December 29, 2004
Mail Stop 0409
Gerald J. Riehsen, III
Executive Vice President
Behringer Harvard Opportunity REIT I, Inc.
15601 Dallas Parkway, Suite 600
Addison, Texas 75001
Re: Behringer Harvard Opportunity REIT I, Inc.
Registration Statement on Form S-11 Filed November 30, 2004
Registration No. 333-120847
Dear Mr. Riehsen:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note that you are registering shares to be offered under a
dividend reinvestment plan to investors in the offering. Please
tell
us supplementally whether persons who become shareholders other
than
by participating in the offering may purchase shares through the
dividend reinvestment plan, and, if so, whether you intend to
distribute to those persons a separate prospectus relating solely
to
the dividend reinvestment plan. Please also tell us
supplementally
whether you intend to keep updated and distribute the prospectus
included in this registration statement so long as offers and
sales
are being made under the dividend reinvestment plan or if you
intend
to use a separate prospectus relating solely to the dividend
reinvestment plan. In either case, if you do intend to distribute
a
separate prospectus relating to the dividend reinvestment plan,
please amend the registration statement to include that
prospectus,
which should include a reasonably detailed description of the plan
in
addition to all disclosure required by Form S-11.
2. Supplementally, please provide us with any pictures, graphics
or
artwork that will be used in the prospectus.
3. Please note that any sales literature that is to be used in
connection with this offering, including the items listed on page
156, must be submitted to us supplementally prior to use,
including
sales literature intended for broker-dealer use only. Please
submit
all written sales materials proposed to be transmitted to
prospective
investors, orally or in writing. Please be aware that we will
need
time to review these materials. In addition, note that sales
materials must set forth a balanced presentation of the risks and
rewards to investors and should not contain any information or
disclosure that is inconsistent with or not also provided in the
prospectus. For guidance, refer to Item 19.D of Industry Guide 5.
4. We note that you may conduct the share repurchase program
during
the offering period of the shares being registered under this
registration statement. Please tell us supplementally how the
repurchases of shares will be conducted in a manner that is
consistent with the restrictions on activities by issuers during
distributions of securities set forth in Regulation M and provide
us
an analysis of how the repurchases should be treated under Rule
13e-4
and Regulation 14E of the Exchange Act. See T REIT Inc. (Letter
dated June 4, 2001), Wells Real Estate Investment Trust II, Inc.
(Letter dated December 3, 2003) and Hines Real Estate Investment
Trust, Inc. (Letter dated June 4, 2004).
5. We note your disclosure that you may participate in private
offerings of tenant-in-common interests sponsored by Behringer
Harvard Holdings or its affiliates and that you may contractually
agree to purchase any tenant-in-common interests that Behringer
Harvard Holdings is unable to sell to third parties. We also note
that Behringer Harvard REIT I, Inc.`s Form S-11 contains identical
disclosure regarding its participation in tenant-in-common
offerings
sponsored by Behringer Harvard Holdings and in its most recent
post-
effective amendment it disclosed that substantially all of its
property acquisitions were through these offerings.
Please supplementally provide your analysis as to why Behringer
Harvard Holdings should not be a co-registrant of this offering to
the extent a substantial amount of the proceeds of this offering
will
be used to purchase these tenant-in-common interests. Please
refer
to Rule 140 of the Securities Act of 1933.
Cover Page
6. We note the disclosure regarding your intention to apply to
list
the shares on the NASDAQ. Please refer to the note to Item 202 of
Regulation S-K and revise accordingly.
7. Refer to the paragraph beginning with "[n]o one is authorized
to
make any statement about this offering different from those that
appear in this prospectus." This information is not appropriate
for
the cover page because it is not required by Item 501 of
Regulation
S-K and does not appear to be key to an investment decision.
Please
remove this paragraph from the cover page.
Suitability Standards, page 1
8. Please remove the cross reference and include the suitability
requirements of specific states in this section. Refer to Item 2
of
Industry Guide 5.
Prospectus Summary, page 1
Certain Summary Risk Factors, page 2
9. Please include a risk factor discussing the likelihood that you
may make distributions to investors from the proceeds of the
offering, thereby further reducing the amount of proceeds to be
invested in properties.
10. Refer to the fifth bullet point on page 3. Please revise to
state the formula for determining the number of common shares that
will be issued upon conversion of the convertible stock.
Currently,
the magnitude of the dilution risk is not clear in the summary.
Description of Properties to be Acquired, page 4
11. Please revise to explain what you mean by "opportunistic
investment strategy."
12. Please provide the basis for your belief that your shorter
targeted holding period and higher debt "will provide a rate of
return superior to comparable companies."
Dividend Policy, page 5
13. Please explicitly state that the proceeds from this offering
may
be used to make distributions to investors. Also, please clarify
that your taxable income may exceed available cash even after you
have achieved cash flow from operations, and that you may need to
borrow funds in order to make required distributions. Disclose
that
distributions in any period may constitute a return of capital to
investors.
Conflicts of Interest, page 5
14. Refer to the third bullet point on page 6. Supplementally,
please tell us the portion of fees payable to your advisor and its
affiliates that Robert Behringer will be entitled to receive by
virtue of his ownership interests in those entities.
15. Please revise the last bullet point to identify the affiliate
of
your advisor that holds the convertible stock. Also, please
disclose
Robert Behringer`s interest in that entity.
16. Please revise footnote (4) to state the percentage of your
outstanding common stock that Behringer Harvard Holdings will own
after the public offering, assuming both the minimum and the
maximum
number of shares are sold.
Share Redemption Program, page 11
17. The disclosure in this section consists of one lengthy
paragraph
with a number of lists embedded in paragraph form. As a result,
the
disclosure is dense and difficult to follow. Please revise to
break
up the disclosure into more than one paragraph. Also, use bullet
points instead of embedded lists.
Other Behringer Harvard Programs, page 13
18. Please supplementally advise us whether Behringer Harvard Mid-
Term Fund I or Behringer Harvard Short-Term Fund I intend to
conduct
follow-on offerings in 2005.
19. Please supplementally advise us why you have not included
Behringer Harvard Mid-Term Fund I or Behringer Harvard Short-Term
Fund I in the table.
20. Please revise the "Investment Objectives" row to more clearly
distinguish the two offerings. We note that while there appear to
be
no substantive differences between the programs, the format of the
disclosure may cause an investor to conclude otherwise.
21. Please revise the "Compensation of Advisor and Affiliates for
Services" row to reflect the different asset management fees.
Questions and Answers About this Offering, page 17
22. Your Q&A section contains a significant amount of information
that is already disclosed in the prospectus summary. Please
revise
to eliminate redundant disclosure.
23. Please include disclosure regarding tenant-in-common
investments,
including control, distribution and liquidation rights.
Q: How are you different from your competitors who offer unlisted
finite-life public REIT or real estate limited partnership units?,
page 18
24. Please clarify the meaning of "defined exit strategies." Does
this refer to the listing or liquidation of the entire company, or
exit strategies with respect to each particular property?
Risk Factors, page 26
25. Please include risk factors on the following risks:
* Risks relating to your focus on riskier investments in volatile,
low barriers to entry markets and your strategy to employ a higher
level of debt than comparable programs;
* The risks that the advisor will have to allocate opportunities,
including properties and tenants, among affiliated entities that
have
almost identical investment strategies;
* The risk that the convertible shares may be worth 15% of the
excess
of your enterprise value over the sum invested by the shareholders
plus a 10% annual return;
* The risk that your investment policies and strategies may be
changed without shareholder consent;
* The risks of joint venture investments;
* The restricted ability of the company to replace the property
manager or the advisor for poor performance;
* Risks specific to your targeted investments, including
properties
in low barrier to entry and or deteriorated markets;
* Potential securities liability in connection with 1031 tenant-
in-
common transactions;
* If applicable, that a substantial portion of your portfolio may
be
in office properties and in the form of tenant-in-common
interests;
and
* Each of the other public programs advised by affiliates of your
advisor have experienced losses in the current fiscal year and
prior
fiscal year.
We may suffer from delays in locating suitable investments, which
could adversely affect the return on your investment, page 26
26. Please clarify that the Behringer Harvard programs have
investment objectives and strategies substantially similar to
yours.
Until proceeds from this offering are invested and generating
operating cash flow sufficient to pay dividends to our
stockholders,
we intend to pay all or a substantial portion of our distributions
from available capital in anticipation of future cash flow which
may
reduce the amount of capital we ultimately invest and negatively
impact the value of your investment, page 36
27. Please clarify in the header and the risk factor that
"available
capital" refers to the proceeds of this offering.
We intend to incur mortgage indebtedness and other borrowings,
which
may increase our business risks, page 42
28. Please disclose your 75% debt policy and reference your
earlier
statement that you will incur a higher level of debt than
comparable
companies.
Estimated Use of Proceeds, page 52
29. Please include disclosure that a portion of the proceeds may
be
used to make distributions to investors and that such
distributions
would reduce the amount of proceeds available for investment in
properties below 84.3%.
Management, page 55
30. Please disclose the duties of your executive officers.
Affiliated Companies, page 67
31. Please disclose the circumstances in which you are permitted
to
engage a party other than HPT Management to provide leasing
services.
32. Please disclose the management obligations of HPT Management
that
are being performed by Trammell Crow and those that are not.
Management Compensation, page 69
33. Please provide disclosure on fees to be paid to Behringer
Harvard
Holding in connection with 1031 tenant-in-common offerings for
which
you will agree to purchase any unsold interests.
Conflicts of Interest, page 77
Interests in Other Real Estate Programs, page 77
34. Please disclose, when identified, whether your independent
directors are independent directors of other Behringer programs.
Competition in Acquiring Properties, page 78
35. Please revise the header to reference competition in finding
tenants and in selling properties.
36. Please provide more detailed disclosure regarding conflicts of
interest in acquiring and leasing properties. In particular,
please
disclose whether the individuals responsible for identifying
properties for acquisition or tenants for leasing are the same for
each Behringer program. Please also discuss the similarities in
property types and tenants targeted by the Behringer programs.
Please include a discussion of the potential conflicts of interest
in
the event that each of the Behringer programs is required to
liquidate.
Receipt of Fees and Other Compensation by Our Advisor and
its
Affiliates, page 79
37. Please include disclosure regarding the conflicts created by
your
participation in the private offerings of tenant-in-common
interests
by Behringer Harvard Holdings, including a discussion of fees that
will be paid to Behringer Harvard Holdings.
Investment Objectives and Criteria, page 82
Acquisition and Investment Policies, page 82
38. Considering that you currently have not identified any
properties
for acquisition, please tell us the basis for your belief that
three
to six years is the "optimal period to enable [you] to capitalize
on
the potential for increased income and capital appreciation of
[your]
properties."
Section 1031 Tenant-in-Common Transactions, page 88
39. Supplementally, please tell us the exemption from registration
that the Behringer Harvard Exchange Entities will rely upon for
the
private placement of tenant-in-common interests.
Making Loans and Investments in Mortgages, page 90
40. Please disclose whether you have policies on investing in
construction loans, loans secured by leasehold interests or junior
loans.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 95
41. In light of your stated strategy to use levels of debt higher
than comparable companies to finance your operations, please
discuss
the potential impact of rising interest rates on your business.
42. Please conform your discussion of your working capital
reserves
to disclosure elsewhere in the prospectus that discloses the
percentage of offering proceeds you intend to hold in capital
reserve. For example, refer to footnote 5 on page 53.
Liquidity and Capital Resources, page 96
43. Please discuss whether or not you intend to pay distributions
prior to having cash flow from property operations and the
expected
source of any such distributions.
Prior Performance Summary, page 99
44. Please clarify the type of property interest owned by the
Behringer programs. If not held in fee simple, please disclose
the
percentage owned and whether they are tenant-in-common, limited
partnership or general partner interests.
Private Programs, page 102
45. We note your disclosure that "some of these programs" have
endured adverse business conditions, and your examples that
follow.
Please confirm that you have disclosed all major adverse business
conditions of these programs.
46. Please discuss the losses suffered by each of your other
public
programs for the prior fiscal year and the current fiscal year or
advise us why you do not consider these major adverse business
conditions.
Federal Income Tax Considerations, page 105
Opinion of Counsel, page 105
47. Please revise the Morris, Manning & Martin opinion. The
opinion
should in substance provide that the company is organized in
conformity with the REIT tax requirements and its proposed method
of
operation as described in the prospectus will enable it to meet
the
requirements for qualification and taxation as a REIT. Please
also
limit counsel`s reliance on assumptions and representations to
factual matters.
Description of Shares, page 128
Dividends, page 132
48. Refer to the first full paragraph on page 133, which discusses
payment of dividends in anticipation of cash flow that you have
not
yet received. Please revise to refer to these payments as
"distributions" rather than dividends, since the payments do not
reflect income earned.
Share Redemption Program, page 134
49. Please disclose whether redemption requests that are not
accepted
in a particular period are automatically cancelled or are
considered
in the next redemption period.
Plan of Distribution, page 147
Minimum Offering, page 150
50. Please revise to state whether shares purchased by your
executive
officers and directors, or the executive officers and directors of
your affiliates, will count toward the minimum offering amount.
Volume Discounts, page 151
51. Please disclose who is responsible for monitoring the
application
of volume discounts. Please disclose whether discounts are
automatically applied or require further action by the investor.
Supplemental Sales Material, page 156
52. Please include the detail required by Item 19B of Industry
Guide
5 with respect to any supplemental sales material to be used in
the
offering.
Legal Matters, page 156
53. We note your statement that neither Venable nor Morris Manning
&
Martin purport to represent stockholders or potential investors,
who
should consult their own counsel. This statement may suggest that
investors cannot rely on the legal opinions of these firms and
therefore is inappropriate. Please revise to omit this disclaimer
from your prospectus.
Prior Performance Tables
54. Please consider updating your prior performance tables as of
the
latest interim period in your next amendment to the Registration
Statement on Form S-11, as applicable, and advise us.
Table I, A-2
55. We note that you have included programs for which offerings
have
been initiated since January 1, 1995. Instruction 1 to Table I in
Guide 5 requests information only for programs the offering of
which
closed in the most recent three years. Please tell us why you
have
provided information beyond the scope of Guide 5 or revise the
tables
to limit the disclosure. Similarly address the scope of Tables
II,
III, and IV.
Table V, A-29
56. Please supplementally advise us why the excess of cash over
expenditures disclosed for Harvard Property Parkside and Harvard
Property (UP) is significantly different than the disclosure in
Behringer Harvard REIT I, Inc.`s post-effective amendment filed
December 7, 2004.
Financial Statements and Notes
Note 1. Organization, page F-5
57. Please consider disclosing the structure of Behringer Harvard
Opportunity OP I and the significant terms of the operating
partnership agreement consistent with your disclosures on pages
144-
146 or elsewhere in the filing and advise us.
Note 2 Summary of Significant Accounting Policies, page F-5
58. Please refer to the disclosure on page 7 relating to your
ownership structure. Please revise the note to explain, and
advise
us, how you account for your investment in BHO Partners, LLC and
Behringer Harvard Opportunity OP I, LP, and refers us to the GAAP
literature that supports your policy. Also, disclose the
percentage
ownership held by the REIT in these entities.
59. Please disclose your accounting policy for organizational and
offering costs.
Part II
Exhibit 8.1
60. Please revise the third and fifth paragraphs of the opinion to
clarify that counsel may rely on information and representations
as
to factual matters only.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Andrew Mew at (202) 942-2913 or Jorge
Bonilla,
Reviewing Staff Accountant, at (202) 942-1993 if you have
questions
regarding comments on the financial statements and related
matters.
Please contact Michael McTiernan, Attorney-Advisor, at (202) 824-
5445, or me at (202) 942-1960 with any other questions.
Sincerely,
Karen J. Garnett
Assistant Director
cc: Rosemarie Thurston, Esq. (via facsimile)
Morris, Manning & Martin, LLP
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Behringer Harvard Opportunity REIT I, Inc.
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