BEHRINGER HARVARD REIT I INC (Form: 10-Q, Received: 08/08/2011 16:10:15)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[Mark One]

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

For the quarterly period ended June 30, 2011

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

For the transition period from to

Commission File Number: 000-51293

Behringer Harvard REIT I, Inc.

(Exact name of registrant as specified in its charter)

Maryland		68-0509956
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15601 Dallas Parkway, Suite 600, Addison, Texas 75001

(Address of principal executive offices)

(Zip code)

(866) 655-1605

(Registrant’s telephone number, including area code)

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 x No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.45 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 x 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 x (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of July 29, 2011, Behringer Harvard REIT I, Inc. had 296,511,804 shares of common stock, $.0001 par value, outstanding.

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BEHRINGER HARVARD REIT I, INC.

FORM 10-Q

Quarter Ended June 30, 2011

		Page

	PART I
	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2011 and 2010	4

	Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2011 and 2010	5

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	35

	PART II
	OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	39

Item 4.	(Removed and Reserved)	39

Item 5.	Other Information	39

Item 6.	Exhibits	40

Signature		41

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Behringer Harvard REIT I, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

	June 30,			December 31,
	2011			2010
Assets
Real estate
Land	$	452,147		$	463,972
Buildings, net	2,725,627			2,904,309
Total real estate	3,177,774			3,368,281

Cash and cash equivalents	108,281			139,139
Restricted cash	97,986			99,206
Accounts receivable, net	99,449			94,204
Prepaid expenses and other assets	11,196			10,245
Investments in unconsolidated entities	73,248			68,996
Deferred financing fees, net	13,062			14,916
Notes receivable	—			10,359
Lease intangibles, net	268,917			313,234
Assets associated with real estate held for sale	6,944			30,725
Total assets	$	3,856,857		$	4,149,305

Liabilities and equity

Liabilities
Notes payable	$	2,538,269		$	2,720,858
Accounts payable	2,542			1,543
Payables to related parties	1,489			2,217
Acquired below-market leases, net	78,536			97,902
Distributions payable	2,472			2,464
Accrued liabilities	117,896			137,076
Deferred tax liabilities	2,921			3,067
Other liabilities	17,046			17,680
Obligations associated with real estate held for sale	12,600			—
Total liabilities	2,773,771			2,982,807

Commitments and contingencies

Equity
Preferred stock, $.0001 par value per share; 17,500,000 shares authorized, none outstanding	—			—
Convertible stock, $.0001 par value per share; 1,000 shares authorized, 1,000 shares issued and outstanding	—			—
Common stock, $.0001 par value per share; 382,499,000 shares authorized, 296,267,404 and 295,276,170 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively	30			29
Additional paid-in capital	2,635,225			2,632,290
Cumulative distributions and net loss attributable to common stockholders	(1,558,677		)	(1,472,068		)
Stockholders’ equity	1,076,578			1,160,251
Noncontrolling interests	6,508			6,247
Total equity	1,083,086			1,166,498
Total liabilities and equity	$	3,856,857		$	4,149,305

See Notes to Condensed Consolidated Financial Statements.

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Behringer Harvard REIT I, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010

Rental revenue	$	122,541		$	129,180		$	253,237		$	258,260

Expenses
Property operating expenses	37,216			38,542			74,743			78,033
Interest expense	39,652			40,583			79,651			81,511
Real estate taxes	18,584			17,907			34,234			37,650
Property management fees	3,620			3,905			7,259			7,738
Asset management fees	5,039			4,551			9,963			9,085
Asset impairment losses	6,527			5,116			6,527			5,116
Goodwill impairment losses	—			11,470			—			11,470
General and administrative	2,713			2,467			5,510			5,808
Depreciation and amortization	54,843			56,017			115,082			114,021
Total expenses	168,194			180,558			332,969			350,432

Interest and other income	3,026			386			3,138			796
Gain on troubled debt restructuring	—			—			1,008			9,390
Loss from continuing operations before income taxes, equity in earnings of investments and gain on sale of assets	(42,627		)	(50,992		)	(75,586		)	(81,986		)

Benefit (provision) for income taxes	169			(580		)	(55		)	(1,128		)
Equity in earnings of investments	287			65			593			541
Loss from continuing operations	(42,171		)	(51,507		)	(75,048		)	(82,573		)

Discontinued operations:

Income (loss) from discontinued operations	(791		)	(38,202		)	964			(34,413		)
Gain on sale of discontinued operations	—			—			639			—
Income (loss) from discontinued operations	(791		)	(38,202		)	1,603			(34,413		)

Gain on sale of assets	1,385			—			1,385			—

Net loss	(41,577		)	(89,709		)	(72,060		)	(116,986		)

Net (income) loss attributable to noncontrolling interests
Noncontrolling interests in continuing operations	70			238			246			393
Noncontrolling interests in discontinued operations	2			—			(2		)	(10		)

Net loss attributable to common stockholders	$	(41,505	)	$	(89,471	)	$	(71,816	)	$	(116,603	)

Basic and diluted weighted average common shares outstanding	296,090,715			293,963,393			295,867,940			293,573,156

Basic and diluted loss per common share:
Continuing operations	$	(0.14	)	$	(0.17	)	$	(0.25	)	$	(0.28	)
Discontinued operations	—			(0.13		)	0.01			(0.12		)
Basic and diluted loss per common share	$	(0.14	)	$	(0.30	)	$	(0.24	)	$	(0.40	)

Amounts attributable to common stockholders:
Continuing operations	$	(40,716	)	$	(51,269	)	$	(73,417	)	$	(82,180	)
Discontinued operations	(789		)	(38,202		)	1,601			(34,423		)
Net loss attributable to common stockholders	$	(41,505	)	$	(89,471	)	$	(71,816	)	$	(116,603	)

Comprehensive loss:
Net loss	$	(41,577	)	$	(89,709	)	$	(72,060	)	$	(116,986	)
Other comprehensive income:
Reclassification of unrealized loss on interest rate swaps to earnings	—			367			—			736
Unrealized gain on interest rate swaps	—			935			—			1,647
Total other comprehensive income	—			1,302			—			2,383

Comprehensive loss	(41,577		)	(88,407		)	(72,060		)	(114,603		)
Comprehensive loss attributable to noncontrolling interests	72			237			244			380
Comprehensive loss attributable to common stockholders	$	(41,505	)	$	(88,170	)	$	(71,816	)	$	(114,223	)

See Notes to Condensed Consolidated Financial Statements.

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Behringer Harvard REIT I, Inc.

Condensed Consolidated Statements of Changes in Equity

(in thousands)

(unaudited)

											Cumulative
											Distributions
											and
											Net Loss
	Convertible Stock			Common Stock				Additional			Attributable to			Accumulated Other
	Number	Par		Number		Par		Paid-in			Common			Comprehensive			Noncontrolling			Total
	of Shares	Value		of Shares		Value		Capital			Stockholders			Loss			Interests			Equity
For the six months ended June 30, 2011

Balance at January 1, 2011	1	$	—	295,276		$	29	$	2,632,290		$	(1,472,068	)	$	—		$	6,247		$	1,166,498

Net loss and comprehensive loss	—	—		—		—		—			(71,816		)	—			(244		)	(72,060		)
Redemption of common stock	—	—		(471	)	—		(2,145		)	—			—			—			(2,145		)
Distributions declared	—	—		—		—		—			(14,793		)	—			(26		)	(14,819		)
Shares issued pursuant to Distribution Reinvestment Plan	—	—		1,462		1		6,655			—			—			—			6,656
Costs of share issuance	—	—		—		—		(8		)	—			—			—			(8		)
Acquisition of noncontrolling interest	—	—		—		—		(1,567		)	—			—			531			(1,036		)

Balance at June 30, 2011	1	$	—	296,267		$	30	$	2,635,225		$	(1,558,677	)	$	—		$	6,508		$	1,083,086

For the six months ended June 30, 2010

Balance at January 1, 2010	1	$	—	292,494		$	29	$	2,612,961		$	(1,190,133	)	$	(4,718	)	$	9,170		$	1,427,309

Comprehensive loss:
Net loss	—	—		—		—		—			(116,603		)	—			(383		)	(116,986		)
Reclassification of unrealized loss to earnings	—	—		—		—		—			—			735			1			736
Unrealized gain on interest rate swap	—	—		—		—		—			—			1,645			2			1,647
Total comprehensive loss																				(114,603		)

Redemption of common stock	—	—		(516	)	—		(5,035		)	—			—			—			(5,035		)
Distributions declared	—	—		—		—		—			(36,694		)	—			(2,149		)	(38,843		)
Shares issued pursuant to Distribution Reinvestment Plan	—	—		2,233		—		19,847			—			—			—			19,847
Cost of share issuance	—	—		—		—		(7		)	—			—			—			(7		)

Balance at June 30, 2010	1	$	—	294,211		$	29	$	2,627,766		$	(1,343,430	)	$	(2,338	)	$	6,641		$	1,288,668

See Notes to Condensed Consolidated Financial Statements.

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Behringer Harvard REIT I, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Cash flows from operating activities
Net loss	$	(72,060	)	$	(116,986	)
Adjustments to reconcile net loss to net cash flows provided by operating activities:
Asset impairment losses	6,998			40,533
Goodwill impairment losses	—			11,470
Gain on sale of assets	(1,385		)	—
Gain on sale of discontinued operations	(639		)	—
Gains on troubled debt restructuring	(3,358		)	(15,941		)
Gain on derivatives	—			(87		)
Depreciation and amortization	116,054			123,112
Amortization of lease intangibles	956			780
Amortization of above/below market rent	(12,527		)	(5,993		)
Amortization of deferred financing and mark-to-market costs	2,389			4,320
Equity in earnings of investments	(593		)	(541		)
Distributions from investments	496			438
Change in accounts receivable	(10,693		)	(4,568		)
Change in prepaid expenses and other assets	(2,488		)	(5,255		)
Change in lease commissions	(6,556		)	(12,489		)
Change in other lease intangibles	(1,848		)	(1,219		)
Change in accounts payable	1,153			2,442
Change in accrued liabilities	(11,143		)	(1,340		)
Change in other liabilities	1,980			1,886
Change in payables to related parties	(729		)	140
Cash provided by operating activities	6,007			20,702

Cash flows from investing activities
Return of investments	387			467
Purchases of real estate	(1,035		)	—
Investments in unconsolidated entities	(3,515		)	—
Capital expenditures for real estate	(29,988		)	(18,720		)
Capital expenditures for real estate under development	—			(4,410		)
Proceeds from notes receivable	10,355			579
Proceeds from sale of discontinued operations	36,378			—
Proceeds from sale of assets	93,050			—
Change in restricted cash	1,220			6,797
Cash provided by (used in) investing activities	106,852			(15,287		)

Cash flows from financing activities
Financing costs	(729		)	—
Payments on notes payable	(132,640		)	(41,619		)
Payments on capital lease obligations	(40		)	(37		)
Redemptions of common stock	(2,145		)	(5,035		)
Offering costs	(8		)	(7		)
Distributions to common stockholders	(8,129		)	(22,322		)
Distributions to noncontrolling interests	(26		)	(2,158		)
Cash used in financing activities	(143,717		)	(71,178		)

Net change in cash and cash equivalents	(30,858		)	(65,763		)
Cash and cash equivalents at beginning of period	139,139			179,583
Cash and cash equivalents at end of period	$	108,281		$	113,820

See Notes to Condensed Consolidated Financial Statements.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Business

Organization

Behringer Harvard REIT I, Inc. (which, along with our subsidiaries, may be referred to as the “Company,” “we,” “us,” or “our”) was incorporated in June 2002 as a Maryland corporation and has elected to be taxed, and currently qualifies, as a real estate investment trust, or REIT, for federal income tax purposes. We primarily operate institutional quality real estate. In particular, we have generally focused on acquiring what we believe are institutional quality office properties that have premier business addresses, mainly in metropolitan cities and select suburban markets in the United States, are of high quality construction, offer personalized amenities and are leased to highly creditworthy commercial tenants. As of June 30, 2011, we owned interests in 62 properties located in 21 states and the District of Columbia. We are externally managed and advised by Behringer Advisors, LLC (referred to herein as “Behringer Advisors” or “our advisor”), a Texas limited liability company. Behringer Advisors is responsible for managing our day-to-day affairs and for identifying and making acquisitions and dispositions of investments on our behalf.

Substantially all of our business is conducted through Behringer Harvard Operating Partnership I LP (“Behringer OP”), a Texas limited partnership organized in 2002. Our wholly-owned subsidiary, BHR, Inc., a Delaware corporation, is the sole general partner of Behringer OP. Our direct and indirect wholly-owned subsidiaries, BHR Business Trust, a Maryland business trust, and BHR Partners, LLC, a Delaware limited liability company, are limited partners holding substantially all of Behringer OP.

Our common stock is not listed on a national securities exchange. However, between 2013 and 2017, management anticipates either listing our common stock on a national securities exchange or liquidating our assets. Depending upon then prevailing market conditions, our management may consider beginning the process of listing or liquidating prior to 2013. In the event we do not obtain listing of our common stock or complete the liquidation of our assets before the end of 2017, our charter requires us to liquidate our assets, unless a majority of the board of directors and a majority of the independent directors extend such date.

2. Interim Unaudited Financial Information

The accompanying condensed 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, 2010, which was filed with the Securities and Exchange Commission (“SEC”) on March 8, 2011. Certain 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 omitted from this report on Form 10-Q 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 condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010 and condensed consolidated statements of operations and comprehensive loss, changes in equity, and cash flows for the periods ended June 30, 2011 and 2010 have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to present fairly our financial position as of June 30, 2011 and December 31, 2010 and our results of operations and our cash flows for the periods ended June 30, 2011 and 2010. These adjustments are of a normal recurring nature.

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

3. Summary of Significant Accounting Policies

Described below are certain of our significant accounting policies. The disclosures regarding several of the policies have been condensed or omitted in accordance with interim reporting regulations specified by Form 10-Q. Please see our Annual Report on Form 10-K for a complete listing of all of our significant accounting policies.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Real Estate

As of June 30, 2011 and December 31, 2010, accumulated depreciation and amortization related to our consolidated real estate properties and related lease intangibles were as follows (in thousands):

				Lease Intangibles
				Assets						Liabilities
							Acquired			Acquired
	Buildings and			Other Lease			Above-Market			Below-Market
as of June 30, 2011	Improvements			Intangibles			Leases			Leases
Cost	$	3,295,987		$	485,157		$	39,466		$	(149,234	)
Less: accumulated depreciation and amortization	(570,360		)	(233,139		)	(22,567		)	70,698
Net	$	2,725,627		$	252,018		$	16,899		$	(78,536	)

				Lease Intangibles
				Assets						Liabilities
							Acquired			Acquired
	Buildings and			Other Lease			Above-Market			Below-Market
as of December 31, 2010	Improvements			Intangibles			Leases			Leases
Cost	$	3,430,506		$	538,155		$	54,013		$	(170,912	)
Less: accumulated depreciation and amortization	(526,197		)	(245,210		)	(33,724		)	73,010
Net	$	2,904,309		$	292,945		$	20,289		$	(97,902	)

We amortize the value of in-place leases, in-place tenant improvements and in-place leasing commissions to expense over the initial term of the respective leases. The tenant relationship values are amortized to expense over the initial term and any anticipated renewal periods, but in no event does the amortization period for intangible assets or liabilities exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the acquired lease intangibles related to that tenant would be charged to expense. The estimated remaining average useful lives for acquired lease intangibles range from less than one year to more than ten years. Anticipated amortization associated with the acquired lease intangibles for each of the following five years is as follows (in thousands):

July - December 2011	$	18,858
2012	$	29,872
2013	$	22,270
2014	$	18,441
2015	$	12,634

Accounts Receivable, net

The following is a summary of our accounts receivable as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011			December 31, 2010

Straight-line rental revenue receivable	$	89,634		$	83,738
Tenant receivables	12,263			12,639
Non-tenant receivables	644			1,025
Allowance for doubtful accounts	(3,092		)	(3,198		)
Total	$	99,449		$	94,204

Impairment

For our consolidated real estate assets, we monitor events and changes in circumstances that may indicate that carrying amounts of the real estate assets may not be recoverable. When such events or changes in circumstances are present, we assess potential impairment by comparing estimated future undiscounted cash flows expected to be generated over the life of the asset including its eventual disposition, to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

future undiscounted cash flows, we recognize an impairment loss to adjust the carrying amount of the asset to estimated fair value. For the six months ended June 30, 2011 and June 30, 2010, we recorded non-cash impairment charges of approximately $7.0 million and $35.4 million, respectively, related to the impairment of consolidated real estate assets, including discontinued operations. Primarily, changes in management’s estimate of the intended hold periods for certain of our properties resulted in an assessment of these properties for impairment for both the current year and the prior year periods.

For our unconsolidated real estate assets, including those we own through an investment in a joint venture, TIC interest or other similar investment structure, at each reporting date, we compare the estimated fair value of our investment to the carrying amount. An impairment charge is recorded to the extent the fair value of our investment is less than the carrying amount and the decline in value is determined to be other than a temporary decline. For the six months ended June 30, 2011, we had no impairment charges related to our investments in unconsolidated entities. For the six months ended June 30, 2010, we recorded non-cash impairment charges of approximately $5.1 million related to the impairment of our investments in unconsolidated entities.

If our assumptions regarding the cash flows expected to result from the use and eventual disposition of our properties decrease or our expected hold periods decrease, we may incur future impairment charges on our real estate related assets. In addition, we may incur impairment charges on assets classified as held for sale in the future if the carrying amount of the asset upon classification as held for sale exceeds the estimated fair value, less costs to sell.

In connection with estimating the value of our outstanding common stock on May 17, 2010, we evaluated our goodwill for impairment between annual tests and determined that the implied fair value of goodwill was equal to zero, and approximately $11.5 million was charged to impairment expense during the six months ended June 30, 2010. The goodwill consisted of goodwill recorded in connection with our purchase of the subsidiaries of IPC US Real Estate Investment Trust (“IPC”) through a business combination that was completed on December 12, 2007.

Deferred Financing Fees, net

Deferred financing fees are recorded at cost and are amortized to interest expense using a straight-line method that approximates the effective interest method over the life of the related debt. Deferred financing fees, net of accumulated amortization, totaled approximately $13.1 million and $14.9 million at June 30, 2011 and December 31, 2010, respectively. Accumulated amortization of deferred financing fees was approximately $16.9 million and $16.8 million as of June 30, 2011 and December 31, 2010, respectively.

Revenue Recognition

We recognize rental income generated from all leases on real estate assets that we consolidate on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any. The total net increase to rental revenues due to straight-line rent adjustments for the six months ended June 30, 2011 and 2010 was approximately $11.3 million and $7.7 million, respectively, and includes amounts recognized in discontinued operations. As discussed above, our rental revenue also includes amortization of acquired above- and below-market leases. The total net increase to rental revenues due to the amortization of acquired above- and below-market leases for the six months ended June 30, 2011 and 2010 was approximately $12.5 million and $6.0 million, respectively, and includes amounts recognized in discontinued operations. Revenues relating to lease termination fees are recognized on a straight-line basis amortized from the time that a tenant’s right to occupy the leased space is modified through the end of the revised lease term. We recognized lease termination fees of approximately $5.6 million and $2.1 million for the six months ended June 30, 2011 and 2010, respectively, which includes amounts recognized in discontinued operations.

Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and have qualified as a REIT since the year ended December 31, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income (excluding net capital gains) to our stockholders. As a REIT, we generally will not be subject to federal income tax at the corporate level (except to the extent we distribute less than 100% of our taxable income and/or net taxable capital gains).

We acquired the subsidiaries of IPC on December 12, 2007 and have elected for IPC (US), Inc. to be taxed as a REIT for federal income tax purposes since the tax year ended December 31, 2008. We believe IPC (US), Inc. is organized and operates in a manner to qualify for this election. Prior to acquisition, IPC (US), Inc. was a taxable C-corporation, and for the balance of the year ended December 31, 2007, IPC (US), Inc. was treated as a taxable REIT subsidiary of the Company for federal income tax purposes.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of June 30, 2011, we have deferred tax liabilities of approximately $2.9 million and deferred tax assets of approximately $0.5 million related to various state taxing jurisdictions. At December 31, 2010, we had deferred tax liabilities of approximately $3.1 million and deferred tax assets of approximately $0.4 million related to various state taxing jurisdictions.

We recognize in our financial statements the impact of our tax return positions if it is more likely than not that the tax position will be sustained upon examination (defined as a likelihood of more than fifty percent of being sustained upon audit, based on the technical merits of the tax position). Tax positions that meet the more likely than not threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. We recognize the tax implications of the portion of a tax position that does not meet the more likely than not threshold together with the accrued interest and penalties in the financial statements as a component of the benefit (provision) for income taxes. For the six months ended June 30, 2011 and 2010 we recognized a provision for income taxes, including amounts recognized in discontinued operations, of approximately $0.5 million and $1.1 million, respectively, related to certain state and local income taxes.

4. New Accounting Pronouncements

In January 2010, the FASB updated the disclosure requirements for fair value measurements. The updated guidance requires companies to disclose separately the investments that transfer in and out of Levels 1 and 2 and the reasons for those transfers. Additionally, in the reconciliation for fair value measurements using significant unobservable inputs (Level 3), companies should present information separately about purchases, sales, issuances and settlements. We adopted the updated guidance on January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which are effective for fiscal years beginning after December 15, 2010. We adopted the remaining guidance on January 1, 2011. The adoption of the required guidance did not have a material impact on our financial statements or disclosures.

In April 2011, the FASB issued further clarification on when a loan modification or restructuring is considered a troubled debt restructuring. In determining whether a loan modification represents a troubled debt restructuring, an entity should consider whether the debtor is experiencing financial difficulty and the lender has granted a concession to the borrower. This guidance is to be applied retrospectively, with early application permitted. This guidance is effective for the first interim or annual period beginning on or after June 15, 2011. We adopted this guidance on July 1, 2011, and it will not have a material impact on our financial statements or disclosures.

In May 2011, the FASB issued updated guidance for fair value measurements. The guidance amends existing guidance to provide common fair value measurements and related disclosure requirements between GAAP and International Financial Reporting Standards. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We are currently evaluating this guidance to determine if it will have a material impact on our financial statements or disclosures.

In June 2011, the FASB issued updated guidance related to comprehensive income. The guidance requires registrants to present the total of comprehensive income, the components of net income, and the components of other comprehensive income (“OCI”) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, registrants will be required to present on the face of the financial statements reclassification adjustments for items that are reclassified from OCI to net income in the statements where the components of net income and the components of OCI are presented. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not expect this guidance to have a material impact on our financial statements or disclosures.

5. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Fair value, as defined by GAAP, is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy) has been established.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Impairment of Real Estate Related Assets

We have recorded non-cash impairment charges related to a reduction in the fair value of certain of our assets. The inputs used to calculate the fair value of these assets included projected cash flows and a risk-adjusted rate of return that we estimated would be used by a market participant in valuing these assets, third-party broker valuation estimates, bona fide purchase offers or the expected sales price of an executed sales agreement. These fair value estimates are considered Level 3 under the fair value hierarchy described above. The following table summarizes those assets which were measured at fair value and impaired during the periods presented (in thousands):

			Basis of Fair Value Measurements
			Quoted Prices		Significant
			In Active		Other		Significant
	Fair Value		Markets for		Observable		Unobservable		Total
	of Assets		Identical Items		Inputs		Inputs		Gains/
Description	(Liabilities)		(Level 1)		(Level 2)		(Level 3)		(Losses) (1)
as of June 30, 2011
Real estate	$	11,500	$	—	$	—	$	11,500	$	(6,527	)

as of December 31, 2010
Real estate	$	99,282	$	—	$	—	$	99,282	$	(42,661	)
Real estate held for sale	$	30,000	$	—	$	—	$	30,000	$	(2,266	)
Investments in unconsolidated entitites	$	47,909	$	—	$	—	$	47,909	$	(5,116	)
Goodwill	$	—	$	—	$	—	$	—	$	(11,470	)

(1) Excludes approximately $0.5 million and $37.8 million in impairment losses of our discontinued operations as of June 30, 2011 and December 31, 2010, respectively.

Fair Value Disclosures

Fair Value of Financial Instruments

Notes payable totaling approximately $2.5 billion in principal amount as of June 30, 2011 had a fair value of approximately $2.4 billion based upon interest rates for notes with similar terms and remaining maturities that management believes we could have obtained on June 30, 2011. Notes payable totaling approximately $2.7 billion in principal amount as of December 31, 2010 had a fair value of approximately $2.5 billion based upon interest rates for notes with similar terms and remaining maturities that management believes we could have obtained on December 31, 2010. The carrying value of our notes receivable at December 31, 2010 reasonably approximates fair value based on expected interest rates for notes to similar borrowers with similar terms and remaining maturities at December 31, 2010.

Other financial instruments held at June 30, 2011 and December 31, 2010 but not measured at fair value on a recurring basis include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, accounts payable, payables to related parties, accrued liabilities, other liabilities and distributions payable. The carrying value of these items reasonably approximates their fair value based on their highly-liquid nature and/or short-term maturities.

6. Real Estate Activities

Dispositions

On January 6, 2011, pursuant to a deed-in-lieu of foreclosure, we transferred ownership of our Executive Park property to the lender associated with this property, resulting in a gain on troubled debt restructuring of approximately $1.0 million. Prior to the transaction, the loan had an outstanding balance of approximately $5.6 million and a scheduled maturity date of October 2010. Executive Park is located in Louisville, Kentucky, and contains approximately 109,000 rentable square feet.

On January 27, 2011, we sold our Westway One property to an unaffiliated third party for a contract sales price of approximately $31.0 million. Proceeds of approximately $30.6 million from the sale were used to pay down a portion of the outstanding balance on our credit facility. As of December 31, 2010, our Westway One property was classified as held for sale. Westway One is located in Houston, Texas, and contains approximately 144,000 rentable square feet.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

On February 25, 2011, pursuant to a foreclosure, we transferred ownership of our Grandview II property to the lender associated with this property, resulting in a gain on troubled debt restructuring of approximately $1.1 million. Prior to the transaction, the loan had an outstanding balance of approximately $17.0 million and a scheduled maturity date of November 2016. Grandview II is located in Birmingham, Alabama, and contains approximately 149,000 rentable square feet.

On June 9, 2011, we sold our 200 South Wacker property for a contract sales price of approximately $95.5 million to a joint venture in which we hold a 9.82% ownership interest. We used proceeds from the sale to pay off the related mortgage loan of $95.5 million. The property was deconsolidated and a gain on sale of approximately $1.4 million was recognized in continuing operations. 200 South Wacker is located in Chicago, Illinois, and consists of approximately 755,000 square feet.

On June 30, 2011, we sold our AMEC Paragon I & II property to an unaffiliated third party for a contract sales price of approximately $25.0 million. No gain or loss on the sale was recognized. AMEC Paragon I & II consists of two buildings located in Houston, Texas, and contain approximately 227,000 combined square feet.

Held for Sale

As of June 30, 2011 our Downtown Plaza property met each of the criteria for classification for held for sale and was classified as such on the June 30, 2011 balance sheet and the results of operations are reflected as discontinued operations for all periods presented. Downtown Plaza is located in Long Beach, California, and consists of approximately 100,000 square feet. Downtown Plaza was sold on July 22, 2011 to an unaffiliated third party for a contract sales price of approximately $12.8 million.

7. Investments in Unconsolidated Entities

Investments in unconsolidated entities consists of our undivided tenant-in-common (“TIC”) interests in two office buildings, our noncontrolling 60% interest in the Wanamaker Building and our noncontrolling 9.82% interest in 200 South Wacker. During the first quarter of 2011, we acquired an additional 3.08% TIC interest in the Alamo Plaza property. During the second quarter of 2011, we deconsolidated our 200 South Wacker property when we sold the property to a joint venture in which we hold a noncontrolling 9.82% interest.

The following is a summary of our investments in unconsolidated entities as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011		December 31, 2010
Property Name	Ownership Interest		Ownership Interest		June 30, 2011		December 31, 2010
Wanamaker Building	60.00	%	60.00	%	$	48,112	$	47,826
Alamo Plaza	37.01	%	33.93	%	12,646		11,568
St. Louis Place	35.71	%	35.71	%	9,453		9,602
200 South Wacker	9.82	%	100.00	%	3,037		—
Total					$	73,248	$	68,996

For the six months ended June 30, 2011, we recorded approximately $0.6 million of equity in earnings and approximately $0.9 million of distributions from our investments in unconsolidated entities. For the six months ended June 30, 2010, we recorded approximately $0.5 million of equity in earnings and approximately $0.9 million of distributions from our investments in unconsolidated entities. Our equity in earnings for the six months ended June 30, 2011 and 2010 from these investments represents our proportionate share of the combined earnings for the period of our ownership.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

8. Noncontrolling Interests

The following table is a summary of our noncontrolling interests (in thousands):

	June 30,		December 31,
	2011		2010
Noncontrolling interests in real estate properties	$	5,353	$	4,961
Limited partnership units	1,153		1,280
IPC (US), Inc. preferred shares	2		6
Total	$	6,508	$	6,247

9. Notes Payable

Our notes payable was approximately $2.5 billion in principal amount at June 30, 2011, which consists of approximately $2.4 billion of loans secured by mortgages on our properties and $119.1 million of borrowings under the revolving loans outstanding under our credit facility. Our notes payable was approximately $2.7 billion at December 31, 2010. As of June 30, 2011, all of our debt is fixed rate debt, with the exception of the $119.1 million in revolving loans which bear interest at an annual variable rate, which was equal to approximately 2.94% as of June 30, 2011. Our loan agreements generally require us to comply with certain reporting and financial covenants.

At June 30, 2011, the stated annual interest rates on our notes payable ranged from 5.02% to 7.78%, with an effective weighted average interest rate of approximately 5.62%. For each of our loans that are in default, as detailed below, we incur default interest rates which are 400 to 500 basis points higher than their stated interest rate, which results in an overall effective weighted average interest rate of approximately 5.89%.

We have a non-recourse property loan of approximately $27.3 million, secured by our Minnesota Center property, that matured in November 2010 and remains outstanding and in default. We are in discussions with the lender to restructure or payoff this loan at a discount. There is no assurance that we will be able to restructure or payoff this loan at a discount, which could result in foreclosure or transfer of ownership of the property to the lender. We had a non-recourse property loan of approximately $26.0 million, secured by our 4440 El Camino Real property that matured in April 2011 and remained outstanding and in default at June 30, 2011, but it was paid in full with cash on hand in July 2011.

As of June 30, 2011, we were in default on an additional non-recourse property loan with an outstanding balance of approximately $61.2 million secured by our 17655 Waterview, Gateway 12, Gateway 23 and Southwest Center properties (the “Western Office Portfolio”). We are currently marketing each of these properties for sale on behalf of the lender. In the current economic environment, it is difficult to predict whether these sales will be completed and we can provide no assurance that we will be able to sell these properties, which could result in foreclosure or transfer of ownership of the properties to the lender. As of June 30, 2011, our 1300 Main property is under receivership and is held as security for non-recourse debt of approximately $34.6 million, which is also in default and may result in foreclosure or transfer of ownership of the property to the lender. At June 30, 2011, other than the defaults discussed above, we believe we were in compliance with each of the debt covenants under each of our other loan agreements. In addition, we believe other non-recourse loans totaling approximately $172.4 million, some of which may have imminent defaults or events of default and are secured by three of our properties, need to be modified during 2011 in order to justify further investment.

At June 30, 2011, our notes payable, excluding those notes that have already matured as detailed above, had maturity dates that range from July 2011 to May 2017. The note payable with a July 2011 maturity date relates to a non-recourse property loan of approximately $6.5 million, secured by our St. Louis Place TIC investment property. We have requested forbearance of 180 days from the lender while new financing is secured. There is no assurance that the lender will accept this forbearance which could result in foreclosure or transfer of ownership of the property to the lender.

In July 2011, we replaced approximately $188.6 million of borrowings secured by our One Financial Place property, scheduled to mature in August 2011, with approximately $160.0 million of borrowings with an August 2013 maturity date, and the remaining balance of approximately $28.6 million was paid with cash on hand. In July 2011, we also paid in full the approximate $119.1 million in outstanding borrowings under our credit facility that was scheduled to mature in December 2011 and entered into new borrowings of approximately $100.0 million, secured by our One BriarLake Plaza property, that mature in July 2021. We also entered into a $26.0 million 120-day bridge loan in July 2011. During the remainder of 2011, we have approximately $231.5 million, or 9%, of our June 30, 2011 outstanding debt maturing. The $231.5 million due during the

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

remainder of 2011 excludes approximately $95.8 million for the non-recourse loans secured by our 1300 Main property and the Western Office Portfolio which are in default and have a maturity date after 2011, but for which we have received notification from lenders demanding immediate payment. We have no debt scheduled to mature in 2012.

The following table summarizes our notes payable as of June 30, 2011 (in thousands):

Principal payments due in:
July - December 2011	$	603,268
2012	23,344
2013	70,312
2014	90,479
2015	598,063
Thereafter	1,154,857
unamortized discount	(2,054		)
Total	$	2,538,269

The table above reflects each of the loans secured by our 1300 Main property and the Western Office Portfolio using their original maturity dates. If each of these loans were shown as payable as of July 1, 2011, the principal payments in 2011 would increase by approximately $93.8 million, while principal payments in 2012, 2013, 2014 and 2015 would decrease by approximately $1.6 million, $1.7 million, $33.1 million and $57.4 million, respectively. The table above also excludes approximately $12.5 million of debt secured by our Downtown Plaza property which has a maturity date of June 2015 and is classified as obligations associated with real estate held for sale at June 30, 2011. Downtown Plaza was sold on July 22, 2011 to an unaffiliated third party and the associated debt was assumed by the buyer.

Credit Facility

Through our operating partnership, Behringer OP, as of June 30, 2011, we had a secured credit agreement providing for secured borrowings up to $125.0 million, available as revolving loans (subject to increase to $300 million upon lender approval and payment of certain activation fees to the agent and lenders). The borrowings are to be supported by additional collateral owned by certain of our subsidiaries, each of which has guaranteed the credit facility and granted a first mortgage or deed of trust on its real property as security for the credit facility. As of June 30, 2011, there was approximately $119.1 million outstanding under the revolving loans which bear interest at a rate of LIBOR plus 2.75% per annum, which as of June 30, 2011 was approximately 2.94% per annum. The borrowings outstanding under the credit facility, scheduled to mature in December 2011, were paid in full on July 22, 2011.

Troubled Debt Restructuring

In February 2010, we completed a discounted purchase, through a wholly-owned subsidiary, of the note totaling approximately $42.8 million associated with our 1650 Arch Street property, resulting in a gain on troubled debt restructuring of approximately $10.4 million, of which approximately $9.4 million was recognized in the six months ended June 30, 2010 and $1.0 million was deferred until March 2011, when we acquired the outstanding 10% ownership in the 1650 Arch Street property held by our partner, an unaffiliated third party, for a cash payment of approximately $1.0 million.

In February 2010, pursuant to a deed in lieu of foreclosure, we transferred ownership of KeyBank Center to the lender associated with the property. This transaction was accounted for as a full settlement of debt and resulted in a gain on troubled debt restructuring of approximately $6.5 million which is included in income from discontinued operations.

In January 2011, pursuant to a deed-in-lieu of foreclosure, we transferred ownership of our Executive Park property to the lender associated with the property. This transaction was accounted for as a full settlement of debt and resulted in a gain on troubled debt restructuring of approximately $1.0 million which is included in income from discontinued operations.

In February 2011, pursuant to a foreclosure, we transferred ownership of our Grandview II property to the lender associated with the property. This transaction was accounted for as a full settlement of debt and resulted in a gain on troubled debt restructuring of approximately $1.1 million which is included in income from discontinued operations.

On both a basic and diluted income per share basis, the $3.1 million gain for the six months ended June 30, 2011 was approximately $0.01 per common share. On both a basic and diluted income per share basis, the $15.9 million gain for the six months ended June 30, 2010 was approximately $0.05 per common share. These totals include gains recorded in both continuing operations and discontinued operations.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

10. Stockholders’ Equity

Capitalization

As of June 30, 2011, we had 296,267,404 shares of our common stock outstanding, which includes 271,352,628 shares issued through our primary offerings, 5,521,002 shares issued as a result of our 10% stock dividend in October 2005, 30,964,031 shares issued through distribution reinvestment, and 22,000 shares issued to Behringer Harvard Holdings, LLC, offset by 11,592,257 shares repurchased. As of June 30, 2011, Behringer Harvard REIT I, Inc. had no shares of preferred stock issued and outstanding and had options to purchase 104,500 shares of common stock outstanding at a weighted average exercise price of $7.89 per share. At June 30, 2011, Behringer OP had 432,586 units of limited partnership interest held by third parties. These units of limited partnership interest are convertible into an equal number of shares of our common stock. We sold 1,000 shares of our non-participating, non-voting convertible stock to Behringer Advisors for $1,000 on March 22, 2006. Pursuant to its terms, the convertible stock is convertible into shares of our common stock with a value equal to 15% of the amount by which (1) our enterprise value, including the total amount of distributions paid to our stockholders, exceeds (2) the sum of the aggregate capital invested by stockholders plus a 9% cumulative, non-compounded, annual return on such capital. At the date of issuance of the shares of convertible stock, management determined the fair value under GAAP was less than the nominal value paid for the shares; therefore, the difference is not material.

Share Redemption Program

Our board of directors has authorized a share redemption program to provide limited interim liquidity to stockholders. In 2009, the board determined to suspend until further notice redemptions other than those submitted in respect of a stockholder’s death, disability or confinement to a long-term care facility (referred to herein as “exceptional redemptions”). In November 2010, the board set a funding limit of $4.25 million for exceptional redemptions considered in 2011 proportional to each redemption period, or $1,062,500 per period. During the quarter ended June 30, 2011, we fulfilled a pro rata portion of the 482 exceptional redemption requests related to 1,377,089 shares of common stock which were received as of the April 30, 2011 redemption date. If redemption requests exceed the budget for the applicable redemption period, we redeem shares on a pro rata basis for the applicable redemption period, and any excess shares are treated as a request for redemption in the following period and combined with all subsequent requests received, unless the requesting shareholder withdraws the redemption request. If the remaining unredeemed balance of a request falls below 200 shares, the remaining shares are redeemed in full. We have not kept a record of ordinary redemption requests received since the March 2009 suspension. Cash amounts paid to stockholders for redemption requests during the six months ended June 30, 2011 were approximately $2.1 million for redemption of approximately 471,000 shares and were funded from cash on hand. Cash amounts paid to stockholders for redemption requests during the six months ended June 30, 2010 were approximately $5.0 million for redemption of approximately 516,000 shares and were funded from cash on hand. Our board maintains its right to redeem additional shares, subject to the limits set forth in our share redemption program, if it deems it to be in the best interest of the Company and its stockholders.

We will not redeem, during any twelve-month period, more than 5% of the weighted average number of shares outstanding during the twelve-month period immediately prior to the date of redemption. Further, our board may, from time to time, in its sole discretion, limit the funds that we use to redeem shares; provided that in no event may the funds used for redemption during any period exceed the proceeds from our distribution reinvestment plan (“DRP”) during the period consisting of the preceding four fiscal quarters for which financial statements are available, less any redemptions during the same period. Our board reserves the right in its sole discretion at any time and from time to time to (1) waive the one-year holding period applicable to requests for exceptional redemptions or other exigent circumstances such as bankruptcy, a mandatory distribution requirement under a stockholder’s IRA or with respect to shares purchased under or through our DRP, (2) reject any request for redemption, (3) change the purchase price for redemptions, (4) limit the funds to be used for redemptions or otherwise change the limitations on redemption or (5) amend, suspend (in whole or in part) or terminate the program.

Stock Plans

Our stockholders have approved and adopted the 2005 Incentive Award Plan, which allows for equity-based incentive awards to be granted to our independent directors and consultants and to employees and consultants of affiliates (as defined in the plan). The 2005 Incentive Award Plan replaced the Non-Employee Director Stock Option Plan, the Non-Employee Director Warrant Plan and the 2002 Employee Stock Option Plan, each of which was terminated upon the approval of the 2005 Incentive Award Plan. Under our 2005 Incentive Award Plan, each non-employee director is automatically granted an option to purchase 5,000 shares of common stock on the date he first becomes a director and upon each reelection as a director. As of June 30, 2011, we had outstanding to the independent members of the board of directors options to purchase 104,500 shares of our common stock

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

at a weighted average exercise price of $7.89 per share. These options have a maximum term of ten years, except for the grants made in 2005, 2006 and 2007 under the 2005 Incentive Award Plan. Those options are exercisable and expire as follows: 25% during 2011, 25% during 2012 and 50% during 2013. For the grants made in 2008 and thereafter under the 2005 Incentive Award Plan, the options become exercisable one year after the date of grant. The options were anti-dilutive to earnings per share for the six months ended June 30, 2011 and 2010.

Distributions

Effective since May 2010, the declared distribution rate has been equal to a monthly amount of $0.0083 per share of common stock, which is equivalent to an annual distribution rate of 1.0% based on a purchase price of $10.00 per share and 2.2% based on the December 31, 2010 estimated valuation of $4.55 per share. From April 2009 to April 2010, the declared distributions rate was equal to a monthly amount of $0.0271 per share of common stock, which is equivalent to an annual distribution rate of 3.25% assuming the share was purchased for $10.00.

Pursuant to our DRP, stockholders may elect to reinvest any cash distribution in additional shares of common stock. We record a liability for distributions when declared. The stock issued through the DRP is recorded to equity when the shares are issued. For both the six month periods ended June 30, 2011 and 2010, distributions declared and recorded as a reduction to noncontrolling interest in connection with the Behringer OP limited partnership units were less than $0.1 million. Distributions declared and payable as of June 30, 2011 were approximately $2.5 million, which included approximately $1.4 million of cash distributions payable and approximately $1.1 million of DRP distributions payable.

The following are the distributions declared for both our common stock and the Behringer OP limited partnership units during the six months ended June 30, 2011 and 2010 (in thousands):

2011	Total		Cash		DRP
1st Quarter	$	7,401	$	4,081	$	3,320
2nd Quarter	7,414		4,078		3,336
Total	$	14,815	$	8,159	$	6,656

2010
1st Quarter	$	23,866	$	12,598	$	11,268
2nd Quarter	12,882		7,015		5,867
Total	$	36,748	$	19,613	$	17,135

11. Related Party Arrangements

Our advisor and certain of its affiliates earn fees and compensation in connection with the acquisition, debt financing, management and sale of our assets.

Behringer Advisors, or its affiliates, receives acquisition and advisory fees of up to 2.5% of (1) the purchase price of real estate investments acquired directly by us, including any debt when acquired, or (2) when we make an investment indirectly through another entity, our pro rata share of the gross asset value of real estate investments held by that entity. Behringer Advisors or its affiliates also receives up to 0.5% of the contract purchase price of each asset purchased or the principal amount of each loan made by us for reimbursement of expenses related to making the investment. Behringer Advisors earned less than $0.1 million in acquisition and advisory fees or reimbursement of expenses in the six months ended June 30, 2011, and no acquisition and advisory fees or reimbursement of expenses were earned in the six months ended June 30, 2010.

We pay Behringer Advisors or its affiliates a debt financing fee equal to 1% of the amount of any debt made available to us. Behringer Advisors earned less than $0.1 million of debt financing fees for the six months ended June 30, 2011 and no debt financing fees for the six months ended June 30, 2010.

HPT Management Services, LLC (“HPT Management”), our property manager and an affiliate of our advisor, receives fees for management, leasing and construction supervision of our properties, which may be subcontracted to unaffiliated third parties. The management fees are generally equal to approximately 3% of gross revenues of the respective property; leasing commissions are based upon the customary leasing commission applicable to the geographic location of the respective property; and construction supervision fees are generally equal to an amount not greater than 5% of all hard construction costs incurred in connection with capital improvements, major building reconstruction and tenant improvements. In the event that we contract directly with a non-affiliated third party property manager for management of a property, we pay HPT Management an oversight

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

fee equal to 0.5% of gross revenues of the property managed. In no event will we pay both a property management fee and an oversight fee to HPT Management with respect to any particular property. We incurred and expensed fees of approximately $7.3 million and $8.4 million in the six month periods ended June 30, 2011 and 2010, respectively, for the services provided by HPT Management in connection with our properties, including property management fees associated with our sold and held for sale properties which are classified in discontinued operations.

Depending on the nature of the asset, we pay Behringer Advisors an annual asset management fee of either (1) 0.6% of aggregate asset value for operating assets or (2) 0.6% of total contract purchase price plus budgeted improvement costs for development or redevelopment assets (each fee payable monthly in an amount equal to one-twelfth of 0.6% of such total amount as of the date it is determinable). For the six month periods ended June 30, 2011 and 2010, we incurred and expensed approximately $10.1 million and $9.9 million of asset management fees, respectively, including asset management fees associated with our sold and held for sale properties which are classified in discontinued operations. Asset management fees of approximately $3.5 million were waived for the six months ended June 30, 2011. Asset management fees of approximately $4.6 million were waived for the six months ended June 30, 2010.

Behringer Advisors requires us to reimburse it for costs and expenses paid or incurred to provide services to us, including the costs of goods, services or materials used by us and the salaries and benefits of persons employed by it and its affiliates and performing services for us; provided, however, no reimbursement is made for salaries and benefits to the extent the advisor receives a separate fee for the services provided. HPT Management also requires us to reimburse it for costs and expenses paid or incurred to provide services to us, including salaries and benefits of persons employed by it and its affiliates and engaged in the operation, management, maintenance and leasing of our properties. For the six months ended June 30, 2011, we incurred and expensed approximately $14.9 million for reimbursement of these costs and expenses to Behringer Advisors and HPT Management as compared to approximately $15.6 million for the six months ended June 30, 2010.

At June 30, 2011 and December 31, 2010, we had payables to related parties of approximately $1.5 million and $2.2 million, respectively, consisting primarily of expense reimbursements payable to Behringer Advisors and property management fees payable to HPT Management.

Behringer Advisors or its affiliates will be paid disposition fees if the advisor or its affiliates provide a substantial amount of services, as determined by our independent directors, in connection with the sale of one or more properties. In such event, we will pay the advisor, or its affiliates, an amount equal to the lesser of (subject to the limitation set forth below): (a) one-half of the brokerage commission paid, or (b) 3% of the sales price of each property sold. This fee will not be earned or paid unless and until our stockholders have received total distributions (excluding the 10% stock dividend) in an amount equal to or greater than the sum of the aggregate capital contributed by stockholders plus a 9% annual, cumulative, non-compounded return thereon. Subordinated disposition fees that are not earned and payable at the date of sale are reflected as a contingent liability which will be earned and paid when the above condition has been satisfied, if ever. Based on sales of properties through June 30, 2011, if all the conditions above were met, Behringer Advisors would be paid approximately $2.2 million in disposition fees.

We are dependent on Behringer Advisors and HPT Management for certain services that are essential to us, including asset acquisition and disposition decisions, property management and leasing services and other general administrative responsibilities. In the event that these companies were unable to provide us with the respective services, we would be required to obtain such services from other sources.

12. Commitments and Contingencies

As of June 30, 2011, we had commitments of approximately $42.6 million for future tenant improvements and leasing commissions.

Behringer Advisors or its affiliates will be paid disposition fees if the advisor or its affiliates provides a substantial amount of services, as determined by our independent directors, in connection with the sale of one or more properties. Based on sales of properties through June 30, 2011, if all conditions were met, Behringer Advisors would be paid approximately $2.2 million in disposition fees. For a description of the conditions for payment, see Footnote 11 above.

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

13. Supplemental Cash Flow Information

Supplemental cash flow information is summarized below for the six months ended June 30, 2011 and 2010: (in thousands):

	Six Months Ended		Six Months Ended
	June 30, 2011		June 30, 2010
Interest paid, net of amounts capitalized	$	71,088	$	79,868
Income taxes paid	$	1,438	$	1,942

Non-cash investing activities:
Property and equipment additions in accrued liabilities	$	12,539	$	11,119
Transfer of real estate and lease intangibles through cancellation of debt	$	21,346	$	19,055

Non-cash financing activities:
Common stock issued in distribution reinvestment plan	$	6,656	$	19,847
Mortgage notes assumed	$	962	$	—
Accrual for distributions declared	$	2,472	$	2,455
Mortgage notes assumed by purchaser	$	16,269	$	—
Cancellation of debt through transfer of real estate	$	22,260	$	26,323

14. Discontinued Operations and Real Estate Held for Sale

During the six months ended June 30, 2011, we sold two properties and transferred ownership of two properties to their respective lenders pursuant to a deed-in-lieu of foreclosure and a foreclosure. During the year ended December 31, 2010, we sold five properties and transferred ownership of two properties to their respective lenders pursuant to deeds-in-lieu of foreclosure. At June 30, 2011, our Downtown Plaza property was classified as held for sale. The results of operations for each of these properties have been reclassified as discontinued operations in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 as summarized in the following table (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010

Rental revenue	$	1,421		$	11,111		$	3,353		$	22,900

Expenses
Property operating expenses	277			3,528			857			7,298
Interest expense	412			4,004			1,147			7,552
Real estate taxes	205			1,246			433			2,959
Property and asset management fees	76			725			220			1,489
Asset impairment losses	471			35,417			471			35,417
Depreciation and amortization	353			4,393			972			9,091
Total expenses	1,794			49,313			4,100			63,806

Provision for income taxes	(431		)	—			(431		)	(13		)
Gain on troubled debt restructuring	13			—			2,141			6,508
Interest income/(other expense)	—			—			1			(2		)

Income (loss) from discontinued operations	$	(791	)	$	(38,202	)	$	964		$	(34,413	)

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Behringer Harvard REIT I, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of June 30, 2011 our Downtown Plaza property was held for sale. As of December 31, 2010, our Westway One property was held for sale. The major classes of assets and liabilities of real estate held for sale as of June 30, 2011 and December 31, 2010 are as follows (in thousands):

	June 30, 2011		December 31, 2010
Land	$	1,987	$	3,400
Buildings, net	4,671		24,267
Accounts receivable, net	233		502
Lease intangibles, net	53		2,556
Assets associated with real estate held for sale	$	6,944	$	30,725

Notes payable	$	12,500	$	—
Accrued liabilities	70		—
Other liabilities	30		—
Obligations associated with real estate held for sale	$	12,600	$	—

15. Subsequent Events

In April 2011, our approximately $26.0 million loan secured by our 4440 El Camino Real property matured. o n July 5, 2011, we paid off the loan with cash on hand without penalty.

On July 11, 2011, we entered into two loan agreements with JP Morgan Chase Bank, N.A. to borrow $160.0 million in total, secured by our One Financial Place property located in Chicago, Illinois. The loans consist of a $90.0 million loan with an annual interset rate equal to one-month LIBOR plus 2.59% and a $70.0 million loan with an annual interest rate equal to one-month LIBOR plus 8.55%. For each loan, one-month LIBOR is subject to a floor of 1.0%. In connection with the loans, we entered into two interest rate caps to cap one-month LIBOR at 1.75% until August 14, 2012 and 2.00% from August 15, 2012 until August 15, 2013. The loans require monthly payments of interest only and mature in August 2013 with three one-year extensions available. The proceeds of these borrowings, together with cash on hand, were used to pay off the previously existing $188.6 million principal balance of borrowings secured by this property that was scheduled to mature in August 2011.

On July 22, 2011, we sold our Downtown Plaza property, a building located in Long Beach, California, that consists of approximately 100,000 square feet, to an unaffiliated third party for a contract sales price of approximately $12.8 million. As of June 30, 2011, this property was classified as held for sale.

On July 22, 2011, we entered into two loan agreements to borrow $100.0 million, in total, secured by our One BriarLake Plaza property located in Houston, Texas. The loans consist of an $85.0 million loan with Bank of America, N.A. with a fixed annual interest rate of 5.646% and a $15.0 million mezzanine loan with SBAF Mortgage Fund I/Lender, LLC with a fixed annual interest rate of 9.8%. The loans each require monthly payments of principal and interest and have a maturity date of July 2021.

On July 22, 2011, we entered into a bridge loan with JP Morgan Chase Bank, N.A. to borrow $26.0 million for 120 days with no available extensions. The annual interest rate on the loan is equal to LIBOR (one, two or three months) plus 250 basis points or prime rate subject to a floor equal to one-month LIBOR plus 250 basis points. The loan requires monthly payments of interest only.

On July 22, 2011, we paid in full the borrowings outstanding under our credit facility of approximately $119.1 million. The credit facility was scheduled to mature in December 2011.

On August 4, 2011, we entered into a letter agreement with Behringer Advisors, in which our advisor set our obligation to pay asset management fees for services rendered under the Fifth Amended and Restated Advisory Management Agreement, dated December 29, 2006, as amended, at $5.0 million for the third quarter of 2011. In doing so, our advisor waived our obligation to pay approximately $1.4 million in additional asset management fees that would otherwise become due and payable during the third quarter of 2011 (based on assets held as of July 1, 2011).

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include discussion and analysis of the financial condition of Behringer Harvard REIT I, Inc. and our subsidiaries (which may be referred to herein as the “Company,” “we,” “us” or “our”), including our ability to rent space on favorable terms, our ability to address debt maturities and fund our liquidity requirements, our intentions to sell certain properties, our need to modify certain property loans in order to justify further investment, the value of our assets, our anticipated capital expenditures, the amount and timing of anticipated future cash distributions to our stockholders, and other matters. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.

These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described under “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 8, 2011, and the factors described below:

· market and economic challenges experienced by the U.S. economy or real estate industry as a whole and the local economic conditions in the markets in which our properties are located;

· the inability of tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business;

· the availability of cash flow from operating activities or other sources to fund distributions and capital expenditures;

· our level of debt, existing defaults on certain debt, and the terms and limitations imposed on us by our debt agreements;

· the availability of credit generally, and any failure to refinance or extend our debt as it comes due or a failure to satisfy the conditions and requirements of that debt;

· the need to invest additional equity in connection with debt refinancings as a result of reduced asset values and requirements to reduce overall leverage;

· future increases in interest rates;

· our ability to raise capital in the future by issuing additional equity or debt securities, selling our assets or otherwise;

· our ability to retain our executive officers and other key personnel of our advisor, our property manager and their affiliates;

· conflicts of interest arising out of our relationships with our advisor and its affiliates;

· changes in the level of financial assistance or support provided by our sponsor or its affiliates;

· unfavorable changes in laws or regulations impacting our business or our assets; and

· factors that could affect our ability to qualify as a real estate investment trust.

Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Report, and may ultimately prove to be incorrect or false. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.

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Cautionary Note

The representations, warranties and covenants made by us in any agreement filed as an exhibit to this Quarterly Report on Form 10-Q are made as of specific dates and solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties or covenants to or with any other parties. Moreover, these representations, warranties or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including investment impairment. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Below is a discussion of the accounting policies that we consider to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Principles of Consolidation and Basis of Presentation

Our condensed consolidated financial statements include our accounts, the accounts of variable interest entities (“VIEs”) in which we are the primary beneficiary, if any, 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 are evaluated based on applicable GAAP which requires the consolidation of VIEs in which we are deemed to be the primary beneficiary. If the interest is in an entity that is determined not to be a VIE, then the entity is 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.

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 assets of the entity. The determination is also based on an evaluation of the voting and other rights of owners and other parties to determine if the equity interests possess minimum governance powers. The evaluation also considers the relation of these rights to their economic participation in benefits or obligation to absorb losses. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary that has: (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, (ii) an implicit financial responsibility to ensure that a VIE operates as designed, and (iii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We assess our interests in those entities on an ongoing basis to determine whether such entities should be consolidated. In evaluating if an entity is a VIE, our analysis involves considerable management judgment, assumptions and estimates. A change in these judgments, assumptions, and estimates could result in consolidating an 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.

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. These assets acquired and liabilities assumed may consist of land, inclusive of associated rights, buildings, assumed debt, identified intangible assets and liabilities and asset retirement obligations. Identified intangible assets generally consist of the above-market leases, in-place leases, in-place tenant improvements, in-place leasing commissions and tenant relationships. Identified intangible liabilities generally consist of below-market leases. 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.

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 fair value of these assets

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using discounted cash flow analyses or similar methods believed to be used by market participants. The value of buildings is depreciated over the estimated useful life of 25 years using the straight-line method.

We determine the fair value of assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that management believes we could obtain at the date of the debt assumption. 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 using the effective interest method.

We determine the value of above-market and below-market 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 options 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 determined lease term.

The total value of identified real estate intangible assets acquired is further allocated to in-place leases, in-place tenant improvements, in-place leasing commissions 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 for tenant improvements and leasing commissions is based on estimates of these costs incurred at inception of the acquired leases, amortized through the date of acquisition. 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 the carrying costs that would have otherwise been incurred had the leases not been in place, we include such items as real estate taxes, insurance and other operating expenses as well as lost rental revenue during the expected lease-up period based on current market conditions. The estimates of the fair value of tenant relationships also include costs to execute similar leases including leasing commissions, legal fees and tenant improvements as well as an estimate of the likelihood of renewal as determined by management on a tenant-by-tenant basis.

In allocating the purchase price of each of our properties, management makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets, discount rates used to determine present values, market rental rates per square foot and the period required to lease the property up to its occupancy at acquisition if it were vacant. Many of these estimates are obtained from independent third party appraisals. However, management is responsible for the source and use of these estimates. A change in these estimates and assumptions could result in the various categories of our real estate assets and/or related intangibles being overstated or understated which could result in an overstatement or understatement of depreciation and/or amortization expense and/or rental revenue. These variances could be material to our financial statements.

Impairment of Real Estate Related Assets

For our consolidated real estate assets, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable. When such events or changes in circumstances are present, we assess potential impairment by comparing estimated future undiscounted cash flows expected to be generated over the life of the asset including its eventual disposition, to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted cash flows, we recognize an impairment loss to adjust the carrying amount of the asset to its estimated fair value.

For our unconsolidated real estate assets, including those we own through an investment in a joint venture, tenant-in-common (“TIC”) interest or other similar investment structure, at each reporting date we compare the estimated fair value of our investment to the carrying amount. An impairment charge is recorded to the extent the fair value of our investment is less than the carrying amount and the decline in value is determined to be other than a temporary decline.

In evaluating our investments for impairment, management makes several estimates and assumptions, including, but not limited to, the projected date of disposition and sales price for each property, the estimated future cash flows of each property during our ownership period, and for unconsolidated investments, the estimated future distributions from the investment. A change in these estimates and assumptions could result in understating or overstating the carrying amount of our investments which could be material to our financial statements.

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We undergo continuous evaluations of property level performance, credit market conditions and financing options. If our assumptions regarding the cash flows expected to result from the use and eventual disposition of our properties decrease or our expected hold periods decrease, we may incur future impairment charges on our real estate related assets. In addition, we may incur impairment charges on assets classified as held for sale in the future if the carrying amount of the asset upon classification as held for sale exceeds the estimated fair value, less costs to sell.

Overview

We are externally managed and advised by Behringer Advisors, LLC (“Behringer Advisors”). Behringer Advisors is responsible for managing our day-to-day affairs and for identifying and making acquisitions and dispositions of investments on our behalf. Substantially all of our business is conducted through our operating partnership, Behringer Harvard Operating Partnership I LP (“Behringer OP”).

At June 30, 2011 we owned interests in 61 operating properties with approximately 22.8 million rentable square feet, including our Downtown Plaza property which was classified as held for sale at June 30, 2011 and sold on July 22, 2011. We also had one non-operating property, with approximately 305,000 rentable square feet, the initial development of which was completed in November 2009 but was unleased as of June 30, 2011. In July 2011, we leased approximately 244,000 square feet, or approximately 80%, of this non-operating property with a commencement date of October 1, 2011.

Adverse economic conditions and changes in the credit markets continue to impact our business, results of operations and financial condition. As an owner of real estate, the majority of our income and cash flow is derived from rental revenue received pursuant to tenant leases for space at our properties. Our earnings are negatively impacted by a deterioration of our rental revenue, which has occurred as a result of: (1) a decline in occupancy since late 2008; (2) a decrease in rental rates for new leases from the terms of in-place leases; (3) tenant concessions; and (4) tenant defaults. As a result of the deterioration of our rental revenue, we are focusing on conserving cash, strategically selling certain assets, and identifying other property and company level capital sources.

Cash Conservation . At June 30, 2011, we had cash and restricted cash of approximately $206.3 million, much of which we anticipate using for leasing costs, to restructure or refinance our debt, or for other strategic opportunities. Given the approximate $42.6 million of commitments we have for future tenant improvements and leasing commissions as of June 30, 2011, and the refinancings we have completed in July 2011, we expect our cash and restricted cash to decline in future quarters, excluding cash increases due to strategic asset sales. In order to conserve cash, we have reduced distributions, limited share redemptions, re-bid vendor contracts, continued to protest our real estate taxes on an annual basis, and structured leases to conserve capital. We have also benefited from a waiver of asset management fees owed to Behringer Advisors.

Strategic Asset Sales . We believe it makes economic sense to sell properties in today’s market in certain instances, such as when we believe the value of the leases in place at a property will significantly decline over the remaining lease term, when a property has limited or no equity with a near-term debt maturity, when a property has equity but the projected returns do not justify further investment or when we believe the equity in a property can be redeployed in the portfolio in order to achieve better returns or strategic goals. See “—Liquidity and Capital Resources — General” for a more detailed discussion of our strategic asset sales.

Property and Company Level Capital Sources. We believe that the optimal value for most of our properties will be achieved by holding them until market conditions improve. Rather than selling these assets before market conditions improve, we are exploring opportunities to raise both property-level and company-level capital during the remainder of 2011. For example, in June 2011, we completed a joint venture arrangement with a third party for our 200 South Wacker property and we are working with various banks to generate property- and company-level capital during the remainder of 2011.

As a result of cash conservation, strategic asset sales and sourcing property and company level capital, we believe we will have the resources available to actively lease space in our portfolio in order to increase occupancy, refinance near-term debt maturities, restructure certain debt, and pursue other strategic opportunities. There is, however, no assurance that we will able to realize any capital from these strategic asset sales and property and company level capital initiatives.

Leasing. We continue to experience an increased level of concessions required to acquire a new tenant, including free rent, tenant improvement allowances, lower rental rates, or other financial incentives. Also, a number of current tenants are leveraging the current economic environment to negotiate lease renewals or extensions with similar increased concessions. If these trends continue, we expect the decline in our property net operating income to continue.

During the three months ended June 30, 2011, we had approximately 0.8 million square feet of leases that expired. We executed renewals, expansions and new leases totaling approximately 0.8 million square feet with an average net rent that was approximately $0.82 per square foot per year, or 6%, lower than expiring rent. Renewals were approximately 542,000 square feet with leasing costs of approximately $25.77 per square foot with an average term of approximately 8.2 years. Expansions were

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approximately 96,000 square feet with leasing costs of approximately $38.52 per square foot with an average term of approximately 8.6 years. New leases totaled approximately 161,000 square feet with leasing costs of approximately $25.30 per square foot with an average term of approximately 5.1 years. During the three months ended June 30, 2011, our lease renewals represented 70% of expiring leases and 65% of expiring square feet.

During the six months ended June 30, 2011, we had approximately 2.0 million square feet of leases that expired. We executed renewals, expansions and new leases totaling approximately 1.8 million square feet with an average net rent that was approximately $0.88 per square foot per year, or 6%, lower than expiring rent. Renewals were approximately 1.4 million square feet with leasing costs of approximately $23.71 per square foot with an average term of approximately 7.2 years. Expansions were approximately 158,000 square feet with leasing costs of approximately $27.65 per square foot with an average term of approximately 7.0 years. New leases totaled approximately 247,000 square feet with leasing costs of approximately $22.42 per square foot with an average term of approximately 4.8 years. During the six months ended June 30, 2011, our lease renewals represented 71% of expiring leases and 70% of expiring square feet.

During the six months ended June 30, 2010, we had approximately 2.2 million square feet of expiring leases. We executed renewals, expansions and new leases totaling approximately 2.1 million square feet with an average net rent that was approximately $1.04 per square foot per year, or 7%, lower than expiring rent.

The weighted average leasing cost for the six months ended June 30, 2011 was approximately $23.88 per square foot per year as compared to approximately $20.54 per square foot per year for the six months ended June 30, 2010. The average lease term for renewals, expansions and new leases executed in the six months ended June 30, 2011 was approximately 6.8 years as compared to approximately 5.9 years for the six months ended June 30, 2010.

Our portfolio occupancy was 84% at June 30, 2011 as compared to 86% at June 30, 2010. We have approximately 1.5 million square feet of scheduled lease expirations in the remainder of 2011.

Refinance and Restructure Debt. Substantially all of our assets are currently subject to mortgages, generally for property level non-recourse debt incurred in connection with their acquisition or which were in place upon acquisition. In general, in the current market, lenders have increased the amount of equity required to support either new or existing borrowings. In addition, capitalization rates (or cap rates) for office properties have generally increased since the initial acquisition of our properties. Cap rates and property prices move inversely so that an increase in cap rates should, without an increase in property net operating income, result in a decrease in property value. Although positive for new property acquisitions, the overall impact will likely be negative for us because we believe many of our properties may be viewed as less valuable today than at acquisition, thus requiring us to use more cash on hand to refinance or borrow new monies.

As of June 30, 2011, we have approximately $53.3 million of debt that has matured and remains outstanding. We have a non-recourse property loan of approximately $27.3 million, secured by our Minnesota Center property that matured in November 2010 and remains outstanding and in default. We are in discussions with the lender to restructure or payoff this loan at a discount. There is no assurance that we will be able to restructure or payoff this loan at a discount, which could result in foreclosure or transfer of ownership of the property to the lender. We had a non-recourse property loan of approximately $26.0 million, secured by our 4440 El Camino Real property with an April 2011 maturity date that was paid in full with cash on hand in July 2011.

The reduction in our property net operating income, as well as the increased costs of retaining and attracting new tenants, coupled with increases in vacancy rates and cap rates, has caused us to reconsider our long-term strategy for certain of our properties, especially a limited number of properties where we believe the principal balance of the debt encumbering the property exceeds the value of the asset under current market conditions. In those cases where our advisor believes the value of a property is not likely to recover, our advisor and board of directors have decided to redeploy our capital to what they believe are more effective uses by reducing the amount of monies we fund as capital expenditures and leasing costs or having us cease making debt service payments on certain property level non-recourse debt, resulting in defaults or events of default under the related loan agreements. See “Liquidity and Capital Resources — Notes Payable.” We are in active negotiations with certain lenders to refinance or restructure debt in a manner that achieves what we believe is the best outcome for the Company and its stockholders and expect that some loans will be resolved through a discounted purchase or payoff of the debt or a write-down or subordination of a portion of the debt by the lender and, in certain situations, other loans will be resolved by negotiating agreements conveying the properties to the lender.

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Other Strategic Opportunities . Although our primary purposes for conserving cash, strategically selling certain assets and identifying other property- and company-level capital sources are to have the necessary capital resources available for leasing space in our portfolio and refinancing and restructuring our debt, we may also be able to use those resources to capitalize on certain other strategic investment opportunities, such as an acquisition or development of a property that may be uniquely attractive and accretive for our stockholders.

If we are successful with our efforts to lease our portfolio, refinance or restructure our debt, and pursue strategic opportunities, we believe we can achieve three important objectives for our stockholders: (1) increase our estimated value per share; (2) increase distributable cash flow; and (3) provide liquidity to our stockholders. Currently, our management is reviewing alternatives to create liquidity for our stockholders, including larger strategic dispositions of properties or portfolios of properties, entrance into the public markets through a listing of our common stock on a national securities exchange or through a merger transaction with a listed company, and/or a merger with a non-listed company. In the event we do not obtain listing of our common stock or complete the liquidation of our assets by the end of 2017, our charter requires us to liquidate our assets, unless a majority of the board of directors and a majority of the independent directors extend such date.

Results of Operations

Three months ended June 30, 2011 as compared to the three months ended June 30, 2010

Continuing Operations

Rental Revenue. Rental revenue for the three months ended June 30, 2011 was approximately $122.5 million as compared to approximately $129.2 million for the three months ended June 30, 2010 and was generated by our consolidated real estate properties. The $6.7 million decrease was primarily attributable to decreases in tenant rental income of approximately $6.3 million, primarily related to free rent, reduced rental rates and lower occupancy as compared to the prior year, lower tenant recovery income of approximately $1.1 million, an unfavorable change in net above- and below-market lease adjustments of $0.5 million and approximately $1.3 million in lower other income. These decreases were partially offset by an increase in straight-line rent adjustments of approximately $1.3 million and lease termination fee income of $1.2 million.

Property Operating Expenses. Property operating expenses for the three months ended June 30, 2011 were approximately $37.2 million as compared to approximately $38.5 million for the three months ended June 30, 2010 and were comprised of property operating expenses from our consolidated real estate properties. The $1.3 million decrease was primarily attributable to a decrease in repairs and maintenance expense of approximately $1.0 million and various other decreases totaling approximately $0.3 million .

Interest Expense. Interest expense for the three months ended June 30, 2011 was approximately $39.7 million as compared to approximately $40.6 million for the three months ended June 30, 2010 and was comprised of interest expense and amortization of deferred financing fees and interest rate mark-to-market adjustments related to our notes payable associated with our consolidated real estate properties, TIC interest investments, our credit facility and our interest rate swap agreements. The $0.9 million decrease from prior year was primarily a result of a decrease in amortization of deferred financing fees of approximately $0.8 million and a decrease of approximately $1.0 million in interest incurred due to a lower interest rate on our credit facility and overall decreased borrowings, partially offset by a decrease in interest capitalized of approximately $0.9 million.

Real Estate Taxes. Real estate taxes for the three months ended June 30, 2011 were approximately $18.6 million as compared to approximately $17.9 million for the three months ended June 30, 2010 and were comprised of real estate taxes from our consolidated real estate properties. The $0.7 million increase was primarily due to more refunds received in the prior year period as compared to the same period in the current year.

Property Management Fees. Property management fees for the three months ended June 30, 2011 were approximately $3.6 million as compared to approximately $3.9 million for the three months ended June 30, 2010 and were comprised of property management fees related to both our consolidated and unconsolidated real estate properties. The decrease is primarily due to lower property revenue.

Asset Management Fees. Asset management fees for the three months ended June 30, 2011 were approximately $5.0 million as compared to approximately $4.6 million for the three months ended June 30, 2010 and were comprised of asset management fees associated with both our consolidated and unconsolidated real estate assets. The $0.4 million increase from the prior year was primarily attributable to an increase in the number of properties in discontinued operations in the second quarter of 2010 as compared to the same period in 2011. Our advisor waived approximately $1.7 million in asset management fees in the three months ended June 30, 2011 as compared to approximately $2.3 million waived in the three months ended June 30, 2010. Our advisor determines the amount of any fees waived at its sole discretion, and we can provide no assurance that our advisor will waive additional asset management fees in future periods.

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Asset Impairment Losses. Asset impairment losses for the three months ended June 30, 2011 were approximately $6.5 million as compared to approximately $5.1 million for the three months ended June 30, 2010. The impairment losses in the current year period primarily relate to changes in expected holding periods of certain of our real estate properties. The impairment losses in the prior year period relate to changes in the estimated fair value of investments in unconsolidated entities.

Goodwill Impairment Losses. We had no goodwill impairment losses for the three months ended June 30, 2011. Goodwill impairment losses for the three months ended June 30, 2010 were approximately $11.5 million. In connection with the May 17, 2010 estimation of the value of our outstanding common stock, we evaluated our goodwill for impairment between annual tests and determined that the implied fair value of goodwill was equal to zero and approximately $11.5 million was recorded as impairment loss.

General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2011 were approximately $2.7 million as compared to approximately $2.5 million for the three months ended June 30, 2010 and were comprised of corporate general and administrative expenses including directors’ and officers’ insurance premiums, audit and tax fees, legal fees, other administrative expenses and reimbursement of certain expenses of our advisor.

Depreciation and Amortization Expense. Depreciation and amortization expense for the three months ended June 30, 2011 was approximately $54.8 million as compared to approximately $56.0 million for the three months ended June 30, 2010 and was comprised of depreciation and amortization expense from each of our consolidated real estate properties. The $1.2 million decrease primarily resulted from decreased amortization of lease intangibles due to an increase in the number of acquired lease intangibles that have been fully amortized.

Interest and Other Income . Interest and other income for the three months ended June 30, 2011 was approximately $3.0 million as compared to approximately $0.4 million for the three months ended June 30, 2010. The three months ended June 30, 2011 amount includes approximately $2.3 million in proceeds from a litigation settlement related to one of our properties and approximately $0.6 million in fees received in connection with the sale of 200 South Wacker.

Benefit (Provision) for Income Taxes. We had a benefit for income taxes of approximately $0.2 million in the three months ended June 30, 2011 as compared to a provision of approximately $0.6 million in the three months ended June 30, 2010. The $0.8 million change primarily related to a reduction in deferred tax assets related to the expiration of net operating loss carryforwards in the three months ended June 30, 2010.

Equity in Earnings of Investments . Equity in earnings of investments for the three months ended June 30, 2011 was approximately $0.3 million as compared to approximately $0.1 million for three months ended June 30, 2010 and was comprised of our share of equity in the earnings of unconsolidated investments.

Net Loss attributable to Noncontrolling Interest . Net loss attributable to noncontrolling interest was approximately $0.1 million for the three months ended June 30, 2011 as compared to approximately $0.2 million for the three months ended June 30, 2010 and represents the net income or loss attributable to third parties who have interests in certain of our consolidated properties and third parties owning limited partnership units issued by Behringer OP.

Discontinued Operations

Income (Loss) from Discontinued Operations . Loss from discontinued operations for the three months ended June 30, 2011 was approximately $0.8 million as compared to approximately $38.2 million for the three months ended June 30, 2010. In the six months ended June 30, 2011, we disposed of four properties and one property was held for sale as of June 30, 2011, and we disposed of seven properties during the year ended December 31, 2010. Our results of operations for each of these properties are classified as discontinued operations in all periods presented. The $37.4 million change is primarily due to approximately $35.0 million in lower asset impairment losses in 2011 as compared to the same period in 2010.

Six months ended June 30, 2011 as compared to the six months ended June 30, 2010

Continuing Operations

Rental Revenue. Rental revenue for the six months ended June 30, 2011 was approximately $253.2 million as compared to approximately $258.3 million for the six months ended June 30, 2010 and was generated by our consolidated real estate properties. The $5.1 million decrease was primarily attributable to decreases in tenant rental income of approximately $12.3 million, primarily related to free rent, reduced rental rates and lower occupancy as compared to the prior year, and decreased tenant recovery income of approximately $5.7 million, and decreases in other income of approximately $2.0 million. These decreases were partially offset by a favorable increase in net above- and below-market lease adjustments of approximately $6.9 million, an increase in straight-line rent adjustments of approximately $4.3 million and an increase in lease termination fee income of approximately $3.7 million.

Property Operating Expenses. Property operating expenses for the six months ended June 30, 2011 were approximately $74.7 million as compared to approximately $78.0 million for the six months ended June 30, 2010 and were comprised of property operating expenses from our consolidated real estate properties. The $3.3 million decrease was primarily attributable to a decrease

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in bad debt expense of approximately $1.5 million, a decrease in repairs and maintenance expense of approximately $0.7 million, a decrease in insurance expense of approximately $0.5 million and various other decreases totaling approximately $0.6 million .

Interest Expense. Interest expense for the six months ended June 30, 2011 was approximately $79.7 million as compared to approximately $81.5 million for the six months ended June 30, 2010 and was comprised of interest expense and amortization of deferred financing fees and interest rate mark-to-market adjustments related to our notes payable associated with our consolidated real estate properties, TIC interest investments, our credit facility and our interest rate swap agreements. The $1.8 million decrease from prior year was primarily a result of a decrease in amortization of deferred financing fees of approximately $1.5 million and a decrease of approximately $2.0 million in interest incurred due to a lower interest rate on our credit facility and overall decreased borrowings, offset by a decrease in interest capitalized of approximately $1.7 million.

Real Estate Taxes. Real estate taxes for the six months ended June 30, 2011 were approximately $34.2 million as compared to approximately $37.7 million for the six months ended June 30, 2010 and were comprised of real estate taxes from our consolidated real estate properties. The $3.5 million decrease was primarily due to lower overall property tax expense of approximately $1.8 million due to lower real estate tax estimates as compared to prior year, resulting from lower property assessments across the portfolio and approximately $1.7 million more tax refunds received in the current year period as compared to the same period in the prior year.

Property Management Fees. Property management fees for the six months ended June 30, 2011 were approximately $7.3 million as compared to approximately $7.7 million for the six months ended June 30, 2010 and were comprised of property management fees related to both our consolidated and unconsolidated real estate properties. The decrease is primarily due to lower property revenue.

Asset Management Fees. Asset management fees for the six months ended June 30, 2011 were approximately $10.0 million as compared to approximately $9.1 million for the six months ended June 30, 2010 and were comprised of asset management fees associated with both our consolidated and unconsolidated real estate assets. The $0.9 million increase from the prior year was primarily attributable to an increase in the number of properties in discontinued operations in the prior year as compared to the same period in 2011. Our advisor waived approximately $3.5 million in asset management fees in the six months ended June 30, 2011 as compared to approximately $4.6 million waived in the six months ended June 30, 2010. Our advisor determines the amount of any fees waived at its sole discretion, and we can provide no assurance that our advisor will waive additional asset management fees in future periods.

Asset Impairment Losses. Asset impairment losses for the six months ended June 30, 2011 were approximately $6.5 million as compared to approximately $5.1 million for the six months ended June 30, 2010. The impairment losses in the current year period primarily relate to changes in expected holding periods of certain of our real estate properties. The impairment losses in the prior year period relate to changes in the estimated fair value of investments in unconsolidated entities.

Goodwill Impairment Losses. We had no goodwill impairment losses for the six months ended June 30, 2011. Goodwill impairment losses for the six months ended June 30, 2010 were approximately $11.5 million. In connection with the May 17, 2010 estimation of value of our outstanding common stock, we evaluated our goodwill for impairment between annual tests and determined that the implied fair value of goodwill was equal to zero and approximately $11.5 million was recorded as impairment loss.

General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2011 were approximately $5.5 million as compared to approximately $5.8 million for the six months ended June 30, 2010 and were comprised of corporate general and administrative expenses including directors’ and officers’ insurance premiums, audit and tax fees, legal fees, other administrative expenses and reimbursement of certain expenses of our advisor.

Depreciation and Amortization Expense. Depreciation and amortization expense for the six months ended June 30, 2011 was approximately $115.1 million as compared to approximately $114.0 million for the six months ended June 30, 2010 and was comprised of depreciation and amortization expense from each of our consolidated real estate properties. The $1.1 million increase primarily resulted from increased depreciation and amortization of lease intangibles due to early lease terminations and additional tenant improvements and leasing commissions associated with lease renewals. These increases were partially offset by decreases in amortization and depreciation due to an increase in the number of acquired lease intangibles that have been fully amortized.

Interest and Other Income . Interest and other income for the six months ended June 30, 2011 was approximately $3.1 million as compared to approximately $0.8 million for the six months ended June 30, 2010. The six months ended June 30, 2011 amount includes approximately $2.3 million in proceeds from a litigation settlement related to one of our properties and approximately $0.6 million in fees received in connection with the sale of 200 South Wacker. The remaining $0.6 million decrease from the prior year was primarily due to lower cash and notes receivable balances in the current year.

Gain on Troubled Debt Restructuring. Gain on troubled debt restructuring for the six months ended June 30, 2011 was approximately $1.0 million as compared to approximately $9.4 million for the six months ended June 30, 2010. Each of these gains is related to the settlement of debt of our loan associated with the 1650 Arch property which occurred in February 2010. A

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portion of this gain was deferred and recognized in March 2011 when we purchased the 10% ownership of the 1650 Arch property held by our partner, an unaffiliated third party.

Benefit (Provision) for Income Taxes. We had a provision for income taxes of approximately $0.1 million in the six months ended June 30, 2011 as compared to approximately $1.1 million in the six months ended June 30, 2010. The $1.0 million change was primarily related to a reduction in deferred tax assets related to the expiration of net operating loss carryforwards in the six months ended June 30, 2010.

Equity in Earnings of Investments . Equity in earnings of investments for the six months ended June 30, 2011 was approximately $0.6 million as compared to approximately $0.5 million for six months ended June 30, 2010 and was comprised of our share of equity in the earnings of unconsolidated investments.

Net Loss attributable to Noncontrolling Interest . Net loss attributable to noncontrolling interest was approximately $0.2 million and $0.4 million for the six month ended June 30, 2011 and 2010, respectively, and represents the net income or loss attributable to third parties who have interests in certain of our consolidated properties and third parties owning limited partnership units issued by Behringer OP.

Discontinued Operations

Income (Loss) from Discontinued Operations . Income from discontinued operations for the six months ended June 30, 2011 was approximately $1.0 million as compared to a loss of approximately $34.4 million for the six months ended June 30, 2010. In the six months ended June 30, 2011, we disposed of four properties and one property was held for sale as of June 30, 2011, and we disposed of seven properties during the year ended December 31, 2010. Our results of operations for each of these properties are classified as discontinued operations in all periods presented. The $35.4 million change is primarily due to approximately $35.0 million in lower asset impairment losses in 2011 as compared to the same period in 2010.

Gain on Sale of Discontinued Operations. Gain on sale of discontinued operations for the six months ended June 30, 2011 was approximately $0.6 million and primarily relates to the sale of Westway One. We had no gain on sale of discontinued operations for the six months ended June 30, 2010.

Cash Flow Analysis

Six months ended June 30, 2011 as compared to six months ended June 30, 2010

Cash flows provided by operating activities were approximately $6.0 million for the six months ended June 30, 2011 compared to approximately $20.7 million for the six months ended June 30, 2010. The change in cash flows provided by operating activities is attributable to (1) the factors discussed in our analysis of results of operations for the six months ended June 30, 2011 compared to June 30, 2010, including results of our consolidated real estate property operations, interest expense, asset management fees and general and administrative expenses; (2) decreases in lease commissions and other lease intangibles of approximately $5.3 million; and (3) the timing of receipt of revenues and payment of expenses which is evidenced by net cash outflows in working capital assets and liabilities of approximately $21.9 million in 2011 compared to approximately $6.7 million in 2010.

Cash flows provided by investing activities for the six months ended June 30, 2011 were approximately $106.9 million and were primarily comprised of proceeds from the sale of properties of approximately $129.4 million, proceeds from notes receivable of approximately $10.4 million, and proceeds from the change in restricted cash of approximately $1.2 million. These proceeds were partially offset by monies used to fund capital expenditures for existing real estate of approximately $30.0 million and purchases of real estate and investments in unconsolidated entities of approximately $4.6 million. During the six months ended June 30, 2010, cash flows used in investing activities were approximately $15.3 million and were primarily comprised of monies used to fund capital expenditures for existing real estate of approximately $18.7 million and capital expenditures for real estate development of approximately $4.4 million, partially offset by approximately $6.8 million in the change in restricted cash.

Cash flows used in financing activities for the six months ended June 30, 2011 were approximately $143.7 million and were comprised primarily of payments on notes payable of approximately $132.6 million, distributions to our stockholders of approximately $8.1 million and redemptions of common stock of approximately $2.1 million. During the six months ended June 30, 2010, cash flows used in financing activities were approximately $71.2 million and were comprised primarily of payments on notes payable of approximately $41.6 million, distributions to our stockholders of approximately $22.3 million, redemptions of common stock of approximately $5.0 million and distributions to noncontrolling interests of approximately $2.2 million.

For a detailed discussion of our liquidity strategy and how we funded distributions, see “Liquidity and Capital Resources” below.

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Funds from Operations (“FFO”) and Modified Funds from Operations (“MFFO”)

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate and intangibles 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. FFO 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”) to be net income (loss), computed in accordance with GAAP excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property (including deemed sales and settlements of pre-existing relationships), plus depreciation and amortization on real estate assets, and after related adjustments for unconsolidated partnerships, joint ventures and subsidiaries and noncontrolling interests. We believe that the use of FFO, together with the required GAAP presentations, is helpful to our stockholders and our management in understanding our operating performance because it excludes real estate-related depreciation and amortization, gains and losses from property dispositions, 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 are not immediately apparent from net income. Factors that impact FFO include fixed costs, lower yields on cash held in accounts, income from portfolio properties and other portfolio assets, interest rates on debt financing and operating expenses.

Since FFO was promulgated, several new accounting pronouncements have been issued, such that management, industry investors and analysts have considered the presentation of FFO alone to be insufficient. Accordingly, in addition to FFO, we use MFFO, as defined by the Investment Program Association (“IPA”). MFFO excludes from FFO the following items:

(1) acquisition fees and expenses;

(2) straight line rent amounts, both income and expense;

(3) amortization of above- or below-market intangible lease assets and liabilities;

(4) amortization of discounts and premiums on debt investments;

(5) impairment charges on real estate related assets (including properties, loans receivable, and equity and debt investments);

(6) gains or losses from the early extinguishment of debt;

(7) gains or losses on the extinguishment or sales of hedges, foreign exchange, securities and other derivative holdings except where the trading of such instruments is a fundamental attribute of our operations;

(8) gains or losses related to fair value adjustments for interest rate swaps and other derivatives not qualifying for hedge accounting, foreign exchange holdings and other securities;

(9) gains or losses related to consolidation from, or deconsolidation to, equity accounting;

(10) gains or losses related to contingent purchase price adjustments; and

(11) adjustments related to the above items for unconsolidated entities in the application of equity accounting.

We believe that MFFO is a helpful measure of operating performance because it excludes costs that management considers more reflective of investing activities or non-operating valuation and other items outlined above. Accordingly, we believe that MFFO can be a useful metric to assist management, stockholders and analysts in assessing the sustainability of operating performance.

As explained below, management’s evaluation of our operating performance excludes the items considered in the calculation based on the following economic considerations:

· Acquisition fees and expenses . In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analyses differentiate costs to acquire the investment from the operations derived from the investment. Prior to 2009, acquisition costs for both business combinations and equity investments were capitalized; however, beginning in 2009, acquisition costs related to business combinations are expensed. We believe by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for our real estate investments and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition expenses include those paid to our advisor or third parties.

· Adjustments for straight line rents and amortization of discounts and premiums on debt investments . In the application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance.

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· Adjustments for amortization of above- or below-market intangible lease assets . Similar to depreciation and amortization of other real estate related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes predictably over time and that these charges be recognized currently in revenue. Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of our real estate assets.

· Impairment charges and gains or losses related to fair value adjustments for derivatives not qualifying for hedge accounting . Each of these items relates to a fair value adjustment, which, in part, is based on the impact of current market fluctuations and underlying assessments of general market conditions, which may not be directly attributable to our current operating performance. As these gains or losses relate to underlying long-term assets and liabilities where we are not speculating or trading assets, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rates, occupancy and other core operating fundamentals.

· Adjustment for gains or losses related to early extinguishment of hedges, debt, consolidation or deconsolidation and contingent purchase price . Similar to extraordinary items excluded from FFO, these adjustments are not related to our continuing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators.

By providing MFFO, we believe we are presenting useful information that assists stockholders in better aligning their analysis with management’s analysis of long-term core operating activities. Many of these adjustments are similar to adjustments required by SEC rules for the presentation of pro forma business combination disclosures, particularly acquisition expenses, gains or losses recognized in business combinations and other activity not representative of future activities.

MFFO also provides useful information in analyzing comparability between reporting periods that also assists stockholders and analysts in assessing the sustainability of our operating performance. MFFO is primarily affected by the same factors as FFO, but without non-operating changes, particularly valuation changes; therefore, we believe fluctuations in MFFO are more indicative of changes and potential changes in operating activities. MFFO is also more comparable in evaluating our performance over time. We also believe that MFFO is a recognized measure of sustainable operating performance by the real estate industry and is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies that do not have a similar level of involvement in acquisition activities or are not similarly affected by impairments and other non-operating charges.

FFO or MFFO should not be considered as an alternative to net income (loss), or as indications of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make distributions. Both FFO and MFFO are non-GAAP measurements and should be reviewed in connection with other GAAP measurements. Our FFO and MFFO as presented may not be comparable to amounts calculated by other REITs that do not define these terms in accordance with the current NAREIT or IPA definitions or that interpret the definitions differently.

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The following section presents our calculations of FFO and MFFO and provides additional information related to our FFO and MFFO (in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010

Net loss	$	(41,577	)	$	(89,709	)	$	(72,060	)	$	(116,986	)
Net loss attributable to noncontrolling interests	72			238			244			383

Adjustments (1):
Real estate depreciation and amortization from consolidated properties	55,196			60,410			116,054			123,112
Real estate depreciation and amortization from unconsolidated properties	1,732			1,779			3,452			3,468
Gain on sale of depreciable real estate	(1,385		)	—			(2,024		)	—
Noncontrolling interests share of above adjustments	(287		)	(316		)	(600		)	(646		)

FFO attributable to common stockholders	$	13,751		$	(27,598	)	$	45,066		$	9,331

Impairment charges	6,998			52,003			6,998			52,003
Fair value adjustments to derivatives	—			(99		)	—			(87		)
Acqusition-related costs	140			—			175			—
Straight-line rent adjustment	(4,983		)	(4,059		)	(11,481		)	(8,152		)
Amortization of above- and below-market rents, net	(2,498		)	(3,206		)	(12,870		)	(6,227		)
Gain on troubled debt restructuring	(13		)	—			(3,149		)	(15,898		)
Noncontrolling interests share of above adjustments	1			(65		)	30			(31		)
MFFO attributable to common stockholders	$	13,396		$	16,976		$	24,769		$	30,939

Weighted average common shares - basic	296,091			293,963			295,868			293,573
Weighted average common shares - diluted (2)	296,105			293,963			295,882			293,573

Net loss per common share - basic and diluted (2)	$	(0.14	)	$	(0.30	)	$	(0.24	)	$	(0.40	)
FFO per common share - basic and diluted	$	0.05		$	(0.09	)	$	0.15		$	0.03
MFFO per common share - basic and diluted	$	0.05		$	0.06		$	0.08		$	0.11

(1) Reflects the adjustments of continuing operations, as well as discontinued operations.

(2) There are no dilutive securities for purposes of calculating the net loss per common share.

Effective January 1, 2011, we modified our definition of MFFO to be consistent with the definition established by the IPA. All periods presented have been modified to reflect this change. Prior to this modification, our primary adjustments to FFO included acquisition expenses, impairment charges and fair value adjustments for derivatives not qualifying for hedge accounting.

Liquidity and Capital Resources

General

Our business requires continued access to adequate capital to fund our liquidity needs. Our principal demands for funds on a short-term and long-term basis have been and will continue to be for operating expenses, general and administrative expenses, payment of principal and interest on our outstanding indebtedness, refinancing or restructuring our outstanding indebtedness, capital improvements to our properties, including commitments for future tenant improvements, asset management fees and payment of distributions. Our foremost priorities for the near term are preserving and generating cash sufficient to fund our liquidity needs. Given the uncertainty in the economy and the changes to the financial markets, as well as property specific issues, such as vacancies and lease terminations, management believes that access to any outside source of cash will be challenging and is planning accordingly.

Current Liquidity

As of June 30, 2011, we had cash and cash equivalents of $108.3 million. We have deposits in certain financial institutions in excess of federally insured levels. We have diversified our cash and cash equivalents with numerous banking

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institutions in an attempt to minimize exposure to any one of these institutions. We regularly monitor the financial stability of these financial institutions, and we believe that we have placed our deposits with creditworthy financial institutions.

At current operating levels, we anticipate that revenue from our properties, cash and cash equivalents, and restricted cash will continue to provide adequate capital to fund our short-term liquidity requirements. Based on our assessment, we anticipate our short-term liquidity requirements to be approximately $540.8 million over the next twelve months, of which we expect approximately $434.2 million to be provided by revenue from our properties. In addition, debt that is secured by three of our properties, totalling approximately $258.8 million at June 30, 2011, has already matured or matures over the next twelve months. This excludes approximately $333.7 million of debt outstanding at June 30, 2011 that was scheduled to mature over the next twelve months but was paid off in July 2011. We will also need to generate additional funds for long-term liquidity requirements.

Liquidity Strategies

Our expected actual and potential liquidity sources are, among others: cash and cash equivalents and restricted cash; revenue from our properties; proceeds from asset dispositions; proceeds received from contributing existing assets to joint ventures; proceeds from additional secured or unsecured debt financings and refinancings; and proceeds from public or private issuances of debt or equity securities. We also intend to utilize retained capital as a result of the partial suspension and funding limit of the share redemption program and the reductions in our distribution rate, which occurred in 2009 and 2010.

One of our liquidity strategies is to dispose of certain properties, which we expect will help us (1) generate cash through the disposition of identified properties in non-core markets or non-strategic properties that we believe have equity value above the mortgage debt and (2) preserve cash through the disposition of properties with negative cash flow or other potential near-term cash outlay requirements (including debt maturities). In January 2011 and February 2011, pursuant to a deed-in-lieu of foreclosure and a foreclosure, we transferred ownership of our Executive Park and Grandview II properties, respectively, to the lenders associated with each property. In January 2011 and June 2011, we sold Westway One and AMEC Paragon I & II, respectively, each located in Houston, Texas. In July 2011 we sold our Downtown Plaza property, located in Long Beach, California. We intend to sell at least four other properties during 2011, but in the current economic environment, it is difficult to predict whether these sales will be completed. There can be no assurance that future dispositions will occur, or, if they occur, that they will help us to achieve these objectives.

In addition, we may seek to raise capital by contributing one or more of our existing assets to a joint venture with a third party. For example, we completed a joint venture arrangement with a third party for our 200 South Wacker property in June 2011. Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved. Our ability to successfully identify, negotiate and complete joint venture transactions on acceptable terms or at all is highly uncertain in the current economic environment.

We continually evaluate our debt maturities. Part of our overall strategy includes actively addressing our debt maturities in 2011 and considering alternative courses of action if the capital markets are volatile. Based on our current assessment, we believe there will be refinancing alternatives available, but these alternatives may materially impact our expected financial results and liquidity due to higher interest rates and additional equity requirements. However, if refinancing alternatives are not available and we have insufficient liquidity to repay the maturing debt, the related lenders could foreclose on certain of our properties.

We are also exploring opportunities and working with various banks to generate both property-level and company-level capital during 2011. There is, however, no assurance that we will be able to realize any capital from these initiatives.

Notes Payable

We have a non-recourse property loan of approximately $27.3 million, secured by our Minnesota Center property that matured in November 2010 and remains outstanding and in default. We are in discussions with the lender to restructure or payoff this loan at a discount. There is no assurance that we will be able to restructure or payoff this loan at a discount, which could result in foreclosure or transfer of ownership of the property to the lender. We had a non-recourse property loan of approximately $26.0 million, secured by our 4440 El Camino Real property that matured in April 2011 and remained outstanding and in default at June 30, 2011, but it was paid in full with cash on hand in July 2011.

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At June 30, 2011, other than the defaults discussed above, we believe we were in compliance with each of the debt covenants under each of our other loan agreements. In addition, we believe other non-recourse loans totaling approximately $172.4 million, some of which may have imminent defaults or events of default and are secured by three of our properties, need to be modified during 2011 in order to justify further investment.

In July 2011 we replaced approximately $188.6 million of borrowings secured by our One Financial Place property, scheduled to mature in August 2011, with approximately $160.0 million of borrowings with an August 2013 maturity date, and the remaining balance of approximately $28.6 million was paid with cash on hand. In July 2011, we also paid in full the approximate $119.1 million in outstanding borrowings under our credit facility that was scheduled to mature in December 2011 and entered into borrowings of approximately $100.0 million, secured by our One BriarLake Plaza property, that mature in July 2021. We also entered into a $26.0 million 120-day bridge loan in July 2011. During the remainder of 2011, we have approximately $231.5 million, or 9%, of our June 30, 2011 outstanding debt maturing. The $231.5 million due during the remainder of 2011 excludes approximately $95.8 million for the non-recourse loans secured by our 1300 Main property and the Western Office Portfolio which are in default and have a maturity date after 2011, but for which we have received notification from lenders demanding immediate payment. We have no debt scheduled to mature in 2012.

Credit Facility

Troubled Debt Restructuring

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months ended June 30, 2010 was approximately $0.05 per common share. These totals include gains recorded in both continuing operations and discontinued operations.

Share Redemption Program

Our board of directors has authorized a share redemption program to provide limited interim liquidity to stockholders. In 2009, the board determined to suspend until further notice redemptions other than those submitted in respect of a stockholder’s death, disability or confinement to a long-term care facility (referred to herein as “exceptional redemptions”). In November 2010, the board set a funding limit of $4.25 million for exceptional redemptions considered in 2011 proportional to each redemption period, or $1,062,500 per period. During the quarter ended June 30, 2011, we fulfilled a pro rata portion of the 482 exceptional redemption requests related to 1,377,089 shares of common stock which were received as of the April 30, 2011 redemption date. If redemption requests exceed the budget for the applicable redemption period, we redeem shares on a pro rata basis for the applicable redemption period, and any excess shares are treated as a request for redemption in the following period and combined with all subsequent requests received, unless the requesting shareholder withdraws the redemption request. If the remaining unredeemed balance of a request falls below 200 shares, the remaining shares are redeemed in full. We have not kept a record of ordinary redemption requests received since the March 2009 suspension. Cash amounts paid to stockholders for redemption requests during the six months ended June 30, 2011 were approximately $2.1 million for redemption of approximately 471,000 shares and were funded from cash on hand. Our board maintains its right to redeem additional shares, subject to the limits set forth in our share redemption program, if it deems it to be in the best interest of the Company and its stockholders. Our board also maintains the right to further amend, suspend or terminate the program at any time.

Distributions

Distributions are authorized at the discretion of our board of directors based on its analysis of numerous factors, including but not limited to our performance over the previous period, expectations of performance over future periods, forthcoming cash needs, earnings, cash flow, anticipated cash flow, capital expenditure requirements, cash on hand and general financial condition. The board’s decisions are also influenced, in substantial part, by the requirements necessary to maintain our REIT status.

The general indicators of performance in the commercial office market have shown signs of continued weakness as a result of the global recession and the inherent lagging nature of commercial office real estate recovery compared to the broader economy. Contributing to this is a high level of unemployment, which is widely recognized as the key factor in vacancy levels. Lower occupancy levels nationally and in our portfolio have the effect of reducing net operating income available to pay expenses and distributions. Furthermore, in a lower occupancy environment, competitive rental concessions are offered by most office landlords to keep assets leased or attract new tenants, along with increased capital expenditures in the form of tenant improvements and leasing commissions necessary to rebuild occupancy. This further contributes to the need to preserve cash and has the effect of reducing cash available for distributions. The board of directors continues to monitor these and other indicators consistent with its previously stated objective of preserving equity and capital. Reductions in our property net operating income have impacted our ability to maintain the level of distributions that were paid to our stockholders. Effective since May 2010 the declared distribution rate has been equal to a monthly amount of $0.0083 per share of common stock, which is equivalent to an annual distribution rate of 1.0% based on a purchase price of $10.00 per share and 2.2% based on the December 31, 2010 estimated valuation of $4.55 per share. From April 2009 to April 2010, the declared distributions rate was equal to a monthly amount of $0.0271 per share of common stock, which is equivalent to an annual distribution rate of 3.25% assuming the share was purchased for $10.00.

The total distributions paid to common stockholders for the six months ended June 30, 2011 and 2010 were approximately $14.8 million and $42.2 million, respectively. Of the distributions paid to common stockholders for the six months ended June 30, 2011 and 2010, approximately $6.7 million and $19.8 million, respectively, were reinvested in shares of our common stock pursuant to our DRP. We thus used net cash of approximately $8.1 million and $22.4 million to fund the distributions for these periods. For both the six months ended June 30, 2011 and 2010, distributions declared and recorded as a reduction to noncontrolling interest in connection with the Behringer OP limited partnership units were less than $0.1 million. For the six months ended June 30, 2011 and 2010, cash provided by operating activities was approximately $6.0 million and $20.7 million, respectively. For the six months ended June 30, 2011 and 2010, net cash distributions paid to common stockholders exceeded cash flows from operating activities by approximately $2.1 million and $1.6 million, respectively.

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The following are the distributions paid and declared to our common stockholders during the six months ended June 30, 2011 and 2010 (amounts in thousands, except per share amounts):

							Total		Declared
	Distributions Paid						Distributions		Distribution
	Cash		DRP		Total		Declared		Per Share (1)
2011
1st Quarter	$	4,063	$	3,323	$	7,386	$	7,389	$	0.025
2nd Quarter	4,066		3,333		7,399		7,404		0.025
Total	$	8,129	$	6,656	$	14,785	$	14,793	$	0.050

2010
1st Quarter	$	12,434	$	11,371	$	23,805	$	23,830	$	0.081
2nd Quarter	9,888		8,476		18,364		12,864		0.044
Total	$	22,322	$	19,847	$	42,169	$	36,694	$	0.125

(1) Distributions declared per share assumes the share was issued and outstanding as of the record date and is based on a declared monthly distribution rate for the first four months of 2010 of $0.0271 and a declared monthly distribution rate for May 2010 through June 2011 of $0.0083.

Operating performance cannot be accurately predicted due to numerous factors including the financial performance of our investments in the current uncertain real estate environment and the types and mix of investments in our portfolio. As a result, future distributions paid and declared could continue to exceed cash provided by operating activities even though our board of directors lowered our distribution rate in May 2010. Although we anticipate cash provided by operating activities will be sufficient to fully fund the payment of distributions at the current rate during most quarters, the first half of each year typically requires us to use more cash to pay accrued real estate taxes. We can provide no assurances that the level of our distributions is sustainable or if we will continue to pay distributions at all, and we may pay some or all of our distributions from other sources. For example, from time to time, our advisor and its affiliates may agree to continue to waive or defer all, or a portion, of the acquisition, asset management or other fees or incentives due them, enter into lease agreements for unleased space, pay general and administrative expenses or otherwise supplement investor returns in order to increase the amount of cash that we have available to pay distributions to our stockholders. However, there is no assurance that these other sources will continue to be available to fund distributions.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to interest rate changes primarily as a result of our debt used to acquire properties. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we borrow primarily at fixed rates or variable rates with what we believe are the lowest margins available and in some cases, the ability to convert variable rates to fixed rates. With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

Of our approximately $2.5 billion in notes payable at June 30, 2011, approximately $119.1 million represented debt bearing interest at variable rates. A 100 basis point increase or decrease in interest rates would result in a net increase or decrease in total annual interest incurred of approximately $1.2 million.

We do not have any foreign operations and thus we are not directly exposed to foreign currency fluctuations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated as of June 30, 2011, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of June 30, 2011, were effective for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported

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within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting that occurred during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

We are not party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

The following risk factors supplement the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2010.

We may not be able to refinance or repay our indebtedness.

We may not be able to refinance or repay our existing indebtedness. Currently, debt that is secured by three of our properties, totaling approximately $258.8 million at June 30, 2011, has already matured or matures over the next twelve months and we have no debt maturing in 2012. Due to (1) reduced values of our investments, (2) limited cash flows from operating activities, (3) our debt level, (4) the cost and terms of new or refinanced indebtedness and (5) material changes in lending parameters, including lower loan-to-value ratios, we may face significant challenges refinancing our current debt on acceptable terms.

Further, we may not have the funds necessary to repay our debt as it matures. Failure to refinance or extend our debt as it comes due, or a failure to satisfy the conditions and requirements of that debt, could result in an event of default. We have experienced, and may continue to experience, defaults or events of default with respect to our existing indebtedness, which has required us to either restructure the debt in a way that is supported by the underlying asset values of the properties collateralizing the debt or to purchase or pay off the debt at a discount. In situations where we have been unable to restructure the debt or to purchase or pay off the debt at a discount, we have transferred the underlying property to the lender. We can provide no assurance that, with respect to any other indebtedness that we may be unable to repay, we will be able to restructure that debt or to purchase or pay off that debt at a discount, which could result in lenders accelerating that debt or foreclosing on the related property. If our debt is accelerated, the value of our assets may not be sufficient to repay the debt in full. If we are unable to refinance or repay our debt as it comes due and maintain sufficient cash flow, our business, financial condition and results of operations will be materially and adversely affected. Furthermore, even if we are able to obtain extensions on our existing debt, those extensions may include operational and financial covenants significantly more restrictive than the covenants on existing indebtedness. Any extensions will also require us to pay certain fees to, and expenses of, our lenders. Any fees and cash flow restrictions will affect our ability to fund our ongoing operations and to pay distributions.

Unless we generate sufficient cash flow from operating activities to fund distributions to our stockholders and capital requirements of our properties, we will make distributions from other sources, including cash on hand, which may negatively impact our ability to sustain or pay distributions.

Distributions are authorized at the discretion of our board of directors based on its analysis of our forthcoming cash needs, earnings, cash flow, anticipated cash flow, capital expenditure requirements, cash on hand, general financial condition and other factors that our board deems relevant. Actual cash available for distribution may vary substantially from estimates. Historically, the amount of our declared distributions has exceeded our cash flow from operating activities, but because of the participation level in our DRP, which results in a reinvestment of distributions in shares of our common stock, the net cash that we have historically been required to pay in distributions has been less than cash flow from operating activities. However, cash flow from operating activities has been insufficient to fund both the net cash required to fund distributions and the capital requirements of our properties. For example, during the six months ended June 30, 2011, our properties required approximately $30.0 million for capital expenditures (excluding real estate under development) and the net cash required to fund distributions to our common stockholders was approximately $8.1 million, but because we typically use more cash during the first half of each year to pay accrued real estate taxes, we have lower cash provided by operating activities during the first half of 2011. As a result, some of the net cash required for distributions and capital expenditures was funded from cash on hand.

If the level of participation in our DRP decreases, the net cash required to fund distributions may exceed cash flow from operating activities before funding any of the capital requirements of our properties. Further, if cash flow from operating activities continues to be insufficient to fund both the net cash required to fund distributions and the capital requirements of our properties, a portion of distributions will continue to be funded with cash on hand or from other sources, and the level of our distributions may not be sustainable. For example, we may generate cash to pay distributions from financing activities, components of which may include borrowings (including borrowings secured by our assets) in anticipation of future operating cash flow. In addition, from time to time, our advisor and its affiliates have agreed, but are not required, to waive or defer all, or a portion, of the acquisition, asset management or other fees or other incentives due to them, enter into lease agreements for unleased space, pay general and

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administrative expenses or otherwise supplement investor returns in order to increase the amount of cash available to make distributions to our stockholders. To the extent distributions exceed net cash or cash flow generated by operating or financing activities, the level of distributions may not be sustainable and our board of directors could further reduce or eliminate distributions.

The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.

In addition to general, regional and national economic conditions, our operating results are impacted by the economic conditions of the specific markets in which we have concentrations of properties. Properties located in the metropolitan areas of Chicago, Houston and Philadelphia represent approximately 47% of the net operating income, which represents property revenue less property related expenses, generated during the three months ended June 30, 2011, by our properties owned as of June 30, 2011. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect our property revenue, and hence net operating income.

Co-venture partners, co-tenants or other partners in co-ownership arrangements that we may enter into could take actions that decrease the value of an investment to us and lower your overall return.

As of June 30 2011, we had three joint ventures with third parties and two of our properties were owned in a TIC structure, and we may enter into additional joint ventures, tenant-in-common investments or other co-ownership arrangements with other third parties or Behringer Harvard-sponsored programs. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. In certain instances, we will not be, and generally do not expect to be, in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity in such joint venture investments. Consequently, these investments may involve risks not otherwise present with other forms of real estate investment, including, for example:

· the possibility that our partner in an investment might become bankrupt, which would mean that we and any other remaining venture partners would generally remain liable for the joint venture’s liabilities;

· the possibility that the investment requires additional capital that we or our partner do not have, which lack of capital could affect the performance of the investment or dilute our interest if the partner were to contribute our share of the capital;

· the possibility that a partner in an investment might breach a loan agreement or other agreement or otherwise, by action or inaction, act in a way detrimental to us or the investment;

· that such partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals;

· the possibility that we may incur liabilities as the result of the action taken by our partner;

· that our partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to qualifying and maintaining our qualification as a REIT; or

· that our partner may exercise buy/sell rights that force us to either acquire the entire investment, or dispose of our share of the investment, at a time and price that may not be consistent with our investment objectives.

Any of the above might reduce our returns on joint venture investments.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Share Redemption Program

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with all subsequent requests received, unless the requesting shareholder withdraws the redemption request. If the remaining unredeemed balance of a request falls below 200 shares, the remaining shares are redeemed in full. We have not kept a record of ordinary redemption requests received since the March 2009 suspension. Cash amounts paid to stockholders for redemption requests during the six months ended June 30, 2011 were approximately $2.1 million for redemption of approximately 471,000 shares and were funded from cash on hand. Our board maintains its right to redeem additional shares, subject to the limits set forth in our share redemption program, if it deems it to be in the best interest of the Company and its stockholders.

We will not redeem, during any twelve-month period, more than 5% of the weighted average number of shares outstanding during the twelve-month period immediately prior to the date of redemption. Further, our board may, from time to time, in its sole discretion, limit the funds that we use to redeem shares; provided that in no event may the funds used for redemption during any period exceed the proceeds from our DRP during the period consisting of the preceding four fiscal quarters for which financial statements are available, less any redemptions during the same period. Our board reserves the right in its sole discretion at any time and from time to time to (1) reject any request for redemption, (2) change the purchase price for redemptions, (3) limit the funds to be used for redemptions or otherwise change the limitations on redemption or (4) amend, suspend (in whole or in part) or terminate the program.

During the quarter ended June 30, 2011 we redeemed shares as follows:

				Total Number of	Maximum
	Total			Shares Purchased	Number of Shares
	Number of Shares Redeemed	Average Price Paid per Share		as Part of Publicly Announced Plans or Programs	That May Yet be Purchased Under the Plans or Programs
April 2011	—	$	—	—	(1)
May 2011	237,097	$	4.55	237,097	(1)
June 2011	—	$	—	—	(1)

(1) A description of the maximum number of shares that may be purchased under our redemption program is included in the narrative preceding this table.

Item 3. Defaults upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

Second Amended and Restated Bylaws

On August 4, 2011, our board of directors adopted the Second Amended and Restated Bylaws of the Company to (1) eliminate any inconsistencies resulting from the amendment and restatement of our charter, as approved by our stockholders at the Annual Meeting held on June 24, 2011, which, among other things, removed certain provisions that were originally included in the charter to comply with the Statement of Policy Regarding Real Estate Investment Trusts promulgated by the North American Securities Administrators Association, Inc., known as the “NASAA REIT Guidelines,” (2) provide that holders of shares entitled to cast a majority of the votes entitled to be cast on a matter may cause us to call a special meeting of stockholders for the purpose of acting on such matter and (3) make certain other formatting or corrective changes.

The amendment and restatement of our charter was described in our definitive proxy statement filed with the Securities and Exchange Commission on April 1, 2011. The foregoing description of the Second Amended and Restated Bylaws of the Company, which became effective immediately, does not purport to be complete in scope and is qualified in its entirety by reference to the full text of the Second Amended and Restated Bylaws of the Company, which are filed as Exhibit 3.2 hereto and are incorporated into this report by reference.

Declaration of Distributions

On August 4, 2011, our board of directors authorized distributions payable to stockholders of record on August 31, 2011. Distributions payable to each stockholder of record will be paid in cash on or before the 16th day of the following month. The declared distributions equal a monthly amount of $0.0083 per share of common stock, which is equivalent to an annual distribution rate of 1.0% on a purchase price of $10.00 per share. Distributions are authorized at the discretion of our board of directors based on its analysis of numerous factors, including but not limited to our forthcoming cash needs, and there is no assurance that distributions will continue or be paid at any particular rate. All or a portion of the distributions may constitute return of capital for tax purposes.

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Waiver of Asset Management Fees

The information set forth above with respect to the letter agreement does not purport to be complete in scope and is qualified in its entirety by the full text of the letter agreement, which is filed as Exhibit 10.4 hereto and is incorporated into this report by reference.

Item 6. Exhibits.

The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.

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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.

	BEHRINGER HARVARD REIT I, INC.


Dated: August 8, 2011	By:	/s/ James E. Sharp
		James E. Sharp
		Chief Accounting Officer
		(Principal Accounting Officer)

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Index to Exhibits

Exhibit Number		Description

3.1		Ninth Articles of Amendment and Restatement (previously filed and incorporated by reference to Form 8-K filed on June 28, 2011)

3.2		Second Amended and Restated Bylaws (filed herewith)

4.1		Second Amended and Restated Distribution Reinvestment Plan of the Registrant (previously filed and incorporated by reference to Form 10-Q filed on November 13, 2009)

4.2		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) (previously filed and incorporated by reference to Exhibit 4.4 to Registrant’s Post-Effective Amendment No. 8 to Registration Statement on Form S-11 filed on April 24, 2008)

10.1		Letter Agreement, dated May 5, 2011, between Behringer Harvard REIT I, Inc. and Behringer Advisors, LLC regarding asset management fees (previously filed and incorporated by reference to Form 10-Q filed on March 8, 2011)

10.2		Letter Agreement, dated August 4, 2011, between Behringer Harvard REIT I, Inc. and Behringer Advisors, LLC regarding asset management fees (filed herewith)

31.1		Rule 13a-14(a) or Rule 15d-14(a) Certification (filed herewith)

31.2		Rule 13a-14(a) or Rule 15d-14(a) Certification (filed herewith)

32.1*		Section 1350 Certifications (filed herewith)

101 **		The following financial information from Behringer Harvard REIT I, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2011 and 2010, (ii) Condensed Consolidated Balance Sheets at June 30, 2011, and December 31, 2010, (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (iv) the Notes to Condensed Consolidated Financial Statements.

* In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certification will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

** As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

EXHIBIT 3.2

SECOND AMENDED AND RESTATED

BYLAWS

BEHRINGER HARVARD REIT I, INC.

A MARYLAND CORPORATION

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ARTICLE I OFFICES			1
	Section 1.01	PRINCIPAL OFFICES	1
	Section 1.02	ADDITIONAL OFFICES	1

ARTICLE II MEETINGS OF STOCKHOLDERS			1
	Section 2.01	PLACE	1
	Section 2.02	ANNUAL MEETING	1
	Section 2.03	SPECIAL MEETINGS	1
	Section 2.04	NOTICE FOR MEETINGS	1
	Section 2.05	SCOPE OF NOTICE	2
	Section 2.06	ORGANIZATION AND CONDUCT	2
	Section 2.07	QUORUM; ADJOURNMENT	2
	Section 2.08	VOTING	3
	Section 2.09	PROXIES	3
	Section 2.10	VOTING OF STOCK BY CERTAIN HOLDERS	3
	Section 2.11	EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE	4
	Section 2.12	INSPECTORS	4
	Section 2.13	NOMINATIONS AND STOCKHOLDER BUSINESS	5
	Section 2.14	VOTING BY BALLOT	7

ARTICLE III DIRECTORS			7
	Section 3.01	GENERAL POWERS	7
	Section 3.02	NUMBER, TENURE AND QUALIFICATIONS	7
	Section 3.03	ANNUAL AND REGULAR MEETINGS	7
	Section 3.04	SPECIAL MEETINGS	7
	Section 3.05	NOTICE	8
	Section 3.06	QUORUM	8
	Section 3.07	VOTING	8
	Section 3.08	ORGANIZATION	8
	Section 3.09	ACTION BY WRITTEN CONSENT; INFORMAL ACTION	8
	Section 3.10	PRESUMPTION OF ASSENT	9
	Section 3.11	TELEPHONE MEETINGS	9
	Section 3.12	REMOVAL	9
	Section 3.13	VACANCIES	9
	Section 3.14	COMPENSATION	9
	Section 3.15	LOSS OF DEPOSITS	10
	Section 3.16	SURETY BONDS	10
	Section 3.17	RELIANCE	10
	Section 3.18	CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS	10

ARTICLE IV COMMITTEES			10
	Section 4.01	DESIGNATION	10
	Section 4.02	NUMBER, TENURE AND QUALIFICATIONS	10
	Section 4.03	AUTHORITY	10
	Section 4.04	MEETINGS	10
	Section 4.05	TELEPHONE MEETINGS	11
	Section 4.06	ACTION BY WRITTEN CONSENT; INFORMAL ACTION	11
	Section 4.07	VACANCIES	11

ARTICLE V OFFICERS			11
	Section 5.01	GENERAL PROVISIONS	11
	Section 5.02	REMOVAL AND RESIGNATION	12
	Section 5.03	VACANCIES	12
	Section 5.04	AUTHORITY	12
	Section 5.05	THE CHAIRMAN OF THE BOARD	12
	Section 5.06	THE CHIEF EXECUTIVE OFFICER	12
	Section 5.07	THE PRESIDENT	13
	Section 5.08	THE CHIEF OPERATING OFFICER	13
	Section 5.09	THE TREASURER; CHIEF FINANCIAL OFFICER	13
	Section 5.10	VICE PRESIDENTS	13
	Section 5.11	ASSISTANT TREASURERS	13
	Section 5.12	SECRETARY	14
	Section 5.13	ASSISTANT SECRETARIES	14
	Section 5.14	COMPENSATION	14

ARTICLE VI CONTRACTS, CHECKS AND DEPOSITS			14
	Section 6.01	CONTRACTS	14
	Section 6.02	CHECKS AND DRAFTS	14
	Section 6.03	DEPOSITS	14

ARTICLE VII STOCK CERTIFICATES; ISSUANCES, TRANSFERS			15
	Section 7.01	CERTIFICATES	15
	Section 7.02	TRANSFERS; REGISTERED STOCKHOLDERS	15
	Section 7.03	LOST, STOLEN, OR DESTROYED CERTIFICATES	15
	Section 7.04	CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE	16
	Section 7.05	STOCK LEDGER	17
	Section 7.06	FRACTIONAL STOCK; ISSUANCE OF UNITS	17

ARTICLE VIII ACCOUNTING YEAR			17

ARTICLE IX DISTRIBUTIONS			17
	Section 9.01	AUTHORIZATION	17
	Section 9.02	CONTINGENCIES	17

ARTICLE X INVESTMENT POLICY			18

ARTICLE XI SEAL			18
	Section 11.01	SEAL	18
	Section 11.02	AFFIXING SEAL	18

ARTICLE XII WAIVER OF NOTICE			18

ARTICLE XIII INDEMNIFICATION AND ADVANCE OF EXPENSES			18

ARTICLE XIV AMENDMENT OF BYLAWS			19

SECOND AMENDED AND RESTATED BYLAWS

BEHRINGER HARVARD REIT I, INC.

A MARYLAND CORPORATION

ARTICLE I

OFFICES

Section 1.01 PRINCIPAL OFFICES . The principal office(s) of Behringer Harvard REIT I, Inc. (the “CORPORATION”) shall be located at such place or places as the Board of Directors may designate from time to time.

Section 1.02 ADDITIONAL OFFICES . The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or otherwise as the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.01 PLACE . All meetings of stockholders shall be held at a principal office of the Corporation or at such other place as shall be stated in the notice of the meeting.

Section 2.02 ANNUAL MEETING . An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on such day as the Board of Directors may determine. The purpose of each annual meeting of the stockholders shall be to elect directors of the Corporation and to transact such other business as may properly come before the meeting.

Section 2.03 SPECIAL MEETINGS . Special meetings of the stockholders may be called by the President or the Board of Directors. Special meetings of stockholders shall also be called by the Secretary of the Corporation to act on any matter that may properly be considered at a meeting of stockholders upon the written request of the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting. The Secretary shall inform such stockholders of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment to the Corporation by such stockholders of such costs, the Secretary shall give notice to each stockholder entitled to notice of the meeting.

Section 2.04 NOTICE FOR MEETINGS . The Secretary shall, not less than ten nor more than 90 days before each meeting of stockholders, give to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting, notice, in writing or

by electronic transmission, stating the time and place of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and may vote at the meeting and, in the case of a special meeting or as otherwise required by the Maryland General Corporation Law (the “MGCL”), the purpose of the meeting. Notice shall be deemed delivered to a stockholder upon being (i) personally delivered to the stockholder; (ii) left at the stockholder’s residence or usual place of business; (iii) mailed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, in which case such notice shall be deemed to be given when deposited in the United States mail with postage prepaid thereon; or (iv) transmitted to the stockholder by electronic mail to any electronic mail address of the stockholder or by any other electronic means.

Section 2.05 SCOPE OF NOTICE . Any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except as otherwise set forth in Section 2.12(a) of this Article II and except for such business as is required by the MGCL or any other relevant statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice.

Section 2.06 ORGANIZATION AND CONDUCT . Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment, by the Chairman of the Board or, in the case of a vacancy in the office or absence of the Chairman of the Board, by one of the following officers present at the meeting: the Vice Chairman of the Board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy. The Secretary, or, in the Secretary’s absence, an Assistant Secretary, or in the absence of both the Secretary and Assistant Secretaries, a person appointed by the Board of Directors or, in the absence of such appointment, a person appointed by the chairman of the meeting shall act as secretary. In the event that the secretary presides at a meeting of the stockholders, an assistant secretary shall record the minutes of the meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting, including, without limitation: (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) maintaining order and security at the meeting; (f) removing any stockholder who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; and (g) recessing or adjourning the meeting to a later date and time and place announced at the meeting. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.07 QUORUM; ADJOURNMENT . At any meeting of the stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled

to be cast at such meeting shall constitute a quorum except as otherwise provided by law, the charter of the Corporation (the “CHARTER”) or these Bylaws. If a quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally noticed.

The stockholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Section 2.08 VOTING . A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. Except as otherwise required by law, the Charter or these Bylaws, a majority of the votes cast at a meeting of the stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting. Unless otherwise provided in the Charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of the stockholders.

Section 2.09 PROXIES . A stockholder may cast the votes entitled to be cast by the holder of the shares of stock owned of record by the stockholder in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from its date, unless otherwise provided in the proxy.

Section 2.10 VOTING OF STOCK BY CERTAIN HOLDERS . Stock registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president, a vice president, a general partner, or a trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his name as such fiduciary, either in person or by proxy.

Shares of the Corporation’s stock owned directly or indirectly by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case, subject to the terms of the Charter, they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the

stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification.

Section 2.11 EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE . Notwithstanding any other provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the MGCL shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of “control shares,” as such term is defined in the MGCL, and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share

Section 2.12 INSPECTORS .

(a) The Board of Directors or the chairman of the meeting may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting.

(b) The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 2.13 NOMINATIONS AND STOCKHOLDER BUSINESS .

(a) Annual Meetings of Stockholders.

(1) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of such meeting; (B) by or at the direction of the Board of Directors; or (C) by any stockholder of the Corporation who (i) was a stockholder of record both at the time of giving of notice provided for in this Section 2.13(a) and at the time of the annual meeting in question; (ii) is entitled to vote at such meeting in the election of each person so nominated or on any such other business; and (iii) has complied with the notice procedures set forth in this Section 2.13(a).

For nominations or other business to be properly brought at an annual meeting by a stockholder pursuant to this paragraph (a)(2) or paragraph (a)(1) of this Section 2.13, the stockholder must give timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive office of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the date of mailing of the notice for the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to the date of mailing of the notice for such annual meeting and not later than the close of business on the later of the 90th day prior to the date of mailing of the notice for such annual meeting or the 10th day following the day on which disclosure of the date of mailing of the notice for such meeting is first made. In no event shall the public announcement of a postponement or adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or reelection as a director (i) the name, age, business address, and residence address of such person; (ii) the class and number of shares of stock of the Corporation that are beneficially owned by such person; and (iii) all other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “EXCHANGE ACT”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, (i) a brief description of the business desired to be brought before the meeting; (ii) the reasons for conducting such business at the meeting; and (iii) any material interest in such business that such stockholder and beneficial owner, if any, on whose behalf the proposal is made, may have; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (i) the name and address of such stockholder and beneficial owner, if any, as such appears on the Corporation’s books; and (ii) the number of shares of each class of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner.

Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section 2.13 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board of Directors made by the Corporation at least 100 days prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.13(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation no later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of said meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation’s notice of said meeting; (ii) by or at the direction of the Board of Directors; or (iii) provided the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who (A) is a stockholder of record both at the time of giving of notice provided for in this Section 2.13(b) at the time of the special meeting; (B) is entitled to vote at the meeting in the election of each person so nominated; and (C) complied with the notice procedures set forth in this Section 2.13(b). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation’s notice of meeting, if the stockholder’s notice containing the information required by paragraph (a)(2) of this Section 2.13 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of a postponement or adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

(1) Only such persons who are nominated in accordance with the procedures set forth in this Section 2.13 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.13. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 2.13, and, if any proposed nomination or business is not in compliance with this Section 2.13, to declare that such defective nomination or proposal, if any, be disregarded.

(2) For purposes of this Section 2.13, (i) the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for election of directors and (ii) “public announcement” shall mean disclosure in a press release reported by the Dow

Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 2.13, a stockholder shall also comply with all applicable requirements of state law and the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.13. Nothing in this Section 2.13 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 2.14 VOTING BY BALLOT . Voting on any question or in any election may be viva voce unless the presiding officer shall order, or any stockholder shall demand, that voting be by ballot.

ARTICLE III

DIRECTORS

Section 3.01 GENERAL POWERS . The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.

Section 3.02 NUMBER, TENURE AND QUALIFICATIONS . At any regular meeting or at any special meeting called for that purpose, a majority of the members then serving on the Board of Directors may establish, increase, or decrease the number of directors, provided that, except as otherwise provided in the Charter, the total number thereof shall never be fewer than the minimum number required by the MGCL, and further provided that, except as may be provided in the terms of any preferred stock issued by the Corporation, the tenure of office of a director shall not be affected by any decrease in the number of directors.

Section 3.03 ANNUAL AND REGULAR MEETINGS . An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution.

Section 3.04 SPECIAL MEETINGS . Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, President or by a majority of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them. The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.

Section 3.05 NOTICE . Notice of any special meeting of the Board of Directors shall be delivered personally, or by telephone, electronic mail, facsimile transmission, United States mail, or courier to each director at his business or residence address. Notice by personal delivery, telephone, electronic mail, or facsimile transmission shall be given at least two days prior to the meeting. Notice by United States mail shall be given at least five days prior to the meeting and shall be deemed to be given when deposited in the United States mail properly addressed, with postage prepaid thereon. Telephone notice shall be deemed to be given when the director or his agent is personally given such notice in a telephone call to which he or his agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 3.06 QUORUM . A majority of the directors then serving shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that, if pursuant to the Charter or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group. The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

Section 3.07 VOTING . The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute or the Charter. If enough directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of the directors still present at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute or the Charter.

Section 3.08 ORGANIZATION . At each meeting of the Board of Directors, the Chairman of the Board or, in the absence of the chairman, the Vice Chairman of the Board, if any, shall act as Chairman. In the absence of both the Chairman and Vice Chairman of the Board, the Chief Executive Officer or in the absence of the Chief Executive Officer, the President or in the absence of the President, a director chosen by a majority of the directors present, shall act as Chairman. The Secretary or, in his or her absence, an Assistant Secretary of the Corporation, or in the absence of the secretary and all assistant secretaries, a person appointed by the Chairman, shall act as secretary of the meeting.

Section 3.09 ACTION BY WRITTEN CONSENT; INFORMAL ACTION . Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without

a meeting, if a consent in writing or by electronic transmission to such action is given by each director, and such consent is filed with the minutes of proceedings of the Board of Directors.

Section 3.10 PRESUMPTION OF ASSENT . A director of the Corporation who is present at any meeting of the Board of Directors at which action on any matter is taken shall be presumed to have assented to the action unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof, or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action, or failed to make his or her dissent known at the meeting.

Section 3.11 TELEPHONE MEETINGS . Directors may participate in a meeting of the Board of Directors by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 3.12 REMOVAL . Subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, a director may only be removed from office for cause at an annual or special meeting of stockholders by the affirmative vote of the shares entitled to cast a majority of all of the votes entitled to be cast generally in the election of directors. For purposes of this paragraph, “cause” shall mean with respect to any particular director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to the Corporation through bad faith or active and deliberate dishonesty.

Section 3.13 VACANCIES . If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder. Any vacancy on the Board of Directors for any cause shall be filled by a majority of the remaining directors then in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred and until his or her successor is duly elected and qualifies.

Section 3.14 COMPENSATION . Directors may, in the discretion of the entire Board of Directors, receive annual or monthly salary for their services as directors, fixed sums per meeting and/or per visit to real property or other facilities owned or leased by the Corporation, and/or for any service or activity performed or engaged in as directors on behalf of the Corporation. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their reasonable out-of-pocket expenses, if any, in connection with each such meeting, property visit, and/or other service or activity they performed or engaged in as directors on behalf of the Corporation. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

Section 3.15 LOSS OF DEPOSITS . No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited.

Section 3.16 SURETY BONDS . Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his duties.

Section 3.17 RELIANCE . Each director, officer, employee and agent of the Corporation shall, in the performance of his duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director.

Section 3.18 CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS . The directors shall have no responsibility to devote their full time to the affairs of the Corporation. Any director or officer of the Corporation, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to, or in competition with those of or relating to the Corporation, subject to the provisions of the Charter.

ARTICLE IV

COMMITTEES

Section 4.01 DESIGNATION . The Board of Directors may, by a resolution adopted by a majority of the entire Board of Directors, designate an Executive Committee, an Audit Committee, a Compensation Committee, a Leasing Committee, and any other committee it deems appropriate and in the best interest of the Corporation.

Section 4.02 NUMBER, TENURE AND QUALIFICATIONS . Each committee shall be composed of one or more directors, and such committee members shall serve at the pleasure of the Board of Directors.

Section 4.03 AUTHORITY . Subject to the limitations contained herein and the limitations contained in the resolution establishing such committee, to the extent permitted by law, the executive committee shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the corporation. Each other committee, to the extent expressly provided for in the resolution establishing such committee and except as prohibited by law, shall have and may exercise all of the authority of the Board of Directors in such other matters and affairs concerning the Corporation. Notwithstanding the foregoing, no committee shall have the authority of the Board of Directors to fix the compensation of any committee member.

Section 4.04 MEETINGS . Notice of committee meetings shall be given in the same manner as notice for special or regular meetings of the Board of Directors. A majority of the

members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings.

Section 4.05 TELEPHONE MEETINGS . Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 4.06 ACTION BY WRITTEN CONSENT; INFORMAL ACTION . Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and such consent is filed with the minutes of proceedings of such committee.

Section 4.07 VACANCIES . Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.

ARTICLE V

OFFICERS

Section 5.01 GENERAL PROVISIONS . The officers of the Corporation shall be elected by the Board of Directors, and shall include a President, a Treasurer, a Secretary, and any other officers as determined by the Board of Directors. Such officers may include a Chairman of the Board, Chief Executive Officer, a Chief Operating Officer, a Chief Financial Officer, one or more Vice Presidents, one or more Assistant Treasurers, a Secretary, and/or one or more Assistant Secretaries. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as it shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders, except that the Chief Executive Officer may appoint one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. In its discretion, the Board of Directors may leave unfilled any office except that of President, Treasurer and Secretary. Election of an officer or agent shall not itself create contract rights between the Corporation and such officer or agent.

Section 5.02 REMOVAL AND RESIGNATION . Any officer or agent of the Corporation may be removed by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board, the President or the Secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the notice of resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 5.03 VACANCIES . A vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 5.04 AUTHORITY . Officers shall have such authority and perform such duties in the management of the corporation as are provided in these Bylaws and as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws.

Section 5.05 THE CHAIRMAN OF THE BOARD . The Chairman of the Board may preside at any meetings of the stockholders, the Board of Directors and any committee on which he serves. The Chairman in his role as an executive officer shall not have any authority with respect to the business, financial affairs or day-to-day operations of the Corporation. At the request of the Chairman, or in case of his absence or inability to act, unless otherwise directed by the Board of Directors, the Chief Executive Officer shall perform the duties of the Chairman and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chairman.

Section 5.06 THE CHIEF EXECUTIVE OFFICER . The Chief Executive Officer shall be the highest ranking executive officer of the Corporation and, subject to the supervision of the Board of Directors, shall have all authority and power with respect to, and shall be responsible for, the general management of the business, financial affairs, and day-to-day operations of the Corporation, including, but not limited to: (i) the supervision and management of all other executive officers; (ii) the development of the Corporation’s long-range strategic plan and the annual operating plan; (iii) the engagement, retention and termination of employees and independent contractors of the Corporation, the setting of the compensation and other material terms of employment or engagement of employees and independent contractors, and the establishment of work rules for employees; (iv) the representation of the Corporation at any business or financial meeting or presentation with stockholders, lenders, affiliates, strategic or joint venture partners, financial institutions, underwriters, analysts and any other entity with which the Corporation does business; and (v) the initiation, development, and implementation of new business, markets and technologies. The Chief Executive Officer may preside at any meetings of the stockholders, the Board of Directors and any committee on which he serves. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors are carried into effect and shall perform such other duties and have such other authority and powers as the Board may from time to time prescribe. At the request of the Chief Executive Officer, or in case of his absence or inability to act, unless otherwise directed by the Board of Directors, the President shall perform the duties of the Chief Executive Officer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chief Executive Officer.

Additionally, in the event that the Corporation has both a President and a Chief Executive Officer, any powers or duties conferred upon the President in these Bylaws shall concurrently be conferred upon the Chief Executive Officer, and in such event the powers granted to the President shall be subject to the exercise of such powers or duties by the Chief Executive Officer.

Section 5.07 THE PRESIDENT . The President shall report to the Chief Executive Officer, if distinct, and shall have, subject to the control of the Chief Executive Officer and the Board, active supervision and management over the day-to-day operations of the Corporation and over its subordinate officers, assistants, agents and employees. At the request of the President, or in case of his absence or inability to act, unless otherwise directed by the Board of Directors, the Chief Executive Officer shall perform the duties of the President and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President.

Section 5.08 THE CHIEF OPERATING OFFICER . The Chief Operating Officer shall report to the President, if distinct, and shall have, subject to the control of the President and the Board, active supervision over such portion of the day-to-day operations of the Corporation and over its subordinate officers, assistants, agents and employees as delegated by the President or the Board of Directors.

Section 5.09 THE TREASURER; CHIEF FINANCIAL OFFICER . Unless the Board of Directors shall designate otherwise, the Treasurer shall be the Chief Financial Officer of the Corporation. The Treasurer shall report to the Chief Executive Officer, provided that if the Board of Directors designates a Treasurer that is not the Chief Financial Officer, the Treasurer shall report to the Chief Financial Officer. The Treasurer shall have, subject to the control of the Chief Executive Officer or the Chief Financial Officer, as applicable, and the Board of Directors, the general care and custody of the funds and securities of the Corporation and the authority and power with respect to, and the responsibility for, the Corporation’s accounting, auditing, reporting and financial record-keeping methods and procedures; controls and procedures with respect to the receipt, tracking and disposition of the revenues and expenses of the Corporation; the establishment and maintenance of depository, checking, savings, investment and other accounts of the Corporation; relations with accountants, financial institutions, lenders, underwriters and analysts; the development and implementation of funds management and short-term investment strategies; the preparation of financial statements and all tax returns and filings of the Corporation; and the supervision and management of all subordinate officers and personnel associated with the foregoing.

Section 5.10 VICE PRESIDENTS . Each Vice President shall have such powers and duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President and (in the order as designated by the Board of Directors, or in the absence of such designation, as determined by the length of time each has held the office of Vice President continuously) shall exercise the powers of the President during that officer’s absence or inability to act.

Section 5.11 ASSISTANT TREASURERS . Each Assistant Treasurer shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President. The Assistant Treasurers (in the order as

designated by the Board of Directors or, in the absence of such designation, as determined by the length of time each has held the office of Assistant Treasurer continuously) shall exercise the powers of the Treasurer during that officer’s absence or inability to act.

Section 5.12 SECRETARY . The Secretary shall maintain minutes of all meetings of the Board of Directors, of any committee, and of the stockholders, or consents in lieu of such minutes, in the Corporation’s minute books, and shall cause notice of such meetings to be given when requested by any person authorized to call such meetings. The Secretary may sign with the President, in the name of the Corporation, all contracts of the Corporation and affix the seal of the Corporation thereto. The Secretary shall have charge of the certificate books, stock transfer books, and stock papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection by any director at the office of the Corporation during business hours. The Secretary shall perform such other duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President.

Section 5.13 ASSISTANT SECRETARIES . Each Assistant Secretary shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President. The Assistant Secretaries (in the order designated by the Board of Directors or, in the absence of such designation, as determined by the length of time each has held the office of Assistant Secretary continuously) shall exercise the powers of the Secretary during that officer’s absence or inability to act.

Section 5.14 COMPENSATION . The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director.

ARTICLE VI

CONTRACTS, CHECKS AND DEPOSITS

Section 6.01 CONTRACTS . The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the directors or by an authorized person shall be valid and binding upon the Board of Directors and upon the Corporation when authorized or ratified by action of the Board of Directors.

Section 6.02 CHECKS AND DRAFTS . All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 6.03 DEPOSITS . All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may designate.

ARTICLE VII

STOCK CERTIFICATES; ISSUANCES, TRANSFERS

Section 7.01 CERTIFICATES . Except as may be otherwise provided by the Board of Directors, stockholders of the Corporation are not entitled to certificates representing the shares of stock held by them. In the event that the Corporation issues shares of stock represented by certificates, such certificates shall be in such form as prescribed by the Board of Directors or a duly authorized officer, shall contain the statements and information required by the MGCL and shall be signed by the officers of the Corporation in the manner permitted by the MGCL. In the event that the Corporation issues shares of stock without certificates, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates. There shall be no differences in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.

Section 7.02 TRANSFERS; REGISTERED STOCKHOLDERS . All transfers of shares of stock shall be made on the books of the Corporation, by the holder of the shares, in person or by his or her attorney, in such manner as the Board of Directors or any officer of the Corporation may prescribe and, if such shares are certificated, upon surrender of certificates duly endorsed. The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the Board of Directors that such shares shall no longer be represented by certificates. Upon the transfer of any uncertificated shares, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates.

The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.

Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein.

Section 7.03 LOST, STOLEN, OR DESTROYED CERTIFICATES . Any officer of the Corporation may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed, stolen or mutilated; provided, however, if such shares have ceased to be certificated, no new certificate shall be issued unless requested in writing by such stockholder and the Board of Directors has determined that such certificates may be issued. Unless otherwise determined by an officer of the Corporation, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required, as a condition precedent to the issuance of a new certificate or certificates, to satisfy the following requirements:

(a) Claim. The registered owner makes proof in affidavit form that a previously issued certificate for shares has been lost, destroyed, or stolen;

(b) Timely Request. The registered owner requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;

(c) Bond. The registered owner gives a bond in such form, and with such surety or sureties, with fixed or open penalty, as the Board of Directors may direct, in its discretion, to indemnify the Corporation (and its transfer agent and registrar, if any) against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate; and

(d) Other Requirements. The registered owner satisfies any other reasonable requirements imposed by the Board of Directors.

When a certificate has been lost, destroyed, stolen or mutilated and the stockholder of record fails to notify the Corporation within a reasonable time after he has notice of it, if the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the stockholder of record is precluded from making any claim against the Corporation for the transfer or for a new certificate.

Section 7.04 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE . The Board of Directors may: (i) set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose (such record date, in any case, may not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken); or (ii) direct that the stock transfer books be closed for a period not greater than 20 days. In the case of a meeting of the stockholders, the record date or the date set for the closing of the stock transfer books shall be at least ten days before the date of such meeting.

If no record date is fixed and stock transfer books are not closed for the determination of stockholders, (i) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of (a) the close of business on the day on which the notice of meeting is mailed or (b) the 30th day before the meeting; and (ii) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Board of Directors declaring the divided or allotment of rights is adopted, provided that the payment or allotment may not be made more than 60 days after the date on which such resolution is adopted.

When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment or postponement thereof, except when (i) the determination has been made through the closing of

the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned or postponed to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.

Section 7.05 STOCK LEDGER . The Corporation shall maintain at one or more of its principal offices or at the office of its counsel, accountants, or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

Section 7.06 FRACTIONAL STOCK; ISSUANCE OF UNITS . The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 9.01 AUTHORIZATION . Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the Charter.

Section 9.02 CONTINGENCIES . Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the Charter, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 11.01 SEAL . The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words “Incorporated Maryland.” The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 11.02 AFFIXING SEAL . Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place “[SEAL]” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE XIII

INDEMNIFICATION AND ADVANCE OF EXPENSES

To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, limited

liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. The rights to indemnification and advance of expenses provided by the Charter and these Bylaws shall vest immediately upon election of a director or officer. The Corporation may, with the approval of its Board of Directors, provide such indemnification and advance for expenses to an individual who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. The indemnification and payment or reimbursement of expenses provided in these Bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment or reimbursement of expenses may be or may become entitled under any bylaw, resolution, insurance, agreement or otherwise.

ARTICLE XIV

AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.

Exhibit 10.2

August 4, 2011

Behringer Advisors, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

Re: Third Quarter 2011 Asset Management Fees

Ladies and Gentlemen:

Reference is made to that certain Fifth Amended and Restated Advisory Agreement, dated as of December 29, 2006, as amended (the “ Advisory Agreement ”), by and between Behringer Harvard REIT I, Inc., a Maryland corporation (the “ Company ”), and Behringer Advisors, LLC, a Texas limited liability company (the “ Advisor ”). Capitalized terms used herein but not defined herein shall have the meanings set forth in the Advisory Agreement.

In consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Advisor hereby agree as follows:

1. Third Quarter 2011 Asset Management Fees . Notwithstanding anything to the contrary contained in the Advisory Agreement, the Advisor, on behalf of itself and its Affiliates, and its and their respective successors and assigns, hereby sets the Company’s obligation to pay the Asset Management Fee to the Advisor at $5,000,000 for the third quarter of 2011. In doing so, the Advisor waives the Company’s obligation to pay approximately $1.4 million in additional asset management fees that would otherwise become due and payable during the quarter (based on assets held as of July 1, 2011). The parties acknowledge that the amount waived (and all prior amounts waived) shall be included in amounts for which the Advisor will receive credit in respect of any overpayment to the Advisor under Section 3.05 of the Advisory Agreement.

2. Ratification; Effect on Advisory Agreement .

(a) Ratification . The Advisory Agreement, as amended by this letter agreement, shall remain in full force and effect and is hereby ratified and confirmed in all respects.

(b) Effect on the Advisory Agreement . On and after the date hereof, each reference in the Advisory Agreement to “this Agreement,” “herein,” “hereof,” “hereunder,” or words of similar import shall mean and be a reference to the Advisory Agreement as amended hereby.

3. Miscellaneous .

(a) Governing Law; Venue . This letter agreement and the legal relations between the parties hereto shall be construed and interpreted in accordance with the internal laws of the State of Texas without giving effect to its conflicts of law principles, and venue for any action brought with respect to any claims arising out of this letter agreement shall be brought exclusively in Dallas County, Texas.

(b) Modification . This letter agreement shall not be changed, modified, or amended, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assignees.

(c) Headings . The titles and headings of the sections and subsections contained in this letter agreement are for convenience only, and they neither form a part of this letter agreement nor are they to be used in the construction or interpretation hereof.

(d) Severability . The provisions of this letter agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

(e) Counterparts . This letter agreement may be executed in multiple counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This letter agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. This letter agreement, to the extent signed and delivered by means of electronic mail or a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were an original signed version thereof delivered in person. No party hereto shall raise the use of electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation or enforceability of a contract and each party hereto forever waives any such defense.

[ The remainder of this page intentionally blank ]

If the foregoing meets with your approval, please indicate your acceptance of this letter agreement by countersigning a copy of this letter agreement in the space indicated below.

	Very truly yours,

	BEHRINGER HARVARD REIT I, INC.

	By:	/s/ Scott W. Fordham
	Name:	Scott W. Fordham
	Its:	Chief Operating and Financial Officer

Acknowledged and agreed, as of
the date first written above:

BEHRINGER ADVISORS, LLC

By:	Harvard Property Trust, LLC,
	its Manager


	By:	/s/ Robert S. Aisner
		Robert S. Aisner
		Co-Chief Operating Officer and President

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Robert S. Aisner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Behringer Harvard REIT I, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 8th day of August, 2011.

	/s/ Robert S. Aisner
	Robert S. Aisner
	President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Scott W. Fordham, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Behringer Harvard REIT I, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 8th day of August, 2011.

	/s/ Scott W. Fordham
	Scott W. Fordham
	Chief Operating Officer and Chief Financial Officer

Exhibit 32.1

SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

The undersigned, who are the Chief Executive Officer and Chief Financial Officer of Behringer Harvard REIT I, Inc. (the “Company”), each hereby certify as follows:

The Quarterly Report on Form 10-Q of the Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 8th day of August, 2011.

	/s/ Robert S. Aisner
	Robert S. Aisner
	President and Chief Executive Officer


	/s/ Scott W. Fordham
	Scott W. Fordham
	Chief Operating Officer and Chief Financial Officer