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Behringer Harvard REIT: Debt Outweighs Its Equity

Investors in non-traded real estate investment trusts (REITs) have had to face some unpleasant news recently – from inaccurate valuations to suspended dividends. Now, Behringer Harvard Holdings LLC is preparing to inform clients that its Behringer Harvard Strategic Opportunity Fund I is under water.

As reported Aug. 22 by Investment News, Behringer reportedly will inform investors about the demise of the REIT tomorrow, Aug. 24.

Launched in 2005, the Behringer Harvard Strategic Opportunity Fund I raised $65 million and invested in six properties. Among them: a hotel on Wilshire Boulevard and an Amsterdam office building.

Another Behringer fund, the Strategic Opportunity Fund II, raised $62 million during that same time period. The Strategic Opportunity Fund I’s “liabilities are greater than its assets,” stated Michael O’Hanlon, chief executive of the funds comprising Behringer Harvard’s opportunity platform. The fund is negotiating with banks over one property, the hotel in Los Angeles, that is a “swing issue,” he said in the Investment News story.

The Strategic Opportunity Fund I isn’t the only Behringer Harvard REIT to face problems. At the end of 2011, the Behringer Harvard Opportunity REIT I saw its estimated value decline 46% to $4.12 a share from $7.66 a year earlier. In June, one property in that REIT entered into bankruptcy protection.

Another Behringer REIT has had similar problems. The Behringer Harvard Short-Term Opportunity Fund I LLP had approximately $130 million in assets when it saw its valuation drop to 40 cents a share from $6.48 a share as of Dec. 31, 2010.

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