Lightstone Value Plus REIT V, Inc. - Quarter Report: 2010 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

Commission File Number: 000-53650

Behringer Harvard Opportunity REIT II, Inc.
(Exact Name of Registrant as Specified in Its Charter)


Maryland (State or other jurisdiction of incorporation or organization)		20-8198863 (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 o 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 ý

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 October 29, 2010, Behringer Harvard Opportunity REIT II, Inc. had 21,478,432 shares of common stock outstanding.

Table of Contents

BEHRINGER HARVARD OPPORTUNITY REIT II, INC.
FORM 10-Q
Quarter Ended September 30, 2010



PART I FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (Unaudited).
	Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009	3
	Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2010 and 2009	4
	Consolidated Statements of Equity for the Nine Months Ended September 30, 2010 and 2009	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	57
Item 4.	(Removed and Reserved)	57
Item 5.	Other Information	57
Item 6.	Exhibits	57
Signature		58

Table of Contents

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.

Behringer Harvard Opportunity REIT II, Inc.

Consolidated Balance Sheets

(in thousands, except shares)

(unaudited)

				September 30, 2010			December 31, 2009

Assets
	Real estate
		Land and improvements, net		$	34,430		$	9,000
		Buildings, net			91,141			25,314

			Total real estate		125,571			34,314
	Real estate loans receivable, net				25,211			39,712

			Total real estate and real estate-related investments, net		150,782			74,026
	Cash and cash equivalents				92,173			67,509
	Restricted cash				1,657			—
	Accounts receivable, net				708			344
	Interest receivable—real estate loans receivable				1,645			398
	Prepaid expenses and other assets				2,176			564
	Investment in unconsolidated joint venture				4,485			506
	Furniture, fixtures and equipment, net				1,770			—
	Acquisition deposits				2,222			—
	Lease intangibles, net				4,602			1,590

			Total assets	$	262,220		$	144,937

Liabilities and Equity
	Notes payable			$	79,039		$	18,500
	Accounts payable				366			11
	Payables to related parties				1,178			582
	Acquired below-market leases, net				999			1,134
	Distributions payable				860			607
	Accrued and other liabilities				3,653			1,504

			Total liabilities		86,095			22,338
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, 21,115,043 and 14,648,698 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively				2			1
	Additional paid-in capital				184,078			126,815
	Accumulated distributions and net loss				(12,685	)		(6,839	)
	Accumulated other comprehensive income				373			—

		Total Behringer Harvard Opportunity REIT II, Inc. Equity			171,768			119,977
	Noncontrolling interest				4,357			2,622

	Total equity				176,125			122,599

			Total liabilities and equity	$	262,220		$	144,937

See Notes to Consolidated Financial Statements.

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Behringer Harvard Opportunity REIT II, Inc.

Consolidated Statements of Operations and Other Comprehensive Income

(in thousands, except per share amounts)

(unaudited)

			Three Months Ended September 30,						Nine Months Ended September 30,

			2010			2009			2010			2009
Revenues
		Rental revenue	$	3,007		$	1,313		$	6,204		$	4,087
		Interest income from real estate loans receivable		1,169			302			3,753			302

Total revenues				4,176			1,615			9,957			4,389
Expenses:
		Property operating expenses		1,097			310			2,016			931
		Interest expense		702			329			1,399			980
		Real estate taxes		303			139			663			419
		Property management fees		86			42			196			132
		Asset management fees		292			103			683			275
		General and administrative		706			530			1,562			1,190
		Acquisition expense		3,135			—			4,581			—
		Depreciation and amortization		1,577			596			3,235			1,860

Total expenses				7,898			2,049			14,335			5,787
Interest income, net				180			149			437			374
Gain on sale of investment				152			—			152			—
Bargain purchase gain				—			—			5,492			—
Other income (expense)				5			—			(133	)		—

Income (loss) before equity in losses of
		unconsolidated joint venture		(3,385	)		(285	)		1,570			(1,024	)
Equity in losses of unconsolidated joint venture				(144	)		—			(151	)		—

Net income (loss)				(3,529	)		(285	)		1,419			(1,024	)
		Net (income) loss attributable to the noncontrolling interest		231			—			(388	)		—

Net income (loss) attributable to common shareholders			$	(3,298	)	$	(285	)	$	1,031		$	(1,024	)

Weighted average shares outstanding:
		Basic and diluted		20,509			11,389			18,369			9,616
Net income (loss) per share attributable to common shareholders
		Basic and diluted	$	(0.16	)	$	(0.03	)	$	0.06		$	(0.11	)
Comprehensive income (loss):
Net income (loss)			$	(3,529	)	$	(285	)	$	1,419		$	(1,024	)

Other comprehensive loss:
	Foreign currency translation gain			373			—			373			—

Total other comprehensive income				373			—			373			—

Comprehensive income (loss) attributable to common shareholders			$	(3,156	)	$	(285	)	$	1,792		$	(1,024	)

See Notes to Consolidated Financial Statements.

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Behringer Harvard Opportunity REIT II, Inc.

Consolidated Statements of Equity

(in thousands)

(unaudited)

			Convertible Stock				Common Stock

			Convertible Stock				Common Stock											Accumulated Other Comprehensive Income (Loss)
			Number of Shares		Par Value		Number of Shares			Par Value		Additional Paid-in Capital			Accumulated Distributions and Net Income/(Loss)			Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest			Total Equity
Balance at January 1, 2009				1	$	—		7,323		$	1	$	59,987		$	(1,166	)	$	—	$	—		$	58,822
	Issuance of common stock, net							5,036					43,600											43,600
	Redemption of common stock							(42	)				(380	)										(380	)
	Distributions declared on common stock															(2,904	)							(2,904	)
	Net loss															(1,024	)							(1,024	)

Balance at September 30, 2009				1	$	—		12,317		$	1	$	103,207		$	(5,094	)	$	—	$	—		$	98,114

Balance at January 1, 2010				1	$	—		14,649		$	1	$	126,815		$	(6,839	)	$	—	$	2,622		$	122,599
	Issuance of common stock, net							6,596			1		58,452											58,453
	Redemption of common stock							(130	)				(1,189	)										(1,189	)
	Distributions declared on common stock															(6,877	)							(6,877	)
	Contributions from noncontrolling interest																				3,404			3,404
	Distributions to noncontrolling interest																				(2,057	)		(2,057	)
	Other comprehensive income:
		Foreign currency translation gain																	373					373
	Net income															1,031					388			1,419

Balance at September 30, 2010				1	$	—		21,115		$	2	$	184,078		$	(12,685	)	$	373	$	4,357		$	176,125

See Notes to Consolidated Financial Statements.

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Behringer Harvard Opportunity REIT II, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

				Nine Months ended September 30,

				2010			2009
Cash flows from operating activities:
	Net income (loss)			$	1,419		$	(1,024	)
	Adjustments to reconcile net income (loss) to net cash
		flows used in operating activities:
		Depreciation and amortization			2,536			981
		Amortization of deferred financing fees			143			100
		Equity in losses of unconsolidated joint venture			151			—
		Bargain purchase gain			(5,492	)		—
		Gain on sale of interest in unconsolidated joint venture			(152	)		—
		Change in accounts receivable			(285	)		(138	)
		Change in interest receivable—real estate loan receivable			(1,246	)		(300	)
		Change in prepaid expenses and other assets			(9	)		(118	)
		Change in accounts payable			338			21
		Change in accrued and other liabilities			789			283
		Change in net payables to related parties			182			(348	)
		Addition of lease intangibles			(267	)		(158	)

			Cash used in operating activities		(1,893	)		(701	)

Cash flows from investing activities:
	Acquisition deposits				(2,222	)		(23,696	)
	Purchases of real estate				(64,186	)		—
	Investment in unconsolidated joint venture				(4,630	)		—
	Proceeds from sale of interest in unconsolidated joint venture				616			—
	Investment in real estate loans receivable				(12,594	)		(12,629	)
	Additions of property and equipment				(893	)		(371	)
	Change in restricted cash				(583	)		—

			Cash used in investing activities		(84,492	)		(36,696	)

Cash flows from financing activities:
	Financing costs				(1,401	)		—
	Proceeds from notes payable				59,479			—
	Issuance of common stock				61,031			48,280
	Redemptions of common stock				(624	)		(224	)
	Offering costs				(6,785	)		(5,264	)
	Distributions				(2,002	)		(674	)
	Contributions from noncontrolling interest holders				3,404			—
	Distributions to noncontrolling interest holders				(2,057	)		—

			Cash provided by financing activities		111,045			42,118

	Effect of exchange rate changes on cash and cash equivalents				4			—

	Net change in cash and cash equivalents				24,664			4,721
	Cash and cash equivalents at beginning of period				67,509			47,375

	Cash and cash equivalents at end of period			$	92,173		$	52,096

See Notes to Consolidated Financial Statements.

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Business and Organization

Business

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

We acquire and operate commercial real estate and real estate-related assets. In particular, we focus generally on acquiring commercial properties with significant possibilities for short-term capital appreciation, such as those requiring development, redevelopment, or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who are distressed or face time-sensitive deadlines. In addition, given economic conditions as of September 30, 2010, our opportunistic investment strategy also includes investments in real estate-related assets that present opportunities for higher current income. Such investments may have capital gain characteristics, whether as a result of a discount purchase or related equity participations. We may acquire a wide variety of commercial properties, including office, industrial, retail, hospitality, recreation and leisure, single-tenant, multifamily, and other real properties. These properties may be existing, income-producing properties, newly constructed properties, or properties under development or construction and may include multifamily properties purchased for conversion into condominiums and single-tenant properties that may be converted for multi-tenant use. Further, we may invest in real estate-related securities, including securities issued by other real estate companies, either for investment or in change of control transactions completed on a negotiated basis or otherwise. We also may originate or invest in collateralized mortgage-backed securities, mortgage, bridge or mezzanine loans, and Section 1031 tenant-in-common interests (including those issued by affiliates of our advisor), or in entities that make investments similar to the foregoing. We expect to make our investments in or in respect of real estate assets located in the United States and other countries based on our view of existing market conditions. We completed our first property acquisition, an office building located in Denver, Colorado, on October 28, 2008, and, as of September 30, 2010, we had invested in eight real estate and real estate-related assets, including two investments in unconsolidated joint ventures, one of which, our 9.99% interest in Stone Creek, we sold on August 30, 2010 to an unrelated third party.

Substantially all of our business is conducted through Behringer Harvard Opportunity OP II LP, a limited partnership organized in Delaware on January 12, 2007 ("Behringer Harvard Opportunity OP II"). As of September 30, 2010, our wholly-owned subsidiary, BHO II, Inc., a Delaware corporation, was the sole general partner of Behringer Harvard Opportunity OP II and owned a 0.1% partnership interest in Behringer Harvard Opportunity OP II. As of September 30, 2010, our wholly-owned subsidiary, BHO Business Trust II, a Maryland business trust, was the sole limited partner of Behringer Harvard Opportunity OP II and owned the remaining 99.9% interest in Behringer Harvard Opportunity OP II.

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

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

1. Business and Organization (Continued)

Our office is located at 15601 Dallas Parkway, Suite 600, Addison, Texas 75001, and our toll-free telephone number is (866) 655-3600. The name Behringer Harvard is the property of Behringer Harvard Holdings, LLC ("Behringer Harvard Holdings") and is used by permission.

Organization

On February 26, 2007, we filed a Registration Statement on Form S-11 with the Securities and Exchange Commission ("SEC") to offer up to 125,000,000 shares of common stock for sale to the public (the "Offering"), of which 25,000,000 shares are being offered pursuant to our distribution reinvestment plan (the "DRP"). We reserve the right to reallocate the shares we are offering between our primary offering and the DRP. The SEC declared our Registration Statement effective on January 4, 2008, and we commenced our ongoing initial public offering on January 21, 2008.

In connection with our initial capitalization, on January 19, 2007, we issued 22,471 shares of our common stock and 1,000 shares of our convertible stock to Behringer Harvard Holdings, an affiliate of our advisor. On April 2, 2010, Behringer Harvard Holdings transferred ownership of its convertible stock to Behringer Opportunity Advisors II. As of September 30, 2010, we had 21,115,043 shares of common stock outstanding, which includes the 22,471 shares issued to Behringer Harvard Holdings. As of September 30, 2010, we had 1,000 shares of convertible stock issued and outstanding to Behringer Opportunity Advisors II.

We commenced operations on April 1, 2008 upon satisfaction of the conditions of our escrow agreement and our acceptance of initial subscriptions of common stock. Upon admission of new stockholders, subscription proceeds are used for payment of dealer manager fees and selling commissions and may be utilized as consideration for investments and the payment or reimbursement of offering expenses and operating expenses. Until required for such purposes, net offering proceeds are held in short-term, liquid investments. Through September 30, 2010, we had sold 21,306,762 shares in the Offering, including the DRP, for gross proceeds of $212.3 million.

On September 13, 2010, we filed a registration statement on Form S-11 with the SEC to register a follow-on public offering. Pursuant to the registration statement, we propose to register 50,000,000 shares of our common stock at a price of $10.00 per share in our primary offering, with discounts available to investors who purchase more than 50,000 shares and to other categories of purchasers. We will also register 25,000,000 shares of common stock pursuant to our distribution reinvestment plan at $9.50 per share. The follow-on public offering has not yet been declared effective.

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

2. Interim Unaudited Financial Information

The accompanying 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, 2009, which was filed with the SEC on March 30, 2010. Certain

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

2. Interim Unaudited Financial Information (Continued)

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 from this quarterly report pursuant to the rules and regulations of the SEC.

The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying consolidated balance sheet and consolidated statement of equity as of September 30, 2010, the consolidated statements of operations and other comprehensive income for the three and nine months ended September 30, 2010 and 2009, and the consolidated statements of cash flows for the nine months ended September 30, 2010 and 2009 have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to fairly present our consolidated financial position as of September 30, 2010 and December 31, 2009 and our consolidated results of operations and cash flows for the periods ended September 30, 2010 and 2009. Such adjustments are of a normal recurring nature.

3. Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates include such items as purchase price allocation for real estate acquisitions, impairment of long-lived assets, depreciation and amortization, and allowance for doubtful accounts. Actual results could differ from those estimates.

Principles of Consolidation and Basis of Presentation

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

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility, and using a discount rate to determine the net present value of those future losses. A change in the judgments, assumptions, and estimates outlined above could result in consolidating an

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

3. Summary of Significant Accounting Policies (Continued)

entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

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

Real Estate

Upon the acquisition of real estate properties, we recognize the assets acquired, the liabilities assumed, and any noncontrolling interest as of the acquisition date, measured at their fair values. The acquisition date is the date on which we obtain control of the real estate property. The assets acquired and liabilities assumed may consist of buildings, any assumed debt, identified intangible assets and asset retirement obligations. Identified intangible assets generally consist of the above-market and below-market leases, in-place leases, in-place tenant improvements and tenant relationships. 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 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.

We determine the fair value of assumed debt by calculating the net present value of the scheduled note payments using interest rates for debt with similar terms and remaining maturities that we believe we could obtain. 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.

The fair value of the tangible assets acquired, consisting of land and buildings, is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land and buildings. Land values are derived from appraisals, and building values are calculated as replacement cost less depreciation or management's estimates of the relative fair value of these assets using discounted cash flow analyses or similar methods. The value of the commercial office building is depreciated over the estimated useful life of 25 years using the straight-line method.

We determine the value of above-market and below-market in-place leases for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (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 fixed rate renewal option 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 above determined lease term.

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

3. Summary of Significant Accounting Policies (Continued)

The total value of identified real estate intangible assets acquired is further allocated to in-place lease values 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 of in-place leases acquired and tenant relationships is determined by applying a fair value model. The estimates of fair value of in-place leases include an estimate of carrying costs during the expected lease-up periods for the respective spaces, considering current market conditions. In estimating fair value of in-place leases, we consider items such as real estate taxes, insurance and other operating expenses, as well as lost rental revenue during the expected lease-up period and carrying costs that would have otherwise been incurred had the leases not been in place, including tenant improvements and commissions. The estimates of the fair value of tenant relationships also include costs to execute similar leases, including leasing commissions, legal costs 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 to expense over the term of the respective leases. The value of tenant relationship intangibles is amortized to expense over the initial term and any anticipated renewal periods, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and tenant relationship intangibles is charged to expense. As of September 30, 2010, the estimated remaining useful life for acquired lease intangibles was approximately 4.5 years.

Anticipated amortization expense associated with the acquired lease intangibles as of September 30, 2010 is as follows:

Year	Lease Intangibles

October 1, 2010 - December 31, 2010	$	1,436
2011		1,384
2012		226
2013		141
2014		81

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

As of September 30, 2010		Buildings and Improvements			Land and Improvements			Lease Intangibles			Acquired Below-Market Leases

Cost		$	93,728		$	34,442		$	7,381		$	(2,621	)
Less: depreciation and amortization			(2,587	)		(12	)		(2,779	)		1,622

	Net	$	91,141		$	34,430		$	4,602		$	(999	)

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Behringer Harvard Opportunity REIT II, Inc.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

3. Summary of Significant Accounting Policies (Continued)

Property Name	Location			Description	Ownership Interest

1875 Lawrence	Denver, CO	185,000		15-story Office Building	100%
PAL Loan	(1)	n/a		Hospitality/Redevelopment	Lender
Palms of Monterrey	Fort Myers, FL		(2)	Multifamily	90%
Holstenplatz	Hamburg, Germany	80,000		8-story Office Building	100%
Archibald Business Center	Ontario, CA	231,000		Office and Industrial Warehouse	80%
Parrot's Landing	North Lauderdale, FL		(3)	Multifamily	90%

	Pro Forma for the Nine Months Ended September 30,

	2010			2009
Revenue	$	10,339		$	7,495
Net income (loss)	$	(3,892	)	$	3,636
Net income (loss) per share	$	(0.21	)	$	0.38

		Palms of Monterrey

Land		$	5,800
Land improvements			562
Building			23,604
Lease intangibles, net			1,028
Acquired below-market leases, net			(16	)
Furniture, fixtures and equipment			1,123
Working capital			482

	Total identifiable net assets	$	32,583

	Pro Forma for the Nine Months Ended September 30,

	2010		2009
Revenue	$	10,638	$	5,416
Net loss	$	2,346	$	(2,966	)
Net loss per share	$	0.13	$	(0.31	)

		Holstenplatz

Land		$	2,703
Building			8,858
Lease intangibles, net			1,079
Acquired below-market leases, net			(127	)

	Total identifiable net assets	$	12,513

As of December 31, 2009		Buildings and Improvements			Land and Improvements		Lease Intangibles			Acquired Below-Market Leases

Cost		$	26,548		$	9,000	$	2,787		$	(2,143	)
Less: depreciation and amortization			(1,234	)		—		(1,197	)		1,009

	Net	$	25,314		$	9,000	$	1,590		$	(1,134	)

		Archibald Business Center

Land		$	3,892
Building			5,193
Lease intangibles, net			525
Acquired below-market leases, net			(104	)

	Total identifiable net assets	$	9,506

		Parrot's Landing

Land		$	11,064
Land Improvements			1,110
Building			27,645
Furniture, fixtures and equipment			708
Lease intangibles, net			1,498
Acquired below-market leases, net			(25	)

	Total identifiable net assets	$	42,000

				Carrying Value of Investment

Property Name	Ownership Interest			September 30, 2010		December 31, 2009
Stone Creek		9.99	%	$	—	$	506
El Cajon Distribution Center		16.00	%		4,485		—

				$	4,485	$	506

		September 30, 2010		December 31, 2009

Real estate assets, net		$	50,229	$	13,886
Cash and cash equivalents			2,254		641
Other assets			27		46

	Total assets	$	52,510	$	14,573

Notes payable		$	27,076	$	12,917
Other liabilities			514		151

	Total liabilities		27,590		13,068
Equity			24,920		1,505

	Total liabilities and equity	$	52,510	$	14,573

		Three Months Ended September 30, 2010			Nine Months Ended September 30, 2010

Revenue		$	448		$	1,862
Operating expenses:
	Operating expenses		306			652
	Property taxes		221			385

	Total operating expenses		527			1,037

Operating income			(79	)		825
Non-operating expenses:
	Depreciation and amortization		277			760
	Interest and other, net		609			1,107

	Total non-operating expenses		886			1,867

Net loss		$	(965	)	$	(1,042	)

Company's share of net loss		$	(144	)	$	(151	)

Loan Name		Property Type	Book Value as of 9/30/2010		Book Value as of 12/31/2009

PAL Loan	8/14/2009	Hospitality/Redevelopment	$	25,211	$	12,634	18	%	9/1/2016
Palms of Monterrey	10/2/2009	Multifamily		—		27,078		⁽¹⁾		⁽¹⁾

			$	25,211	$	39,712

Description	September 30, 2010		December 31, 2009		Interest Rate

1875 Lawrence	$	18,996	$	18,500	30-day LIBOR + 2.5%⁽¹⁾⁽²⁾	12/31/12
Palms of Monterrey		19,700		—	30-day LIBOR + 3.35%⁽¹⁾⁽³⁾	07/01/17
Holstenplatz		10,765		—	3.887%	04/30/15
Parrot's Landing		29,578		—	4.230%	10/01/17

	$	79,039	$	18,500

Year	Amount Due

October 1, 2010 - December 31, 2010	$	135
2011		1,012
2012		19,569
2013		1,117
2014		1,154
Thereafter		56,052

	$	79,039

Year	Minimum Rental Payments

October 1, 2010 - December 31, 2010	$	1,109
2011		3,516
2012		2,554
2013		1,678
2014		1,028
Thereafter		2,131

Total	$	12,016

As of September 30, 2010	Investments in Unconsolidated VIEs		Our Maximum Exposure to Loss

PAL Loan⁽¹⁾	$	—	$	25,000

2010	Cash		DRP		Total		Per Share

3rd Quarter	$	1,133	$	1,454	$	2,587	$	0.126
2nd Quarter		716		1,607		2,323		0.125
1st Quarter		571		1,396		1,967		0.123

	$	2,420	$	4,457	$	6,877	$	0.374

2009	Cash		DRP		Total		Per Share

3rd Quarter	$	392	$	1,045	$	1,437	$	0.126
2nd Quarter		227		654		881		0.091
1st Quarter		147		439		586		0.074

	$	766	$	2,138	$	2,904	$	0.291

	Payments Due by Period

	October 1, 2010 - December 31, 2010		2011		2012		After 2012		Total
Principal payments—variable rate debt	$	—	$	301	$	18,840	$	19,554	$	38,695
Principal payments—fixed rate debt		135		711		729		38,769		40,344
Interest payments—variable rate debt (based on rates in effect as of September 30, 2010)		480		1,916		1,997		5,887		10,280
Interest payments—fixed rate debt		319		1,673		1,648		3,834		7,474

Total	$	934	$	4,601	$	23,214	$	68,044	$	96,793

		Nine Months ended September 30,

		2010		2009
Interest paid		$	1,200	$	784
Non-cash investing activities:
	Conversion of loan to equity investment	$	27,091	$	—
	Capital expenditures for real estate under development in accounts payable and accrued liabilities	$	1	$	—
Non-cash financing activities:
	Common stock issued in distribution reinvestment plan	$	4,622	$	1,918
	Accrued dividends payable	$	860	$	494
	Offering costs payable to related parties	$	824	$	1,335
	Redemption of stock in accrued liabilities	$	565	$	156

Properties		Venture Ownership %			Interest Rate (as of September 30, 2010)			Carrying Amount			Maturity Date

El Cajon Distribution Center			16	%		3.256	%	$	27,076			August 10, 2012	⁽¹⁾

		Three Months Ended September 30,				Increase (Decrease)

		2010		2009		Amount		Percent
Revenues:
	Rental revenue	$	3,007	$	1,313	$	1,694		129	%
	Interest income from real estate loans receivable		1,169		302		867		287	%

Total revenue		$	4,176	$	1,615	$	2,561		159	%

Expenses:
	Property operating expenses	$	1,097	$	310	$	787		254	%
	Interest expense		702		329		373		113	%
	Real estate taxes		303		139		164		118	%
	Property management fees		86		42		44		105	%
	Asset management fees		292		103		189		183	%
	General and administrative		706		530		176		33	%
	Acquisition expense		3,135		—		3,135		n/a
	Depreciation and amortization		1,577		596		981		165	%

Total expenses		$	7,898	$	2,049	$	5,849		285	%

		Distributions Paid

		Distributions Paid						Cash Flow Provided by (Used In) Operations			Total Distributions Declared		Declared Distribution Per Share
2010		Cash		Reinvested		Total		Cash Flow Provided by (Used In) Operations			Total Distributions Declared		Declared Distribution Per Share
3rd Quarter		$	794	$	1,736	$	2,530	$	(1,130	)	$	2,587	$	0.126
2nd Quarter			677		1,553		2,230		(1,933	)		2,323		0.125
1st Quarter			531		1,333		1,864		1,170			1,967		0.123

	Total	$	2,002	$	4,622	$	6,624	$	(1,893	)	$	6,877	$	0.374

Type of Expense		Amount

Other expenses to affiliates⁽¹⁾		$	26,589
Other expenses to non-affiliates			—

	Total expenses	$	26,589

2010		Average Price Paid Per Share

July	—	$	—	—
August	61,775	$	8.97	61,775	⁽¹⁾
September	—	$	—	—

	61,775	$	8.97	61,775	⁽¹⁾


	BEHRINGER HARVARD OPPORTUNITY REIT II, INC.
Dated: November 15, 2010	By:	/s/ GARY S. BRESKY Gary S. Bresky Executive Vice President and Chief Financial Officer (Principal Financial Officer)

		Description

3.1		Second Articles of Amendment and Restatement as amended by the First Articles of Amendment and the Second Articles of Amendment (incorporated by reference to Exhibit 3.1 to Form 10-Q filed on November 14, 2008)
3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Form 10-K filed on March 30, 2010)
3.2(a	)	Amendment to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2(a) to Form 10-K filed on March 30, 2010)
4.1		Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 10 to the Company's Registration Statement on Form S-11, Commission File No. 333-140887)
4.2		Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.2 to Post-Effective Amendment No. 10 to the Company's Registration Statement on Form S-11, Commission File No. 333-140887)
4.3		Amended and Restated Automatic Purchase Plan (incorporated by reference to Exhibit 4.3 to Post-Effective Amendment No. 10 to the Company's Registration Statement on Form S-11, Commission File No. 333-140887)
4.4		Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.2 to Form 10-Q filed on November 12, 2009)
4.5		Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.5 to Pre-Effective Amendment No. 3 to the Company's Registration Statement on Form S-11, Commission File No. 333-140887)
10.1*		Multifamily Note made by 7900 Hampton Blvd, LLC to Amerisphere Multifamily Finance, L.L.C. dated as of September 17, 2010, incorporated by reference to Exhibit 10.29 to Post-Effective Amendment No. 12 to the Company's Registration Statement on Form S-11, Commission File No. 333-140887
10.2*		Multifamily Mortgage, Assignment of Rents and Security Agreement between 7900 Hampton Blvd, LLC and Amerisphere Multifamily Finance, L.L.C. dated as of September 17, 2010, incorporated by reference to Exhibit 10.30 to Post-Effective Amendment No. 12 to the Company's Registration Statement on Form S-11, Commission File No. 333-140887
10.3*		Limited Liability Company Agreement of 7900 Hampton Blvd, LLC dated September 17, 2010 by, between and among Behringer Harvard Parrot's Landing, LLC and Hampton Peak, LLC, incorporated by reference to Exhibit 10.31 to Post-Effective Amendment No. 12 to the Company's Registration Statement on Form S-11, Commission File No. 333-140887
31.1*		Rule 13a-14(a)/15d-14(a) Certification
31.2*		Rule 13a-14(a)/15d-14(a) Certification
32.1*		Section 1350 Certifications**