UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q/AAmendment No. 1

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

For the quarterly period ended June 30, 2010

Commission File Number: 000-51961

Behringer Harvard Opportunity REIT I, Inc.(Exact Name of Registrant as Specified in Its Charter)

Maryland(State or other Jurisdiction of
Incorporation or Organization)

20-1862323(I.R.S. Employer
Identification No.)


15601 Dallas Parkway, Suite 600, Addison, Texas 75001(Address of Principal Executive Offices) (ZIP Code)

Registrant's Telephone Number, Including Area Code: (866) 655-3600

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 ý    No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 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 o    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 ý (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 ý

As of July 30, 2010, the Registrant had 56,195,575 shares of common stock outstanding.



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EXPLANATORY NOTE

Behringer Harvard Opportunity REIT I, Inc. (which may be referred to as the "Company," "we," "us," or "our") filed its Quarterly
Report on Form 10-Q for the quarter ended June 30, 2010, filed with the U.S. Securities and Exchange Commission (the "SEC") on August 13, 2010 (the "Original Filing").
The Original Filing included a discussion of our funds from operations ("FFO") and modified funds from operations ("MFFO") in "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations." After the Original Filing was made, we discovered that we had not included in the impairment charges and provision for loan losses added back to determine MFFO
for the six months ended June 30, 2010 an approximate $7,136,000 provision for loan loss incurred in the first quarter of 2010 to determine MFFO for the six months ended June 30, 2010.
The Original Filing incorrectly reported MFFO and MFFO per share of approximately $(1,942,000) and $(0.03), respectively, for the six months ended June 30, 2010. The correct amounts are
approximately $5,194,000 of MFFO and MFFO per share of $0.09.

We
are amending the Original Filing to correct this error in the "Funds from Operations and Modified Funds from Operations" subsection of "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" by restating that subsection in its entirety. We are not amending any other part of the Original Filing. This amendment speaks as of the date
of the Original Filing.

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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 financial statements of the Company 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 Opportunity 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, to address our debt maturities and to fund our liquidity requirements, the value of our assets, our anticipated
capital expenditures, the amount and timing of anticipated future cash distributions to our stockholders, the estimated per share value of our common stock 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 Item 1A, "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 19, 2010 and the factors described below:



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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.

Cautionary Note

The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this report on
Form 10-Q are made 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.

Executive Overview

We are a Maryland corporation that was formed in November 2004 to invest in and operate commercial real estate or
real-estate related assets located in or outside the United States on an opportunistic basis. We conduct substantially all of our business through our operating partnership and its
subsidiaries. We are organized and qualify as a real-estate investment trust ("REIT") for federal income tax purposes.

We
are externally managed and advised by Behringer Harvard Opportunity Advisors I, LLC ("Behringer Opportunity Advisors I"), a Texas limited liability company formed in June 2007.
Behringer Opportunity Advisors I is responsible for managing our day-to-day affairs and for identifying and making acquisitions and investments on our behalf.

As
of June 30, 2010, we had invested in 22 assets: 11 consolidated wholly owned properties; five properties consolidated through investments in joint ventures, including two hotel
and development properties and a mixed-use property; an investment in an island development accounted for under the equity method; an investment in a portfolio of 22 properties located in
four Central European countries accounted for under the equity method; two investments in student housing projects in Texas and Virginia, also accounted for under the equity method; and two mezzanine
loans on multifamily properties, which were consolidated prior to January 1, 2010. Our investment properties are located in Arizona, California, Colorado, Massachusetts, Minnesota, Missouri,
Nevada, Texas, Virginia, the Commonwealth of The Bahamas, London, England, the Czech Republic, Poland, Hungary, and Slovakia.

Market Outlook

Beginning in 2008, the U.S. and global economies experienced a significant downturn. This downturn included disruptions in the broader
financial and credit markets, declining consumer confidence, and an increase in unemployment rates. These conditions have contributed to weakened market conditions. Due to the struggling U.S. and
global economies, overall demand across most real estate sectors including office, hospitality, and retail remains low due to losses in the financial and professional services industries and a U.S.
unemployment rate of 10% throughout much of the second half of 2009. We believe that corresponding rental rates will also remain weak at least through the third quarter of 2010. The national vacancy
percentage for office space increased from 14.5% in the fourth quarter of 2008 to 19.6% in the first quarter of 2010. Vacancies are expected to peak at around 20% in 2010. Further, we believe that
tenant defaults and bankruptcies are likely to increase in the short-term.

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To
date, we have not experienced any significant tenant defaults resulting in the loss of material rental income.

The
hospitality industry continues to be negatively affected by the poor global economy. Smith Travel Research indicates that the national overall occupancy rate for hospitality
properties in the United States declined from 53.1% in the fourth quarter of 2008 to 51.9% in the first quarter of 2010. The national overall Average Daily Rate ("ADR") has also declined, from $103.43
in the fourth quarter of 2008 to $96.27 in the first quarter of 2010. This weakening of the hospitality industry is expected to continue throughout 2010 and is not expected to recover until 2011.

In
the multifamily real estate sector, a limited new supply of multifamily assets is expected in the near future. Since high quality multifamily developments can take 18 months to
36 months to entitle, obtain necessary permits, and construct, we believe there will be an imbalance in supply and demand fundamentals for at least the next couple of years. As the economy
improves, we expect renter demand and effective rents to increase in multifamily communities.

We
have several projects in various stages of development including Rio Salado located in Phoenix, Arizona; Frisco Square located in Frisco, Texas; The Lodge & Spa at Cordillera
located in Edwards, Colorado; and Royal Island, located in The Bahamas. Due in large part to the struggling U.S. and global economies, we have decided to defer further substantive development
activities on these projects for the near term.

While
it is unclear as to when the overall economy will recover, we do not expect conditions to improve significantly in the near future. Management expects that the current volatility
in the capital
markets will continue, at least in the short-term. This volatility has significantly impacted the availability of credit for borrowers. The Wall Street Journal reported in February 2010
that lending by U.S. banks fell by 7.4% in 2009 compared to the prior year, the largest decline in bank lending since 1942. These market conditions make it more difficult to refinance assets when
their mortgages mature as well as impact our ability to access bank capital for leasing, tenant improvements, and other capital needs of our properties. Consequently, we may seek alternative sources
of financing to achieve our investment objectives including using the proceeds from the sale of our properties and/or temporarily reducing or eliminating our quarterly dividend.

Liquidity and Capital Resources

Our principal demands for funds for the next twelve months and beyond will be for the payment of costs associated with the
lease-up of available space at our operating properties (including commissions, tenant improvements, and capital improvements), for certain ongoing costs at our development properties, for
the payment of operating expenses and distributions, and for the payment of interest and principal on our outstanding indebtedness. Generally, cash needs for items other than costs associated with the
lease-up of available space at our operating properties (including commissions, tenant improvements, and capital improvements) and ongoing costs at our development properties are expected
to be met from operations and borrowings. In August 2010, Behringer Opportunity Advisors I deferred until March 31, 2011 our obligation to pay all asset management fees accruing during the
months of May 2010 through October 2010 and all debt financing fees and expense reimbursements accruing during the months of July 2010 through October 2010. Also in August 2010, BH Property Management
deferred until March 31, 2011 our obligation to pay property management oversight fees accruing during the months of July 2010 through October 2010.

We
expect to fund our short-term liquidity requirements by using the short-term borrowings and cash flow from the operations of our current investments. Operating
cash flows are expected to be flat due to rental revenue stabilizing on our operating properties combined with lower hotel revenues at The Lodge and Spa at Cordillera offset by anticipated condominium
sales at The Private Residences at The Chase Park Plaza. For both our short-term and long-term liquidity requirements, other potential

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future
sources of capital may include proceeds from secured or unsecured debt financing, asset dispositions, reduction or elimination of the amount of distributions paid, decreases in the amount of
nonessential capital expenditures, deferral of fees paid to Behringer Harvard Opportunity Advisors I, further limitation on the payment of dividend redemptions, and undistributed funds from
operations. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.



We may, from time to time, make mortgage, bridge, or mezzanine loans and other loans for investments or property development. We may
obtain financing at the time an investment is made or at such later time as determined to be necessary, depending on multiple factors. Except as noted below, we believe that we were in compliance with
the debt covenants under our loan agreements as of June 30, 2010.

Our
notes payable decreased to $352.1 million at June 30, 2010 from $429.8 million at December 31, 2009 primarily as a result of the deconsolidation of
Tanglewood at Voss and Alexan Black Mountain, effective January 1, 2010 (see Note 8 to our consolidated financial statements). Each of our loans is secured by one or more of our
properties. At June 30, 2010, our notes payable interest rates ranged from 2.1% to 6.3%, with a weighted average interest rate of 3.2%. Generally, our notes payable mature at approximately two
to ten years from origination and require payments of interest only for approximately two to five years, with all principal and interest due at maturity. Notes payable associated with our Northborough
and Frisco Square investments require monthly payments of both principal and interest. At June 30, 2010, our notes payable had maturity dates that range from July 2010 to January 2016.

The
commercial real estate debt markets have been experiencing and continue to experience volatility as a result of certain factors, including the tightening of underwriting standards by
lenders and credit rating agencies. Credit spreads for major sources of capital have widened significantly as investors have demanded a higher risk premium. This is resulting in lenders increasing the
cost for debt financing. Current economic conditions, as well as few unmortgaged assets, negatively impact our ability to finance capital needs through borrowings. Current market conditions also make
it more difficult to refinance assets when their mortgages mature. In general, in the current market lenders have increased the amount of equity required to support either new or existing borrowings.
Consequently, there is greater uncertainty regarding our ability to access the credit markets in order to attract financing on reasonable terms.

Except
for selected sub-markets in the multifamily sector, capitalization rates (or cap rates) for real estate properties have generally increased. Cap rates and property
prices move inversely so that an increase in cap rates should, absent an increase in property net operating income, result in a decrease in property value. Although this development is positive for
new property acquisitions, the overall impact will likely be negative for us because we believe it will further strain our ability to finance our business using existing assets and to refinance debt
on our existing assets because our properties may be viewed as less valuable.

As
the overall cost of borrowings increase, either by increases in the index rates or by increases in lender spreads, we will need to factor such increases into the economics of our
developments and property contributions. This may result in our investment operations generating lower overall economic returns and a reduced level of cash flow, which could potentially impact our
ability to make distributions to our stockholders at current levels. In addition, the recent dislocations in the debt markets have reduced the amount of capital that is available to finance real
estate, which, in turn: (i) leads to a decline in real estate values generally; (ii) slows real estate transaction activity; (iii) reduces the loan to value upon which lenders are
willing to extend debt; and, (iv) results in

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difficulty
in refinancing debt as it becomes due, all of which may reasonably be expected to have a material adverse impact on the value of real estate investments and the revenues, income or cash
flow from the acquisition and operations of real properties and mortgage loans. In addition, the current state of the debt markets has negatively impacted the ability to raise equity capital.

If
debt financing is not available on acceptable terms and conditions, we may not be able to refinance maturing debt or obtain financing for investments. Domestic and international
financial markets have been experiencing and continue to experience unusual volatility and uncertainty. If this volatility and uncertainty persists, our ability to borrow monies, on acceptable terms
and conditions, to finance the purchase of, or other activities related to, real estate assets will be significantly impacted. If we are unable to borrow monies on acceptable terms and conditions, we
may find it difficult, costly or impossible to refinance indebtedness upon maturity. If interest rates are higher when the properties are refinanced, our cash flow from operating activities will be
reduced. In addition, in the current market, lenders have increased the amount of equity required to support either new or existing borrowings.



The Santa Clara Tech Center property consists of three buildings: the 700, 750, and 800 buildings. The mortgage and mezzanine loans
(collectively, the "Original Loans") associated with the Santa Clara Tech Center matured on June 9, 2010. As of the maturity date, due to ongoing negotiations with an unaffiliated third party
(the "Santa Clara JV Partner") to create the joint ventures discussed below, we had not yet reached an agreement with the lender to extend the terms of the Original Loans and accordingly, we were
granted a forbearance by the lender through August 5, 2010.

On
August 5, 2010, concurrent with entering into two new joint ventures with the Santa Clara JV Partner, we reached an agreement with the lender to modify and extend the Original
Loans in the following manner:



As
of June 30, 2010, the aggregate balance due under the Original Loans was $52.5 million. Following the August 5, 2010 modification and extension, the balance due
under the Replacement Loans was an aggregate $45.5 million. There is no penalty for prepayment of the Replacement Loans, subject to certain conditions.

Further,
on August 5, 2010, we entered into the following arrangements:



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Our
interests in the joint ventures are noncontrolling, unconsolidated interests which we expect to account for using the equity method of accounting. Accordingly, effective,
August 5, 2010, we expect to deconsolidate the Santa Clara Tech Center property on our consolidated financial statements.



Our loan agreements generally stipulate that we comply with certain reporting and financial covenants. These covenants include, among
other things, notifying the lender of any change in management and maintaining minimum debt service coverage ratios. As a result of the difficult economic conditions negatively impacting both
occupancy and rental rates at the Becket House, which caused lease renewals and new leases to be executed at substantially lower rates per square foot, we were unable to meet certain financial
covenants under the Becket House loan agreement as of June 30, 2010. In addition, in 2009 and 2008, we recognized impairment charges related to our leasehold interest in Becket House of
$9.9 million and $6 million, respectively. Failure to meet the loan covenants under the loan agreement constitutes a technical default and, absent a waiver or modification of the loan
agreement, the lender may accelerate maturity with any unpaid interest and principal immediately due and payable. At June 30, 2010, the outstanding principal balance of the Becket House loan
was $17.6 million. We are currently in negotiations with the lender to waive the event of noncompliance or modify the loan agreement. However, there are no assurances that we will
be successful in our negotiations with the lender. The Becket House loan is non-recourse to us.



At Ferncroft Corporate Center ("Ferncroft"), our wholly owned eight-story office building located in Middleton, Massachusetts, our two
largest tenants renewed their leases for additional terms but for a combined 60,000 square feet less than they previously occupied. As a result of this significant drop in occupancy we are currently
operating under a cash management arrangement in accordance with Ferncroft's $18 million CMBS mortgage loan agreement. Accordingly, tenant rental payments are deposited in a restricted lockbox
account. As such, we do not have direct access to these rental payments, and the disbursement of cash from the restricted lockbox account to us is at the discretion of the loan's servicer.
Furthermore, we have been unable to disburse cash from the restricted lockbox account to us in order to pay Ferncroft's operating expenses. Not paying the operating expenses as they become due
constitutes an event of default under the loan agreement. The Ferncroft loan is non-recourse to us. We are in negotiations with the servicer and there are several potential outcomes
including a loan modification for us to retain ownership in return for additional capital commitments, a sale of the property to a third-party, or a deed-in-lieu of
foreclosure. However, as of the date of this report we expect that the most likely outcome will be a deed-in-lieu of foreclosure. We remain the title holder on Ferncroft as of
June 30, 2010, and as of the date of this report.

One
of our principal long-term liquidity requirements includes the repayment of maturing debt, including borrowings under our senior secured credit facility discussed below.
The following table

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provides
information with respect to the contractual maturities and scheduled principal repayments of our indebtedness as of June 30, 2010. The table does not represent any extension options.

Payments Due by PeriodJuly 1, 2010 -
December 31, 2010

2011-2012

2013-2014

After 2014

TotalPrincipal paymentsfixed rate debt

$
144

$
2,300

$
17,025

$
18,883

$
38,352Interest paymentsfixed rate debt


1,164


4,543


2,979


1,166


9,852Principal paymentsvariable rate debt


140,595


172,212








312,807Interest paymentsvariable rate debt (based on rates in effect as of June 30, 2010)


3,929


2,912








6,841Total

$
145,832

$
181,967

$
20,004

$
20,049

$
367,852


Included in the $140.6 million of principal paymentsvariable rate debt due in 2010, is $52.5 million related to Santa
Clara Tech Center. On August 5, 2010, we reached an agreement with the lender to modify and extend the Santa Clara note payable to June 9, 2013. Notes payable related to Chase Park Plaza
Hotel of $77.5 million, and ChaseThe Private Residences of $9.7 million are scheduled to mature in 2010. The loan agreements for Chase Park Plaza Hotel and
ChaseThe Private Residences provide us with two one-year options to extend the maturity dates of the notes payable, subject to certain conditions. In the second half of 2010,
we expect to further pay down the outstanding balance on the note payable related to ChaseThe Private Residences through proceeds from the sale of the condominium unit currently under
contract or reserved as of June 30, 2010. We are in discussions with the respective lenders to extend the maturity date or refinance these loans. If we are unable to reach a satisfactory
arrangement with the lenders or are unable to extend the maturity dates under the loan agreements, we could go into default under the respective loan agreements. Consequently, we may seek other
lenders to refinance the notes payable or seek alternative sources of funding, including the use of proceeds from the sale of our properties.



On February 13, 2008, we entered into a senior secured revolving credit facility (the "Credit Agreement") providing for up to
$75 million of secured borrowings with Bank of America, as lender and administrative agent, and other lending institutions that become a party to the Credit Agreement. The credit facility is
secured by a first lien on all real property assets in a collateral pool consisting of five wholly owned properties. Loans under the credit facility bear interest at an annual rate that is equal to a
combination of (i) the LIBOR plus an applicable margin that, depending upon the debt service coverage ratio, may vary from 1.5% to 1.7%, or (ii) the prime rate plus an applicable margin
that, depending upon the debt service coverage ratio, may vary from 0% to 0.2%. The credit facility matures on February 13, 2011. We have two options to extend the maturity date for a period of
twelve months each upon meeting certain conditions per the Credit Agreement.

We
have unconditionally guaranteed payment of the senior secured revolving credit facility. The availability of credit under the senior secured credit facility is limited by the terms of
the Credit Agreement. As of June 30, 2010, the maximum availability and outstanding balance under the senior secured credit facility was $69.1 million. The proceeds of the senior secured
credit facility have been used to fund ongoing costs at our development and operating properties and for general corporate purposes. Our ability to fund our liquidity requirements are expected to come
from the cash and cash equivalents on the consolidated balance sheet totaling $5.6 million as of June 30, 2010 and additional amounts that may become available under our senior secured
credit facility. As necessary, we may seek alternative sources of financing including using the proceeds from the sale of our properties and temporarily reducing or eliminating our quarterly
distribution to achieve our investment objectives.

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As
of June 30, 2010, restricted cash on the consolidated balance sheet of $7.3 million includes amounts held in lockbox accounts related to Ferncroft Corporate Center of
$1.1 million and amounts set aside as interest reserves totaling $3.1 million. The remaining balance of $3.1 million includes amounts set aside related to certain operating
properties for tenant improvement and commission reserves, tax reserves, maintenance and capital expenditures reserves, and other amounts as may be required by our lenders.



We have noncontrolling, unconsolidated ownership investments in three properties and one investment in a joint venture consisting of 22
properties. Our effective ownership percentages range from 30% to 50%. We exercise significant influence over, but do not control, these entities and therefore they are presently accounted for using
the equity method of accounting. As of June 30, 2010, the aggregate debt held by unrelated parties, including both ours and our partners' share, incurred by these ventures was approximately
$147.1 million.

The
table below summarizes the outstanding debt of these properties as of June 30, 2010.

Properties

Venture
Ownership
%

Interest Rate
(as of
June 30, 2010)

Carrying
Amount

Maturity
DateGrandMarc at the Corner


50
%

5.06
%
$
27,089

January 1, 2020GrandMarc at Westberry Place


50
%

4.99
%

37,772

January 1, 2020Central Europe Joint Venture


47
%

2.31
%(1)

82,255

March 1, 2012(2)Total







$
147,116


(1)Represents
the weighted average interest rate of the various notes payable secured by the 22 properties in the Central Europe Joint Venture.(2)Represents
the weighted average maturity date of the various notes payable secured by the 22 properties in the Central Europe Joint Venture.


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Results of Operations

As of June 30, 2010, we had invested in 22 assets: 11 consolidated wholly owned properties; five properties consolidated through
investments in joint ventures, including two hotel and development properties and a mixed-used property; an investment in an island development accounted for under the equity method; an
investment in a portfolio of 22 properties located in four Central European countries accounted for under the equity method; two investments in student housing projects in Texas and Virginia, also
accounted for under the equity method; and two mezzanine loans on multifamily properties, which we consolidated prior to January 1, 2010. Our investment properties are located in Arizona,
California, Colorado, Massachusetts, Minnesota, Missouri, Nevada, Texas, Virginia, the Commonwealth of The Bahamas, London, England, the Czech Republic, Poland, Hungary, and Slovakia.

As
a result of new accounting guidance regarding the accounting and disclosure requirements for the consolidation of variable interest entities, on January 1, 2010, we
deconsolidated the assets and liabilities of Tanglewood at Voss and Alexan Black Mountain along with the associated revenue and expenses.

Three months ended June 30, 2010 as compared to three months ended June 30, 2009

Three months ended
June 30,

Increase (Decrease)2010

2009

Amount

PercentRevenue:Rental revenue

$
12,213

$
15,755

$
(3,542
)

-22
%Hotel revenue


815


674


141


21
%Condominium sales


2,207


8,109


(5,902
)

-73
%Interest income from notes receivable


476





476


n/aTotal revenues

$
15,711

$
24,538

$
(8,827
)

-36
%Expenses:Property operating expenses

$
5,066

$
6,870

$
(1,804
)

-26
%Cost of condominium sales


2,417


8,178


(5,761
)

-70
%Interest expense


3,555


4,057


(502
)

-12
%Real estate taxes


1,934


2,125


(191
)

-9
%Impairment charge





2,732


(2,732
)

n/aProperty management fees


528


599


(71
)

-12
%Asset management fees


1,641


1,441


200


14
%General and administrative


1,337


1,668


(331
)

-20
%Depreciation and amortization


5,834


7,251


(1,417
)

-20
%Total expenses

$
22,312

$
34,921

$
(12,609
)

-36
%


Revenues.Our total revenues decreased by $8.8 million to $15.7 million for the three months ended June 30, 2010 as
compared to
$24.5 million for the three months ended June 30, 2009. The change in revenues is primarily due to:



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Property Operating Expenses.Property operating expenses for the three months ended June 30, 2010 were $5.1 million as
compared to
$6.9 million for the three months ended June 30, 2009, and were comprised of operating expenses from our consolidated properties. The decrease in property operating expenses was
primarily due to $0.7 million related to reduced service charges on Becket House consistent with reduced occupancy and $0.5 million related to the deconsolidation of the Tanglewood at
Voss and Alexan Black Mountain properties (see Note 8 to our consolidated financial statements).

Cost of Condominium Sales.Cost of condominium sales, relating to the sale of condominium units at The Private Residences at The Chase
Park Plaza,
for the three months ended June 30, 2010 were $2.4 million as compared to $8.2 million for the three months ended June 30, 2009. The decrease is due to the sale of one
condominium unit for the three months ended June 30, 2010 as compared to the sales of 11 condominium units for the three months ended June 30, 2009.

Interest Expense.Interest expense for the three months ended June 30, 2010 was $3.6 million as compared to $4.1 million
for the
three months ended June 30, 2009 and was primarily due to the decrease in notes
payable balances related to the deconsolidation of Tanglewood at Voss and Alexan Black Mountain (see Note 8 to our consolidated financial statements). Our total notes payable at June 30,
2010 was $352.1 million as compared to $433.2 million at June 30, 2009. Other items contributing to the decrease in interest expense were a decrease on the Becket House note
payable of $0.3 million related to a decrease in the average interest rate, offset by an increase of $0.1 million related to a higher weighted average balance on our revolving credit
facility.

Real Estate Taxes.Real estate taxes, net of amounts capitalized, for the three months ended June 30, 2010 were $1.9 million
as
compared to $2.1 million for the three months ended June 30, 2009 and were comprised of real estate taxes from each of our consolidated properties. The decrease in real estate taxes is
primarily due to the deconsolidation of the Tanglewood at Voss and Alexan Black Mountain properties. We expect increases in real estate taxes in the future as available space at our operating
properties is leased-up.

Impairment charge.We did not recognize any impairment charges for the three months ended June 30, 2010. We recognized a
$2.7 million
non-cash impairment charge for the three months ended June 30, 2009, related to our leasehold interest, Becket House.

Property Management Fees.Property management fees for the three months ended June 30, 2010 were $0.5 million as compared to
$0.6 million for the three months ended June 30, 2009 and were comprised of fees incurred by our consolidated properties. We expect increases in property management fees in the future as
available space at our operating properties is leased-up.

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Asset Management Fees.Asset management fees for the three months ended June 30, 2010 totaled $1.6 million as compared to
$1.4 million for the three months ended June 30, 2009 and were comprised of fees incurred by our consolidated properties. We expect asset management fees to stabilize in the future.

General and Administrative Expenses.General and administrative expenses for the three months ended June 30, 2010 totaled
$1.3 million,
as compared to $1.7 million for the three months ended June 30, 2009 and were comprised of corporate general and administrative expenses, including directors' and officers' insurance
premiums, auditing fees, legal fees and other administrative expenses.

Depreciation and Amortization Expense.Depreciation and amortization expense for the three months ended June 30, 2010 was
$5.8 million
as compared to $7.3 million for the three months ended June 30, 2009 and was comprised of depreciation and amortization of our consolidated properties. The decrease in depreciation and
amortization expense was primarily due to the deconsolidation of the Tanglewood at Voss and Alexan Black Mountain properties (see Note 8 to our consolidated financial statements).

Six months ended June 30, 2010 as compared to six months ended June 30, 2009

Six months ended
June 30,

Increase (Decrease)2010

2009

Amount

PercentRevenue:Rental revenue

$
24,544

$
31,581

$
(7,037
)

-22
%Hotel revenue


2,049


1,498


551


37
%Condominium sales


25,564


11,929


13,635


114
%Interest income from notes receivable


6,434





6,434


n/aTotal revenues

$
58,591

$
45,008

$
13,583


30
%Expenses:Property operating expenses

$
10,994

$
13,557

$
(2,563
)

-19
%Cost of condominium sales


25,937


12,020


13,917


116
%Interest expense


7,233


8,191


(958
)

-12
%Real estate taxes


3,759


4,435


(676
)

-15
%Impairment charge


4,230


2,732


1,498


55
%Provision for loan losses


7,136





7,136


n/aProperty management fees


1,087


1,199


(112
)

-9
%Asset management fees


3,103


2,779


324


12
%General and administrative


2,598


2,984


(386
)

-13
%Depreciation and amortization


11,582


15,014


(3,432
)

-23
%Total expenses

$
77,659

$
62,911

$
14,748


23
%


Revenues.Our total revenues increased by $13.6 million to $58.6 million for the six months ended June 30, 2010 as
compared to
$45 million for the six months ended June 30, 2009. The change in revenues is primarily due to:



12

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Property Operating Expenses.Property operating expenses for the six months ended June 30, 2010 were $11 million as compared
to
$13.6 million for the six months ended June 30, 2009, and were comprised of operating expenses from our consolidated properties. The decrease in property operating expenses was primarily
due to $0.9 million related to reduced service charges on Becket House consistent with reduced occupancy and $1.1 million related to the deconsolidation of the Tanglewood at Voss and
Alexan Black Mountain properties (see Note 8 to our consolidated financial statements).

Cost of Condominium Sales.Cost of condominium sales, relating to the sale of condominium units at The Private Residences at The Chase
Park Plaza,
for the six months ended June 30, 2010 were $25.9 million as compared to $12 million for the six months ended June 30, 2009. We closed on the sale of 12 condominium units
at an average cost of $2.1 million each at The Private Residences at The Chase Park Plaza during the six months ended June 30, 2010. We closed on the sale of 16 condominium units at an
average cost of $0.7 million each at The Private Residences at The Chase Park Plaza during the six months ended June 30, 2009

Interest Expense.Interest expense for the six months ended June 30, 2010 was $7.2 million as compared to $8.2 million
for the
six months ended June 30, 2009 and was primarily due to the decrease in notes payable balances related to the deconsolidation of Tanglewood at Voss and Alexan Black Mountain (see Note 8
to our consolidated financial statements). Our total notes payable at June 30, 2010 was $352.1 million as compared to $433.2 million at June 30, 2009. Other items
contributing to the decrease in interest expense were a decrease of $0.6 million related to a paydown of $8.7 million on the note payable related to Chase Park Plaza, offset by an
increase of $0.3 million on The Private Residences at Chase Park Plaza due to a reduction in interest capitalization as construction of the condominiums is completed.

Real Estate Taxes.Real estate taxes, net of amounts capitalized, for the six months ended June 30, 2010 were $3.8 million as
compared
to $4.4 million for the six months ended June 30, 2009 and were comprised of real estate taxes from each of our consolidated properties. The decrease in real estate taxes is primarily
due to the deconsolidation of the Tanglewood at Voss and Alexan Black Mountain properties. We expect increases in real estate taxes in the future as available space at our operating properties is
leased-up.

Impairment charge.We recognized a $4.2 million non-cash impairment charge during the first quarter of 2010 related to our office
property, Ferncroft Corporate Center. For the six months ended

13

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June 30,
2009, we recognized an impairment charge of $2.7 million related to our lease-hold interest, Becket House.

Provision for loan losses.During the first quarter of 2010, we recorded a $7.1 million provision for loan losses to reflect our
current
estimate of potential loan loss. The provision for loan losses relates to the Alexan Black Mountain mezzanine loan. There were no such provisions or reserves recorded for the first or second quarter
of 2009 as we did not consolidate this asset.

Property Management Fees.Property management fees for the six months ended June 30, 2010 were $1.1 million as compared to
$1.2 million for the six months ended June 30, 2009 and were comprised of fees incurred by our consolidated properties. We expect increases in property management fees in the future as
available space at our operating properties is leased-up.

Asset Management Fees.Asset management fees for the six months ended June 30, 2010 totaled $3.1 million as compared to
$2.8 million for the six months ended June 30, 2009 and were comprised of fees incurred by our consolidated properties. We expect asset management fees to stabilize in the future.

General and Administrative Expenses.General and administrative expenses for the six months ended June 30, 2010 were
$2.6 million as
compared to $3 million for the six months ended June 30, 2009 and were comprised of corporate general and administrative expenses, including directors' and officers' insurance premiums,
auditing fees, legal fees and other administrative expenses.

Depreciation and Amortization Expense.Depreciation and amortization expense for the six months ended June 30, 2010 was
$11.6 million
as compared to $15 million for the six months ended June 30, 2009 and was comprised of depreciation and amortization of our consolidated properties. The decrease in depreciation and
amortization expense was primarily due a decrease in depreciation and amortization expense of $1.2 million related to a write-off at Ferncroft, and to $1.6 million related to
the deconsolidation of the Tanglewood at Voss and Alexan Black Mountain properties (see Note 8 to our consolidated financial statements).

Cash Flow Analysis

Cash flows provided by operating activities for the six months ended June 30, 2010 were $17.1 million and were comprised
primarily of a decrease in condominium inventory of $19.1 million, provision for loan losses of $7.1 million, an impairment charge to our Ferncroft property of $4.2 million, and
depreciation and amortization expense of $10.2 million, offset by the net loss of $20.4 million, and an increase in accrued and other liabilities of $3.2 million. Cash flows
provided by operating activities for the six months ended June 30, 2009 were $5.3 million and were comprised primarily of the net loss of $19.5 million offset by a decrease in
condominium inventory of $6 million and depreciation and amortization expense of $12.7 million.

Cash
flows used in investing activities for the six months ended June 30, 2010 were $8 million and primarily represent investment in notes receivable of $3.3 million
and capital expenditures for real estate under development of $3.7 million. Cash flows used in investing activities for the six months ended June 30, 2009 were $23.8 million and
primarily represent capital expenditures for real estate under development, including capital expenditures of consolidated borrowers totaling $9.4 million, investment in notes receivable of
$5.1 million, and additions of property and equipment of $5 million.

Cash
flows used in financing activities for the six months ended June 30, 2010 were $10.2 million and were comprised primarily of payments on notes payable of
$21.6 million, offset by net borrowings on our senior secured revolving credit facility of $6.5 million, and proceeds from notes payable of $7 million. Cash flows provided by
financing activities for the six months ended June 30, 2009 were $13.5 million and were comprised primarily of net borrowings on our senior secured revolving credit

14

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facility
of $8.6 million and proceeds from notes payable of $16.4 million, offset by payments on notes payable of $11.7 million.

Funds from Operations and Modified Funds from Operations

Funds from operations ("FFO") is a non-GAAP financial measure that is widely recognized as a measure of REIT operating
performance. We use FFO, defined by the National Association of Real Estate Investment Trusts as net income (loss), computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP,
and gains (or losses) from sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures, subsidiaries, and
noncontrolling interests as one measure to evaluate our operating performance. In addition to FFO, we use modified funds from operations ("Modified Funds from Operations" or "MFFO"), which excludes
from FFO acquisition-related costs, impairment charges and adjustments to fair value for derivatives not qualifying for hedge accounting, to further evaluate our operating performance.

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

We
believe that FFO is helpful to investors and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property
dispositions, and extraordinary items, and as a result, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, general and
administrative expenses, and interest costs, which is not immediately apparent from net income. We believe that MFFO is helpful to our investors and our management as a measure of operating
performance because it excludes costs that management considers more reflective of investing activities and other non-operating items included in FFO. By providing FFO and MFFO, we present
information that assists investors in aligning their analysis with management's analysis of
long-term, core operating activities. We believe fluctuations in MFFO are indicative of changes in operating activities and provide comparability in evaluating our performance over time
and as compared to other real estate companies that may not have acquisition activities or derivatives or be affected by impairments.

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



15

---





FFO
or MFFO should not be considered an alternative to net income (loss) or an indication of our liquidity. Neither is indicative of funds available to fund our cash needs, including our
ability to make distributions, and each should be reviewed in connection with other GAAP measurements. Our FFO and MFFO may not be comparable to presentations by other REITs.

Our
calculation of FFO and MFFO for the three and six months ended June 30, 2010 and 2009 is presented below (amounts in thousands, except per share amounts):

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Net loss

$
(7,204
)
$
(11,850
)
$
(20,362
)
$
(19,503
)Net loss attributable to noncontrolling interest


237


2,756


601


5,077Adjustments for:Real estate depreciation and amortization per income statement


5,834


7,251


11,582


15,014Pro rata share of unconsolidated JV depreciation and amortization(1)


1,109


1,230


2,271


2,421Noncontrolling interest depreciation & amortization(2)


(129
)

(1,022
)

(261
)

(2,022
)Funds from operations (FFO)

$
(153
)
$
(1,635
)
$
(6,169
)
$
987Other Adjustments:Impairment charge and provision for loan loss





2,732


11,366


2,732Noncontrolling interest share of impairment charge





(546
)




(546
)Gain on derivatives not designated as hedging instruments





(575
)

(4
)

(754
)Noncontrolling interest share of gain on derivatives not designated as hedging instruments





29


1


38MFFO

$
(153
)
$
5

$
5,194

$
2,457GAAP weighted average shares:Basic and diluted


56,203


55,211


56,127


55,122MFFO per share

$


$


$
0.09

$
0.04


---

16

---



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



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

As
noted above, we believe FFO and MFFO are helpful to investors and our management as a measure of operating performance. FFO and MFFO are not indicative of our cash available to fund
distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and MFFO.

Distributions

Distributions are authorized at the discretion of our board of directors based on its analysis of our performance over the previous
period, expectations of performance for future periods, including actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for our portfolio, capital
expenditure needs, general financial condition, and other factors that our board deems relevant. The board's decision will be influenced, in substantial part, by its obligation to ensure that we
maintain our status as a REIT. In light of the pervasive and fundamental disruptions in the global financial and real estate markets, we cannot provide assurance that we will be able to achieve
expected cash flows necessary to continue to pay distributions at any particular level, or at all. Our board may determine to reduce our current distribution rate or cease paying distributions in
order to conserve cash.

Cash
amounts distributed to stockholders during the six months ended June 30, 2010 was $1.8 million. For the six months ended June 30, 2010, cash flows provided by
operating activities was $16.5 million. Accordingly, for the six months ended June 30, 2010, cash flow from operations exceeded cash amounts distributed to stockholders by
$14.7 million. Cash amounts distributed to stockholders during the six months ended June 30, 2009 were $1.4 million. For the six months ended June 30, 2009,

17

---



cash
flows provided by operating activities were $5.3 million. Accordingly, for the six months ended June 30, 2009, cash flow from operations exceeded cash amounts distributed to
stockholders by $3.9 million.

The
following are the distributions paid and declared for the three and six months ended June 30, 2010 and 2009.

Distributions PaidTotal
Distributions
Declared

Declared
Distribution
Per Share2010

Cash

Reinvested

TotalSecond Quarter

$
460

$
943

$
1,403

$
1,406

$
0.025First Quarter


1,316


2,872


4,188


1,405


0.025$
1,776

$
3,815

$
5,591

$
2,811

$
0.050


Distributions PaidTotal
Distributions
Declared

Declared
Distribution
Per Share2009

Cash

Reinvested

TotalSecond Quarter

$
372

$
1,032

$
1,404





First Quarter


1,047


3,017


4,064


4,070


0.075$
1,419

$
4,049

$
5,468

$
4,070

$
0.075


On
April 2, 2009, our Board of Directors voted to declare dividends on a quarterly basis rather than a monthly basis, thus generating significant administrative cost savings to
our shareholders, and to determine and pay future distributions in arrears rather than in advance of the period to which they apply. On July 19, 2010, our Board of Directors authorized a
quarterly distribution in the amount of
$0.025 per share of common stock, which is equivalent to an annual distribution of 1% assuming a $10 price per share. The distribution is payable to the common stockholders of record at the close of
business on June 30, 2010. The distribution was paid on August 10, 2010.

Operating
performance cannot be accurately predicted due to numerous factors, including the financial performance of our investments in the current real estate environment, the types and
mix of investments in our portfolio and the accounting treatment of our investments in accordance with our accounting policies. As a result, future distributions declared and paid may continue to
exceed cash flow from operating activities.

Share Redemption Plan

Our board of directors has authorized a share redemption program for stockholders who have held their shares for more than one year. On
March 30, 2009, our board of directors suspended, until further notice, redemptions other than those submitted in respect of a stockholder's death, disability or confinement to a
long-term care facility. On May 11, 2009 and November 9, 2009, our board of directors approved certain amendments to the program related to the per share redemption price. In
the second quarter ended June 30, 2010, we redeemed 52,899 shares of common stock.

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with 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. We evaluate these estimates, including investment impairment, on a regular basis. These
estimates will be based on management's historical industry experience and on

18

---



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 will be critical in that they may require complex judgment in their application or require estimates about matters that
are inherently uncertain.



Our consolidated financial statements include our accounts 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 will be evaluated based on applicable GAAP, which includes the requirement to
consolidate entities deemed to be variable interest entities ("VIE") in which we are the primary beneficiary. If the interest in the entity is determined not to be a VIE, then the entities will be
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 equity of the entity. Determining expected future losses involves
assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of
those future losses. A change in the judgments, assumptions, and estimates outlined above 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.



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 buildings, any assumed debt, identified intangible assets and asset retirement obligations. Identified intangible assets generally consist of the above-market and below-market
leases, in-place leases, in-place tenant improvements and tenant relationships. 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 any tangible assets acquired, expected to consist of land, land improvements, buildings, building improvements, and furniture, fixtures and equipment, is determined by
valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to the tangible assets. Land values are derived from appraisals, and building and land
improvements values are calculated as replacement cost less depreciation or management's estimates of the relative fair value of these assets using discounted cash flow analyses or similar methods.
Furniture, fixtures, and equipment values are determined based on current reproduction or replacement cost less depreciation and other estimated allowances based on physical, functional, or economic
factors. The value of buildings is depreciated

19

---



over
the estimated useful lives ranging from 25 years for commercial office property to 39 years for hotel/mixed-use property using the straight-line method. Land
improvements are depreciated over the estimated useful life of 15 years, and furniture, fixtures, and equipment are depreciated over estimated useful lives ranging from five to seven years
using the straight-line method.

We
determine the value of above-market and below-market in-place 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 (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of
current market lease rates for the corresponding in-place leases, measured over a period equal to (a) the remaining noncancelable lease term for above-market leases, or
(b) the remaining noncancelable 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 that we may acquire in the future is further allocated to in-place lease values 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 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 fair value of in-place leases, we consider items such as real estate taxes, insurance and other
operating expenses as well as lost rental revenue during the expected lease-up period and carrying costs that would have otherwise been incurred had the leases not been in place, including
tenant improvements and commissions. The estimates of the fair value of tenant relationships also include costs to execute similar leases including leasing commissions, legal costs and tenant
improvements as well as an estimate of the likelihood of renewal as determined by management on a tenant-by-tenant basis.

We
amortize the value of in-place leases acquired in the future to expense over the term of the respective leases. The value of tenant relationship intangibles is amortized
to expense over the initial term and any anticipated renewal periods, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a
tenant terminate their lease, the unamortized portion of the in-place lease value and tenant relationship intangibles would be charged to expense.

Other
intangible assets include the value of identified hotel trade names and in-place property tax abatements. These fair values are based on management's estimates of the
relative fair value of these assets using discounted cash flow analyses or similar methods. The value of the trade names is amortized over its respective estimated useful life of 20 years using
the straight-line method and the value of the in-place property tax abatement is amortized over its estimated term of 10 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. 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.



For real estate we wholly own, 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 operating cash flows expected to be
generated over the life of the asset and from its eventual

20

---



disposition
to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted operating cash flows, we recognize an impairment loss to adjust the
carrying amount of the asset to estimated fair value. We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our
assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding such factors as market rents, economies, and
occupancies could significantly affect these estimates.

In
the first quarter of 2010, we evaluated Ferncroft Corporate Center for impairment, and accordingly, recognized a $4.2 million impairment charge for the three months ended
March 31, 2010. No impairment charges were recognized in the second quarter of 2010.

We
also evaluate our investments in unconsolidated joint ventures at each reporting date and if we believe there is an other than temporary decline in market value we will record an
impairment charge based on these evaluations. We assess potential impairment by comparing our portion of estimated future undiscounted operating cash flows expected to be generated by the joint
venture over the life of the joint venture's assets to the carrying amount of the joint venture. In the event that the carrying amount exceeds our portion of estimated future undiscounted operating
cash flows, we recognize an impairment loss to adjust the carrying amount of the joint venture to its estimated fair value.

We
also evaluate our investments in notes receivable as of each reporting date. If we believe that it is probable we will not collect all principal and interest in accordance with the
terms of the loans, we consider the loan impaired. When evaluating loans for potential impairment, we compare the carrying amount of the loans to the present value of future cash flows discounted at
the loan's effective interest rate, or, if a loan is collateral dependent, to the estimated fair value of the related collateral net of any senior loans. For impaired loans, a provision is made for
loan losses to adjust the reserve for loan losses. The reserve for loan losses is a valuation allowance that reflects our current estimate of loan losses as of the balance sheet date. The reserve is
adjusted through the provision for loan losses account on our consolidated statement of operations.

In
the first quarter of 2010, we recorded a reserve for loan losses totaling $11.1 million related to the mezzanine loan associated with Alexan Black Mountain, including
$7.1 million recognized as a provision to loan losses on our consolidated statement of operations and comprehensive loss, for the three months ended March 31, 2010, and the remaining
$4 million as a cumulative effect adjustment to the opening balance of accumulated distributions and net loss in our consolidated statement of equity for the six months ended June 30,
2010. There was no such provision or reserve recorded for the three months ended June 30, 2010.

In
evaluating our investments for impairment, management may use appraisals and make estimates and assumptions, including, but not limited to, the projected date of disposition of the
properties, the estimated future cash flows of the properties during our ownership, and the projected sales price of each of the properties. A change in these estimates and assumptions could result in
understating or overstating the book value of our investments, which could be material to our financial statements. The value of our properties held for development depends on market conditions,
including estimates of the project start date as well as estimates of future demand for the property type under development. We have analyzed trends and other information related to each potential
development and incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to the judgment and assumptions applied in the estimation
process with respect to impairments, including the fact that limited market information regarding the value of comparable land exists at this time, it is possible actual results could differ
substantially from those estimated.

Other
than the impairment charge discussed above, we believe the carrying value of our operating real estate assets, properties under development, investments in unconsolidated joint
ventures, and notes receivable is currently recoverable. However, if market conditions worsen beyond our current

21

---



expectations,
or if our assumptions regarding expected future cash flows from the use and eventual disposition of our assets decrease or our expected hold periods decrease, or if changes in our
development strategy significantly affect any key assumptions used in our fair value calculations, we may need to take additional charges in future periods for impairments related to existing assets.
Any such non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

22

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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 Opportunity REIT I, Inc.Dated: August 25, 2010

By:

/s/ GARY S. BRESKY Gary S. Bresky Chief Financial Officer
(Principal Financial Officer)


---





Index to Exhibits

Exhibit Number

Description31.1*

Rule 13a-14(a)/15d-14(a) Certification31.2*

Rule 13a-14(a)/15d-14(a) Certification32.1*

Section 1350 Certifications**


*filed
herewith**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 certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that the registrant specifically incorporates it by reference.


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