Mail Stop 4561
March 27, 2007
Gerald J. Riehsen, III
Executive Vice President
Behringer Harvard Opportunity REIT II, Inc.
15601 Dallas Parkway, Suite 600
Addison, Texas 75001
Re: Behringer Harvard Opportunity REIT II, Inc.
Registration Statement on Form S-11
Filed February 26, 2007
Registration No. 333-140887
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
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 on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Please provide us with any pictures, graphics or artwork that
will
be used in the prospectus.
2. Please note that any sales literature that is to be used in
connection with this offering must be submitted to us 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.
Cover Page
3. Please limit the prospectus cover to one page.
4. Please remove the name and logo of the dealer manager from the
bottom of the cover page as it suggests that the offering is
underwritten on a firm-commitment basis.
Terms of the Offering, page 4
5. Please disclose, if true, that you may commence a follow-on
offering with the same or substantially similar terms following
the
completion of this offering.
Summary Risk Factors, page 4
6. Please disclose the risk that potential investors and
shareholders
will not have access to information regarding the company`s net
asset
value or per share net asset value.
Compensation to Our Advisor and Its Affiliates, page 12
7. Please disclose the potential acquisition and advisory fees and
debt financing fees assuming you use debt financing equal to the
maximum amount permitted by our policy.
Conflicts of Interest, page 9
8. There appears to be a number of potential advantages to the
advisor and its management from pursuing listing rather than
liquidation as an exit strategy, including:
* Convertibility of convertible stock irrespective of return
thresholds
* Consideration to be paid in the event the advisor is
internalized
* Compensation to be paid to internalized management
Please include disclosure regarding the apparent conflict of
interest
related to the selection of the exit strategy.
9. Please revise here and on page 167 to clarify the "issue price"
is
the price paid for all outstanding shares and the "enterprise
value"
is the value of the company.
Behringer Harvard Affiliates, page 11
10. Please revise the chart to include percentage ownership in the
chart rather than footnotes.
Share Redemption Program, page 17
11. Please be advised that you are responsible for analyzing the
applicability of the tender offer rules, including Rule 13e-4 and
Regulation 14E, to your share repurchase program. We urge you to
consider all the elements of your share repurchase program in
determining whether the program is consistent with relief granted
by
the Division of Corporation Finance in prior no action letters.
See,
for example, 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).
To the extent you have questions as to whether the program is
entirely consistent with the relief previously granted by the
Division of Corporation Finance, you may contact the Division`s
Office of Mergers and Acquisitions.
12. Please disclose when you intend to request SEC exemptive
relief.
13. Please disclose when you expect to begin having appraisals
performed by an independent third party.
How are you different from your competitors..., page 25
14. Please revise your summary to disclose the nature of assets to
be
held in TRS`s and that the income from TRS`s will not be counted
in
determining the taxable income that is required to be distributed.
15. We note your statement that you anticipate that any
dispositions
typically would occur during the period from three to six years
after
the termination of this offering. Please revise to disclose that
sales on properties held for less than four years may subject you
to
a 100% penalty tax.
Q: Will I be notified of how my investment is doing?, page 30
16. Please disclose whether information regarding the net asset
value
of the company will be provided to shareholders.
Risk Factors, page 32
17. Please include a risk factor regarding the potential costs of
internalizing the advisor in connection with any listing of the
company.
If we pay distributions from sources..., page 35
18. Please disclose if you intend to make distributions prior to
generating sufficient cash flow from operations.
19. Please disclose the risk that investors who invest later in
the
offering may realize a lower rate of return than earlier investors
to
the extent earlier investors were paid distributions from other
than
cash flow from operations.
Behringer Harvard Opportunity Advisors II LP and its
affiliates...,
page 37
20. In the seventh bullet, please disclose that the conversion
shares
will be issued irrespective of returns to investors.
We may have incrased exposure to liabilities from litigation...,
page
65
21. Please revise to explain the nature of your involvement in TIC
transactions in which you receive fees for providing
"accommodation
in support of the transaction."
We may be subject to certain risks in connection with our
arrangements with Behringer Harvard Exchange Entities, page 66
22. Please revise to describe the nature of the risk in the
caption
and the narrative.
Certain Conflict Resolution Procedures, page 107
23. Please include the disclosure required by Item 404(b) of
Regulation S-K.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Critical Accounting Policies and Estimates, page 127
24. Reference is made to your Real Estate critical accounting
policy
and your disclosure that above-market and below-market leases will
be
amortized to expense and rental income over an average term of the
respective leases. Tell us what consideration is given to renewal
options in determining the appropriate amortization periods for
below-market leases.
25. We note that you plan to invest in real estate-related
securities
and, to the extent that your advisor determines that it is
advantageous, you may invest in collateralized mortgage-backed
securities and mortgage, bridge or mezzanine loans. Please
disclose
as a critical accounting policy how you intend to account for
these
real estate-related assets including the factors management will
consider in determining the fair value of your real estate-related
assets.
26. We note that you are likely to enter into joint ventures,
partnerships, tenant-in-common investments or other co-ownership
arrangements with third parties as well as affiliated entities.
Please disclose as a critical accounting policy how you will
evaluate
your investments for potential variable interests pursuant to FIN
46R. Describe the manner in which you plan to account for future
joint venture investments and explain the measurement by which
significant influence will be assessed.
Liquidity and Capital Resources, page 129
27. Please disclose when you intend to start making distributions.
Prior Performance Summary, page 131
28. Please update your prior performance information.
29. Please revise to disclose the investment objectives that you
considered to be "substantially the same" as yours.
Public Programs, page 131
30. We note that you will target a wide range of property types in
the United States and abroad. In order to better reflect the
extent
of your sponsor`s prior experience in different property types and
regions, please include disclosure regarding the percentage of
properties owned by your other public programs based on property
type
and geographic area.
Real Estate Market, page 141
31. We note that you have included general information on why
programs, without identifying the programs, experienced adverse
developments. Please revise to describe with more particularity
any
major adverse business developments or conditions which were
experienced by any prior programs, identifying such programs, and
where applicable, provide a cross-reference to the information
concerning these developments in Table III of the prior
performance
tables.
Pending Litigation, page 142
32. Please include more detailed disclosure regarding the extent
of
the underperformance.
Federal Income Tax Considerations, page 143
33. Please revise your disclosure here and in the risk factor
section
on page 67 to make clear that your tax counsel has issued an
opinion
rather than that it will issue an opinion.
Exchange Rights, page 185
34. Please disclose how the cash value of OP units is determined.
For example, is it based on the offering price, redemption price
or
some other valuation?
Financial Statements
Consolidated Balance Sheet
Note 1 - Organization, page F-4
35. Please revise to disclose the fiscal year-end that you have
adopted.
Note 2 - Summary of Significant Accounting Policies, page F-5
Organization and Offering Costs, page F-5
36. Please revise to disclose the amount of organization and
offering
costs incurred to date. In that regard, if any material amounts
were
incurred subsequent to the balance sheet date, this information
should at a minimum be disclosed as a subsequent event.
Prior Performance Tables, page A-1
Table II
37. Please confirm that the sponsor and its affiliates received no
underwriting fees in connection with the offerings of these prior
programs.
38. Please include a footnote that discloses the specific fees
included in "Other Fees."
39. Footnote one is tied to fees and cash generated from
operations.
Please explain how this relates to the footnote reference to the
first follow-on offering.
Table III
40. Please include a footnote that discloses the specific fees
included in "from other" and "Other."
Table V
41. Please revise the last column to disclose the excess
(deficiency)
of property operating cash receipts over cash expenditures. It
appears that the current figures provided reflect the gain/loss on
sale which is a calculation of the penultimate column subtracted
from
the eighth column. Please consider retaining these totals under a
separate column.
Exhibits
42. Please file copies of your legal and tax opinions or provide
us
with drafts of these opinions so that we have an opportunity to
review them. Please also file any material agreements required to
be
filed under Item 601 of Item S-K.
* * *
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 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 Rachel Zablow, Staff Accountant at 202-551-
3428
or Cicely LaMothe, Accounting Branch Chief, at 202-551-3413 if you
have questions regarding comments on the financial statements and
related matters. Please contact Michael McTiernan at 202-551-3852
or
me at 202-551-3495 with any other questions.
Sincerely,
Elaine Wolff
Branch Chief
cc: Robert Bergdolt, Esq. (via facsimile)
Gerald J. Riehsen, III
Behringer Harvard Opportunity REIT II, Inc.
March 27, 2007
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