1176373--3/31/2009--BEHRINGER_HARVARD_REIT_I

related topics

{investment, property, distribution}

{loan, real, estate}

{debt, indebtedness, cash}

{tax, income, asset}

{interest, director, officer}

{provision, law, control}

{stock, price, share}

{acquisition, growth, future}

{condition, economic, financial}

{loss, insurance, financial}

{financial, litigation, operation}

{cost, contract, operation}

{operation, international, foreign}

{personnel, key, retain}

{cost, regulation, environmental}

{property, intellectual, protect}

Risks Related to Our Business in General A limit on the number of shares a person may own may discourage a takeover. Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired. Maryland law also limits the ability of a third-party to buy a large stake in us and exercise voting power in electing directors. Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act. Stockholders have limited control over changes in our policies and operations. We may not successfully provide stockholders with a liquidity event. Your percentage interest in Behringer Harvard REIT I will be reduced if we issue additional shares. Until we generate sufficient cash flow from operations to make distributions to our stockholders, we may make distributions from other sources, which may negatively impact our ability to sustain or pay distributions. Our stockholders are limited in their ability to sell their shares pursuant to our share redemption program Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our results of operations, financial condition and ability to pay distributions to you. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments. We are uncertain of our sources for funding of future capital needs, which could adversely affect the value of our investments. We may suffer from delays in selecting, acquiring and developing suitable properties. We may have to make decisions on whether to invest in certain properties without detailed information on the property. If we lose or are unable to obtain key personnel, our ability to implement our investment strategies could be delayed or hindered. If we internalize our management functions, the percentage of our outstanding common stock owned by our other stockholders will be reduced, and we could incur other significant costs associated with being self-managed. Our rights, and the rights of our stockholders, to recover claims against our officers, directors and advisor are limited. Your investment may be subject to additional risks if we make international investments. We may have increased exposure to liabilities from litigation as a result of any participation in Section 1031 TIC transactions. We have acquired, and may continue to acquire, certain properties in the form of TIC or other co-tenancy arrangements. Therefore, we are subject to risks associated with co-tenancy arrangements that otherwise may not be present in non-co-tenancy real estate investments. General Risks Related to Investments in Real Estate Our operating results are affected by economic and regulatory changes that may have an adverse impact on the real estate market in general. Increasing vacancy rates resulting from recent disruptions in the financial markets and deteriorating economic conditions could adversely affect the value of our real property investments. We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants. We may be unable to secure funds for future tenant improvements. We may be unable to sell a property on acceptable terms and conditions, if at all. We may suffer uninsured losses relating to real property or pay excessively expensive premiums for insurance coverage. Development and construction projects are subject to delays that may materially increase the cost to complete the project. We could lose our earnest money deposit. We compete with third parties in acquiring properties and other assets. A concentration of our investments in any one property class may leave our profitability vulnerable to a downturn in that sector. Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations. Our operating results will be negatively affected if our investments, including investments in TIC interests sponsored by our sponsor, do not meet projected distribution levels. The cost of complying with environmental and other governmental laws and regulations may adversely affect us. Our costs associated with complying with the Americans with Disabilities Act may affect cash available for distributions. If we sell properties by providing financing to purchasers, we will bear the risk of default by the purchaser. Risks Associated with Debt Financing We incur mortgage indebtedness and other borrowings, which increases our business risks. Recent disruptions in the financial markets and deteriorating economic conditions could adversely affect our ability to secure debt financing on attractive terms and the values of our investments. Lenders often require us to enter into restrictive covenants relating to our operations, which could affect our distribution and operating policies, including our ability to pay distributions. Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders. Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make distributions to our stockholders. To hedge against exchange rate and interest rate fluctuations, we may use derivative financial instruments. Derivative financial instruments may be costly and ineffective and may reduce the overall returns on your investment. We may enter into derivative contracts that could expose us to contingent liabilities in the future. Risks Related to Conflicts of Interest We are subject to conflicts of interest arising out of our relationships with our advisor and its affiliates, including the material conflicts discussed below. Because a number of Behringer Harvard real estate programs use investment strategies that are similar to ours, Behringer Advisors and its and our executive officers face conflicts of interest relating to the purchase and leasing of properties and other investments, and these conflicts may not be resolved in our favor. Our advisor and its affiliates, including all of our executive officers and some of our directors, face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders. Because our ability to replace our property manager is restricted, we may be unable to terminate the property management agreement at the desired time, which may adversely affect our operations and the distributions we are able to pay to our stockholders. Behringer Advisors will face conflicts of interest relating to joint ventures, TIC investments or other co-ownership arrangements that we enter with other Behringer Harvard-sponsored programs, which could result in a disproportionate benefit to another Behringer Harvard-sponsored program. Our officers face conflicts of interest related to the positions they hold with other entities affiliated with Behringer Advisors, which could diminish the value of the services they provide to us. The percentage of our shares that you own will be diluted upon conversion of the convertible stock. Behringer Advisors faces conflicts of interest relating to the incentive fee structure under our advisory management agreement, which could result in actions that are not necessarily in the long-term best interests of our stockholders. Because we rely on affiliates of Behringer Harvard Holdings to provide advisory and property management services, if Behringer Harvard Holdings is unable to meet its obligations we may be required to find alternative providers of these services, which could disrupt our business. Risks Related to Investments in Real Estate-Related Securities Investments in real estate-related-securities will be subject to specific risks relating to the particular issuer of the securities and may be subject to the general risks of investing in subordinated real estate securities. Recent market conditions and the risk of continued market deterioration may reduce the value of any real estate-related securities in which we may invest. The fees that we pay to invest in real estate-related securities will be greater than any fees that you would pay to invest directly in these securities. Investments in real estate-related preferred equity securities involve a greater risk of loss than traditional debt financing. We may invest in non-U.S. dollar denominated securities, exposing us to fluctuating currency rates. We expect that a portion of any real estate-related securities investments we make will be illiquid, and we may not be able to adjust our portfolio in response to changes in economic and other conditions. Interest rate and related risks may cause the value of our real estate-related securities investments to be reduced. We may acquire real estate-related securities through tender offers, which may require us to spend significant amounts of time and money that otherwise could be allocated to our operations. Risks Associated with Mortgage Lending Our mortgage, bridge or mezzanine loans may be impacted by unfavorable real estate market conditions, which could decrease the value of those loans. The mezzanine loans in which we may invest would involve greater risks of loss than senior loans secured by income-producing real properties. Our mortgage, bridge or mezzanine loans will be subject to interest rate fluctuations, which could reduce our returns as compared to market interest rates and reduce the value of the loans if we sell the loans. We may experience delays in liquidating defaulted mortgage, mezzanine or bridge loans, which could delay our ability to pay cash distributions to our stockholders. Returns on our mortgage, bridge or mezzanine loans may be limited by regulations. Foreclosures create additional ownership risks that could adversely impact our returns on mortgage investments. The liquidation of our assets may be delayed, which could delay distributions to our stockholders. Failure to qualify as a REIT would adversely affect our operations and our ability to make distributions. Our investment strategy may cause us to incur penalty taxes, lose our REIT status, or own and sell properties through taxable REIT subsidiaries, each of which would diminish the return to our stockholders. Certain fees paid to us may affect our REIT status. Certain equity participation in mortgage, bridge, and mezzanine loans may result in taxable income and gains from these properties, which could adversely impact our REIT status. Stockholders may have current tax liability on distributions you elect to reinvest in our common stock. If our operating partnership fails to maintain its status as a partnership, its income may be subject to tax at corporate rates. In certain circumstances, we may be subject to federal and state income taxes as a REIT, which would reduce our cash available to pay distributions. Legislative or regulatory action could adversely affect investors.

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1176373--3/31/2009--BEHRINGER_HARVARD_REIT_I_INC