UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): January 14, 2011
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Behringer
Harvard Short-Term Opportunity Fund I LP
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(Exact
Name of Registrant as Specified in Its
Charter)
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Texas
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000-51291
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71-0897613
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(State
or other jurisdiction of incorporation or organization)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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15601
Dallas Parkway, Suite 600, Addison, Texas
75001
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(Address
of principal executive offices)
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(Zip
Code)
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(866)
655-1610
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(Registrant’s
telephone number, including area code)
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None
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(Former
name or former address, if changed since last
report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.0 Entry
into a Material Definitive Agreement.
Behringer
Harvard Short-Term Opportunity Fund I LP (which may be referred to as the
“Fund,” “we,” or “our”) and Behringer Harvard Holdings, LLC (“Behringer Harvard
Holdings”) are currently parties to the Fourth Amended and Restated Unsecured
Promissory Note (the “Note”) dated November 13, 2009, pursuant to which the
Fund, subject to approval by Behringer Harvard Holdings as the lender, can
borrow up to $40 million. The Note is unsecured, bears interest at a
rate of 5% per annum, and has a maturity date of November 13,
2012. Effective as of December 31, 2010, the Fund and Behringer
Harvard Holdings have entered into a Forgiveness of Indebtedness Agreement,
pursuant to which Behringer Harvard Holdings has forgiven the most recently
borrowed $2.8 million in principal amount and accrued interest thereon under the
Note. The current remaining balance under the Note as of December 31,
2010 is approximately $11.1 million, and all other terms and conditions of the
Note remain unchanged.
Item
2.02 Results
of Operation and Financial Condition
The
information set forth in Item 7.01 of this Current Report on Form 8-K is hereby
incorporated by reference.
Item
7.01 Regulation
FD Disclosure.
ESTIMATED
VALUE PER LIMITED PARTNERSHIP UNIT
The
limited partnership agreement of Behringer Harvard Short-Term Opportunity Fund I
LP (which may be referred to as the “Fund,” “we,” or “our”) requires that the
Fund’s general partners provide its limited partners annually an estimate of
value of the value of the Fund’s limited partnership units. As of
December 31, 2009, Behringer Harvard Advisors II, LP, the Fund’s co-general
partner (the “General Partner”) estimated a value of $6.45 per limited
partnership unit.
In
connection with this valuation process, on January 14, 2011 the General Partner
estimated a value of $6.48 per limited partnership unit as of December 31,
2010. As with any valuation methodology, the General Partner’s
methodology is based upon a number of estimates and assumptions that may not be
accurate or complete. Different parties with different assumptions
and estimates could derive a different estimated value per unit, and these
differences could be significant. The estimated value per unit does
not represent the fair value according to generally accepted accounting
principles (“GAAP”) of the Fund’s assets less its liabilities, nor does it
represent the amount the Fund’s units would trade at on a national securities
exchange.
As part
of the General Partner’s valuation process, and as required by the Fund’s
limited partnership agreement, the General Partner has obtained the opinion of
an independent third party, Robert A. Stanger & Co., Inc., that the
estimated valuation is reasonable and was prepared in accordance with
appropriate methods for valuing real estate. Robert A. Stanger &
Co., founded in 1978, is a nationally recognized investment banking firm
specializing in real estate, REITs and direct participation programs such as the
Fund.
Methodology
The
Fund’s goal in calculating an estimated value per unit is to arrive at a value
that is reasonable and supportable using what the General Partner deems to be
appropriate valuation methodologies, in accordance with the valuation
methodology required by the Fund’s limited partnership agreement. The
following is a summary of the valuation methodologies used by the General
Partner.
2
Investments in
Real Estate: The General Partner estimated the value of the Fund’s
investments in improved operating real estate for purposes of calculating an
estimated value per unit by using a 10-year discounted cash flow
analysis. The General Partner estimated the value of development
assets by reviewing estimated periods to sell such assets or residential units
in those developments, reviewed comparable sales in the markets in which the
properties are located, and then used an applicable discount
rate. The General Partner estimated the value of raw land by
reviewing comparable sales, tax rolls and current appraisals. The
General Partner also reviewed appraisals of various properties.
The
General Partner used internally prepared cash flow estimates, terminal
capitalization rates within historical average ranges and discount rates that
fall within ranges the General Partner believes are used by similar
investors. The capitalization rate ranges and discount rate ranges
were obtained from third-party service providers and the capitalization rate
ranges were gathered for specific metro areas and applied on a
property-by-property basis. The cash flow estimates, capitalization
rates and discount rates for each property were selected by the real estate
professionals at the General Partner based on their expertise in managing
commercial real estate.
The
General Partner believes that these valuation methodologies are among those that
are industry standard and acceptable valuation methodologies. The
estimated values for the Fund’s investments in real estate may not represent
current market values or fair values as determined in accordance with
GAAP. Real estate is currently carried at its amortized cost basis in
the Fund’s financial statements, subject to any adjustments applicable under
GAAP.
The
estimated value per unit of the Fund’s limited partnership units does not
reflect a liquidity discount for the fact that its units are not currently
traded on a national securities exchange, a discount for the non-assumability or
prepayment obligations associated with certain of the Fund’s debt, or a discount
for partnership overhead and other costs that may be incurred, including any
costs of any sale of the Fund’s assets. Different parties using
different assumptions and estimates could derive a different estimated value per
unit, and these differences could be significant. The markets for
real estate can fluctuate and values are expected to change in the
future.
Limitations
of Estimated Value Per Unit
The
estimated value per unit set forth above will first appear on the Fund’s
investor account statements for the fourth quarter of 2010. In
addition, as of January 18, 2011, the Fund will report this estimated value per
unit to fiduciaries of retirement plans preparing annual valuation statements
and input the estimated value in the data system used by the Fund that provides
information to its investors and to broker dealers who have customers who have
invested in the Fund’s units.
As with
any valuation methodology, the General Partner’s methodology is based upon a
number of estimates and assumptions that may not be accurate or complete.
Different parties with different assumptions and estimates could derive a
different estimated value per unit. Accordingly, with respect to the
estimated value per unit, the Fund can give no assurance that:
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a
unit holder would be able to resell his or her units at this estimated
value;
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a
unit holder would ultimately realize distributions per unit equal to the
Fund’s estimated value per unit upon liquidation of the Fund’s assets and
settlement of its liabilities or a sale of the
Fund;
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the
Fund’s units would trade at the estimated value per unit on a national
securities exchange; or
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the
methodology used to estimate the Fund’s value per unit would be acceptable
to FINRA or under ERISA for compliance with their respective reporting
requirements.
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3
Further,
the estimated value per unit has been determined as of December 31,
2010. The value of the Fund’s units will fluctuate over time in
response to developments related to individual assets in the portfolio and the
management of those assets and in response to the real estate and finance
markets. As contemplated by the Fund’s limited partnership agreement,
the General Partner intends to update its estimated value per unit annually but
does not intend to make any attempt to establish any estimated valuations of the
Fund’s units in the interim. There is no assurance as to the extent
to which the current estimated valuation should be relied upon for any purpose
after its effective date regardless that it may be published on any statement
issued by the Fund or otherwise.
The new
estimated valuation reflects the current challenging economic climate that
continues to severely impact the real estate markets. Lease rates for
office properties have continued to fall as businesses’ demand for space has
declined and unemployment remains high. With the discounted cash flow
valuation methodologies that the general partner uses in its estimated
valuation, a decrease in lease rates at these office properties directly affects
the assumptions used by the general partner, and adversely impacts their
estimated valuation. In addition, the Plaza Skillman property’s
placement into receivership negatively affected the Fund’s estimated
valuation. However, it is important to note that all of the debt
related to Plaza Skillman is nonrecourse to the Fund.
Not all
portfolio assets experienced erosion in their valuations during
2010. For example, the estimated valuation of The Palomar Hotel and
Residences in Dallas improved, as the hotel continued to benefit from improving
conditions in the hospitality industry and the available retail space and
available condominiums were 100% leased. In addition, the potential
conversion of 1221 Coit Road into a data center, while not currently fully
reflected in this estimated valuation, is an exciting opportunity that if
completed could also significantly positively impact the Fund’s estimated
valuation. We are diligently working to secure new leases with
quality tenants to increase net operating income and the ultimate value of our
assets, to complete, market and sell development assets and to execute on other
value creation strategies. We are also trying to minimize expenses
when possible. In addition, as described in more detail in Item 1.01
of this Form 8-K, as of December 31, 2010 Behringer Harvard Holdings, LLC, the
Fund’s sponsor, forgave $2.8 million in principal and related interest accrued
thereon of its loan to the Fund, which after this forgiveness has a current
balance of approximately $11.1 million in principal plus accrued interest on
such amount.
Management
of the Fund intends to use all reasonable efforts to realize value for the
Fund’s limited partners when commercial real estate prices have
normalized. Therefore, as we have previously disclosed, the Fund has
not been liquidated in its original estimated time frame, but rather will be
liquidated in a time frame that the Fund’s general partners believe will provide
more value to the Fund’s limited partners.
FORWARD
LOOKING STATEMENTS
Forward-looking
statements that were true at the time made may ultimately prove to be incorrect
or false. The Fund cautions investors not to place undue reliance on
forward-looking statements, which reflect the Fund’s management’s view only as
of the date of this Report. The Fund undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating
results. Factors that could cause actual results to differ materially
from any forward-looking statements made in this Report include changes in
general economic conditions, changes in real estate conditions, construction
costs that may exceed estimates, construction delays, increases in interest
rates, lease-up risks, inability to obtain new tenants upon the expiration of
existing leases, and the potential need to fund tenant improvements or other
capital expenditures out of operating cash flow. The forward-looking
statements should be read in light of the risk factors identified in the “Risk
Factors” section of the Fund’s Annual Report on Form 10-K for the year ended
December 31, 2009, as filed with the SEC and the risks identified in Part II,
Item 1A of its subsequent quarterly reports.
4
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.
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BEHRINGER HARVARD SHORT-TERM
OPPORTUNITY FUND I LP
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By:
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Behringer Harvard Advisors II
LP
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Co-General
Partner
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By:
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Harvard Property Trust,
LLC
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General
Partner
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Dated: January 18,
2011
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By:
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/s/ Gerald J. Reihsen, III
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Gerald J. Reihsen,
III
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Executive Vice President
–
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Corporate Development &
Legal
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and
Secretary
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