Behringer Harvard

The Company explicitly discloses it has no interest in any corporate opportunity known to the Advisor or its Affiliates unless recommended to the Company, creating a structural conflict whereby the Advisor can direct opportunities away from the fund.

“For so long as the Company is externally advised by the Advisor, the Company has no interest in any opportunity known to the Advisor or an Affiliate thereof unless it has been recommended to the Company by the Advisor. The preceding sentence shall be of no consequence except in connection with the application of the corporate opportunity doctrine.”

The Advisor holds 1,000 Convertible Shares (non-participating, non-voting) that convert into Common Shares under certain conditions. Conversion can trigger offsets or elimination of Subordinated Share of Net Sales Proceeds, Subordinated Incentive Listing Fee, and Performance Fee payments, creating a complex interplay between equity conversion and incentive compensation that may not be transparent to common stockholders.

“no payments shall be made under Sections 3.01(d), 3.01(e), 4.03(b) or 4.03(c) if, at or prior to the time the payment is due, the Convertible Shares have been converted into Shares ... any payments otherwise due and payable under Section 3.01(e), 4.03(b) or 4.03(c) shall be reduced, dollar-for-dollar, by an amount equal to the aggregate value of the Shares (as determined at the time of such conversion as being the Company Value divided by the number of Shares outstanding at such time) issued or issuable upon conversion of the Convertible Shares.”

The Advisory Agreement expressly permits the Advisor and its Affiliates to manage other investment programs with similar investment objectives and competing for the same investments, creating a material conflict of interest in deal allocation.

“Nothing herein contained shall prevent the Advisor or its Affiliates from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates ... If the Sponsor, Advisor, Director or Affiliates thereof have sponsored other investment programs with similar investment objectives which have investment funds available at the same time as the Company, it shall be the duty of the Board (including the Independent Directors) to adopt the method set forth in the Company's most recent Prospectus for its Shares or another reasonable method by which investments are to be allocated to the competing investment entities”

The Advisor holds 1,000 Convertible Shares that function as a promote/carried interest: upon a Triggering Event (7% cumulative return to Common shareholders OR Listing), each Convertible Share converts into Common Shares equal to 15% of appreciation above Invested Capital plus 7% Stockholders' Return, divided by the per-share Company Value at the time of conversion. This creates a direct financial conflict of interest between the Advisor and Common shareholders, as the Advisor benefits from the same appreciation it is managing.

“Each outstanding Convertible Share shall become convertible into a number of Common Shares as and at the time set forth in paragraph (b) of this Section 5.3(iv), automatically and without any further action required, upon the occurrence of the first to occur of any of the following events (the 'Triggering Event'): (A) the date when the Company shall have paid total Distributions in an amount equal to or in excess of the sum of Invested Capital and a Stockholders' Return of 7%; or (B) Listing.”

The Company has no interest in any opportunity known to the Advisor or an Affiliate unless recommended to the Company — the corporate opportunity doctrine is explicitly waived in favor of the Advisor while the Company is externally managed.

“For so long as the Company is externally advised by the Advisor, the Company has no interest in any opportunity known to the Advisor or an Affiliate thereof unless it has been recommended to the Company by the Advisor. The preceding sentence shall be of no consequence except in connection with the application of the corporate opportunity doctrine.”

The charter explicitly states the Company has no interest in any corporate opportunity known to the Advisor unless the Advisor recommends it, giving the Advisor broad discretion to divert opportunities to itself or affiliated funds before presenting them to this Company.

“For so long as the Company is externally advised by the Advisor, the Company has no interest in any opportunity known to the Advisor or an Affiliate thereof unless it has been recommended to the Company by the Advisor.”

The Company may invest in Joint Ventures with the Sponsor, Advisor, Directors or their Affiliates, subject only to majority Independent Director approval. This creates a material related-party conflict as the Advisor controls deal flow and recommends assets to a company it co-invests in on substantially the same terms.

“The Company may invest in Joint Ventures with the Sponsor, Advisor, one or more Directors or any Affiliate, only if a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction, approve such investment as being fair and reasonable to the Company and on substantially the same terms and conditions as those received by the other joint venturers.”

The Advisor (Behringer Advisors II LP) holds 1,000 Convertible Shares that convert to Common Shares upon Listing or after investors receive their full Invested Capital plus 8% Return, with the conversion formula providing the Advisor up to 20% of gains above specified thresholds — a significant promote to the external Advisor funded by investor returns.

“Each outstanding Convertible Share shall become convertible into a number of Common Shares as and at the time set forth in paragraph (b) of this Section 5.4(iii), automatically and without any further action required, upon the occurrence of the first to occur of any of the following events (the 'Triggering Event'): (A) the date when the Company shall have paid total Distributions in an amount equal to or in excess of the sum of Invested Capital and the Stockholders' 8% Return; or (B) Listing.”

The LP Agreement contains a bold-text acknowledgement that the Partnership indemnifies the General Partner, its directors, officers and Affiliates even for acts or omissions that constitute negligence.

“THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS EXCULPATION AND INDEMNIFICATION IN RESPECT OF THE ACTIONS OR OMISSIONS OF THE GENERAL PARTNER AND DIRECTORS, OFFICERS AND AFFILIATES OF THE GENERAL PARTNER BY THE PARTNERSHIP EVEN IF SUCH ACTIONS OR OMISSIONS CONSTITUTE NEGLIGENCE OF SUCH PERSONS.”

The LP Agreement expressly permits the General Partner to resolve conflicts between its stockholders and Limited Partners in favor of stockholders, and states that GP is under no obligation to consider the separate interests of LPs.

“The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its stockholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions. In the event of a conflict between the interests of its stockholders on the one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either its stockholders or the Limited Partners; provided, however, that for so long as the General Partner directly owns a controlling interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either its stockholders or the Limited Partners shall be resolved in favor of its stockholders.”

The General Partner and its Affiliates may engage in business activities substantially similar or identical to those of the Partnership, including competitive real estate activities, with no obligation to offer such opportunities to the Partnership or Limited Partners.

“the Affiliates of the General Partner and the officers, directors, managers, agents, trustees and owners of the General Partner and its Affiliates shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership. Neither the Partnership nor any of the Limited Partners shall have any rights by virtue of this Agreement in any such business ventures, interests or activities.”

The Company is expressly permitted to invest in Joint Ventures with the Sponsor, Advisor, Directors or their Affiliates, subject only to majority Independent Director approval that the terms are fair and reasonable — creating ongoing related-party conflict risk.

“The Company may invest in Joint Ventures with the Sponsor, Advisor, one or more Directors or any Affiliate, only if a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction, approve such investment as being fair and reasonable to the Company and on substantially the same terms and conditions as those received by the other joint venturers.”

Company may purchase or lease assets from the Sponsor, Advisor, Directors or their Affiliates at a price not to exceed current appraised value, provided majority of Independent Directors approve as fair and reasonable. This allows related-party asset transfers into the fund portfolio.

“The Company may purchase or lease Assets from the Sponsor, the Advisor, a Director or any Affiliate thereof upon a finding by a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction that the transaction is fair and reasonable to the Company and at a price to the Company no greater than the cost of the Asset to the Sponsor, Advisor, Director or Affiliate”