News Column

BEHRINGER HARVARD OPPORTUNITY REIT II, INC. FILES (8-K) Disclosing Regulation FD Disclosure, Other Events, Financial Statements and Exhibits

May 16, 2014

Item 7.01 Regulation FD Disclosure.



On May 16, 2014, Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation (which may be referred to herein as the "Registrant," the "Company," "we," "us" or "our"), first used the presentation attached as Exhibit 99.1 in connection with a conference call with stockholders and financial advisors to review first quarter 2014 results. The information included in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

The presentation materials include information about Funds from Operations ("FFO").

Funds from Operations



Funds from operations is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We use FFO as defined by the National Association of Real Estate Investment Trusts ("NAREIT") in the April 2002 "White Paper of Funds From Operations" which is net income (loss), computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property and impairments of depreciable real estate (including impairments of investments in unconsolidated joint ventures and partnerships which resulted from measurable decreases in the fair value of the depreciable real estate held by the joint venture or partnership), plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures, subsidiaries, and noncontrolling interests as one measure to evaluate our operating performance. In October 2011, NAREIT clarified the FFO definition to exclude impairment charges of depreciable real estate (including impairments of investments in unconsolidated joint ventures and partnerships which resulted from measurable decreases in the fair value of the depreciable real estate held by the joint venture or partnership). The exclusion of impairment charges is not applicable for our first quarter 2014 and 2013 calculations of FFO as we recorded no impairments during those time periods.

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance.

We believe that FFO is helpful to investors and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, impairments of depreciable assets, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which is not immediately apparent from net income.

FFO should not be considered as an alternative to net income (loss), as an indication of our liquidity, nor as an indication of funds available to fund our cash needs, including our ability to make distributions and should be reviewed in connection with other GAAP measurements. Additionally, the exclusion of impairments limits the usefulness of FFO as a historical operating performance measure since an impairment charge indicates that operating performance has been permanently affected. FFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO. Our FFO, as presented, may not be comparable to amounts calculated by other REITs that do not define these terms in accordance with the current NAREIT definition or that interpret the definition differently.

2



--------------------------------------------------------------------------------

Our calculation of FFO for the three months ended March 31, 2014 and 2013 is presented below ($ in thousands except per share amounts):

Three Months Ended March 31, 2014 2013 Amount Per Share Amount Per Share Net loss attributable to the Company $ (2,884 )$ (0.11 )$ (4,332 )$ (0.17 ) Adjustments for(1): Real estate depreciation and amortization(2) 3,567 0.14 3,515 0.14 Funds from operations (FFO) $ 683$ 0.03$ (817 )$ (0.03 ) GAAP weighted average shares: Basic and diluted 26,011 26,054



--------------------------------------------------------------------------------

(1) Reflects continuing operations, as well as discontinued operations. There were no discontinued operations for the three months ended March 31, 2014.

(2) Includes our consolidated amount and the noncontrolling interest adjustment for the third-party partners' share.

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

† Straight-line rental revenue was a charge of less than $0.1 million in the first quarter of 2014. Straight-line rental revenue of $0.2 million was recognized in the first quarter of 2013. The noncontrolling interest portion of straight-line rent for the three months ended March 31, 2014 and 2013 was a charge of less than $0.1 million and revenue of less than $0.1 million, respectively.

† Net above/below market lease amortization of less than $0.1 million was recognized as a decrease to rental revenue for the three months ended March 31, 2014 and 2013. The noncontrolling interest portion of net above/below market lease amortization for the three months ended March 31, 2014 and 2013 was less than $0.1 million.

† Amortization of deferred financing costs of $0.2 million and $0.3 million was recognized as interest expense for our notes payable for the three months ended March 31, 2014 and 2013, respectively.

† We recognized acquisition expense of $1.9 million for the three months ended March 31, 2013 primarily due to expenses incurred as a result of our acquisition of Wimberly. We did not have any acquisitions in the first quarter of 2014.

In addition, cash flows generated from FFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO, such as capital expenditures and payments of principal on debt, each of which may impact the amount of cash available for distribution to our stockholders.

Item 8.01 Other Events.



On May 15, 2014, the board of directors of the Company adopted the Third Amended and Restated Share Redemption Program (the "Amended SRP"), effective immediately. The Amended SRP removes a specified amount of cash available for redemptions and provides that the board of directors may set the amount of cash available for redemption upon ten business days' notice to the Company's stockholders. In addition, the Amended SRP removes references to the redemption price for shares redeemed prior to the Company's disclosure of an estimated value per share. In all other material respects, the terms of the share redemption program remain unchanged. The complete program document is filed as an exhibit to this Current Report on Form 8-K.

3



--------------------------------------------------------------------------------

Also on May 15, 2014, the board of directors determined to resume accepting requests for Ordinary Redemptions (as defined in the Amended SRP) and set the cash available for all redemptions in any twelve-month period to $10 million. Stockholders wishing to submit requests for Ordinary Redemptions must mail or deliver to us a written request on a form provided by us. We expect the board of directors to first consider requests for Ordinary Redemptions in July and quarterly thereafter.

Item 9.01 Financial Statements and Exhibits. (d) Exhibits. 99.1 First Quarter 2014 Update Presentation. 99.2 Third Amended and Restated Share Redemption Program. 4



--------------------------------------------------------------------------------


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters