUCHTON ROAD, THE SAME BEING A CURVE CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 800.00 FEET; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE, A DISTANCE OF 147.89 FEET, SAID ARC BEING SUBTENDED BY A CHORD BEARING OF NORTH 63° 51’ 49” WEST AND A CHORD DISTANCE OF 147.68 FEET TO THE POINT TANGENCY OF SAID CURVE; THENCE NORTH 58° 33’ 53” WEST, CONTINUING ALONG SAID NORTHEASTERLY RIGHT OF WAY LINE, A DISTANCE OF 253.93 FEET TO THE AFOREMENTIONED POINT OF BEGINNING.

EXHIBIT D

to
Contract of Sale

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”) is made and entered into to be effective as of July 20, 2015 (the “Effective Date”) by and between 9727 TOUCHTON ROAD, LLC, a Delaware limited liability company (“Assignor”), and WW DEERWOOD LLC, a Delaware limited liability company (“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 Duval County, Florida (the “Property”) and being more particularly described on Exhibit A, which is attached hereto and made a part hereof for all purposes.

B.    Assignee desires to purchase from Assignor, and Assignor desires to sell and assign to Assignee, certain intangible personal 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, the following properties (collectively, the “Assigned Properties”):

1. The trade name and all trademarks pertaining to “Wimberly at Deerwood,” 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.”

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.

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 Contract of Sale dated July __, 2015 between Assignor and 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.

EXECUTED by the undersigned to be effective as of the Effective Date.

ASSIGNOR:

9727 TOUCHTON ROAD, LLC,

a Delaware limited liability company

By: 9727 Touchton Road Holding, LLC,
a Delaware limited liability company,
its Managing Member

By: /s/ S. Jason Hall
Name: S. Jason Hall
Title: SVP, Treasurer

ASSIGNEE:

WW DEERWOOD LLC,

a Delaware limited liability company

By: WW Deerwood Investors LLC,
a Texas limited liability company
its Member

By: /s/ W. Chandler Wonderly

Name: W. Chandler Wonderly

Title: Manager

Exhibit A - Property Description

Exhibit B - List of Service Contracts

EXHIBIT A

to
Assignment and Assumption Agreement

PROPERTY DESCRIPTION

ALL THAT CERTAIN PIECE, PARCEL OR TRACT OF LAND SITUATE, LYING AND BEING IN THE COUNTY OF DUVAL AND STATE OF FLORIDA AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL OF PARCELS “P” AND “Q” TOGETHER WITH A PART OF PARCELS “M”, “S”, “R” AND “T”, ALL IN DEERWOOD PARK NORTH REPLAT NUMBER ONE, AS RECORDED IN PLAT BOOK 51, PAGES 6 AND 6A THROUGH 6N OF THE PUBLIC RECORDS OF DUVAL COUNTY, FLORIDA, ALL MORE PARTICULARLY DESCRIBED AS FOLLOWS: FOR A POINT OF BEGINNING COMMENCE AT A POINT ON THE NORTHEASTERLY RIGHT-OF-WAY LINE OF TOUCHTON ROAD (A 100 FOOT RIGHT-OF-WAY AS NOW ESTABLISHED), SAID POINT BEING COMMON TO AFOREMENTIONED PARCELS “P” AND “S”; THENCE N. 58 DEGREES 33 MINUTES 53 SECONDS W. ALONG SAID NORTHEASTERLY RIGHT-OF-WAY LINE, A DISTANCE OF 404.45 FEET TO A POINT COMMON TO PARCELS “O” AND “P”; THENCE N. 31 DEGREES 26 MINUTES 07 SECONDS E., ALONG THE LINE DIVIDING SAID PARCELS “0” AND “P” AND ITS NORTHEASTERLY PROJECTION, A DISTANCE OF 652.89 FEET TO A POINT ON THE NORTH LINE OF AFORESAID PARCEL “M”; THENCE S. 78 DEGREES 34 MINUTES 33 SECONDS E. A DISTANCE OF 115.92 FEET; THENCE S. 80 DEGREES 55 MINUTES 05 SECONDS E., ALONG A NORTHERLY LINE OF PARCEL “P”, A DISTANCE OF 409.87 FEET TO THE SOUTHWEST CORNER OF AFORESAID PARCEL “Q”; THENCE N. 09 DEGREES 58 MINUTES 54 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q”, A DISTANCE OF 465.04 FEET TO AN ANGLE POINT IN SAID WESTERLY LINE; THENCE N. 00 DEGREES 28 MINUTES 10 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q” A DISTANCE OF 75.59 FEET TO THE NORTHWEST CORNER OF SAID PARCEL “Q”; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., ALONG THE NORTH LINE OF SAID PARCELS “Q” AND “P”, A DISTANCE OF 1383.74 FEET, THENCE N. 03 DEGREES 56 MINUTES 48 SECONDS W., A DISTANCE OF 18.31 FEET; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., A DISTANCE OF 63.45 FEET; THENCE DUE SOUTH A DISTANCE OF 618.44 FEET TO A POINT ON A NORTHERLY LINE OF AFOREMENTIONED PARCEL “S”; THENCE WESTERLY ALONG THE NORTHERLY LINES OF SAID PARCEL “S” THE FOLLOWING FIVE (5) COURSES: 1) S. 86 DEGREES 30 MINUTES 29 SECONDS W. A DISTANCE OF 31.50 FEET, 2) S. 82 DEGREES 29 MINUTES 58 SECONDS WEST A DISTANCE OF 70.80 FEET; 3) N 89 DEGREES 32 MINUTES 23 SECONDS W. A DISTANCE OF 111.26 FEET; 4) S. 88 DEGREES 05 MINUTES 20 SECONDS W. A DISTANCE OF 109.55 FEET; 5) S. 73 DEGREES 00 MINUTES 45 SECONDS W., A DISTANCE OF 100.17 FEET; THENCE N. 83 DEGREES 00 MINUTES 08 SECONDS W., A DISTANCE OF 267.63 FEET; THENCE S. 79 DEGREES 02 MINUTES 17 SECONDS W., A DISTANCE OF 490.78 FEET; THENCE S. 40 DEGREES 09 MINUTES 23 SECONDS W., A DISTANCE OF 133.35 FEET; THENCE S. 83 DEGREES 59 MINUTES 10 SECONDS W., A DISTANCE OF 162.01 FEET; THENCE SOUTH 16° 29’ 38” EAST, A DISTANCE OF 153.93 FEET; THENCE SOUTH 68° 33’ 52” EAST, A DISTANCE OF 24.67 FEET; THENCE SOUTH 21° 53’ 57” WEST, A DISTANCE OF 61.55 FEET; THENCE NORTH 66° 51’ 16” WEST, A DISTANCE OF 15.33 FEET; THENCE SOUTH 20° 50’ 25” WEST, A DISTANCE OF 410.61 FEET TO A POINT ON THE AFOREMENTIONED NORTHEASTERLY RIGHT OF WAY LINE OF TOUCHTON ROAD, THE SAME BEING A CURVE CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 800.00 FEET; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE, A DISTANCE OF 147.89 FEET, SAID ARC BEING SUBTENDED BY A CHORD BEARING OF NORTH 63° 51’ 49” WEST AND A CHORD DISTANCE OF 147.68 FEET TO THE POINT TANGENCY OF SAID CURVE; THENCE NORTH 58° 33’ 53” WEST, CONTINUING ALONG SAID NORTHEASTERLY RIGHT OF WAY LINE, A DISTANCE OF 253.93 FEET TO THE AFOREMENTIONED POINT OF BEGINNING.

EXHIBIT B

to
Assignment and Assumption Agreement

LIST OF SERVICE CONTRACTS

[List of Service Contracts to be Inserted]

EXHIBIT E

to
Contract of Sale

ASSIGNMENT OF TENANT LEASES AND ASSUMPTION

This ASSIGNMENT OF TENANT LEASES AND ASSUMPTION (this “Assignment”) is made and entered into as of July 20, 2015 (the “Effective Date”) by and between 9727 TOUCHTON ROAD, LLC, a Delaware limited liability company(“Assignor”), and WW DEERWOOD LLC, a Delaware limited liability company (“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 FLORIDA UNIFORM COMMERCIAL CODE OR ANY OTHER LAW.

Assignee hereby assumes and agrees to pay and perform all of the terms, covenants, conditions and obligations of the Assignor of the Premises under or with respect to the Property arising or accruing on or after the date hereof, and agrees to indemnify, defend and hold Assignor harmless from and against any claims, costs or liabilities in connection therewith arising or accruing on or after the date hereof. Subject to any limitations on damages contained in that certain Contract of Sale dated July 20, 2015 between Assignor and Assignee (the “Contract”), Assignor agrees to indemnify, defend and hold Assignee harmless from and against any claims, costs or liabilities in connection with the Property arising or accruing prior to 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.

REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE(S) FOLLOWS.

EXECUTED by the undersigned to be effective as of the Effective Date.

ASSIGNOR:

9727 TOUCHTON ROAD, LLC,

a Delaware limited liability company

By: 9727 Touchton Road Holding, LLC,
a Delaware limited liability company,
its Managing Member

By: /s/ S. Jason Hall
Name: S. Jason Hall
Title: SVP, Treasurer

ASSIGNEE:

WW DEERWOOD LLC,

a Delaware limited liability company

By: WW Deerwood Investors LLC,
a Texas limited liability company
its Member

By: /s/ W. Chandler Wonderly

Name: W. Chandler Wonderly

Title: Manager

Exhibit A - Land Description

EXHIBIT A

to
Assignment of Tenant Leases and Assumption

LAND DESCRIPTION

ALL THAT CERTAIN PIECE, PARCEL OR TRACT OF LAND SITUATE, LYING AND BEING IN THE COUNTY OF DUVAL AND STATE OF FLORIDA AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL OF PARCELS “P” AND “Q” TOGETHER WITH A PART OF PARCELS “M”, “S”, “R” AND “T”, ALL IN DEERWOOD PARK NORTH REPLAT NUMBER ONE, AS RECORDED IN PLAT BOOK 51, PAGES 6 AND 6A THROUGH 6N OF THE PUBLIC RECORDS OF DUVAL COUNTY, FLORIDA, ALL MORE PARTICULARLY DESCRIBED AS FOLLOWS: FOR A POINT OF BEGINNING COMMENCE AT A POINT ON THE NORTHEASTERLY RIGHT-OF-WAY LINE OF TOUCHTON ROAD (A 100 FOOT RIGHT-OF-WAY AS NOW ESTABLISHED), SAID POINT BEING COMMON TO AFOREMENTIONED PARCELS “P” AND “S”; THENCE N. 58 DEGREES 33 MINUTES 53 SECONDS W. ALONG SAID NORTHEASTERLY RIGHT-OF-WAY LINE, A DISTANCE OF 404.45 FEET TO A POINT COMMON TO PARCELS “O” AND “P”; THENCE N. 31 DEGREES 26 MINUTES 07 SECONDS E., ALONG THE LINE DIVIDING SAID PARCELS “0” AND “P” AND ITS NORTHEASTERLY PROJECTION, A DISTANCE OF 652.89 FEET TO A POINT ON THE NORTH LINE OF AFORESAID PARCEL “M”; THENCE S. 78 DEGREES 34 MINUTES 33 SECONDS E. A DISTANCE OF 115.92 FEET; THENCE S. 80 DEGREES 55 MINUTES 05 SECONDS E., ALONG A NORTHERLY LINE OF PARCEL “P”, A DISTANCE OF 409.87 FEET TO THE SOUTHWEST CORNER OF AFORESAID PARCEL “Q”; THENCE N. 09 DEGREES 58 MINUTES 54 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q”, A DISTANCE OF 465.04 FEET TO AN ANGLE POINT IN SAID WESTERLY LINE; THENCE N. 00 DEGREES 28 MINUTES 10 SECONDS W., ALONG A WESTERLY LINE OF SAID PARCEL “Q” A DISTANCE OF 75.59 FEET TO THE NORTHWEST CORNER OF SAID PARCEL “Q”; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., ALONG THE NORTH LINE OF SAID PARCELS “Q” AND “P”, A DISTANCE OF 1383.74 FEET, THENCE N. 03 DEGREES 56 MINUTES 48 SECONDS W., A DISTANCE OF 18.31 FEET; THENCE N. 89 DEGREES 52 MINUTES 54 SECONDS E., A DISTANCE OF 63.45 FEET; THENCE DUE SOUTH A DISTANCE OF 618.44 FEET TO A POINT ON A NORTHERLY LINE OF AFOREMENTIONED PARCEL “S”; THENCE WESTERLY ALONG THE NORTHERLY LINES OF SAID PARCEL “S” THE FOLLOWING FIVE (5) COURSES: 1) S. 86 DEGREES 30 MINUTES 29 SECONDS W. A DISTANCE OF 31.50 FEET, 2) S. 82 DEGREES 29 MINUTES 58 SECONDS WEST A DISTANCE OF 70.80 FEET; 3) N 89 DEGREES 32 MINUTES 23 SECONDS W. A DISTANCE OF 111.26 FEET; 4) S. 88 DEGREES 05 MINUTES 20 SECONDS W. A DISTANCE OF 109.55 FEET; 5) S. 73 DEGREES 00 MINUTES 45 SECONDS W., A DISTANCE OF 100.17 FEET; THENCE N. 83 DEGREES 00 MINUTES 08 SECONDS W., A DISTANCE OF 267.63 FEET; THENCE S. 79 DEGREES 02 MINUTES 17 SECONDS W., A DISTANCE OF 490.78 FEET; THENCE S. 40 DEGREES 09 MINUTES 23 SECONDS W., A DISTANCE OF 133.35 FEET; THENCE S. 83 DEGREES 59 MINUTES 10 SECONDS W., A DISTANCE OF 162.01 FEET; THENCE SOUTH 16° 29’ 38” EAST, A DISTANCE OF 153.93 FEET; THENCE SOUTH 68° 33’ 52” EAST, A DISTANCE OF 24.67 FEET; THENCE SOUTH 21° 53’ 57” WEST, A DISTANCE OF 61.55 FEET; THENCE NORTH 66° 51’ 16” WEST, A DISTANCE OF 15.33 FEET; THENCE SOUTH 20° 50’ 25” WEST, A DISTANCE OF 410.61 FEET TO A POINT ON THE AFOREMENTIONED NORTHEASTERLY RIGHT OF WAY LINE OF TOUCHTON ROAD, THE SAME BEING A CURVE CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 800.00 FEET; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE, A DISTANCE OF 147.89 FEET, SAID ARC BEING SUBTENDED BY A CHORD BEARING OF NORTH 63° 51’ 49” WEST AND A CHORD DISTANCE OF 147.68 FEET TO THE POINT TANGENCY OF SAID CURVE; THENCE NORTH 58° 33’ 53” WEST, CONTINUING ALONG SAID NORTHEASTERLY RIGHT OF WAY LINE, A DISTANCE OF 253.93 FEET TO THE AFOREMENTIONED POINT OF BEGINNING.

EXHIBIT F

to
Contract of Sale

TENANT NOTICE LETTER

_____________________

Apartment No._________

_____________________

NOTICE OF CHANGE OF OWNERSHIP

Re: Notice of Change of Ownership of 9727 Touchton Road, Jacksonville, Duval County, Florida (the “Property”)

Dear Tenant:

We are pleased to announce that, as of __________, 2015, 9727 Touchton Road, LLC, a Delaware limited liability company, has transferred, sold, assigned, and conveyed the Property to WW Deerwood LLC (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 _________________________________________________________________.

Very truly yours,

NEW OWNER:

WW DEERWOOD LLC,
a Delaware limited liability company

By: WW Deerwood Investors LLC,
a Texas limited liability company
its Member

By: /s/ W. Chandler Wonderly

Name: W. Chandler Wonderly
Title: Manager

TRANSFER ACKNOWLEDGED:

9727 TOUCHTON ROAD, LLC,

a Delaware limited liability company

By: 9727 Touchton Road Holding, LLC,
a Delaware limited liability company,
its Managing Member

By: /s/ S. Jason Hall
Name: S. Jason Hall
Title: SVP, Treasurer

-45-

Contract of Sale (Wimberly at Deerwood)

NAI-1500426046v5

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Thomas P. Kennedy, 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 13th day of August, 2015. 

/s/ Thomas P. Kennedy

Thomas P. Kennedy

President

Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, S. Jason Hall, 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 13th day of August, 2015.

/s/ S. Jason Hall

S. Jason Hall

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 President 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 13th day of August, 2015.

/s/ Thomas P. Kennedy

Thomas P. Kennedy

President

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 13th day of August, 2015.

/s/ S. Jason Hall

S. Jason Hall

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 and Real Estate-Related Investments (Details) $ in Thousands, € in Millions				3 Months Ended			6 Months Ended
	Feb. 21, 2015 EUR (€)	Feb. 21, 2015 USD ($)	Jan. 08, 2015 USD ($)	Jun. 30, 2015 USD ($) real_estate_investment	Mar. 31, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) real_estate_investment	Jun. 30, 2014 USD ($)	Oct. 20, 2010 building
Real Estate Properties [Line Items]
Number of real estate assets consolidated | real_estate_investment				10			10
Loss on early extinguishment of debt				$ 0		$ (454)	$ (119)	$ (454)
Repayment of long-term debt							17,716	16,682
Cumulative translation adjustment				0		0	596	0
Gain on sale of real estate				0		11,445	5,320	11,445
Repayments of debt							8,600
Net income (loss) attributable to the Company				(1,960)		9,184	$ (2,133)	6,300
Holstenplatz, Hamburg, Germany
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							100.00%
Gardens Medical Pavilion, South Florida
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							80.40%
Real estate ownership interest							80.40%
Courtyard Kauai at Coconut Beach Hotel
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							80.00%
River Club and the Townhomes at River Club, Athens, Georgia
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							85.00%
Babcock Self Storage San Antonio
Real Estate Properties [Line Items]
Loss on early extinguishment of debt			$ (100)
Repayment of long-term debt			$ 2,100
Ownership interest percentage			85.00%
Sales contract price, real estate			$ 5,400
Net cash proceeds from sale of real estate			5,200
Gain on sale of real estate			$ 2,000
Lakes of Margate, Margate, Florida
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							92.50%
Arbors Harbor Town, Memphis, Tennessee
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							94.00%
Alte Jakobstrabe Berlin
Real Estate Properties [Line Items]
Loss on early extinguishment of debt		$ (100)
Repayment of long-term debt	€ 5.7	6,500
Cumulative translation adjustment		$ 600			$ 600
Ownership interest percentage	99.70%	99.70%
Sales contract price, real estate	€ 12.4	$ 14,100
Net cash proceeds from sale of real estate		13,000
Gain on sale of real estate		$ 3,300
Wimberly at Deerwood, Jacksonville, Florida
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							95.00%
22 Exchange, Akron, Ohio
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							90.00%
Parkside Apartments, Sugarland, Texas
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							90.00%
Original Florida MOB Portfolio
Real Estate Properties [Line Items]
Number of properties | building									8
Florida MOB Portfolio, South Florida
Real Estate Properties [Line Items]
Number of properties | building									9
Lakewood Flats
Real Estate Properties [Line Items]
Ownership Interest (as a percent)							100.00%
Disposal Group, Not Discontinued Operations | Babcock, Alte Jakobstrabe and 1875 Lawrence
Real Estate Properties [Line Items]
Net income (loss) attributable to the Company				500		10,600	$ 2,900	9,900
Disposal Group, Not Discontinued Operations | 1875 Lawrence, Denver, CO
Real Estate Properties [Line Items]
Net income (loss) attributable to the Company						$ 11,400		$ 11,400
Disposal Group, Not Discontinued Operations | Babcock, Alte Jakobstrabe and 1875 Lawrence
Real Estate Properties [Line Items]
Net income (loss) attributable to the Company							$ 5,300
Foreign Tax Authority | Alte Jakobstrabe Berlin
Real Estate Properties [Line Items]
Provision (credit) for income tax				$ (500)	$ 2,200

XML

Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Supplemental Cash Flow Information [Abstract]
Interest paid, net of amounts capitalized	$ 3,252	$ 3,915
Income tax paid, net	35	196
Escrow Deposits Related to Property Sales	912	0
Non-cash investing and financing activities:
Capital expenditures for real estate in accrued liabilities	583	393
Accrued distributions to noncontrolling interest holder	$ 20	$ 72

XML

Derivative Instruments and Hedging Activities - Additional Information (Details)	6 Months Ended
	Jun. 30, 2015 USD ($) derivative	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Interest rate cap
Derivative [Line Items]
Number of interest rate caps	2
Designated as Hedging Instrument
Derivative [Line Items]
Number of derivatives held	0
Interest Expense
Derivative [Line Items]
Reclassification of unrealized loss to interest expense (less than) | $	$ 0	$ 100,000.0
Prepaid Expenses and Other Assets
Derivative [Line Items]
Derivative financial instruments (less than) | $	$ 100,000.0		$ 100,000.0

XML

Subsequent Events (Details) - Subsequent Event € in Millions, $ in Millions	Jul. 20, 2015 USD ($)	Jul. 16, 2015 EUR (€)	Jul. 16, 2015 USD ($)	Aug. 11, 2015 USD ($) shares
Subsequent Event [Line Items]
Stock redemptions approved (in shares) | shares				36,457
Aggregate redemption payment of shares approved				$ 0.2
Holstenplatz Notes
Subsequent Event [Line Items]
Sales contract price, real estate		€ 16.5	$ 18.1
Wimberly at Deerwood
Subsequent Event [Line Items]
Sales contract price, real estate	$ 43.5

XML

Leasing Activity - Schedule of Future Minimum Payments (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Leases [Abstract]
July 1, 2015 - December 31, 2015	$ 566
2015	1,156
2016	1,028
2017	716
2018	646
Thereafter	2,992
Total	$ 7,104

XML

Business and Organization (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) real_estate_investment shares	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) real_estate_investment shares	Jun. 30, 2014 USD ($)	Dec. 31, 2014 shares	Jan. 19, 2007 shares
Business and Organization
Straight-line rental revenue | $	$ 0.1	$ 0.1	$ 0.1	$ 0.1
Number of real estate investments | real_estate_investment			11
Number of real estate assets consolidated | real_estate_investment	10		10
Percentage of ownership interest by BHO II, Inc			0.10%
Percentage of remaining ownership interest held by BHO Business Trust II			99.90%
Common stock, shares issued	25,691,443		25,691,443		25,801,669
Common stock, shares outstanding	25,691,443		25,691,443		25,801,669
Redemption of common stock (in shares)			1,000,000
Convertible stock outstanding	1,000		1,000		1,000
Maximum
Business and Organization
Liquidation period of assets and distribution of net proceeds to stockholders			6 years
Initial Capitalization | Behringer Harvard Holdings
Business and Organization
Common stock, shares issued						22,471
Convertible stock issued (in shares)						1,000
Common stock, shares outstanding	22,471		22,471
Convertible stock outstanding	1,000		1,000
Initial Offering
Business and Organization
Common stock, shares issued	26,700,000		26,700,000
Common stock issued pursuant to reinvestment plan			2,200,000
Consolidated Entities | Wholly Owned Properties
Business and Organization
Number of real estate investments | real_estate_investment			2
Consolidated Entities | Partially Owned Properties
Business and Organization
Number of real estate investments | real_estate_investment			8

XML

Assets and Liabilities Measured at Fair Value (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Schedule of information about assets measured at fair value on a recurring basis

The following fair value hierarchy table presents information about our assets measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014:

June 30, 2015	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	5	$	—	$	5

December 31, 2014	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	28	$	—	$	28

XML

Derivative Instruments and Hedging Activities - Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Derivative not designated as hedging instruments | Interest rate derivative contracts
Derivative [Line Items]
Derivative financial instruments	$ 5	$ 28

XML

Investment in Unconsolidated Joint Venture - Additional Information (Details) - Prospect Park $ in Millions			3 Months Ended		6 Months Ended
	May. 05, 2014 USD ($)	May. 24, 2013 USD ($) extension_option	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)
Investment in Unconsolidated Joint Venture
Outstanding principal balance under mezzanine loan			$ 15.2		$ 15.2
Interest capitalized			$ 0.1	$ 0.1	$ 0.2	$ 0.2
Initial Advance to Joint Venture
Investment in Unconsolidated Joint Venture
Loans receivable, construction		$ 13.7
Annual interest rate (as a percent)		10.00%
Period for which annual interest rate will be 10 percent		3 years
Number of extensions of the term of mezzanine loan at the option of the borrower | extension_option		2
Period of extension of the term of mezzanine loan at the option of the borrower		1 year
Annual interest rate after two extensions of mezzanine loan (as a percent)		14.00%
Initial Advance to Joint Venture | Third-party senior construction lender
Investment in Unconsolidated Joint Venture
Loans receivable, construction		$ 35.6
Additional Advance to Joint Venture
Investment in Unconsolidated Joint Venture
Annual interest rate (as a percent)	18.00%
Construction cost overruns	$ 6.6
Increase to maximum borrowing capacity, loan receivable	1.5
Additional Advance to Joint Venture | Third-party senior construction lender
Investment in Unconsolidated Joint Venture
Loans receivable, construction	$ 40.0

XML

Assets and Liabilities Measured at Fair Value (Details) - Recurring - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets
Derivative financial instruments	$ 5	$ 28
Level 1
Assets
Derivative financial instruments	0	0
Level 2
Assets
Derivative financial instruments	5	28
Level 3
Assets
Derivative financial instruments	$ 0	$ 0

XML

Distributions (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended			6 Months Ended
	Mar. 18, 2015	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2014	Jun. 30, 2014
Distributions [Abstract]
Special distribution declared on common stock (in dollars per share)	$ 1.00
Special distribution declared on common stock, amount		$ 0.0	$ 25.7	$ 0.0	$ 0.0

XML

Leasing Activity - Additional Information (Details) - Jun. 30, 2015 $ in Thousands	USD ($) office_property
Operating Leased Assets [Line Items]
Maximum lease term	1 year
Future minimum payments, after five years	$ 2,992
Holstenplatz Notes
Operating Leased Assets [Line Items]
Minimum payments over the next five years	3,600
Future minimum payments, after five years	$ 1,700
Germany and Florida
Operating Leased Assets [Line Items]
Number of office properties remaining | office_property	2

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

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 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, or substantive participating rights or both under the respective ownership agreement.  For entities in which we have less than a controlling interest or entities which we are not deemed to be the primary beneficiary, we account for the investment using the equity method of accounting.

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 hotels and all other buildings is depreciated over the estimated useful lives of 39 years and 25 years, respectively, 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 existing 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 existing 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.  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 June 30, 2015 was as follows: 

Year	Lease / Other Intangibles
July 1, 2015 - December 31, 2015	$	18
2016	36
2017	20
2018	(14		)
2019	(12		)

_________________________

(1) Excludes Holstenplatz which was classified as held for sale as of June 30, 2015. The anticipated amortization expense of Holstenplatz over the next five years is $0.2 million.

As of June 30, 2015 and December 31, 2014, accumulated depreciation and amortization related to our consolidated investments in real estate assets and intangibles were as follows: 

June 30, 2015	Buildings and Improvements			Land and Improvements			Lease Intangibles			Acquired Below-Market Leases
Cost(1)	$	244,605		$	59,759		$	3,023		$	(184	)
Less: depreciation and amortization(1)	(27,785		)	(2,459		)	(2,703		)	96
Net	$	216,820		$	57,300		$	320		$	(88	)

______________________________________________

(1) Excludes Holstenplatz, which was classified as held for sale as of June 30, 2015. We entered into a PSA effective July 16, 2015 to sell Holstenplatz, an office building located in Germany. Net book values included in assets associated with real estate held for sale on the condensed consolidated balance sheet were buildings and improvements of $6.8 million, land and improvements of $2.5 million, lease intangibles of $0.4 million, and acquired below-market leases of less than $0.1 million. See Note 8, Real Estate Held for Sale.

December 31, 2014	Buildings and Improvements			Land and Improvements			Lease Intangibles			Acquired Below-Market Leases
Cost(1)	$	252,812		$	62,447		$	4,551		$	(469	)
Less: depreciation and amortization(1)	(24,162		)	(2,073		)	(2,701		)	259
Net	$	228,650		$	60,374		$	1,850		$	(210	)

______________________________________________

(1) Excludes Babcock and AJS, which were classified as held for sale as of December 31, 2014. These two properties sold on January 8, 2015 and February 21, 2015, respectively. Net book values included in assets associated with real estate held for sale in the consolidated balance sheet were buildings and improvements of $9.6 million, land and improvements of $3.2 million, lease intangibles of $0.2 million, and acquired below-market leases of less than $0.1 million. See Note 8, Real Estate Held for Sale.

Real Estate Held for Sale and Discontinued Operations

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 June 30, 2015, we were in active negotiations for the disposal of Holstenplatz, and on July 16, 2015, we entered into a PSA to sell Holstenplatz, an office building located in Germany and our only remaining foreign operation at June 30, 2015. The prospective buyer has substantially completed the due diligence process and we believe the sale is probable within the next twelve months. Therefore, we classified Holstenplatz as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015. During the fourth quarter of 2014, we entered into PSAs for Babcock, a self storage facility in Texas, and AJS, an office building located in Germany, and classified Babcock and AJS as real estate held for sale in our consolidated balance sheet at December 31, 2014. We sold Babcock on January 8, 2015 and AJS on February 21, 2015.

Effective as of April 1, 2014, we adopted the revised guidance in Accounting Standards Update No. 2014-08 regarding discontinued operations. For sales of real estate or assets classified as held for sale after April 1, 2014, we will evaluate whether a disposal transaction meets the criteria of a strategic shift and will have a major effect on our operations and financial results to determine if the results of operations and gains on sale of real estate will be presented as part of our continuing operations or as discontinued operations in our consolidated statements of operations. If the disposal represents a strategic shift, it will be classified as discontinued operations for all periods presented; if not, it will be presented in continuing operations.

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 those 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.  These projected cash flows are prepared internally by the Advisor and reflect in-place and projected leasing activity, market revenue and expense growth rates, market capitalization rates, discount rates, and changes in economic and other relevant conditions. The Company’s principal executive officer and principal financial officer, as well as a panel of asset managers and a financial analyst of the Advisor, review these projected cash flows to assure that the valuation is prepared using reasonable inputs and assumptions that are consistent with market data or with assumptions that would be used by a third-party market participant and assume the highest and best use of the investment. We consider trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. 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.  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. In addition, we may incur impairment charges on assets classified as held for sale in the future if the carrying amount of the asset upon classification as held for sale exceeds the estimated fair value, less costs to sell.

We also evaluate our investments in unconsolidated joint ventures at each reporting date.  If we believe there is an other than temporary decline in market value, we will record an impairment charge based on these evaluations.  We assess potential impairment by comparing our portion of estimated future undiscounted operating cash flows expected to be generated by the joint venture over the life of the joint venture’s assets to the carrying amount of the joint venture.  In the event that the carrying amount exceeds our portion of estimated future undiscounted operating cash flows, we recognize an impairment loss to adjust the carrying amount of the joint venture to its estimated fair value.

We believe the carrying value of our operating real estate is currently recoverable. Accordingly, there were no impairment charges for the three and six months ended June 30, 2015 and 2014.  However, if market conditions worsen unexpectedly 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.

Investment in Unconsolidated Joint Venture

We provide funding to third-party developers for the acquisition, development, and construction of real estate (“ADC Arrangement”).  Under the ADC Arrangement, we may participate in the residual profits of the project through the sale or refinancing of the property.  We evaluate this arrangement to determine if it has characteristics similar to a loan or if the characteristics are more similar to a joint venture or partnership such as participating in the risks and rewards of the project as an owner or an investment partner.  When we determine that the characteristics are more similar to a jointly-owned investment or partnership, we account for the arrangement as an investment in an unconsolidated joint venture under the equity method of accounting or a direct investment (consolidated basis of accounting) instead of applying loan accounting. The ADC Arrangement is reassessed at each reporting period. See Note 9, Investment in Unconsolidated Joint Venture, for further discussion.

Revenue Recognition

We recognize rental income generated from leases of our operating properties on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any.  Straight-line rent was income of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2015. Straight-line rent was a charge of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2014. Leases associated with our multifamily, student housing, and hotel assets are generally short-term in nature, and thus have no straight-line rent. Net below-market lease amortization was income of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2015. Net above-market lease amortization was a charge of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2014.

Hotel revenue is derived from the operations of the Courtyard Kauai Coconut Beach Hotel and consists primarily of guest room, food and beverage, and other ancillary revenues such as laundry and parking. Hotel revenue is recognized as the services are rendered.

Accounts Receivable

Accounts receivable primarily consist of receivables related to our consolidated properties of $2.5 million and $2.2 million as of June 30, 2015 and December 31, 2014, respectively, and included straight-line rental revenue receivables of $0.4 million and $0.6 million as of June 30, 2015 and December 31, 2014, respectively. 

Furniture, Fixtures, and Equipment

Furniture, fixtures, and equipment are recorded at cost and are depreciated according to the Company’s capitalization policy, which uses the straight-line method over their estimated useful lives of five to seven years.  Furniture, fixtures and equipment associated with properties classified as held for sale are not depreciated. Maintenance and repairs are charged to operations as incurred.  Accumulated depreciation associated with our furniture, fixtures, and equipment was $7.7 million and $6.4 million as of June 30, 2015 and December 31, 2014, 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 $2.3 million and $2.2 million as of June 30, 2015 and December 31, 2014, respectively.

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. Taxable income from non-REIT activities managed through a taxable REIT subsidiary (“TRS”) is subject to applicable federal, state, and local income and margin taxes. We have no taxable income associated with a TRS. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level.

The Company recorded a provision for income tax of approximately $2.2 million in the first quarter of 2015 as a result of estimated foreign income tax related to the sale of AJS which is located in Berlin, Germany. The foreign income tax was calculated on gains recognized at the exchange rate in effect on the sale date of February 21, 2015 and calculated using current tax rates. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS.

We have reviewed our tax positions under GAAP guidance that clarify 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 federal tax status as a REIT will be sustained in any tax examination.

Foreign Currency Translation

For our international investments 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 other comprehensive income (loss) (“OCI”) as a separate component. 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 AJS. We sold AJS in the first quarter of 2015. 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 three and six months ended June 30, 2015, the foreign currency translation adjustment was a gain of $0.4 million and a loss of $0.4 million, respectively. For the three and six months ended June 30, 2014, the foreign currency translation adjustment was a loss of less than $0.1 million.

When the Company has substantially liquidated its investment in a foreign entity, the cumulative translation adjustment (“CTA”) balance is required to be released into earnings. During the first quarter of 2015, we recognized a CTA of approximately $0.6 million as a reduction to the gain on sale of our AJS office building which we sold on February 21, 2015. Our wholly owned investment in the Holstenplatz office building, located in Hamburg, Germany, is our only remaining foreign operation and is classified as real estate held for sale at June 30, 2015. The cumulative balance of our foreign currency translation for Holstenplatz is a gain of $0.3 million at June 30, 2015. In accordance with ASU 2013-05, upon disposal of the property, we would recognize the CTA as an adjustment to the gain on sale.

Concentration of Credit Risk

At June 30, 2015 and December 31, 2014, 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.

Geographic and Asset Type Concentration

Our investments in target assets may at times be concentrated in certain asset types that are subject to higher risk of foreclosure, or secured by assets concentrated in a limited number of geographic locations. For the six months ended June 30, 2015, excluding Holstenplatz, which was classified as real estate held for sale at June 30, 2015, and Babcock and AJS which were sold in the first quarter of 2015, 36% and 20% of our total revenues were derived from our properties located in Hawaii and Florida, respectively. Additionally, excluding Holstenplatz, Babcock, and AJS, 44%, 36%, and 16% of our total revenues for the six months ended June 30, 2015 were from our multifamily, hotel, and student housing investments, respectively. To the extent that our portfolio is concentrated in limited geographic regions or types of assets, downturns relating generally to such region or type of asset may result in defaults on a number of our investments within a short time period, which may reduce our net income and the value of our common stock and accordingly limit our ability to fund our operations.

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 generally on their ownership percentage.  In certain instances, our joint venture agreement provides for liquidating distributions based on achieving certain return metrics (“promoted interest”).  If a property reaches a defined return threshold, then it will result in distributions to noncontrolling interest which is different from the standard pro-rata allocation 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 loss per share were the same for each of the three and six months ended June 30, 2015 and 2014, as there were no potentially dilutive securities outstanding.

Subsequent Events

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

XML

Investment in Unconsolidated Joint Venture - Schedule of Ownership Interest (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Prospect Park
Investment in Unconsolidated Joint Venture
Carrying Amount	$ 14,222	$ 13,973

XML

Notes Payable (Tables)

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Schedule of information on notes payable

The following table sets forth information on our notes payable as of June 30, 2015 and December 31, 2014:

	Notes Payable as of
Description	June 30, 2015		December 31, 2014		Interest Rate		Maturity Date
Holstenplatz(2)	n/a		$	9,125	3.887%		4/30/2015
Courtyard Kauai Coconut Beach Hotel	38,000		38,000		30-day LIBOR + .95%	(1)	11/9/2015
Florida MOB Portfolio - Gardens Medical Pavilion	13,491		13,678		4.9%		1/1/2018
River Club and the Townhomes at River Club	24,482		24,664		5.26%		5/1/2018
Lakes of Margate	14,617		14,723		5.49% and 5.92%		1/1/2020
Arbors Harbor Town	25,362		25,591		3.985%		1/1/2019
Wimberly	26,551		26,685		30-day LIBOR + 2.28%	(1)	3/1/2023
22 Exchange	19,500		19,500		3.93%		5/5/2023
Parkside(3)	10,649		10,828		5%		6/1/2018
Lakewood Flats	33,500		33,500		30-day LIBOR + 1.5%	(1)	11/5/2019
	$	206,152	$	216,294
Notes payable in obligations associated with real estate held for sale:
Holstenplatz(2)	$	—	n/a		3.887%		4/30/2015
Babcock Self Storage(4)	—		2,137		5.8%		8/30/2018
Alte Jakobstraße(4)	—		6,985		2.3%		12/30/2015
	$	—	$	9,122
Total notes payable obligations	$	206,152	$	225,416

_________________________________

(1) 30-day London Interbank Offer Rate (“LIBOR”) was 0.19% at June 30, 2015.

(2) We paid off the balance of the Holstenplatz debt on April 30, 2015. As of June 30, 2015, Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet.

(3) Includes approximately $0.5 million of unamortized premium related to debt we assumed at acquisition.

(4) As of December 31, 2014, Babcock and AJS were classified as real estate held for sale on our consolidated balance sheet. The properties were sold in the first quarter of 2015 and a portion of the sales proceeds for each property was used to pay off the existing indebtedness in full.

Contractual obligations for principal payments

The following table summarizes our contractual obligations for principal payments as of June 30, 2015:  

Year	Amount Due
July 1, 2015 - December 31, 2015	$	39,082
2016	2,447
2017	2,670
2018	47,393
2019	58,345
Thereafter	55,724
Total contractual obligations for principal payments	$	205,661
Unamortized premium	491
Total notes payable	$	206,152

XML

Investment in Unconsolidated Joint Venture (Tables)

6 Months Ended

Jun. 30, 2015

Equity Method Investments and Joint Ventures [Abstract]

Schedule of ownership interest in Prospect Park that is recorded as equity investment

The following table sets forth our ownership interest in Prospect Park: 

	Ownership Interest		Carrying Amount
Property Name	June 30, 2015	December 31, 2014	June 30, 2015	December 31, 2014
Prospect Park	N/A	N/A	$14,222	$13,973

XML

Notes Payable (Details) $ in Thousands, € in Millions					3 Months Ended			6 Months Ended
	Apr. 30, 2015 USD ($)	Feb. 21, 2015 EUR (€)	Feb. 21, 2015 USD ($)	Jan. 08, 2015 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Notes Payable
Notes payable					$ 206,152			$ 206,152		$ 216,294
Variable rate (as a percent)					0.19%			0.19%
Repayment of long-term debt								$ 17,716	$ 16,682
Courtyard Kauai at Coconut Beach Hotel
Notes Payable
Notes payable					$ 38,000			38,000
Alte Jakobstrabe
Notes Payable
Repayment of long-term debt		€ 5.7	$ 6,500
Babcock Self Storage
Notes Payable
Repayment of long-term debt				$ 2,100
Notes Payable, Other Payables | Holstenplatz Notes
Notes Payable
Notes payable					$ 0			$ 0		9,125
Interest rate (as a percent)					3.887%			3.887%
Repayment of long-term debt	$ 8,100
Notes Payable, Other Payables | Courtyard Kauai at Coconut Beach Hotel
Notes Payable
Variable rate basis						30-day LIBOR
Variable rate (as a percent)								0.95%
Notes payable					$ 38,000			$ 38,000		38,000
Variable rate (as a percent)					0.15%			0.15%
Notes Payable, Other Payables | Florida MOB Portfolio - Gardens Medical Pavilion
Notes Payable
Notes payable					$ 13,491			$ 13,491		13,678
Interest rate (as a percent)					4.90%			4.90%
Notes Payable, Other Payables | River Club and the Townhomes at River Club (formerly referred to as the UGA Portfolio)
Notes Payable
Notes payable					$ 24,482			$ 24,482		24,664
Interest rate (as a percent)					5.26%			5.26%
Notes Payable, Other Payables | Lakes of Margate
Notes Payable
Notes payable					$ 14,617			$ 14,617		14,723
Minimum interest rate (as a percent)								5.49%
Maximum interest rate (as a percent)								5.92%
Notes Payable, Other Payables | Arbors Harbor Town
Notes Payable
Notes payable					$ 25,362			$ 25,362		25,591
Interest rate (as a percent)					3.985%			3.985%
Notes Payable, Other Payables | Wimberly at Deerwood
Notes Payable
Variable rate basis						30-day LIBOR
Variable rate (as a percent)								2.28%
Notes payable					$ 26,551			$ 26,551		26,685
Variable rate (as a percent)					0.15%			0.15%
Notes Payable, Other Payables | 1875 Lawrence, Denver, CO
Notes Payable
Variable rate basis						30-day LIBOR
Variable rate (as a percent)								5.35%
Variable rate (as a percent)					0.15%			0.15%
Notes Payable, Other Payables | 22 Exchange
Notes Payable
Notes payable					$ 19,500			$ 19,500		19,500
Interest rate (as a percent)					3.93%			3.93%
Notes Payable, Other Payables | Parkside
Notes Payable
Notes payable					$ 10,649			$ 10,649		10,828
Interest rate (as a percent)					5.00%			5.00%
Debt instrument, unamortized premium					$ 500			$ 500
Notes Payable, Other Payables | Lakewood Flats
Notes Payable
Notes payable					33,500			33,500		33,500
Prospect Park
Notes Payable
Interest capitalized					100		$ 100	$ 200	$ 200
Alte Jakobstrabe
Notes Payable
Repayment of long-term debt		€ 5.7	$ 6,500
Babcock Self Storage
Notes Payable
Repayment of long-term debt				$ 2,100
Notes Payable to Banks | Courtyard Kauai at Coconut Beach Hotel
Notes Payable
Debt instrument, term of renewal option								18 months
Notes Payable, Other Payables
Notes Payable
Notes payable					0			$ 0		9,122
Notes Payable, Other Payables | Alte Jakobstrabe
Notes Payable
Notes payable					0			0		6,985
Notes Payable, Other Payables | Babcock Self Storage
Notes Payable
Notes payable					0			0		2,137
Notes Payable, Assets Held-for-sale
Notes Payable
Notes payable					$ 206,152			$ 206,152		$ 225,416

XML

Leasing Activity (Tables)

6 Months Ended

Jun. 30, 2015

Leases [Abstract]

Future minimum base rental payments of our office and industrial properties due to us under non-cancelable leases

Future minimum base rental payments of our office properties due to us under non-cancelable leases in effect as of June 30, 2015 are as follows: 

Year	Amount Due
July 1, 2015 - December 31, 2015	$	566
2016	1,156
2017	1,028
2018	716
2019	646
Thereafter	2,992
Total	$	7,104

XML

Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of notional value of derivative financial instruments

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 Date
Not Designated as Hedging Instruments
Interest rate cap - Courtyard Kauai Coconut Beach Hotel	$	38,000	3.00%	30-day LIBOR	October 15, 2016
Interest rate cap - Wimberly	26,685		4.56%	30-day LIBOR	March 1, 2018

Summary of fair value of derivative financial instruments

The table below presents the fair value of our derivative financial instruments, as well as their classification on the consolidated balance sheets as of June 30, 2015 and December 31, 2014: 

Derivatives not designated as hedging instruments:		Asset Derivatives
	Balance Sheet Location	June 30, 2015		December 31, 2014
Interest rate derivative contracts	Prepaid expenses and other assets	$	5	$	28

Summary of effect of derivative financial instruments on consolidated statements of operations

The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014: 

Derivatives Not Designated as Hedging Instruments
Amount of Loss
Three months ended June 30,				Six months ended June 30,
2015		2014		2015		2014
$	—	$	103	$	15	$	159

XML

Interim Unaudited Financial Information

6 Months Ended

Jun. 30, 2015

Interim Unaudited Financial Information

Interim Unaudited Financial Information

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, 2014, which was filed with the SEC on March 20, 2015.  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 June 30, 2015, the condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2015 and 2014 and condensed consolidated statements of equity and cash flows for the six months ended June 30, 2015 and 2014 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 June 30, 2015 and December 31, 2014 and our condensed consolidated results of operations and cash flows for the periods ended June 30, 2015 and 2014.  Such adjustments are of a normal recurring nature.

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.

XML

Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Information [Abstract]

Schedule of supplemental cash flow information

Supplemental cash flow information is summarized below:  

	Six months ended June 30,
Description	2015		2014
Interest paid, net of amounts capitalized	$	3,252	$	3,915
Income tax paid, net	35		196
Non-cash investing and financing activities:
Proceeds held in escrow through sale of real estate interests	912		—
Capital expenditures for real estate in accrued liabilities	583		393
Accrued distributions to noncontrolling interest holder	20		72

XML

Real Estate Held for Sale - Additional Information (Details) - Subsequent Event € in Millions, $ in Millions	Jul. 20, 2015 USD ($)	Jul. 16, 2015 EUR (€)	Jul. 16, 2015 USD ($)
Holstenplatz Notes
Long Lived Assets Held-for-sale [Line Items]
Sales contract price, real estate		€ 16.5	$ 18.1
Wimberly at Deerwood
Long Lived Assets Held-for-sale [Line Items]
Sales contract price, real estate	$ 43.5

XML

Related Party Transactions (Details) $ in Thousands		3 Months Ended		6 Months Ended
	Jun. 06, 2015 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) installment	Jun. 30, 2014 USD ($)	Dec. 31, 2013 USD ($)
Related party transaction
Acquisition and advisory fees incurred				$ 100	$ 100
Reimbursement of acquisition expense		$ 100		100
Asset management fees incurred		$ 717	$ 98	$ 1,442	1,068
Advisor
Related party transaction
Acquisition and advisory fees as percentage of purchase, development, construction, or improvement of each asset acquired				1.50%
Acquisition and advisory fees as percentage of funds advanced in respect of loan or other investment				1.50%
Percentage of debt financing fee payable under loan or line of credit				0.50%
Asset management fee, annual (percent)				0.70%
Asset management fees accrued						$ 300
Reversal of asset management fees accrued			$ 100
Asset management fees incurred				$ 1,300	1,000
Administrative service fee, annual	$ 1,800			$ 1,500
Administrative service fees, number of annual installment payments | installment				4
Administrative service fees, maximum period for payment				45 days
Administrative services cost incurred and expensed				$ 800	900
Due diligence service costs (less than)				$ 100
Construction management fee, percentage (not to exceed)				5.00%
Construction management fees (less than)					100
Advisor | Funds paid for purchasing an asset
Related party transaction
Percentage of reimbursement of acquisition expense				0.25%
Advisor | Funds budgeted for development, construction or improvement of assets
Related party transaction
Percentage of reimbursement of acquisition expense				0.25%
Advisor | Funds advanced in respect of loan investment
Related party transaction
Percentage of reimbursement of acquisition expense				0.25%
Behringer Harvard Opportunity II Management Services, LLC
Related party transaction
Property management fees as percentage of gross revenues of properties				4.00%
Oversight fee as percentage of gross revenues of property managed				0.50%
Property management fees or oversight fees incurred				$ 300	$ 300
Behringer Harvard Opportunity II Management Services, LLC | Minimum
Related party transaction
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%

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Real estate
Land and improvements, net	$ 57,300	$ 60,374
Buildings and improvements, net	216,820	228,650
Real estate under development	589	274
Total real estate	274,709	289,298
Real Estate Held-for-sale	9,581	12,951
Cash and cash equivalents	47,985	72,949
Restricted cash	4,891	4,199
Accounts receivable, net	2,530	2,208
Prepaid expenses and other assets	842	1,402
Investment in unconsolidated joint venture	14,222	13,973
Furniture, fixtures and equipment, net	7,384	8,244
Deferred financing fees, net	2,204	2,617
Lease intangibles, net	320	1,850
Total assets	364,668	409,691
Liabilities and Equity
Notes payable	206,152	216,294
Accounts payable	594	702
Payables to related parties	389	466
Acquired below-market leases, net	88	210
Distributions payable to noncontrolling interest	20	19
Income taxes payable	1,648	0
Accrued and other liabilities	8,029	6,232
Real Estate Liabilities Associated with Assets Held for Development and Sale	95	9,212
Total liabilities	217,015	233,135
Commitments and contingencies	0	0
Equity
Preferred stock, $.0001 par value per share; 50,000,000 shares authorized, none outstanding	0	0
Convertible stock, $.0001 par value per share; 1,000 shares authorized, 1,000 outstanding	0	0
Common stock, $.0001 par value per share; 350,000,000 shares authorized, 25,691,443 and 25,801,669 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	3	3
Additional paid-in capital	230,480	231,240
Accumulated distributions and net loss	(90,342)	(62,477)
Accumulated other comprehensive income	(22)	(246)
Total Behringer Harvard Opportunity REIT II, Inc. equity	140,119	168,520
Noncontrolling interest	7,534	8,036
Total equity	147,653	176,556
Total liabilities and equity	$ 364,668	$ 409,691

XML

Notes Payable (Details 2) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Debt Instrument [Line Items]
Repayments of Notes Payable	$ 17,716	$ 16,682
Contractual obligations for principal payments
July 1, 2015 - December 31, 2015	39,082
2015	2,447
2016	2,670
2017	47,393
2018	58,345
Thereafter	55,724
Total contractual obligations for principal payments	205,661
Unamortized premium	491
Total notes payable	206,152		$ 216,294
Courtyard Kauai at Coconut Beach Hotel
Contractual obligations for principal payments
Total notes payable	$ 38,000
Courtyard Kauai at Coconut Beach Hotel | Notes Payable to Banks
Debt Instrument [Line Items]
Debt Instrument, Renewal Option, Term	18 months

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net income (loss)	$ (1,540)	$ 6,176
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization	8,292	7,006
Amortization of deferred financing fees	370	415
Gain on sale of real estate	(5,320)	(11,445)
Loss on early extinguishment of debt	119	454
Loss on derivatives	15	159
Change in operating assets and liabilities:
Accounts receivable	330	356
Prepaid expenses and other assets	544	156
Accounts payable	(107)	444
Income taxes payable	1,705	0
Accrued and other liabilities	771	(893)
Payables to related parties	(76)	(97)
Addition of lease intangibles	(6)	(87)
Cash provided by operating activities	5,097	2,644
Cash flows from investing activities:
Acquisition deposits reimbursed	0	500
Investment in unconsolidated joint venture	(249)	(249)
Proceeds from sale of real estate	18,244	46,290
Additions of property and equipment	(1,617)	(4,267)
Change in restricted cash	(692)	(38)
Cash provided by investing activities	15,686	42,236
Cash flows from financing activities:
Financing costs	(107)	(101)
Payments on notes payable	(17,716)	(16,682)
Redemptions of common stock	(760)	(233)
Distributions paid on common stock	(25,732)	0
Contributions from noncontrolling interest holders	154	53
Distributions to noncontrolling interest holders	(1,249)	(443)
Cash used in financing activities	(45,410)	(17,406)
Effect of exchange rate changes on cash and cash equivalents	(337)	14
Net change in cash and cash equivalents	(24,964)	27,488
Cash and cash equivalents at beginning of period	72,949	94,877
Cash and cash equivalents at end of period	$ 47,985	$ 122,365

XML

Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands		3 Months Ended			6 Months Ended
	Feb. 21, 2015	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Revenue Recognition
Straight-line rental revenue		$ 100		$ 100	$ 100	$ 100
Market lease amortization included in rental revenue		100		100	100	100
Accounts Receivable
Straight-line rental revenue		0			0		$ 1,000
Deferred Financing Fees
Accumulated amortization, deferred financing fees		2,300			$ 2,300		2,200
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		(400)		100	$ (400)	0
Cumulative translation adjustment		0		$ 0	596	$ 0
Furniture, Fixtures and Equipment
Furniture, Fixtures and Equipment
Accumulated depreciation associated with furniture, fixtures and equipment		7,700			$ 7,700		6,400
Furniture, Fixtures and Equipment | Minimum
Furniture, Fixtures and Equipment
Estimated useful lives					5 years
Furniture, Fixtures and Equipment | Maximum
Furniture, Fixtures and Equipment
Estimated useful lives					7 years
Consolidated Properties
Accounts Receivable
Accounts receivable		3,000			$ 3,000		$ 2,000
Alte Jakobstrabe Berlin
Foreign Currency Translation
Cumulative translation adjustment	$ 600		$ 600
Alte Jakobstrabe Berlin | Foreign Tax Authority
Income Taxes
Provision (credit) for income tax		$ (500)	$ 2,200
Holstenplatz Notes
Foreign Currency Translation
Cumulative translation adjustment					$ 300
Sales Revenue, Net | HAWAII | Geographic Concentration Risk
Geographic Areas, Revenues from External Customers [Abstract]
Concentration risk (percent)					36.00%
Sales Revenue, Net | FLORIDA | Geographic Concentration Risk
Geographic Areas, Revenues from External Customers [Abstract]
Concentration risk (percent)					20.00%
Multifamily | Sales Revenue, Net | Real Estate Asset Concentration Risk
Geographic Areas, Revenues from External Customers [Abstract]
Concentration risk (percent)					44.00%
Hotel | Sales Revenue, Net | Real Estate Asset Concentration Risk
Geographic Areas, Revenues from External Customers [Abstract]
Concentration risk (percent)					36.00%
Student Housing | Sales Revenue, Net | Real Estate Asset Concentration Risk
Geographic Areas, Revenues from External Customers [Abstract]
Concentration risk (percent)					16.00%

XML

Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Holstenplatz - Purchase and Sale Agreement

On July 16, 2015, we entered into a PSA to sell Holstenplatz to an unaffiliated third party for a contract sales price of approximately €16.5 million, or approximately $18.1 million based on the exchange rate in effect on July 16, 2015. Holstenplatz was classified as real estate held for sale as of June 30, 2015. See Note 8, Real Estate Held for Sale.

Wimberly - Purchase and Sale Agreement

On July 20, 2015, we entered into a PSA to sell Wimberly to an unaffiliated third party for a contract sales price of approximately $43.5 million. We did not classify Wimberly as held for sale as of June 30, 2015. See Note 8, Real Estate Held for Sale.

Share Redemption Program

On August 11, 2015, our board of directors approved redemptions for the third quarter of 2015 totaling 36,457 shares with an aggregate redemption payment of approximately $0.2 million . See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” for a full description of the price at which we redeem shares under our share redemption program.

******

XML

New Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
Deferred financing fees, net	$ 2,204	$ 2,617

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Schedule of anticipated amortization expense associated with the acquired lease intangibles excluding properties classified as discontinued operations

Anticipated amortization expense associated with the acquired lease intangibles for each of the following five years as of June 30, 2015 was as follows: 

Year	Lease / Other Intangibles
July 1, 2015 - December 31, 2015	$	18
2016	36
2017	20
2018	(14		)
2019	(12		)

Schedule of accumulated depreciation and amortization related to entity's consolidated investments in real estate assets and intangibles

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

June 30, 2015	Buildings and Improvements			Land and Improvements			Lease Intangibles			Acquired Below-Market Leases
Cost(1)	$	244,605		$	59,759		$	3,023		$	(184	)
Less: depreciation and amortization(1)	(27,785		)	(2,459		)	(2,703		)	96
Net	$	216,820		$	57,300		$	320		$	(88	)

______________________________________________

(1) Excludes Holstenplatz, which was classified as held for sale as of June 30, 2015. We entered into a PSA effective July 16, 2015 to sell Holstenplatz, an office building located in Germany. Net book values included in assets associated with real estate held for sale on the condensed consolidated balance sheet were buildings and improvements of $6.8 million, land and improvements of $2.5 million, lease intangibles of $0.4 million, and acquired below-market leases of less than $0.1 million. See Note 8, Real Estate Held for Sale.

December 31, 2014	Buildings and Improvements			Land and Improvements			Lease Intangibles			Acquired Below-Market Leases
Cost(1)	$	252,812		$	62,447		$	4,551		$	(469	)
Less: depreciation and amortization(1)	(24,162		)	(2,073		)	(2,701		)	259
Net	$	228,650		$	60,374		$	1,850		$	(210	)

______________________________________________

(1) Excludes Babcock and AJS, which were classified as held for sale as of December 31, 2014. These two properties sold on January 8, 2015 and February 21, 2015, respectively. Net book values included in assets associated with real estate held for sale in the consolidated balance sheet were buildings and improvements of $9.6 million, land and improvements of $3.2 million, lease intangibles of $0.2 million, and acquired below-market leases of less than $0.1 million. See Note 8, Real Estate Held for Sale.

XML

Business and Organization

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Organization

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 were formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic and value-add basis. In particular, we have focused generally on acquiring commercial properties with significant possibilities for 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.  We have acquired a wide variety of commercial properties, including office, industrial, retail, hospitality and multifamily.  We have purchased existing, income-producing properties and newly-constructed properties. We have also invested in a mortgage loan and a mezzanine loan. We are not actively seeking to purchase additional assets at this time, but may invest capital in our current assets in order to position them for sale in the normal course of business. We intend to hold the various real properties in which we have invested until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. As of June 30, 2015, we had 11 real estate investments, ten of which were consolidated in our condensed consolidated financial statements (two wholly owned and eight properties consolidated through investments in joint ventures). We sold Babcock Self Storage (“Babcock”) and Alte Jakobstraße (“AJS”) on January 8, 2015 and February 21, 2015, respectively. We entered into a Purchase and Sale Agreement (“PSA”) effective July 16, 2015 to sell Holstenplatz, an office building located in Hamburg, Germany. Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet at June 30, 2015.

Substantially all of our business is conducted through Behringer Harvard Opportunity OP II LP, a limited partnership organized in Delaware (“Behringer Harvard Opportunity OP II”).  As of June 30, 2015, our wholly-owned subsidiary, BHO II, Inc., a Delaware corporation, owned a 0.1% partnership interest in Behringer Harvard Opportunity OP II as its sole general partner.  As of June 30, 2015, 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 (the “Advisor”).  The Advisor is responsible for managing our day-to-day affairs and for identifying and making investments on our behalf.

Organization

In connection with our initial capitalization, we issued 22,471 shares of our common stock and 1,000 shares of our convertible stock to Behringer Harvard Holdings, LLC (“Behringer”) on January 19, 2007.  Behringer transferred its shares of convertible stock to one of its affiliates on April 2, 2010.

As of June 30, 2015, we had issued 26.7 million shares of our common stock, including 22,471 shares owned by Behringer and 2.2 million shares issued through the distribution reinvestment plan.  As of June 30, 2015, we had redeemed 1 million shares of our common stock and had 25.7 million shares of common stock outstanding.  As of June 30, 2015, we had 1,000 shares of convertible stock outstanding held by an affiliate of Behringer.

Our common stock is not currently listed on a national securities exchange.  The timing of a liquidity event will depend upon then prevailing market conditions. We currently intend to consider the process of disposing assets, liquidating, and distributing the net proceeds to our stockholders no later than six years after the termination of our initial public offering of common stock, which occurred on July 3, 2011.  Economic or market conditions may, however, result in different holding periods for different assets.

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
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	25,691,443	25,801,669
Common stock, shares outstanding	25,691,443	25,801,669

XML

Leasing Activity

6 Months Ended

Jun. 30, 2015

Leases [Abstract]

Leasing Activity

Leasing Activity

Future minimum base rental payments of our office properties due to us under non-cancelable leases in effect as of June 30, 2015 are as follows: 

Year	Amount Due
July 1, 2015 - December 31, 2015	$	566
2016	1,156
2017	1,028
2018	716
2019	646
Thereafter	2,992
Total	$	7,104

The schedule above does not include rental payments due to us from our multifamily, hotel, and student housing properties, as leases associated with these properties typically are for periods of one year or less. We have two remaining office properties at June 30, 2015, Holstenplatz, located in Germany and Gardens Medical Pavilion, located in Florida. We have excluded Holstenplatz from the schedule above as it was classified as held for sale at June 30, 2015. The future minimum base rental payments of our Holstenplatz property over the next 5 years is $3.6 million and the total for years 2020 through 2028 is $1.7 million.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
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	Jun. 30, 2015
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		25,654,986
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

XML

Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

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.  As of June 30, 2015, none of our derivative instruments were designated as hedging instruments. We have two interest rate caps as of June 30, 2015.

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 June 30, 2015 and December 31, 2014. During the six months ended June 30, 2014, we recorded a reclassification of unrealized loss to interest expense of less than $0.1 million to adjust the carrying amount of the interest rate caps. During the six months ended June 30, 2015, we had no reclassification of unrealized loss to interest expense.  The reclassification out of OCI in our statement of equity for the six months ended June 30, 2014 was due to all derivatives being designated as non-hedging instruments as of January 1, 2013.

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 Date
Not Designated as Hedging Instruments
Interest rate cap - Courtyard Kauai Coconut Beach Hotel	$	38,000	3.00%	30-day LIBOR	October 15, 2016
Interest rate cap - Wimberly	26,685		4.56%	30-day LIBOR	March 1, 2018

The table below presents the fair value of our derivative financial instruments, as well as their classification on the consolidated balance sheets as of June 30, 2015 and December 31, 2014: 

Derivatives not designated as hedging instruments:		Asset Derivatives
	Balance Sheet Location	June 30, 2015		December 31, 2014
Interest rate derivative contracts	Prepaid expenses and other assets	$	5	$	28

The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014: 

Derivatives Not Designated as Hedging Instruments
Amount of Loss
Three months ended June 30,				Six months ended June 30,
2015		2014		2015		2014
$	—	$	103	$	15	$	159

XML

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues
Rental revenue	$ 8,465	$ 7,889	$ 16,951	$ 15,770
Hotel revenue	4,314	4,138	9,142	8,502
Total revenues	12,779	12,027	26,093	24,272
Expenses
Property operating expenses	2,767	2,625	5,664	5,349
Hotel operating expenses	3,116	2,988	6,274	6,010
Interest expense, net	1,746	2,055	3,567	4,118
Real estate taxes	1,572	1,352	3,156	2,765
Property management fees	418	403	864	830
Asset management fees	717	98	1,442	1,068
General and administrative	790	1,098	1,711	1,957
Acquisition Expense	0	25	0	25
Depreciation and amortization	3,949	3,400	8,402	7,062
Total expenses	15,075	14,044	31,080	29,184
Interest income, net	29	54	79	100
Loss on early extinguishment of debt	0	(454)	(119)	(454)
Other loss	(130)	(3)	(169)	(3)
Loss before gain on sale of real estate and income tax benefit (expense)	(2,397)	(2,420)	(5,196)	(5,269)
Gain on sale of real estate	0	11,445	5,320	11,445
Income tax benefit (expense)	519	0	(1,664)	0
Loss before gain on sale of real estate and income tax benefit (expense)	(1,878)	9,025	(1,540)	6,176
Net income (loss)	(1,878)	9,025	(1,540)	6,176
Net (income) loss attributable to the noncontrolling interest	(82)	159	(593)	124
Net income (loss) attributable to the Company	$ (1,960)	$ 9,184	$ (2,133)	$ 6,300
Weighted average shares outstanding:
Basic and diluted (in shares)	25,704	25,993	25,740	26,002
Basic and diluted income (loss) per share
Basic and diluted income (loss) per share (in dollars per share)	$ (0.07)	$ 0.35	$ (0.08)	$ 0.24
Distributions declared per common share (in dollars per share)	$ 0.00	$ 0.0000	$ 1.00	$ 0.0000
Comprehensive income (loss):
Net income (loss)	$ (1,878)	$ 9,025	$ (1,540)	$ 6,176
Other comprehensive income (loss):
Reclassification of unrealized loss on interest rate derivatives to net income	0	20	0	37
Reclassification of unrealized loss on currency translation to net income	0	0	596	0
Foreign currency translation gain (loss)	397	(54)	(372)	(27)
Total other comprehensive income (loss)	397	(34)	224	10
Comprehensive income (loss)	(1,481)	8,991	(1,316)	6,186
Comprehensive income (loss) attributable to noncontrolling interest	(82)	155	(593)	117
Comprehensive income (loss) attributable to the Company	$ (1,563)	$ 9,146	$ (1,909)	$ 6,303

XML

Financial Instruments not Reported at Fair Value

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Financial Instruments not Reported at Fair Value

inancial 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 June 30, 2015 and December 31, 2014, 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 to noncontrolling interests were at amounts that reasonably approximated their fair value based on their highly-liquid nature and/or short-term maturities.  The notes payable of $206.2 million as of June 30, 2015 and $216.3 million, excluding $9.1 million of contractual obligations on real estate held for sale as of December 31, 2014, have a fair value of approximately $205.9 million and $217.1 million as of June 30, 2015 and December 31, 2014, 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 June 30, 2015 and December 31, 2014.

XML

Assets and Liabilities Measured at Fair Value

6 Months Ended

Jun. 30, 2015

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Assets and Liabilities Measured at Fair Value

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 June 30, 2015, 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 June 30, 2015 and December 31, 2014:

June 30, 2015	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	5	$	—	$	5

December 31, 2014	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	28	$	—	$	28

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

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

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 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, or substantive participating rights or both under the respective ownership agreement.  For entities in which we have less than a controlling interest or entities which we are not deemed to be the primary beneficiary, we account for the investment using the equity method of accounting.

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

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 hotels and all other buildings is depreciated over the estimated useful lives of 39 years and 25 years, respectively, 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 existing 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 existing 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.  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.

Real Estate Held for Sale

Real Estate Held for Sale and Discontinued Operations

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 June 30, 2015, we were in active negotiations for the disposal of Holstenplatz, and on July 16, 2015, we entered into a PSA to sell Holstenplatz, an office building located in Germany and our only remaining foreign operation at June 30, 2015. The prospective buyer has substantially completed the due diligence process and we believe the sale is probable within the next twelve months. Therefore, we classified Holstenplatz as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015. During the fourth quarter of 2014, we entered into PSAs for Babcock, a self storage facility in Texas, and AJS, an office building located in Germany, and classified Babcock and AJS as real estate held for sale in our consolidated balance sheet at December 31, 2014. We sold Babcock on January 8, 2015 and AJS on February 21, 2015.

Effective as of April 1, 2014, we adopted the revised guidance in Accounting Standards Update No. 2014-08 regarding discontinued operations. For sales of real estate or assets classified as held for sale after April 1, 2014, we will evaluate whether a disposal transaction meets the criteria of a strategic shift and will have a major effect on our operations and financial results to determine if the results of operations and gains on sale of real estate will be presented as part of our continuing operations or as discontinued operations in our consolidated statements of operations. If the disposal represents a strategic shift, it will be classified as discontinued operations for all periods presented; if not, it will be presented in continuing operations.

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 those 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.  These projected cash flows are prepared internally by the Advisor and reflect in-place and projected leasing activity, market revenue and expense growth rates, market capitalization rates, discount rates, and changes in economic and other relevant conditions. The Company’s principal executive officer and principal financial officer, as well as a panel of asset managers and a financial analyst of the Advisor, review these projected cash flows to assure that the valuation is prepared using reasonable inputs and assumptions that are consistent with market data or with assumptions that would be used by a third-party market participant and assume the highest and best use of the investment. We consider trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. 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.  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. In addition, we may incur impairment charges on assets classified as held for sale in the future if the carrying amount of the asset upon classification as held for sale exceeds the estimated fair value, less costs to sell.

We also evaluate our investments in unconsolidated joint ventures at each reporting date.  If we believe there is an other than temporary decline in market value, we will record an impairment charge based on these evaluations.  We assess potential impairment by comparing our portion of estimated future undiscounted operating cash flows expected to be generated by the joint venture over the life of the joint venture’s assets to the carrying amount of the joint venture.  In the event that the carrying amount exceeds our portion of estimated future undiscounted operating cash flows, we recognize an impairment loss to adjust the carrying amount of the joint venture to its estimated fair value.

We believe the carrying value of our operating real estate is currently recoverable. Accordingly, there were no impairment charges for the three and six months ended June 30, 2015 and 2014.  However, if market conditions worsen unexpectedly 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.

Investment in Unconsolidated Joint Venture

Investment in Unconsolidated Joint Venture

We provide funding to third-party developers for the acquisition, development, and construction of real estate (“ADC Arrangement”).  Under the ADC Arrangement, we may participate in the residual profits of the project through the sale or refinancing of the property.  We evaluate this arrangement to determine if it has characteristics similar to a loan or if the characteristics are more similar to a joint venture or partnership such as participating in the risks and rewards of the project as an owner or an investment partner.  When we determine that the characteristics are more similar to a jointly-owned investment or partnership, we account for the arrangement as an investment in an unconsolidated joint venture under the equity method of accounting or a direct investment (consolidated basis of accounting) instead of applying loan accounting. The ADC Arrangement is reassessed at each reporting period. See Note 9, Investment in Unconsolidated Joint Venture, for further discussion.

Revenue Recognition

Revenue Recognition

We recognize rental income generated from leases of our operating properties on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any.  Straight-line rent was income of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2015. Straight-line rent was a charge of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2014. Leases associated with our multifamily, student housing, and hotel assets are generally short-term in nature, and thus have no straight-line rent. Net below-market lease amortization was income of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2015. Net above-market lease amortization was a charge of less than $0.1 million recognized in rental revenues for the three and six months ended June 30, 2014.

Hotel revenue is derived from the operations of the Courtyard Kauai Coconut Beach Hotel and consists primarily of guest room, food and beverage, and other ancillary revenues such as laundry and parking. Hotel revenue is recognized as the services are rendered.

Accounts Receivable

Accounts Receivable

Accounts receivable primarily consist of receivables related to our consolidated properties of $2.5 million and $2.2 million as of June 30, 2015 and December 31, 2014, respectively, and included straight-line rental revenue receivables of $0.4 million and $0.6 million as of June 30, 2015 and December 31, 2014, respectively. 

Furniture, Fixtures, and Equipment

Furniture, Fixtures, and Equipment

Furniture, fixtures, and equipment are recorded at cost and are depreciated according to the Company’s capitalization policy, which uses the straight-line method over their estimated useful lives of five to seven years.  Furniture, fixtures and equipment associated with properties classified as held for sale are not depreciated. Maintenance and repairs are charged to operations as incurred.  Accumulated depreciation associated with our furniture, fixtures, and equipment was $7.7 million and $6.4 million as of June 30, 2015 and December 31, 2014, 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 $2.3 million and $2.2 million as of June 30, 2015 and December 31, 2014, respectively.

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. Taxable income from non-REIT activities managed through a taxable REIT subsidiary (“TRS”) is subject to applicable federal, state, and local income and margin taxes. We have no taxable income associated with a TRS. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level.

The Company recorded a provision for income tax of approximately $2.2 million in the first quarter of 2015 as a result of estimated foreign income tax related to the sale of AJS which is located in Berlin, Germany. The foreign income tax was calculated on gains recognized at the exchange rate in effect on the sale date of February 21, 2015 and calculated using current tax rates. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS.

We have reviewed our tax positions under GAAP guidance that clarify 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 federal tax status as a REIT will be sustained in any tax examination.

Foreign Currency Translation

Foreign Currency Translation

For our international investments 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 other comprehensive income (loss) (“OCI”) as a separate component. 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 AJS. We sold AJS in the first quarter of 2015. 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 three and six months ended June 30, 2015, the foreign currency translation adjustment was a gain of $0.4 million and a loss of $0.4 million, respectively. For the three and six months ended June 30, 2014, the foreign currency translation adjustment was a loss of less than $0.1 million.

When the Company has substantially liquidated its investment in a foreign entity, the cumulative translation adjustment (“CTA”) balance is required to be released into earnings. During the first quarter of 2015, we recognized a CTA of approximately $0.6 million as a reduction to the gain on sale of our AJS office building which we sold on February 21, 2015. Our wholly owned investment in the Holstenplatz office building, located in Hamburg, Germany, is our only remaining foreign operation and is classified as real estate held for sale at June 30, 2015.

Concentration of Credit Risk

Concentration of Credit Risk

At June 30, 2015 and December 31, 2014, 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.

Geographic and Asset Type Concentration

Our investments in target assets may at times be concentrated in certain asset types that are subject to higher risk of foreclosure, or secured by assets concentrated in a limited number of geographic locations. For the six months ended June 30, 2015, excluding Holstenplatz, which was classified as real estate held for sale at June 30, 2015, and Babcock and AJS which were sold in the first quarter of 2015, 36% and 20% of our total revenues were derived from our properties located in Hawaii and Florida, respectively. Additionally, excluding Holstenplatz, Babcock, and AJS, 44%, 36%, and 16% of our total revenues for the six months ended June 30, 2015 were from our multifamily, hotel, and student housing investments, respectively. To the extent that our portfolio is concentrated in limited geographic regions or types of assets, downturns relating generally to such region or type of asset may result in defaults on a number of our investments within a short time period, which may reduce our net income and the value of our common stock and accordingly limit our ability to fund our operations.

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 generally on their ownership percentage.  In certain instances, our joint venture agreement provides for liquidating distributions based on achieving certain return metrics (“promoted interest”).  If a property reaches a defined return threshold, then it will result in distributions to noncontrolling interest which is different from the standard pro-rata allocation 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 loss per share were the same for each of the three and six months ended June 30, 2015 and 2014, as there were no potentially dilutive securities outstanding.

Subsequent Events

Subsequent Events

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

XML

Distributions

6 Months Ended

Jun. 30, 2015

Distributions [Abstract]

Distributions

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, proceeds from asset sales 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 federal tax status as a REIT. We cannot provide assurance that we will pay distributions at any particular level, or at all. We expect that any future distributions authorized by our board of directors will be periodic, special distributions as opposed to regular monthly or quarterly distributions.

On March 18, 2015, our board of directors authorized a special cash distribution of $1.00 per share of common stock payable to stockholders of record as of March 30, 2015. The total special cash distribution of $25.7 million, which represents a portion of proceeds from asset sales, was paid on March 31, 2015. We did not pay any distributions to stockholders during the three months ended June 30, 2015 or during the three and six months ended June 30, 2014.

We have paid, and may in the future pay, some or all of our distributions from sources other than operating cash flow. For example, we have generated cash to pay special distributions from sales activities and financing activities, components of which included proceeds from our 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, which may increase the amount of cash that we have available to pay distributions to our stockholders.

Future special distributions authorized and paid at the discretion of the board of directors, are expected to be funded with proceeds from asset sales. Therefore, future special distributions may exceed cash flow from operating activities or funds from operations.

XML

Investment in Unconsolidated Joint Venture

6 Months Ended

Jun. 30, 2015

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Joint Venture

Investment in Unconsolidated Joint Venture

On May 24, 2013, we (the “Lender”) provided mezzanine financing totaling $13.7 million (the “Initial Advance”) to an unaffiliated third-party entity (the “Borrower”) that owns an apartment complex under development in Denver, Colorado (“Prospect Park”).  The Borrower also has a senior construction loan with a third-party construction lender (the “Senior Lender”) in an aggregate original principal amount of $35.6 million.  The senior construction loan is guaranteed by the owners of the developer.  We also have a personal guaranty from the owners of the developer guaranteeing completion of the project and payment of cost overruns. Our mezzanine loan is secured by all of the membership interests of the Borrower and is subordinate to the senior construction loan. Our Initial Advance has an annual stated interest rate of 10% for the first three years of the term, followed by twoone-year extension options at which point the annual interest rate would increase to 14%. We evaluated this ADC Arrangement and determined that the characteristics are similar to a jointly-owned investment or partnership. Accordingly, the investment was accounted for as an unconsolidated joint venture under the equity method of accounting instead of loan accounting since we will participate in the residual interests through the sale or refinancing of the property. 

As a result of projected cost overruns, an event of default was declared by the Senior Lender on April 28, 2014, and we declared an event of default under the mezzanine loan agreement on May 5, 2014. The events of default were cured by the Borrower and developer agreeing to cover cost overruns totaling $6.6 million, increasing our financing by $1.5 million (the “Additional Advance”) at an annual interest rate of 18%, and the Senior Lender increasing their loan to $40 million. The terms of our Initial Advance remained the same under the amended loan agreement.

We considered the impact of these events on the accounting treatment and determined the ADC Arrangement will continue to be accounted for as an unconsolidated joint venture under the equity method of accounting. We will continue to monitor this situation and any impact these events might have on our ability to ultimately realize our investment. The ADC Arrangement is reassessed at each reporting period.

As of June 30, 2015, the outstanding principal balance under our mezzanine loan was $15.2 million. Interest capitalized for the three and six months ended June 30, 2015 was $0.1 million and $0.2 million, respectively. Interest capitalized for the three and six months ended June 30, 2014 was $0.1 million and $0.2 million, respectively.  For the three and six months ended June 30, 2015 and 2014, we recorded no equity in earnings (losses) of unconsolidated joint venture related to our investment in Prospect Park.

The following table sets forth our ownership interest in Prospect Park: 

	Ownership Interest		Carrying Amount
Property Name	June 30, 2015	December 31, 2014	June 30, 2015	December 31, 2014
Prospect Park	N/A	N/A	$14,222	$13,973

XML

Real Estate and Real Estate-Related Investments

6 Months Ended

Jun. 30, 2015

Real Estate [Abstract]

Real Estate and Real Estate-Related Investments

Real Estate and Real Estate-Related Investments

As of June 30, 2015, we consolidated ten real estate assets, including Holstenplatz, which was classified as real estate held for sale in our condensed consolidated balance sheet. The following table presents certain information about our consolidated investments as of June 30, 2015:

Property Name	Description	Location	Date Acquired	Ownership Interest
Holstenplatz(1)	Office building	Hamburg, Germany	June 30, 2010	100%
Gardens Medical Pavilion(2)	Medical office building	Palm Beach Gardens, Florida	October 20, 2010	80.4%
Courtyard Kauai Coconut Beach Hotel	Hotel	Kauai, Hawaii	October 20, 2010	80%
River Club and the Townhomes at River Club	Student housing	Athens, Georgia	April 25, 2011	85%
Lakes of Margate	Multifamily	Margate, Florida	October 19, 2011	92.5%
Arbors Harbor Town	Multifamily	Memphis, Tennessee	December 20, 2011	94%
Wimberly at Deerwood (“Wimberly”)	Multifamily	Jacksonville, Florida	February 19, 2013	95%
22 Exchange	Student housing	Akron, Ohio	April 16, 2013	90%
Parkside Apartments (“Parkside”)	Multifamily	Sugar Land, Texas	August 8, 2013	90%
Lakewood Flats	Multifamily	Dallas, Texas	October 10, 2014	100%

_________________________________________

(1) We entered into a PSA effective July 16, 2015 to sell Holstenplatz, an office building located in Hamburg, Germany. Holstenplatz is classified as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015.

(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 were referred to as the Florida MOB Portfolio.  The Florida MOB Portfolio consisted of nine medical office buildings.  On September 20, 2013, we sold the Original Florida MOB Portfolio. As of June 30, 2015, we own approximately 80.4% of the ninth building, Gardens Medical Pavilion.

Real Estate Asset Dispositions

Babcock Self Storage

On January 8, 2015, we sold Babcock for a contract sales price of approximately $5.4 million. We recorded a gain on sale of real estate of $2.0 million and loss on early extinguishment of debt of less than $0.1 million, which was composed of the write-off of deferred financing fees and an early termination fee. A portion of the proceeds from the sale were used to pay off in full the existing indebtedness of approximately $2.1 million associated with the storage facility. Babcock was classified as held for sale on our consolidated balance sheet at December 31, 2014.

Alte Jakobstraße

On February 21, 2015, we sold AJS, which is located in Berlin, Germany, for a contract sales price of approximately €12.4 million (approximately $14.1 million).  We recorded a gain on sale of real estate of approximately $3.3 million which is net of a CTA of approximately $0.6 million. We recognized a loss on early extinguishment of debt of less than $0.1 million, which was composed of the write-off of deferred financing fees and an early termination fee. A portion of the proceeds from the sale were used to fully satisfy the existing indebtedness associated with the property of approximately €5.7 million (approximately $6.5 million). The Company recorded a provision for income tax of approximately $2.2 million during the first quarter of 2015 as a result of foreign income tax related to the sale. The foreign income tax was calculated on gains recognized at the exchange rate in effect on the sale date of February 21, 2015 and calculated using current tax rates. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS. All U.S. dollar amounts related to the AJS sale are based on the exchange rate in effect on February 21, 2015. AJS was classified as held for sale on our consolidated balance sheet at December 31, 2014.

Sales of Real Estate Reported in Continuing Operations

The Company does not view the disposals of Babcock and AJS in the first quarter of 2015 or the disposal of 1875 Lawrence in the second quarter of 2014 as a strategic shift. Therefore, the results of operations for Babcock and AJS are presented in continuing operations in the consolidated statements of operations for the six months ended June 30, 2015 and the results of operations for all three investments are presented in continuing operations in the consolidated statements of operations for the three and six months ended June 30, 2014.

The following table presents our sales of real estate for the six months ended June 30, 2015 ($ in millions):

Date of Sale	Property	Ownership Interest	Sales Contract Price		Net Cash Proceeds(1)		Gain on Sale of Real Estate
January 8, 2015	Babcock Self Storage	85%	$	5.4	$	5.2	$	2.0
February 21, 2015	Alte Jakobstraße	99.7%	$	14.1	$	13.0	$	3.3

______________________________________

(1) A portion of the net cash proceeds was used to pay off the property-associated debt of $8.6 million.

In addition, we sold our 1875 Lawrence office building on May 30, 2014, which is included in continuing operations for the three and six months ended June 30, 2014.

The following table presents net income attributable to the Company for the three and six months ended June 30, 2015 and 2014 related to Holstenplatz (classified as Real Estate Held for Sale at June 30, 2015, see Note 8), Babcock, AJS, and 1875 Lawrence. Net income for the three and six months ended June 30, 2014 includes the gain on sale of 1875 Lawrence of $11.4 million. Net income for the six months ended June 30, 2015 includes the gain on sale of AJS and Babcock for a total of $5.3 million (in millions):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Description	2015		2014		2015		2014
Net income attributable to the Company	$	0.5	$	10.6	$	2.9	$	9.9

Real Estate Held for Sale

As of June 30, 2015, Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet. As of December 31, 2014, Babcock and AJS were classified as real estate held for sale on our consolidated balance sheet. We sold Babcock and AJS in the first quarter of 2015.

In 2010, we acquired Holstenplatz, an office building located in Hamburg, Germany, with the investment objective of increasing net operating income through longer lease terms and increased rents. On July 16, 2015, we entered into a PSA to sell Holstenplatz to an unaffiliated third party for a contract sales price of approximately €16.5 million or approximately $18.1 million based on the exchange rate in effect on July 16, 2015. The prospective buyer has substantially completed the due diligence process and we believe the sale is probable within the next twelve months. Therefore, we classified Holstenplatz as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015.

The classification of Holstenplatz as real estate held for sale as of June 30, 2015 did not represent a strategic shift and did not have a major effect on the Company’s operations and financial results. Therefore, the results of operations for Holstenplatz are presented in continuing operations in the consolidated statements of operations for the three and six months ended June 30, 2015 and 2014. See Note 7, Real Estate and Real Estate-Related Investments, for total net income included in continuing operations for Holstenplatz, Babcock, AJS and 1875 Lawrence for the three and six months ended June 30, 2015 and 2014.

The major classes of assets and liabilities associated with our real estate held for sale as of June 30, 2015 and December 31, 2014 were as follows:

	Real Estate Held for Sale as of
Description	June 30, 2015		December 31, 2014
Land and improvements, net	$	2,456	$	3,195
Building and improvements, net	6,761		9,581
Lease intangibles, net	351		175
Furniture, fixtures and equipment, net	13		—
Assets associated with real estate held for sale	$	9,581	$	12,951
Notes payable(1)	$	—	$	9,122
Other	95		90
Obligations associated with real estate held for sale	$	95	$	9,212

___________________________

(1) We paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015, its maturity date.

On July 20, 2015, we entered into a PSA to sell Wimberly to an unaffiliated third party for a contract sales price of approximately $43.5 million. We acquired Wimberly on February 19, 2013. As of June 30, 2015, we were still in active negotiations and the due diligence process was not complete. In addition, at the time of filing this report on Form 10-Q, we cannot give any assurances that the closing of this sale is probable within the next twelve months. Therefore, we determined Wimberly did not meet the requirements to be classified as held for sale at June 30, 2015.

XML

Real Estate Held for Sale

6 Months Ended

Jun. 30, 2015

Real Estate [Abstract]

Real Estate Held for Sale

Real Estate and Real Estate-Related Investments

As of June 30, 2015, we consolidated ten real estate assets, including Holstenplatz, which was classified as real estate held for sale in our condensed consolidated balance sheet. The following table presents certain information about our consolidated investments as of June 30, 2015:

Property Name	Description	Location	Date Acquired	Ownership Interest
Holstenplatz(1)	Office building	Hamburg, Germany	June 30, 2010	100%
Gardens Medical Pavilion(2)	Medical office building	Palm Beach Gardens, Florida	October 20, 2010	80.4%
Courtyard Kauai Coconut Beach Hotel	Hotel	Kauai, Hawaii	October 20, 2010	80%
River Club and the Townhomes at River Club	Student housing	Athens, Georgia	April 25, 2011	85%
Lakes of Margate	Multifamily	Margate, Florida	October 19, 2011	92.5%
Arbors Harbor Town	Multifamily	Memphis, Tennessee	December 20, 2011	94%
Wimberly at Deerwood (“Wimberly”)	Multifamily	Jacksonville, Florida	February 19, 2013	95%
22 Exchange	Student housing	Akron, Ohio	April 16, 2013	90%
Parkside Apartments (“Parkside”)	Multifamily	Sugar Land, Texas	August 8, 2013	90%
Lakewood Flats	Multifamily	Dallas, Texas	October 10, 2014	100%

_________________________________________

(1) We entered into a PSA effective July 16, 2015 to sell Holstenplatz, an office building located in Hamburg, Germany. Holstenplatz is classified as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015.

(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 were referred to as the Florida MOB Portfolio.  The Florida MOB Portfolio consisted of nine medical office buildings.  On September 20, 2013, we sold the Original Florida MOB Portfolio. As of June 30, 2015, we own approximately 80.4% of the ninth building, Gardens Medical Pavilion.

Real Estate Asset Dispositions

Babcock Self Storage

On January 8, 2015, we sold Babcock for a contract sales price of approximately $5.4 million. We recorded a gain on sale of real estate of $2.0 million and loss on early extinguishment of debt of less than $0.1 million, which was composed of the write-off of deferred financing fees and an early termination fee. A portion of the proceeds from the sale were used to pay off in full the existing indebtedness of approximately $2.1 million associated with the storage facility. Babcock was classified as held for sale on our consolidated balance sheet at December 31, 2014.

Alte Jakobstraße

On February 21, 2015, we sold AJS, which is located in Berlin, Germany, for a contract sales price of approximately €12.4 million (approximately $14.1 million).  We recorded a gain on sale of real estate of approximately $3.3 million which is net of a CTA of approximately $0.6 million. We recognized a loss on early extinguishment of debt of less than $0.1 million, which was composed of the write-off of deferred financing fees and an early termination fee. A portion of the proceeds from the sale were used to fully satisfy the existing indebtedness associated with the property of approximately €5.7 million (approximately $6.5 million). The Company recorded a provision for income tax of approximately $2.2 million during the first quarter of 2015 as a result of foreign income tax related to the sale. The foreign income tax was calculated on gains recognized at the exchange rate in effect on the sale date of February 21, 2015 and calculated using current tax rates. During the second quarter of 2015, we recorded a credit of $0.5 million to the provision for income tax based on a change in the estimated taxes payable on the sale of AJS. All U.S. dollar amounts related to the AJS sale are based on the exchange rate in effect on February 21, 2015. AJS was classified as held for sale on our consolidated balance sheet at December 31, 2014.

Sales of Real Estate Reported in Continuing Operations

The Company does not view the disposals of Babcock and AJS in the first quarter of 2015 or the disposal of 1875 Lawrence in the second quarter of 2014 as a strategic shift. Therefore, the results of operations for Babcock and AJS are presented in continuing operations in the consolidated statements of operations for the six months ended June 30, 2015 and the results of operations for all three investments are presented in continuing operations in the consolidated statements of operations for the three and six months ended June 30, 2014.

The following table presents our sales of real estate for the six months ended June 30, 2015 ($ in millions):

Date of Sale	Property	Ownership Interest	Sales Contract Price		Net Cash Proceeds(1)		Gain on Sale of Real Estate
January 8, 2015	Babcock Self Storage	85%	$	5.4	$	5.2	$	2.0
February 21, 2015	Alte Jakobstraße	99.7%	$	14.1	$	13.0	$	3.3

______________________________________

(1) A portion of the net cash proceeds was used to pay off the property-associated debt of $8.6 million.

In addition, we sold our 1875 Lawrence office building on May 30, 2014, which is included in continuing operations for the three and six months ended June 30, 2014.

The following table presents net income attributable to the Company for the three and six months ended June 30, 2015 and 2014 related to Holstenplatz (classified as Real Estate Held for Sale at June 30, 2015, see Note 8), Babcock, AJS, and 1875 Lawrence. Net income for the three and six months ended June 30, 2014 includes the gain on sale of 1875 Lawrence of $11.4 million. Net income for the six months ended June 30, 2015 includes the gain on sale of AJS and Babcock for a total of $5.3 million (in millions):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Description	2015		2014		2015		2014
Net income attributable to the Company	$	0.5	$	10.6	$	2.9	$	9.9

Real Estate Held for Sale

As of June 30, 2015, Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet. As of December 31, 2014, Babcock and AJS were classified as real estate held for sale on our consolidated balance sheet. We sold Babcock and AJS in the first quarter of 2015.

In 2010, we acquired Holstenplatz, an office building located in Hamburg, Germany, with the investment objective of increasing net operating income through longer lease terms and increased rents. On July 16, 2015, we entered into a PSA to sell Holstenplatz to an unaffiliated third party for a contract sales price of approximately €16.5 million or approximately $18.1 million based on the exchange rate in effect on July 16, 2015. The prospective buyer has substantially completed the due diligence process and we believe the sale is probable within the next twelve months. Therefore, we classified Holstenplatz as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015.

The classification of Holstenplatz as real estate held for sale as of June 30, 2015 did not represent a strategic shift and did not have a major effect on the Company’s operations and financial results. Therefore, the results of operations for Holstenplatz are presented in continuing operations in the consolidated statements of operations for the three and six months ended June 30, 2015 and 2014. See Note 7, Real Estate and Real Estate-Related Investments, for total net income included in continuing operations for Holstenplatz, Babcock, AJS and 1875 Lawrence for the three and six months ended June 30, 2015 and 2014.

The major classes of assets and liabilities associated with our real estate held for sale as of June 30, 2015 and December 31, 2014 were as follows:

	Real Estate Held for Sale as of
Description	June 30, 2015		December 31, 2014
Land and improvements, net	$	2,456	$	3,195
Building and improvements, net	6,761		9,581
Lease intangibles, net	351		175
Furniture, fixtures and equipment, net	13		—
Assets associated with real estate held for sale	$	9,581	$	12,951
Notes payable(1)	$	—	$	9,122
Other	95		90
Obligations associated with real estate held for sale	$	95	$	9,212

___________________________

(1) We paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015, its maturity date.

On July 20, 2015, we entered into a PSA to sell Wimberly to an unaffiliated third party for a contract sales price of approximately $43.5 million. We acquired Wimberly on February 19, 2013. As of June 30, 2015, we were still in active negotiations and the due diligence process was not complete. In addition, at the time of filing this report on Form 10-Q, we cannot give any assurances that the closing of this sale is probable within the next twelve months. Therefore, we determined Wimberly did not meet the requirements to be classified as held for sale at June 30, 2015.

XML

Notes Payable

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Notes Payable

Notes Payable

The following table sets forth information on our notes payable as of June 30, 2015 and December 31, 2014:

	Notes Payable as of
Description	June 30, 2015		December 31, 2014		Interest Rate		Maturity Date
Holstenplatz(2)	n/a		$	9,125	3.887%		4/30/2015
Courtyard Kauai Coconut Beach Hotel	38,000		38,000		30-day LIBOR + .95%	(1)	11/9/2015
Florida MOB Portfolio - Gardens Medical Pavilion	13,491		13,678		4.9%		1/1/2018
River Club and the Townhomes at River Club	24,482		24,664		5.26%		5/1/2018
Lakes of Margate	14,617		14,723		5.49% and 5.92%		1/1/2020
Arbors Harbor Town	25,362		25,591		3.985%		1/1/2019
Wimberly	26,551		26,685		30-day LIBOR + 2.28%	(1)	3/1/2023
22 Exchange	19,500		19,500		3.93%		5/5/2023
Parkside(3)	10,649		10,828		5%		6/1/2018
Lakewood Flats	33,500		33,500		30-day LIBOR + 1.5%	(1)	11/5/2019
	$	206,152	$	216,294
Notes payable in obligations associated with real estate held for sale:
Holstenplatz(2)	$	—	n/a		3.887%		4/30/2015
Babcock Self Storage(4)	—		2,137		5.8%		8/30/2018
Alte Jakobstraße(4)	—		6,985		2.3%		12/30/2015
	$	—	$	9,122
Total notes payable obligations	$	206,152	$	225,416

_________________________________

(1) 30-day London Interbank Offer Rate (“LIBOR”) was 0.19% at June 30, 2015.

(2) We paid off the balance of the Holstenplatz debt on April 30, 2015. As of June 30, 2015, Holstenplatz was classified as real estate held for sale on our condensed consolidated balance sheet.

(3) Includes approximately $0.5 million of unamortized premium related to debt we assumed at acquisition.

(4) As of December 31, 2014, Babcock and AJS were classified as real estate held for sale on our consolidated balance sheet. The properties were sold in the first quarter of 2015 and a portion of the sales proceeds for each property was used to pay off the existing indebtedness in full.

At June 30, 2015, our notes payable balance was $206.2 million and consisted of the notes payable related to our consolidated properties.  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 Coconut Beach Hotel, Wimberly, 22 Exchange, and Parkside notes payable. Interest capitalized for the three and six months ended June 30, 2015 was $0.1 million and $0.2 million, respectively, in connection with our equity method investment in Prospect Park. Interest capitalized for the three and six months ended June 30, 2014 was $0.1 million and $0.2 million, respectively.

On January 8, 2015, we sold our Babcock property to an unaffiliated third party. We used a portion of the proceeds from the sale to fully satisfy the existing indebtedness of approximately $2.1 million. On February 21, 2015, we sold AJS, located in Berlin, Germany, to an unaffiliated third party and used a portion of the proceeds from the sale to payoff in full the existing indebtedness of approximately €5.7 million, or approximately $6.5 million based on the exchange rate in effect on February 21, 2015. Babcock and AJS were classified as held for sale on our consolidated balance sheet as of December 31, 2014.

We paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015.

We are subject to customary affirmative, negative, and financial covenants and representations, warranties, and borrowing conditions, all as set forth in our loan agreements, including, among other things, maintaining minimum debt service coverage ratios, loan to value ratios and liquidity. As of June 30, 2015, we believe we were in compliance with the covenants under our loan agreements.

The following table summarizes our contractual obligations for principal payments as of June 30, 2015:  

Year	Amount Due
July 1, 2015 - December 31, 2015	$	39,082
2016	2,447
2017	2,670
2018	47,393
2019	58,345
Thereafter	55,724
Total contractual obligations for principal payments	$	205,661
Unamortized premium	491
Total notes payable	$	206,152

Our debt secured by Courtyard Kauai Coconut Beach Hotel, with a balance of $38 million at June 30, 2015, matures on November 9, 2015. The loan has an 18-month renewal option to extend the term to May 9, 2017.

XML

Summary of Significant Accounting Policies - Real Estate (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2015 unit	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)
Anticipated amortization expense associated with acquired lease intangibles
July 1, 2015 - December 31, 2015		$ 18
2015		36
2016		20
2017		(14)
2018		(12)
Real estate
Total real estate		274,709	$ 289,298
Accumulated depreciation and amortization related to consolidated investments in real estate intangibles
Net		$ 320	1,850
Maximum
Real Estate
Period for change in initial valuations from acquisition date		12 months
Lease Intangibles
Accumulated depreciation and amortization related to consolidated investments in real estate intangibles
Cost		$ 3,023	4,551
Less: depreciation and amortization		(2,703)	(2,701)
Net		320	1,850
Acquired Below-Market Leases
Accumulated depreciation and amortization related to consolidated investments in real estate intangibles
Cost		(184)	(469)
Less: depreciation and amortization		96	259
Net		(88)	(210)
Holstenplatz Notes
Anticipated amortization expense associated with acquired lease intangibles
July 1, 2015 - December 31, 2015		200
Holstenplatz Notes | Lease Intangibles
Real estate
Total real estate		400
Holstenplatz Notes | Acquired Below-Market Leases
Real estate
Total real estate		$ 100
Babcock and Alte Jakobstrabe
Accumulated depreciation and amortization related to consolidated investments in real estate intangibles
Number of Real Estate Properties Sold | unit	2
Babcock and Alte Jakobstrabe | Lease Intangibles
Real estate
Total real estate			200
Babcock and Alte Jakobstrabe | Acquired Below-Market Leases
Real estate
Total real estate			100
Hotel
Real Estate
Estimated useful lives		39 years
Buildings and Improvements
Real Estate
Estimated useful lives		25 years
Real estate
Cost		$ 244,605	252,812
Less: depreciation and amortization		(27,785)	(24,162)
Total real estate		216,820	228,650
Buildings and Improvements | Holstenplatz Notes
Real estate
Total real estate		6,800
Buildings and Improvements | Babcock and Alte Jakobstrabe
Real estate
Total real estate			9,600
Land and Improvements
Real estate
Cost		59,759	62,447
Less: depreciation and amortization		(2,459)	(2,073)
Total real estate		57,300	60,374
Land and Improvements | Holstenplatz Notes
Real estate
Total real estate		$ 2,500
Land and Improvements | Babcock and Alte Jakobstrabe
Real estate
Total real estate			$ 3,200

XML

Derivative Instruments and Hedging Activities - Effect on Financial Statements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Amount of gain or (loss) on derivative not designated as hedging instrument	$ 0	$ 103	$ 15	$ 159

XML

Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Supplemental cash flow information is summarized below:  

	Six months ended June 30,
Description	2015		2014
Interest paid, net of amounts capitalized	$	3,252	$	3,915
Income tax paid, net	35		196
Non-cash investing and financing activities:
Proceeds held in escrow through sale of real estate interests	912		—
Capital expenditures for real estate in accrued liabilities	583		393
Accrued distributions to noncontrolling interest holder	20		72

XML

Real Estate and Real Estate-Related Investments (Tables)

6 Months Ended

Jun. 30, 2015

Real Estate [Abstract]

Schedule of information pertaining to consolidated investments

As of June 30, 2015, we consolidated ten real estate assets, including Holstenplatz, which was classified as real estate held for sale in our condensed consolidated balance sheet. The following table presents certain information about our consolidated investments as of June 30, 2015:

Property Name	Description	Location	Date Acquired	Ownership Interest
Holstenplatz(1)	Office building	Hamburg, Germany	June 30, 2010	100%
Gardens Medical Pavilion(2)	Medical office building	Palm Beach Gardens, Florida	October 20, 2010	80.4%
Courtyard Kauai Coconut Beach Hotel	Hotel	Kauai, Hawaii	October 20, 2010	80%
River Club and the Townhomes at River Club	Student housing	Athens, Georgia	April 25, 2011	85%
Lakes of Margate	Multifamily	Margate, Florida	October 19, 2011	92.5%
Arbors Harbor Town	Multifamily	Memphis, Tennessee	December 20, 2011	94%
Wimberly at Deerwood (“Wimberly”)	Multifamily	Jacksonville, Florida	February 19, 2013	95%
22 Exchange	Student housing	Akron, Ohio	April 16, 2013	90%
Parkside Apartments (“Parkside”)	Multifamily	Sugar Land, Texas	August 8, 2013	90%
Lakewood Flats	Multifamily	Dallas, Texas	October 10, 2014	100%

_________________________________________

(1) We entered into a PSA effective July 16, 2015 to sell Holstenplatz, an office building located in Hamburg, Germany. Holstenplatz is classified as real estate held for sale in our condensed consolidated balance sheet at June 30, 2015.

(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 were referred to as the Florida MOB Portfolio.  The Florida MOB Portfolio consisted of nine medical office buildings.  On September 20, 2013, we sold the Original Florida MOB Portfolio. As of June 30, 2015, we own approximately 80.4% of the ninth building, Gardens Medical Pavilion.

Schedule of real estate sold

The following table presents our sales of real estate for the six months ended June 30, 2015 ($ in millions):

Date of Sale	Property	Ownership Interest	Sales Contract Price		Net Cash Proceeds(1)		Gain on Sale of Real Estate
January 8, 2015	Babcock Self Storage	85%	$	5.4	$	5.2	$	2.0
February 21, 2015	Alte Jakobstraße	99.7%	$	14.1	$	13.0	$	3.3

______________________________________

(1) A portion of the net cash proceeds was used to pay off the property-associated debt of $8.6 million.

Net income for real Estate sold during period

The following table presents net income attributable to the Company for the three and six months ended June 30, 2015 and 2014 related to Holstenplatz (classified as Real Estate Held for Sale at June 30, 2015, see Note 8), Babcock, AJS, and 1875 Lawrence. Net income for the three and six months ended June 30, 2014 includes the gain on sale of 1875 Lawrence of $11.4 million. Net income for the six months ended June 30, 2015 includes the gain on sale of AJS and Babcock for a total of $5.3 million (in millions):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Description	2015		2014		2015		2014
Net income attributable to the Company	$	0.5	$	10.6	$	2.9	$	9.9

XML

Derivative Instruments and Hedging Activities - Summary of Notional Values (Details) - Jun. 30, 2015 - Interest rate cap - USD ($) $ in Thousands	Total
Courtyard Kauai Coconut Beach Hotel, Kauai, Hawaii | LIBOR
Derivative [Line Items]
Interest Rate/ Strike Rate (as a percent)	3.00%
Courtyard Kauai Coconut Beach Hotel, Kauai, Hawaii | Derivative not designated as hedging instruments
Derivative [Line Items]
Notional Value	$ 38,000
Wimberly at Deerwood | LIBOR
Derivative [Line Items]
Interest Rate/ Strike Rate (as a percent)	4.56%
Wimberly at Deerwood | Derivative not designated as hedging instruments
Derivative [Line Items]
Notional Value	$ 26,685

XML

Real Estate Held for Sale - Major Classes of Assets and Liabilities (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Real Estate [Abstract]
Land and improvements, net	$ 2,456		$ 3,195
Building and improvements, net	6,761		9,581
Lease intangibles, net	351		175
Furniture, fixtures and equipment, net	13		0
Assets associated with real estate held for sale	9,581		12,951
Notes payable	0		9,122
Other	95		90
Obligations associated with real estate held for sale	95		$ 9,212
Repayment of long-term debt	$ 17,716	$ 16,682

XML

Condensed Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands	Total	Convertible Stock	Common Stock	Additional Paid-in Capital	Accumulated Distributions and Net (Loss)	Accumulated Other Comprehensive Income (loss)	Noncontrolling Interest
Balance at Dec. 31, 2013	$ 192,789	$ 0	$ 3	$ 232,903	$ (49,520)	$ 498	$ 8,905
Balance (in shares) at Dec. 31, 2013		1	26,016
Increase (Decrease) in Stockholders' Equity
Net income (loss)	6,176				6,300		(124)
Redemption of common stock	(233)			(233)
Redemption of common stock (in shares)			(27)
Noncontrolling Interest, Increase from Capital Contribution							53
Distributions to noncontrolling interest	(495)						(495)
Reclassification of unrealized loss on currency translation to net income	0
Other comprehensive income (loss):
Reclassification of unrealized loss on interest rate derivatives to net income	37					31	6
Foreign currency translation loss	(27)					(27)
Balance at Jun. 30, 2014	198,300	$ 0	$ 3	232,670	(43,220)	502	8,345
Balance (in shares) at Jun. 30, 2014		1	25,989
Balance at Dec. 31, 2014	176,556	$ 0	$ 3	231,240	(62,477)	(246)	8,036
Balance (in shares) at Dec. 31, 2014		1	25,802
Increase (Decrease) in Stockholders' Equity
Net income (loss)	(1,540)				(2,133)		593
Redemption of common stock	(760)			(760)
Redemption of common stock (in shares)			(110)
Dividends, Common Stock					(25,732)
Noncontrolling Interest, Increase from Capital Contribution	154						154
Distributions to noncontrolling interest	(1,249)						(1,249)
Reclassification of unrealized loss on currency translation to net income	596					596
Other comprehensive income (loss):
Foreign currency translation loss	(372)					(372)
Balance at Jun. 30, 2015	$ 147,653	$ 0	$ 3	$ 230,480	$ (90,342)	$ (22)	$ 7,534
Balance (in shares) at Jun. 30, 2015		1	25,692

XML

New Accounting Pronouncements

6 Months Ended

Jun. 30, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an update (“ASU 2014-09”) to ASC Topic 606, Revenue from Contracts with Customers.  ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance.  ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.  ASU 2014-09 is effective for public companies for interim and annual reporting periods beginning after December 15, 2017. This effective date is adjusted for a one-year deferral of the new revenue standard which was confirmed by FASB in the July 2015 meeting. In addition, early adoption will be permitted as of the original effective date in ASU 2014-09, which for public companies was annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods. Either full retrospective adoption or modified retrospective adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

In February 2015, the FASB issued an update (“ASU No. 2015-02”) to ASC Topic 810, Amendments to the Consolidation Analysis. ASU 2015-02 makes several modifications to the consolidation guidance for VIEs and general partners’ investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities. The amendments in ASU 2015-02 are effective for public companies in interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

In April 2015, the FASB issued an update (“ASU 2015-03”) to ASC Topic 835, Interest - Imputation of Interest, Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts, instead of being presented as a deferred charge. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this updated guidance. ASU 2015-03 is effective for public companies in interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The new guidance requires retrospective application. As of June 30, 2015, we have $2.2 million of net deferred financing costs that would be reclassified from a long-term asset to a reduction in the carrying amount of our debt.

XML

Real Estate Held for Sale (Tables)

6 Months Ended

Jun. 30, 2015

Real Estate [Abstract]

Schedule of Major Classes of Assets and Liabilities of Real Estate Held for Sale [Table Text Block]

The major classes of assets and liabilities associated with our real estate held for sale as of June 30, 2015 and December 31, 2014 were as follows:

	Real Estate Held for Sale as of
Description	June 30, 2015		December 31, 2014
Land and improvements, net	$	2,456	$	3,195
Building and improvements, net	6,761		9,581
Lease intangibles, net	351		175
Furniture, fixtures and equipment, net	13		—
Assets associated with real estate held for sale	$	9,581	$	12,951
Notes payable(1)	$	—	$	9,122
Other	95		90
Obligations associated with real estate held for sale	$	95	$	9,212

___________________________

(1) We paid off the Holstenplatz debt of approximately $8.1 million on April 30, 2015, its maturity date.

On July 20, 2015, we entered into a PSA to sell Wimberly to an unaffiliated third party for a contract sales price of approximately $43.5 million. We acquired Wimberly on February 19, 2013. As of June 30, 2015, we were still in active negotiations and the due diligence process was not complete. In addition, at the time of filing this report on Form 10-Q, we cannot give any assurances that the closing of this sale is probable within the next twelve months. Therefore, we determined Wimberly did not meet the requirements to be classified as held for sale at June 30, 2015.

XML

Financial Instruments not Reported at Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Notes payable	$ 206,152	$ 216,294
Real Estate Held-for-sale	0	9,122
Fair value of notes payable	$ 205,900	$ 217,100

XML

Related Party Transactions

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Advisor

The Advisor and certain of its affiliates may receive fees and compensation in connection with the acquisition, management, and sale of our assets based on the advisory management agreement, as amended and restated.

Fourth Amended and Restated Advisory Management Agreement

On June 6, 2014, we entered into the Fourth Amended and Restated Advisory Management Agreement (the “Fourth Advisory Agreement”) with our Advisor to, among other things, revise the acquisition and advisory fees, asset management fee, and the debt financing fee that may be paid to the Advisor and to fix certain expense reimbursement provisions. The Fourth Advisory Agreement was effective as of January 1, 2014. Effective as of June 6, 2015, we entered into the First Amendment to Fourth Amended and Restated Advisory Management Agreement to (i) reduce the administrative services fee to be paid to the Advisor for calendar year 2015 from $1.8 million to $1.5 million and (ii) reimburse the Advisor for certain due diligence services provided in connection with asset dispositions or debt financings separately from the administrative services fee. In addition, we renewed the term of the Fourth Advisory Agreement by one year. As amended, the Fourth Advisory Agreement will expire on June 6, 2016.  In all other material respects, the terms of the Fourth Advisory Agreement remain unchanged. The following discussion reflects the terms of the Fourth Advisory Agreement, as amended, and the fees and expenses paid or reimbursed to the Advisor thereunder since January 1, 2014.

The Advisor or its affiliates receive acquisition and advisory fees of 1.5% of the amount paid in respect of the purchase, development, construction, or improvement of each asset we acquire, including any debt attributable to those assets. In addition, the Advisor and its affiliates will also receive acquisition and advisory fees of 1.5% of the funds advanced in respect of a loan investment. We incurred acquisition and advisory fees payable to the Advisor of less than $0.1 million for the six months ended June 30, 2015 and 2014 as a result of improvements made to our assets. During the six months ended June 30, 2015 and 2014, we had no acquisitions.

The Advisor or its affiliates also receive an acquisition expense reimbursement in the amount of (i) 0.25% of the funds paid for purchasing an asset, including any debt attributable to the asset, plus 0.25% of the funds budgeted for development, construction, or improvement in the case of assets that we acquire and intend to develop, construct, or improve or (ii) 0.25% of the funds advanced in respect of a loan investment. 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 approved in advance by our board of directors 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. Previously, to the extent the Advisor or its affiliates directly provided services, formerly provided or usually provided by third parties, including, without limitation, accounting services related to the preparation of audits required by the Securities and Exchange Commission, 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 was included as acquisition expenses for which we reimbursed the Advisor. Pursuant to the Fourth Advisory Agreement, effective January 1, 2014, such services will no longer be included as acquisition expenses for which the Company will reimburse the Advisor.

In addition, 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 six months ended June 30, 2015 and 2014, we incurred less than $0.1 million in acquisition expense reimbursements.

Beginning January 1, 2014, we pay the Advisor or its affiliates a debt financing fee of 0.5% of the amount available under any loan or line of credit made available to us and will pay directly all third-party costs associated with obtaining the debt financing. We incurred no debt financing fees for the six months ended June 30, 2015 and 2014.

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 to us.  We incurred no such fees for the six months ended June 30, 2015 and 2014.

Pursuant to the Fourth Advisory Agreement, we pay the Advisor or its affiliates a monthly asset management fee which, effective January 1, 2014, was reduced to one-twelfth of 0.7% of the value of each asset. The value of our assets will be the value as determined in connection with the establishment and publication of an estimated value per share unless the asset was acquired after our publication of an estimated value per share (in which case the value of the asset will be the contract purchase price of the asset). In addition, pursuant to the Fourth Advisory Agreement, the Advisor agreed to waive asset management fees previously accrued during the period from August 2013 to December 2013 of $0.3 million. Therefore, we reversed this accrual in the second quarter of 2014. In addition, we reversed approximately $0.1 million in the second quarter of 2014 to reflect the reduction in the fee structure related to the first quarter of 2014. For the six months ended June 30, 2015 and 2014, we expensed $1.3 million and $1 million, respectively, of asset management fees payable to the Advisor. The totals for the six months ended June 30, 2015 and 2014 include asset management fees related to our disposed properties.

Under the Fourth Advisory Agreement, beginning January 1, 2014, instead of reimbursing the Advisor for specific expenses paid or incurred in connection with providing services to us, we pay the Advisor an administrative services fee based on a budget of expenses prepared by the Advisor. The administrative services fee is intended to reimburse for all costs associated with providing services to us under the Fourth Advisory Agreement. On June 6, 2015, we amended the Fourth Advisory Agreement to reduce the administrative services fee from $1.8 million for calendar year 2014 to $1.5 million for calendar year 2015. The administrative services fee is payable in four equal quarterly installments within 45 days of the end of each calendar quarter. For the six months ended June 30, 2015 and 2014, we incurred and expensed such costs for administrative services of approximately $0.8 million and $0.9 million, respectively. In addition, effective January 1, 2015, the amended Fourth Advisory Agreement includes a provision to reimburse the Advisor for certain due diligence services provided in connection with asset dispositions or debt financings separately from the administrative services fee. The expense of $0.8 million for the six months ended June 30, 2015, includes less than $0.1 million of due diligence service costs.

Notwithstanding the fees and cost reimbursements payable to our Advisor pursuant to the Fourth Advisory Agreement, under our charter we may 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:  (i) 2% of our average invested assets, or (ii) 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 unless a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the four fiscal quarters ended June 30, 2015, our total operating expenses (including the asset management fee) were not excessive.

Property Manager

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.  Effective January 1, 2014, we entered into the First Amendment to the Amended and Restated Property Management and Leasing Agreement, which reduced the property management fee paid to 4.0% of gross revenues of the properties managed by BHO II Management or its affiliates. We pay BHO II Management or its affiliates an oversight fee equal to 0.5% of the gross revenues of the property managed for any property for which we contract directly with a third-party property manager.  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 $0.3 million for the six months ended June 30, 2015 and 2014.

We pay the Advisor or its affiliates a construction management fee in an amount not to exceed 5% of all hard construction costs incurred in connection with, but not limited to capital repairs and improvements, major building reconstruction and tenant improvements, if such affiliate supervises construction performed by or on behalf of us or our affiliates. We incurred no construction management fees for the six months ended June 30, 2015. We incurred less than $0.1 million of construction management fees for the six months ended June 30, 2014.

We are dependent on 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.