**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

 

**SPECIAL FINANCIAL REPORT PURSUANT TORULE 15d-2 OF THE**

**SECURITIES EXCHANGE ACT OF 1934**

 

**Containsonly the financial statements for the fiscal year ended December 31, 2007**

 

**Commission File Number: 333-140887**

 

**BehringerHarvard Opportunity REIT II, Inc.**

(Exact name of registrant as specified in its charter)

 

| **Maryland**                                                   | ** ** | **20-8198863**                       |
|----------------------------------------------------------------|------------|--------------------------------------|
| (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)                           |

 

Registrant’stelephone number, including area code:**(866)655-3600**

 

Securities registered pursuant to section 12(b) of the Act:

**None**

 

Securities registered pursuant to section 12(g) of the Act:

**None**

(Title of Class)

 

Indicateby check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405of the Securities Act). Yes o   No x

 

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act. Yes o   No x

 

Indicateby check mark whether the registrant:  (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports) and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes o   No x

 

Theregistrant’s registration statement on Form S-11, as amended (SEC File No. 333-140887),was declared effective January 4, 2008. The registrant has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act since that date.

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K.  x

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

| Large accelerated filer o |   | Accelerated filer o |
|---------------------------|--------|---------------------|

 

| Non-accelerated  filer x (Do not check if smaller reporting company) |   | Smaller  reporting company o |
|----------------------------------------------------------------------|--------|------------------------------|

 

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

 

Noshares of common stock of the registrant were held by non-affiliates on June 30,2007.  As of March 18, 2008, theregistrant had issued 22,471 shares of common stock, all of which were held byan affiliate of our advisor.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

**None**.

 

** **

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**BEHRINGER HARVARD OPPORTUNITY REIT II, INC.**

**Special Report on Form 10-K**

 

**INDEX**

 
| ** **                                                                                                                                            | **Page**   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                                                                  |       |
| **Explanatory  Note**                                                                                                                                 | **1**      |
|                                                                                                                                                  |       |
| **Registrant’s Common Equity**                                                                                                                   | **2**      |
|                                                                                                                                                  |       |
| **Financial  Statements**                                                                                                                             |       |
|                                                                                                                                                  |       |
| **Report of Independent  Registered Public Accounting Firm**                                                                                          | **F-1**    |
| ** **                                                                                                                                            | ** ** |
| **Consolidated  Balance Sheet as of December 31, 2007**                                                                                          | **F-2**    |
| ** **                                                                                                                                            | ** ** |
| **Consolidated  Statement of Operations for the Period from January 9, 2007 (date ofinception)  through December 31, 2007**                 | **F-3**    |
| ** **                                                                                                                                            | ** ** |
| **Consolidated Statement of  Stockholder’s Equity for the Period from January 9, 2007 (date of  inception) through December 31, 2007** | **F-4**    |
| ** **                                                                                                                                            | ** ** |
| **Consolidated  Statement of Cash Flows for the Period from January 9, 2007 (date of  inception) through December 31, 2007**                | **F-5**    |
| ** **                                                                                                                                            | ** ** |
| **Notes to Consolidated Financial Statements**                                                                                                        | **F-6**    |
| ** **                                                                                                                                            | ** ** |
| **Signatures**                                                                                                                                        | ** ** |
| ** **                                                                                                                                            | ** ** |
| **Exhibit Index**                                                                                                                                | ** ** |

 

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**EXPLANATORYNOTE**

 

OnJanuary 21, 2008, Behringer Harvard Opportunity REIT II, Inc. (the “Company”)launched its ongoing initial public offering of 125,000,000 shares of commonstock, par value $0.0001 per share, at a price of $10 per share in its primaryoffering and at a price of $9.50 per share pursuant to its distributionreinvestment plan.  The Company reservesthe right to reallocate the shares it is offering between its primary offeringand its distribution reinvestment plan. A detailed description of the offering is included in the RegistrationStatement on Form S-11, as amended (SEC File No. 333-140887,effective January 4, 2008).

 

Rule 15d-2under the Securities and Exchange Act of 1934, as amended, provides generallythat if a company files a registration statement under the Securities Act of1933, as amended, that upon effectiveness does not contain certified financialstatements for the company’s last full fiscal year (or for the life of thecompany if less than a full fiscal year), then the company must, within 90 daysafter the effective date of the registration statement, file a special reportfurnishing certified financial statements for the last full fiscal year orother period, as the case may be. Rule 15d-2 further provides that thespecial report should be filed under cover of the facing sheet of the formappropriate for annual reports of the company.

 

TheCompany’s Registration Statement on Form S-11 (referenced above) did notcontain the certified, year-end financial statements contemplated by Rule 15d-2;therefore, as required under the rule, the Company is hereby filing suchcertified financial statements with the Securities and Exchange Commissionunder cover of the facing page of an Annual Report on Form 10-K.  Pursuant to NASD Conduct Rule 2710, theCompany is also disclosing the estimated value of its shares of common stock.

 

1

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**REGISTRANT’SCOMMON EQUITY**

 

TheCompany launched its initial public offering of 125,000,000 shares of commonstock on January 21, 2008.  As of March 18,2008, the Company had not accepted any subscriptions for shares in its offeringand had not purchased any properties. The Company must sell a minimum of 200,000 shares of common stock in itsprimary offering by January 4, 2009; otherwise the Company will terminatethis offering and promptly return funds to all subscribing investors withinterest.  Until the Company exceeds theminimum offering amount, funds from subscribing investors will be held in aseparate escrow account by an independent third-party escrow agent.  There is no established public trading marketfor the Company’s common stock.

 

Inorder for FINRA members and their associated persons to participate in theCompany’s offering of shares of common stock, the Company is required pursuantto NASD Conduct Rule 2710(f)(2)(M) to disclose in each annual reportdistributed to investors a per share estimated value of the shares, the methodby which it was developed and the date of the data used to develop theestimated value.  In addition, theCompany will provide reports of its annual estimates of the current value of a shareof its common stock to assist fiduciaries of retirement plans subject to theannual reporting requirements of ERISA in the preparation of their reportsrelating to an investment in the Company’s shares.  During the offering of the Company’s commonstock and for the first three full fiscal years following the termination ofthe last offering of the Company’s common stock, the estimated value of a shareof the Company’s common stock is deemed to be the current offering price of $10per share (without regard to purchase price discounts for certain categories ofpurchasers), as adjusted for any special distribution of net salesproceeds.  Beginning three full fiscalyears after the last offering of the Company’s shares, the estimated value ofshares will be based on valuations of the Company’s properties and otherassets.  Such valuations will beperformed by persons independent of the Company and Behringer HarvardOpportunity Advisors II LP, the Company’s advisor.  There is no public trading market for theshares at this time, and there can be no assurance with respect to any estimateof value that the Company prepares, that the estimated value per share wouldactually be realized by stockholders upon liquidation, because these estimatesdo not necessarily indicate the price at which properties and other assets canbe sold or that stockholders would be able to realize estimated share values ifthey were to attempt to sell their shares, because no public market for theshares exists or is likely to develop.

 

2

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### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

### ** **

Tothe Board of Directors and Stockholders of

BehringerHarvard Opportunity REIT II, Inc., 

Addison,Texas

 

Wehave audited the accompanying consolidated balance sheet of Behringer HarvardOpportunity REIT II, Inc. and subsidiaries (the “Company”) as of December 31,2007 and the related consolidated statement of operations, stockholder’s equityand cash flows for the period from January 9, 2007 (date of inception)through December 31, 2007.  Thesefinancial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these financial statements based on our audit.

 

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  The Company isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Our audit included consideration ofinternal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation.  We believe that our audit provides areasonable basis for our opinion.

 

In our opinion, such consolidated financialstatements present fairly, in all material respects, the financial position ofthe Company at December 31, 2007 and the results of its operations and itscash flows for the period fromJanuary 9, 2007 (date of inception) through December 31, 2007, in conformity with accounting principlesgenerally accepted in the United States of America.

 

 
| /s/  Deloitte & Touche LLP |
|-------------------------------------|
|                                |
| Dallas,  Texas                      |
| March 28,  2008                |

 

F-1

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**Behringer HarvardOpportunity REIT II, Inc.**

**ConsolidatedBalance Sheet**

**As of December 31, 2007**

 
| **Assets**                                                                                                     | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|------------|------------|
| Cash and cash equivalents                                                                                      |       | $          | 203,040    |   |
| **Total assets**                                                                                               |       | $          | 203,040    |   |
|                                                                                                           |       |       |       |
| **Liabilities and stockholder’s equity**                                                                  | ** ** | ** ** | ** ** |
| **Liabilities**                                                                                                | ** ** | ** ** | ** ** |
| Payable to related party                                                                                       |       | $          | 300        |   |
| Accrued liabilities                                                                                            |       | 53,375     |       |
| **Total liabilities**                                                                                          |       | 53,675     |       |
| ** **                                                                                                     | ** ** | ** ** | ** ** |
| **Commitments and contingencies**                                                                              | ** ** | ** ** | ** ** |
|                                                                                                           |       |       |       |
| **Stockholder’s equity**                                                                                  | ** ** | ** ** | ** ** |
| Preferred stock, $.0001 par value per  share; 50,000,000 shares authorized, none outstanding                   |       | —     |       |
| Convertible stock, $.0001 par value per  share; 1,000 shares authorized, 1,000 outstanding                     |       | —     |       |
| Common stock, $.0001 par value per share; 350,000,000  shares authorized, 22,471 shares issued and outstanding |       | 2          |       |
| Additional paid-in capital                                                                                     |       | 200,998    |       |
| Cumulative net loss                                                                                            |       | (51,635    | )          |
| **Total stockholder’s equity**                                                                            |       | 149,365    |       |
| **Total liabilities and stockholder’s equity**                                                            |       | $          | 203,040    |   |

 

*See Notes to Consolidated Financial Statements.*

 

F-2

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**BehringerHarvard Opportunity REIT II, Inc.**

**Consolidated Statement of Operations**

**Forthe Period from January 9, 2007 (date of inception) through December 31, 2007**

 
| **Revenue**                                                |       | $          | —     |   |
|------------------------------------------------------------|------------|------------|------------|--------|
| ** **                                                 | ** ** | ** ** | ** ** |
| **Expenses**                                               | ** ** | ** ** | ** ** |
| General and administrative                                 |       | 53,675     |       |
| **Total expenses**                                         |       | 53,675     |       |
| ** **                                                 | ** ** | ** ** | ** ** |
| Interest income                                            |       | 2,040      |       |
| **Net loss**                                               |       | $          | (51,635    | )      |
| ** **                                                 | ** ** | ** ** | ** ** |
| **Basic and diluted weighted average shares  outstanding** | ** ** | 22,471     | ** ** |
| ** **                                                 | ** ** | ** ** | ** ** |
| **Basic and diluted loss per share**                       |       | $          | (2.30      | )      |

 

*See Notes to Consolidated FinancialStatements.*

 

F-3

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**Behringer Harvard Opportunity REIT II, Inc.**

**Consolidated Statement of Stockholder’s Equity**

**For the Period from January 9, 2007 (date ofinception) through December 31, 2007**

 
| ** **                         | ** ** | **Convertible Stock** | ** ** | **Common Stock** | ** ** | **Additional** | ** ** | ** ** | ** ** | **Total**   | ** ** |
|------------------------------------|------------|-----------------------|------------|------------------|------------|----------------|------------|------------|------------|-------------|------------|
| ** **                         | ** ** | **Number**            | ** ** | **Par**          | ** ** | **Number**     | ** ** | **Par**    | ** ** | **Paid-in** | ** ** | **Cumulative** | ** ** | **Stockholder’s** | ** ** |
| ** **                         | ** ** | **of Shares**         | ** ** | **Value**        | ** ** | **of Shares**  | ** ** | **Value**  | ** ** | **Capital** | ** ** | **Net Loss** | ** ** | **Equity** | ** ** |
| Balance at January 9, 2007         |       | —                |       | $                | —     |           | —     |       | $          | —      |       | $ | — |   | $ | — |   | $ | — |   |
| (date of inception)                |       |                  |       |             |       |           |       |       |       |        |       |   |   |   |   |
| Issuance of convertible stock, net |       | 1,000                 |       | —           |       |           |       |       |       | —      |       |   |   | — |   |
| Issuance of common stock, net      |       |                  |       |             |       | 22,471         |       | 2          |       | 200,998     |       | — |   | 201,000 |   |
| Net loss                           |       |                  |       |             |       |           |       |       |       |        |       | (51,635 | ) | (51,635 | ) |
| Balance at December 31, 2007       |       | 1,000                 |       | $                | —     |           | 22,471     |       | $          | 2           |       | $ | 200,998 |   | $ | (51,635 | ) | $ | 149,365 |   |

 

F-4

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**Behringer Harvard Opportunity REIT II, Inc.**

**Consolidated Statement of CashFlows**

**For the Period from January 9, 2007 (date of inception)through December 31, 2007**

 
| **Cash  flows from operating activities**                                              | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------|------------|------------|------------|
| Net loss                                                                               |       | $          | (51,635    | ) |
| Adjustments to reconcile net loss to net  cash flows provided by operating activities: |       |       |       |
| Change in accrued liabilities                                                          |       | 53,375     |       |
| Change in payable to related party                                                     |       | 300        |       |
| **Cash  provided by operating activities**                                             |       | 2,040      |       |
|                                                                                   |       |       |       |
| **Cash  flows from financing activities**                                              | ** ** | ** ** | ** ** |
| Issuance of common/convertible stock                                                   |       | 201,000    |       |
| **Cash  provided by financing activities**                                             |       | 201,000    |       |
|                                                                                   |       |       |       |
| Net change in cash and cash equivalents                                                |       | 203,040    |       |
| Cash and cash equivalents at beginning of  period                                      |       | —     |       |
| Cash and cash equivalents at end of period                                             |       | $          | 203,040    |   |

 

*See Notes to Consolidated Financial Statements.*

 

F-5

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**BehringerHarvard Opportunity REIT II, Inc.**

**Notes to Consolidated Financial Statements**

 

**1.**                                      **Businessand Organization**

 

***Business***

 

BehringerHarvard Opportunity REIT II, Inc. (which may be referred to as the “Company,”“we,” “us,” or “our”) was organized in Maryland on January 9, 2007 andintends to qualify as a real estate investment trust (“REIT”), for federalincome tax purposes, effective for our taxable year ending December 31,2008.  We intend to acquire and operatecommercial real estate and real estate-related assets.  In particular, we will focus generally onacquiring commercial properties with significant possibilities for short-termcapital appreciation, such as those requiring development, redevelopment or repositioning,those located in markets and submarkets with high growth potential and thoseavailable from sellers who are distressed or face time-sensitivedeadlines.  We may acquire a wide varietyof commercial properties, including office, industrial, retail, hospitality,recreation and leisure, single-tenant, multifamily and other realproperties.  These properties may beexisting, income-producing properties, newly constructed properties orproperties under development or construction and may include multifamilyproperties purchased for conversion into condominiums and single-tenantproperties that may be converted for multifamily use.  Further, we may invest in real estate-relatedsecurities, including securities issued by other real estate companies, eitherfor investment or in change of control transactions completed on a negotiatedbasis or otherwise.  We also mayoriginate or invest in collateralized mortgage-backed securities, mortgage,bridge or mezzanine loans and Section 1031 tenant-in-common interests(including those issued by affiliates of our advisor), or in entities that makeinvestments similar to the foregoing.

 

Substantially allof our business will be conducted through Behringer Harvard Opportunity OP IILP, a limited partnership organized in Delaware on January 12, 2007 (“BehringerHarvard Opportunity OP II”).  As of December 31,2007, our wholly owned subsidiary, BHO II, Inc., a Delaware corporation,was the sole general partner of Behringer Harvard Opportunity OP II and owned a0.1% partnership interest in Behringer Harvard Opportunity OP II.  As of December 31, 2007, our wholly ownedsubsidiary, BHO Business Trust II, a Maryland business trust, was the solelimited partner of Behringer Harvard Opportunity OP II.

 

We are externally managedby and advised by Behringer Harvard Opportunity Advisors II LP (“BehringerOpportunity Advisors II”), a Texas limited partnership formed in January 2007.  Behringer Opportunity Advisors II is ouraffiliate responsible for managing our affairs on a day-to-day basis and foridentifying and making acquisitions and investments on our behalf.

 

***Organization***

 

On February 26,2007, we filed a Registration Statement on Form S-11 with the Securitiesand Exchange Commission to offer up to 125,000,000 shares of common stock forsale to the public (the “Offering”), of which 25,000,000 shares are beingoffered pursuant to our distribution reinvestment plan (the “DRIP”).  We reserve the right to reallocate the shareswe are offering between our primary offering and the DRIP.  The Securities and Exchange Commissiondeclared our Registration Statement effective on January 4, 2008, and wecommenced our ongoing initial public offering on January 21, 2008.

 

Inconnection with our initial capitalization, on January 19, 2007, we issued22,471 shares of our common stock and 1,000 shares of our convertible stock toBehringer Harvard Holdings, LLC (“Behringer Harvard Holdings”), an affiliate ofour advisor.  These were all of theshares that were issued and outstanding as of December 31, 2007.

 

Theescrow agent has not yet released subscription proceeds to us.  Subscription proceeds will be placed in anaccount held by the escrow agent, Citibank, N.A., until such time assubscriptions to purchase at least $2.0 million of shares of common stock havebeen received and accepted by us, except that we may not admit investorsresiding in New York and Pennsylvania as stockholders until we have receivedand accepted subscriptions aggregating $2.5 million and $50 million,respectively.

 

Oncethe escrow agent has released subscription proceeds to us from the Offering, weexpect to admit newstockholders pursuant to the Offering on at least a monthly basis.  All subscription proceeds will be held in aseparate account until the subscribing investors are admitted as stockholders.  Upon admission of new stockholders,subscription proceeds will be wired to our operating cash account and may beutilized as consideration for investments and the payment or reimbursement ofdealer manager fees, selling commissions, organization and offering expensesand operating expenses.  Until requiredfor such purposes, net offering proceeds will be held in short-term, liquidinvestments.

 

Ourcommon stock is not currently listed on a national securities exchange.  Depending upon then prevailing market conditions,it is our intention to consider beginning the process of liquidating our assetsand distributing the net proceeds to our stockholders within three to six yearsafter the termination of the Offering. If we do not begin an orderly liquidation within that period, we mayseek to have our shares listed on a national securities exchange.  If we do not begin 

 

F-6

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**BehringerHarvard Opportunity REIT II, Inc.**

**Notes toConsolidated Financial Statements**

 

the process of liquidating our assets or listing ourshares within six years of the termination of the Offering, our charterrequires that we hold a stockholders meeting to vote on a proposal for ourorderly liquidation unless a majority of our board of directors and a majorityof our independent directors vote to defer such a meeting beyond the sixthanniversary of the termination of the Offering. The proposal would include information regarding appraisals of our portfolio.  If our stockholders did not approve theproposal, we would obtain new appraisals and resubmit the proposal by proxystatement to our stockholders up to once every two years upon the writtenrequest of stockholders owning 10% of our outstanding common stock.

 

As of December 31,2007, neither the Company nor our advisor had purchased or contracted topurchase any properties, or identified any properties in which there is areasonable probability that we or our advisor would invest.

 

**2.****                                     ****Summary of Significant AccountingPolicies**

 

***Useof Estimates in the Preparation of Financial Statements***

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America (“GAAP”) requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Theseestimates include such items as purchase price allocation for real estateacquisitions, impairment of long-lived assets, depreciation and amortizationand allowance for doubtful accounts. Actual results could differ from those estimates.

 

***Principlesof Consolidation and Basis of Presentation***

 

Our consolidatedfinancial statements include our accounts and the accounts of othersubsidiaries over which we have control. All inter-company transactions, balances and profits have beeneliminated in consolidation.  Interestsin entities acquired will be evaluated based on Financial Accounting StandardsBoard (“FASB”) Interpretation (“FIN”) 46R “Consolidation of Variable InterestEntities,” which requires the consolidation of variable interest entities inwhich we are deemed to be the primary beneficiary.  If the interest in the entity is determinednot to be a variable interest entity under FIN 46R, then the entities will beevaluated for consolidation under the American Institute of Certified PublicAccountants’ Statement of Position 78-9, “Accounting for Investments in RealEstate Ventures,” as amended by Emerging Issues Task Force 04-5, “DeterminingWhether a General Partner, or the General Partners as a Group, Controls aLimited Partnership or Similar Entity When the Limited Partners Have CertainRights.”

 

***RealEstate***

 

Upon the acquisition ofreal estate properties, we will allocate the purchase price of those propertiesto the tangible assets acquired, consisting of land, inclusive of associatedrights, and buildings, any assumed debt, identified intangible assets and assetretirement obligations based on their relative fair values in accordance withStatement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwilland Other Intangible Assets.”  Identifiedintangible assets consist of the fair value of above-market and below-marketleases, in-place leases, in-place tenant improvements and tenant relationships.

 

Upon the completion of abusiness combination, we will record the tangible assets acquired, consistingof land and buildings, any assumed debt, identified intangible assets and assetretirement obligations based on their fair values in accordance with SFAS No. 141,“Business Combinations.”  Identifiedintangible assets consist of the fair value of above-market and below-marketleases, in-place leases, in-place tenant improvements and tenantrelationships.  Any amount paid in excessof the fair value of the assets and liabilities acquired will be recorded asgoodwill.  If the value of the assets andliabilities exceed the total purchase price, then the resulting negativegoodwill will be allocated to the tangible assets acquired.

 

Initial valuations willbe subject to change until our information is finalized, which is no later thantwelve months from the acquisition date.

 

We will determine thefair value of assumed debt by calculating the net present value of thescheduled note payments using interest rates for debt with similar terms andremaining maturities that we believe we could obtain.  Any difference between the fair value andstated value of the assumed debt will be recorded as a discount or premium andamortized over the remaining life of the loan.

 

The fair value of thetangible assets acquired, consisting of land and buildings, will be determinedby valuing the property as if it were vacant, and the “as-if-vacant” value isthen allocated to land and buildings. Land values will be derived from appraisals, and building values will becalculated as replacement cost less depreciation or management’s estimates ofthe relative fair value of these assets using discounted cash flow analyses orsimilar methods.  The value of the 

 

F-7

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**BehringerHarvard Opportunity REIT II, Inc.**

**Notes toConsolidated Financial Statements**

 

commercial officebuildings will be depreciated over the estimated useful life of 25 years usingthe straight-line method and hotels/mixed-use properties will be depreciatedover the estimated useful life of 39 years using the straight-line method.

 

We will determine thevalue of above-market and below-market in-place leases for acquired propertiesbased on the present value (using an interest rate that reflects the risksassociated with the leases acquired) of the difference between (1) thecontractual amounts to be paid pursuant to the in-place leases and (2) management’sestimate of current market lease rates for the corresponding in-place leases,measured over a period equal to the determined lease term.  We will record the fair value of above-marketand below-market leases as intangible assets or intangible liabilities,respectively, and amortize them as an adjustment to rental income over thedetermined lease term.

 

The total value ofidentified real estate intangible assets acquired will be further allocated toin-place lease values and tenant relationships based on our evaluation of thespecific characteristics of each tenant’s lease and our overall relationshipwith that respective tenant.  Theaggregate value of in-place leases acquired and tenant relationships will bedetermined by applying a fair value model. The estimates of fair value of in-place leases will include an estimateof carrying costs during the expected lease-up periods for the respectivespaces, considering current market conditions. In estimating fair value of in-place leases, we will consider items suchas real estate taxes, insurance and other operating expenses, as well as lostrental revenue during the expected lease-up period and carrying costs thatwould have otherwise been incurred had the leases not been in place, includingtenant improvements and commissions.  Theestimates of the fair value of tenant relationships will also include costs toexecute similar leases, including leasing commissions, legal costs and tenantimprovements as well as an estimate of the likelihood of renewal as determinedby management on a tenant-by-tenant basis.

 

We plan to amortize thevalue of in-place leases to expense over the term of the respectiveleases.  The value of tenant relationshipintangibles will be amortized to expense over the initial term and anyanticipated renewal periods, but in no event will the amortization period forintangible assets exceed the remaining depreciable life of the building.  Should a tenant terminate its lease, theunamortized portion of the in-place lease value and tenant relationshipintangibles will be charged to expense.

 

***Impairmentof Long-Lived Assets***

 

For real estate we willwholly own, management will monitor events and changes in circumstancesindicating that the carrying amounts of the real estate assets may not berecoverable.  When such events or changesin circumstances occur, we will assess potential impairment by comparingestimated future undiscounted operating cash flows expected to be generatedover the life of the asset, including its eventual disposition, to the carryingamount of the asset.  In the event thatthe carrying amount exceeds the estimated future undiscounted operating cashflows, we will perform an impairment analysis to determine if the carrying amountof the asset needs to be reduced to estimated fair value.

 

For real estate owned byus through an investment in a limited partnership, joint venture,tenant-in-common interest or other similar investment structure, at eachreporting date management will compare the estimated fair value of itsinvestment to the carrying value.  Animpairment charge will be recorded to the extent that the fair value of theinvestment is less than the carrying amount and the decline in value isdetermined to be other than a temporary decline.

 

***Cashand Cash Equivalents***

 

We consider investmentsin highly-liquid money market funds with original maturities of three months orless to be cash equivalents.  Thecarrying amount of cash and cash equivalents reported on the balance sheetapproximates fair value.

 

***Organizationand Offering Expenses***

 

We will reimburse ouradvisor for any organization and offering expenses incurred on our behalf inconnection with the primary offering (other than selling commissions and thedealer manager fee) provided that at no point will we reimburse expenses thatwould cause our total organization and offering expenses (other than sellingcommissions and the dealer manager fee) related to our primary offering toexceed 1.5% of gross offering proceeds from the primary offering.  Organization and offering expenses (otherthan selling commissions and the dealer manager fee) are defined generally asany and all costs and expenses incurred by us in connection with our formation,preparing for the offering, the qualification and registration of the offeringand the marketing and distribution of our shares.  Organization and offering expenses include,but are not limited to, accounting and legal fees, costs to amend theregistration statement and supplement the prospectus, printing, mailing anddistribution costs, filing fees, amounts to reimburse our advisor or itsaffiliates for the salaries of employees and other costs in connection withpreparing supplemental sales literature, telecommunication costs, fees of thetransfer agent, registrars, trustees, escrow holders, depositories and experts,and fees and costs for employees of our advisor or its affiliates to attendindustry conferences.  In the event theminimum number of shares of our common 

 

F-8

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**BehringerHarvard Opportunity REIT II, Inc.**

**Notes toConsolidated Financial Statements**

 

stock is not sold to thepublic, we will have no obligation to reimburse our advisor for anyorganizational and offering costs.

 

All offering costs willbe recorded as an offset to additional paid-in capital, and all organizationcosts will be recorded as an expense at the time we become liable for thepayment of these amounts.  As of December 31,2007, we have not received the minimum proceeds from our public offering and asa result, we have no obligation to reimburse our advisor for amounts it hasincurred related to our public offering costs, accordingly, no amounts havebeen recognized in our consolidated financial statements.  As of December 31, 2007, BehringerOpportunity Advisors II had incurred approximately $67,000 in organizationcosts and $2.0 million in offering costs on our behalf.

 

***IncomeTaxes***

 

We intend to make anelection to be taxed as a REIT under Sections 856 through 860 of the InternalRevenue Code commencing with our taxable year ending December 31,2008.  If we qualify for taxation as aREIT, we generally will not be subject to federal corporate income tax to theextent we distribute our REIT taxable income to our stockholders, so long as wedistribute at least 90 percent of our REIT taxable income (which is computedwithout regard to the dividends paid deduction or net capital gain and whichdoes not necessarily equal net income as calculated in accordance withGAAP).  REITs are subject to a number ofother organizational and operations requirements.  Even if we qualify for taxation as a REIT, wemay be subject to certain state and local taxes on our income and property, andfederal income and excise taxes on our undistributed income.

 

***StockBased Compensation***

 

We have adopted astock-based incentive award plan for our directors and consultants and foremployees, directors and consultants of our affiliates.  We account for this plan in accordance with FASB SFASNo. 123R, “Share-BasedPayment.” In the modified prospective method, compensation cost is recognizedfor all share-based payments granted after the effective date and for allunvested awards granted prior to the effective date. SFAS No. 123R alsorequires the tax benefits associated with these share-based payments to beclassified as financing activities in the Consolidated Statements of CashFlows, rather than as operating cash flows. We had issued no stock-based awardsunder the plan as of December 31, 2007.

 

***Concentrationof Credit Risk***

 

At December 31,2007, we had cash on deposit in one financial institution in excess offederally insured levels; however, we have not experienced any losses in suchaccount.  We limit cash investments tofinancial institutions with high credit standing; therefore, we believe that weare not exposed to any significant credit risk in cash and cash equivalents.

 

***Earningsper Share***

 

Earnings per share iscalculated based on the weighted average number of common shares outstandingduring each period.  The weighted averageshares outstanding used to calculate both basic and diluted loss per share werethe same for the period from January 9, 2007 (date of inception) through December 31,2007 as there were no stock-based awards outstanding.

 

**3.****                                     ****New Accounting Pronouncements**

 

In September 2006,FASB issued SFAS No. 157, “Fair Value Measurements.”  SFAS No. 157 establishes a singleauthoritative definition of fair value, sets out a framework for measuring fairvalue, and requires additional disclosures about fair value measurements.  SFAS No. 157 applies only to fair valuemeasurements that are already required or permitted by other accountingstandards.  SFAS No. 157 iseffective for fiscal years beginning after November 15, 2007.  We anticipate that the adoption of thisstandard will not have a material effect on our financial position, results ofoperations and cash flows.

 

In December 2007,the FASB issued SFAS No. 141(R), “Business Combinations.”  ThisStatement replaces SFAS No. 141 “Business Combinations” but retains thefundamental requirement that the acquisition method of accounting, or purchasemethod, be used for all business combinations and for an acquirer to beidentified for each business combination.

 

F-9

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**BehringerHarvard Opportunity REIT II, Inc.**

**Notes toConsolidated Financial Statements**

 

This Statement is broaderin scope than that of Statement 141, which applied only to businesscombinations in which control was obtained by transferring consideration. SFAS141R applies the same method of accounting (the acquisition method) to alltransactions and other events in which one entity obtains control over one ormore other businesses.  This Statement also makes certain othermodifications to Statement 141, including a broader definition of a businessand the requirement that acquisition related costs are expensed asincurred.  This statement applies to business combinations occurring on orafter the beginning of the first annual reporting period beginning on or after December 15,2008.  Early adoption is notallowed.  We are currently assessing theeffect SFAS No. 141(R) may have on our consolidated results ofoperations and financial position.

 

**4.****                                     ****Stockholders’ Equity**

 

***Capitalization***

 

As of December 31,2007, our authorized capital was 350,000,000 shares of common stock, 50,000,000shares of preferred stock and 1,000 shares of convertible stock.  All shares of such stock have a par value of$.0001 per share.  As of December 31,2007, we had 22,471 shares of our common stock outstanding, all of which wereowned by Behringer Harvard Holdings.  Asof December 31, 2007, we had 1,000 shares of our convertible stock issued andoutstanding and no shares of preferred stock issued and outstanding.

 

The shares ofconvertible stock will be converted into shares of common stock automaticallyif (1) we have made total distributions on then outstanding shares of ourcommon stock equal to the issue price of those shares plus a 10% cumulative,non-compounded, annual return on the issue price of those outstanding shares, (2)we list our common stock for trading on a national securities exchange if thesum of the prior distributions on then outstanding shares of the common stockplus the aggregate market value of the common stock (based on the 30-dayaverage closing price) meets the same 10% performance threshold, or (3) theadvisory management agreement with our advisor expires without renewal or isterminated (other than because of a material breach by our advisor), and at thetime of such expiration or termination we are deemed to have met the foregoing10% performance threshold based on our enterprise value and prior distributionsand, at or subsequent to the expiration or termination the stockholdersactually realize such level of performance upon listing or through totaldistributions. In general, the convertible stock will convert into shares ofcommon stock with a value equal to the lesser of (A) 20% of the excess of ourenterprise value plus the aggregate value of distributions paid to date on thenoutstanding shares of our common stock over the aggregate issue price of thoseoutstanding shares plus a 10% cumulative, non-compounded, annual return on theissue price of those outstanding shares or (B) 15% of the excess of ourenterprise value plus the aggregate value of distributions paid to date on thenoutstanding shares of the common stock over the aggregate issue price of thoseoutstanding shares plus a 6% cumulative, non-compounded, annual return on theissue price of those outstanding shares.

 

 The timing of the conversion of any orall of the convertible stock may be deferred by our board of directors if itdetermines that full conversion may jeopardize our qualification as aREIT.  Any such deferral will in no eventotherwise alter the terms of the convertible stock, and such stock shall beconverted at the earliest date after our board of directors determines thatsuch conversion will not jeopardize our qualification as a REIT.  Our board of directors is authorized to amendour charter, without the approval of the stockholders, to increase theaggregate number of authorized shares of capital stock or the number of sharesof any class or series that we have authority to issue.

 

***ShareRedemption Program***

 

Ourboard of directors has adopted a share redemption program that permits ourstockholders to sell their shares to us in limited circumstances after theyhave held them for at least one year, subject to certain conditions andlimitations.  The purchase price for theredeemed shares is set forth in the prospectus for the Offering of our commonstock.  Our board of directors reservesthe right in its sole discretion at any time, and from time to time, to (1) waivethe one-year holding period in the event of other exigent circumstancesaffecting a stockholder such as bankruptcy or a mandatory distribution 

 

F-10

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**BehringerHarvard Opportunity REIT II, Inc.**

**Notes toConsolidated Financial Statements**

 

requirement under the stockholder’s IRA, (2) rejectany request for redemption, (3) change the purchase price for redemptions,or (4) otherwise amend the terms for the share redemption program.  Under the terms of the program, we will notredeem in excess of 5% of the weighted-average number of shares outstandingduring the twelve-month period immediately prior to the date ofredemption.  In addition, our board ofdirectors will determine at least quarterly whether we have sufficient cash torepurchase shares, and such purchases will generally be limited to proceedsfrom the DRIP plus 1% of operating cash flow for the previous fiscal year (tothe extent positive).

 

***DistributionReinvestment Plan***

 

Wehave adopted our DRIP through which common stockholders may elect to havedistributions otherwise distributable to them invested in additional shares ofour common stock.  We are offering up to25,000,000 shares for sale pursuant to the DRIP at an initial purchase price of$9.50 per share.  The Company may reallocatethe shares of common stock being offered between the primary offering and theDRIP.  We may terminate the DRIP in ourdiscretion at any time upon ten days’ notice to plan participants.

 

**5.****                                     ****Incentive Award Plan**

 

The Behringer HarvardOpportunity REIT II, Inc. 2007 Amended and Restated Incentive Award Plan (“IncentiveAward Plan”) was adopted by our board of directors on December 19, 2007and provides for the grant of equity awards to our employees, directors andconsultants and those of our advisor and its affiliates.  A total of 10,000,000 shares have beenauthorized and reserved for issuance under our Incentive Award Plan.  As of December 31, 2007, no awards havebeen granted under such plan.

 

**6.****                                     ****Related Party Transactions**

 

Our advisor and certain ofits affiliates will receive fees and compensation in connection with theOffering, and in connection with the acquisition, management and sale of ourassets.  As of December 31, 2007, wehad not received the minimum proceeds from the Offering, nor had we purchasedany properties, and as a result, we had no obligation to reimburse our advisorfor fees and compensation in connection with the Offering, acquisition,management or sale of assets.

 

Behringer Securities LP (“BehringerSecurities”), the dealer-manager and an affiliate of our advisor, will receivea commission of up to 7% of gross offering proceeds.  Behringer Securities will reallow 100% ofselling commissions earned to participating broker-dealers.  In addition, we will pay Behringer Securitiesa dealer manager fee of up to 2.5% of gross offering proceeds.  Pursuant to separately negotiated agreements,Behringer Securities may reallow a portion of its dealer manager fee in anaggregate amount up to 2% of gross offering proceeds to broker-dealers participatingin the offering; provided, however, that Behringer Securities may reallow, inthe aggregate, no more than 1.5% of gross offering proceeds for marketing feesand expenses, conference fees and non-itemized, non-invoiced due diligenceefforts and no more than 0.5% of gross offering proceeds for out-of-pocket andbona fide, separately invoiced due diligence expenses incurred as fees, costsor other expenses from third parties.  Noselling commissions or dealer manager fee will be paid for sales under theDRIP.

 

We will reimburse ouradvisor for any organization and offering expenses incurred on our behalf inconnection with our primary offering (other than selling commissions and thedealer manager fee) provided that at no point will we reimburse expenses thatwould cause our total organization and offering expenses related to the primaryoffering (other than selling commissions and the dealer manager fee) to exceed1.5% of gross offering proceeds from the primary offering.

 

Our advisor or its affiliateswill also receive acquisition and advisory fees of 2.5% of the amount (1) actuallypaid and/or budgeted in respect of the purchase, development, construction orimprovement of a property by us, (2) of funds advanced with respect to amortgage or other loan by us or (3) actually paid and/or budgeted inrespect to the purchase of other assets by us, in each case exclusive ofacquisition fees and acquisition expenses but including any debt attributableto such acquired assets.

 

Our advisor or itsaffiliates will also receive reimbursement for all third-party expenses relatedto the selection and acquisition of assets, whether or not acquired by us.

 

Our advisor or itsaffiliates will also receive debt financing fees of 1% of the amount availableunder any loan or line of credit made available to us.  It is anticipated that our advisor will paysome or all of these fees to third parties with whom it subcontracts tocoordinate financing for us.

 

We will pay our advisoror its affiliates a development fee in an amount that is usual and customaryfor comparable services rendered to similar projects in the geographic marketof the project if such affiliate provides the

 

F-11

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**BehringerHarvard Opportunity REIT II, Inc.**

**Notes toConsolidated Financial Statements**

 

development services andif a majority of our independent directors determines that such development feeis fair and reasonable and on terms and conditions not less favorable thanthose available from unaffiliated third parties.

 

We expect to payBehringer Harvard Opportunity II Management Services, LLC (“BHO Management”),our property manager, fees for the management and leasing of the ourproperties.  Property management feeswill be 4.5% of the gross revenues of the properties managed by BHOManagement.  In the event that wecontract directly with a third-party property manager in respect of a property,BHO Management will receive an oversight fee equal to 1% of the gross revenuesof the property managed.  In no eventwill BHO Management receive both a property management fee and an oversight feewith respect to any particular property. In addition to the property management fee or oversight fee, if BHOManagement provides leasing services with respect to a property, we will payBHO Management leasing fees in an amount equal to the leasing fees charged byunaffiliated persons rendering comparable services in the same geographiclocation of the applicable property. We will reimburse the costs and expensesincurred by BHO Management on its behalf, including the wages and salaries andother employee-related expenses of all on-site employees of BHO Management orits subcontractors who are engaged in the operation, management, maintenance oraccess control of the Company’s properties, including taxes, insurance andbenefits relating to such employees, and legal, travel and other out-of-pocketexpenses that are directly related to the management of specificproperties.  Furthermore, otherthird-party charges, including fees and expenses of third-party accountants,will be reimbursed.

 

We will pay our advisor amonthly asset management fee of one-twelfth of 1.0% of the sum of, for each andevery asset, the higher of the cost of investment or the value of investment.

 

Our advisor or itsaffiliates also will be paid a disposition fee if the advisor provides asubstantial amount of services, as determined by our independent directors, inconnection with the sale of one or more assets. In such event, our advisor will receive a disposition fee equal to (1) inthe case of the sale of real property, the lesser of: (A) one-half of theaggregate brokerage commission paid (including the disposition fee) or, if noneis paid, the amount that customarily would be paid, or (B) 3% of the salesprice of each property sold, and (2) in the case of the sale of any assetother than real property, 3% of the sales price of such asset.

 

We will reimburse ouradvisor for all expenses paid or incurred by the advisor in connection with theservices provided to us, subject to the limitation that we will not reimburse ouradvisor for any amount by which its operating expenses (including the assetmanagement fee) at the end of the four preceding fiscal quarters exceeds thegreater of:  (A) 2% of our averageinvested assets, or (B) 25% of our net income determined without reductionfor any additions to reserves for depreciation, bad debts or other similarnon-cash reserves and excluding any gain from the sale of our assets for thatperiod.  Notwithstanding the above, wemay reimburse the advisor for expenses in excess of this limitation if amajority of our independent directors determines that such excess expenses arejustified based on unusual and non-recurring factors.

 

At December 31,2007, we had a payable to a related party of $300.  This balance consists of operating expensespayable to Behringer Opportunity Advisors II.

 

We are dependent onBehringer Securities, Behringer Opportunity Advisors II and BHO Management forcertain services that are essential to us, including the sale of shares of ourcommon stock, asset acquisition and disposition decisions, property managementand leasing services and other general administrative responsibilities.  In the event that these companies were unableto provide us with the respective services, we would be required to obtain suchservices from other sources.

 

*****

 

F-12

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
| ** **                                                                                                                                                                                                       | ** **                                            | **Behringer Harvard Opportunity  REIT II, Inc.** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------|-------------------------------------------------------|
|                                                                                                                                                                                                             |                                                  |                                                  |   |
|                                                                                                                                                                                                             |                                                  |                                                  |   |
| Dated:                                                                                                                                                                                                           | March 31, 2008                                   | By:                                                   | /s/ Robert M. Behringer |
|                                                                                                                                                                                                             |                                                  |                                                  | Robert M. Behringer

Chief Executive Officer |
|                                                                                                                                                                                                             |
| Pursuant to the  requirements of the Securities Exchange Act of 1934, this report has been  signed below by the following persons on behalf of the registrant and in the  capacities and on the dates indicated. |
|                                                                                                                                                                                                             |
|                                                                                                                                                                                                             |
| March 31, 2008                                                                                                                                                                                              | /s/ Robert M. Behringer                               |
|                                                                                                                                                                                                             | Robert M. Behringer                                   |
|                                                                                                                                                                                                             | Chief Executive Officer  and Chairman of the          |
|                                                                                                                                                                                                             | Board of Directors                                    |
|                                                                                                                                                                                                             | (Principal Executive  Officer)                        |
|                                                                                                                                                                                                             |                                                  |
| March 31, 2008                                                                                                                                                                                              | /s/ Robert S. Aisner                                  |
|                                                                                                                                                                                                             | Robert S. Aisner                                      |
|                                                                                                                                                                                                             | President, Chief  Operating Officer and Director      |
|                                                                                                                                                                                                             |                                                  |
| March 31, 2008                                                                                                                                                                                              | /s/ Gary S. Bresky                                    |
|                                                                                                                                                                                                             | Gary S. Bresky                                        |
|                                                                                                                                                                                                             | Executive Vice  President and Chief Financial Officer |
|                                                                                                                                                                                                             | (Principal Financial  Officer)                        |
|                                                                                                                                                                                                             |                                                  |
| March 31, 2008                                                                                                                                                                                              | /s/ Kimberly Arianpour                                |
|                                                                                                                                                                                                             | Kimberly Arianpour                                    |
|                                                                                                                                                                                                             | Chief Accounting  Officer                             |
|                                                                                                                                                                                                             | (Principal Accounting Officer)                        |
|                                                                                                                                                                                                             |                                                  |
| March 31, 2008                                                                                                                                                                                              | /s/ Andreas K. Bremer                                 |
|                                                                                                                                                                                                             | Andreas K. Bremer                                     |
|                                                                                                                                                                                                             | Director                                              |
|                                                                                                                                                                                                             |                                                  |
| March 31, 2008                                                                                                                                                                                              | /s/ Cynthia Pharr Lee                                 |
|                                                                                                                                                                                                             | Cynthia Pharr Lee                                     |
|                                                                                                                                                                                                             | Director                                              |
|                                                                                                                                                                                                             |                                                  |
| March 31, 2008                                                                                                                                                                                              | /s/ Jeffrey P. Mayer                                  |
|                                                                                                                                                                                                             | Jeffrey P. Mayer                                      |
|                                                                                                                                                                                                             | Director                                              |

 

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**EXHIBIT INDEX**

 

| **Exhibit   Number** | ** ** | **Description**                                  |
|---------------------------|------------|--------------------------------------------------|
|                      |       |
| 31.1*                     |       | Rule 13a-14(a)/15d-14(a) Certification |
|                      |       |                                             |
| 31.2*                     |       | Rule 13a-14(a)/15d-14(a) Certification |
|                      |       |                                             |
| 32.1*                     |       | Section 1350  Certifications                |

 

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*filed herewith

 

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