Behringer Harvard REIT I Facing Investor Lawsuit

One of the industry’s largest non-traded real estate investment trusts (REITs) – Behringer Harvard REIT I – is being sued by an investor who cites allegations of negligence and breach of fiduciary duty by the trust, its executives and members of its board.

As reported Sept. 24 by Investment News, Behringer Harvard REIT I was sued one week ago in U.S. District Court for the Northern District of Texas by Lillian Hohenstein, who bought 1,275 shares of the REIT from 2004 to 2008. According to the article, the complaint is the first step to forming a class action against the REIT, Behringer Harvard Holdings LLC, Robert Aisner, chief executive and president of the holding company, and other Behringer Harvard executives.

Behringer Harvard REIT I’s value has plummeted over the past two years following the collapse of the real estate market. Currently, the REIT is valued at $4.64 per share, down dramatically from the $10 per share price of its three offerings in 2003, 2005 and 2006.

Hohenstein’s complaint against Behringer Harvard alleges that it has “sought to mask the poor performance of [the REIT] by paying investors back with their own money, while at the same time draining the company of millions of dollars” for Behringer Harvard and its executives.

“Although [its] performance has been abysmal, there has been nothing to stop [management] from diverting whatever little cash flow is available to shareholders to themselves,” the complaint says.

The complaint goes on to allege that from 2004 to 2001, two related companies, asset manager Behringer Advisors and property manager HPT Management Services LP, collected, respectfully, $104 million and $77 million in fees.