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An Information Guide to Duck Key in the Florida Keys
























Behringer Harvard, Related Group and Hawks Cay

posted January 2012


The major investor in the 2007 purchase and subsequent renovation of Hawks Cay Resort was Behringer Harvard.

Behringer Harvard has a number of non-traded or nonlisted investment funds. Below are eight Behringer Harvard REITS.

Behringer Harvard Mid-Term Value Enhancement Liquidating Trust
Behringer Harvard Multifamily REIT I, Inc.
Behringer Harvard Opportunity REIT I, Inc.
Behringer Harvard Opportunity REIT II, Inc.
Behringer Harvard REIT I, Inc.
Behringer Harvard Short-Term Opportunity Fund I LP
Behringer Harvard Strategic Opportunity Fund I LP
Behringer Harvard Strategic Opportunity Fund II LP

The investment in Hawks Cay is part of the Behringer Harvard Strategic Opportunity Fund II LP. With the exception of Hawks Cay and a property in Nevada most of the Strategic Opportunity II fund's investments are located in the Netherlands.

Behringer Harvard received acquisition financing ($101.8 million) for the purchase of Hawk's Cay Resort and Marina from Barclays Capital Real Estate in 2007.

The loan on the Hawks Cay Resort was recently sold to a joint venture between the Related Group and Mast Capital, in conjunction with Deutsche Bank's Special Situations Group (German American Capital Corp.). See Assignment of Mortgage and Security Agreement (pdf 34 pages)

What is the significance of this? "The quality of the collateral and deal economics were a good fit", according to a statement from the companies in their purchase of a $76.8 million mortgage (A position of a senior loan) on Hawks Cay Resort in the Florida Keys. "We received a good piece of property as collateral," said Matt Allen, chief operating officer for Related Group. "As long as we're buying at a good enough discount, those returns can be great."

The debt is set to come due in February of 2014. Reportly this debt purchase was not one in foreclosure or facing any distress. Terms of the purchase price were not revealed.

One source, Real Capital Analytics, showed the original loan's "Distressed Status" or "troubled property" as resolved on 10/7/2011.

Behringer Harvard distressed loan

Will the new note holders find some way to gain physical control of the Hawks Cay property or is Related Group's debt purchase just good economic sense buying the debt at a discount?


Related Group's Chairman and CEO is Jorge Perez. Perez is one of South Florida's largest luxury condo developers and has had some dealings with Genting, one of the world's foremost gambling operators, with casinos in Singapore, England and New York City, and a 50 percent stake in Norwegian Cruise Lines.

Perez was part of a real estate investment partnership which bought the A position of Omni Center note in downtown Miami for more than $100 million.The note had a principal balance of $161 million, and represented about 78 percent of the total senior mortgage balance of $206 million.

The Genting Group, which plans to build Resorts World Miami to be located just south of the Omni property, purchased the debt Related controlled as well as the debt held by the minority position to gain control of the Omni, which it plans to turn into a casino, if a gambling license is approved.

Perez and partners netted more than $60 million from the sale of the asset's debt to the Genting Group.

Perez would seem to be a knowledgable investor. Could gambling come to the Keys. The Genting's land investment is estimated to be around $500 million. Genting's Resorts World Miami plans are behind the push for destination gambling resort legislation. It has been reported that Genting will develop the $3.8 billion Resorts World Miami project with or without gambling.

Monroe County and Gambling

Proposals filed with the Florida Legislaiure if passed would allow for three casino resort licenses to be issued in Miami-Dade and Broward immediately and open the door for other counties to hold a referendum to build them in the future.

There is a dormant pari-mutuel gambling permit for the Keys owned by New Rochelle, N.Y., resident John Van Lindt. Lindt told the Keynoter that he'd like to see an off-track betting operation in Key West and would like to meet with officials of Key West to discuss possibilities. Key West Mayor Craig Gates is reported to have commented he won't speak to Lindt until after the Fall election. Cates apparently is not in favor of casino gambling. He is quoted as saying, "We can't be everything to everybody."

George Neugent, Monroe County Commissioner, in June of 2011 suggested at a Marathon City Council meeting that folks should discuss the merits of casino gambling at Florida Keys Marathon Airport. He suggested gambling "would generate funding for county infrastructure projects, in particular wastewater and stormwater efforts."

In July of 2011, the Keynoter reported that Marathon Councilman "Mike Cinque said a casino in the Keys would work best in a resort setting like Hawks Cay Resort on Duck Key. A free-standing casino at the Marathon Airport; it doesn't give me warm and fuzzy feelings. It wouldn't be the attraction we need, ..".


Over the years people have related stories that the Indies House was built as a place for gambling.
Dick Philpott of Boynton Beach, Florida wrote an e-mail to Duck Key Online,

"I knew Les Barrett, and I remember seeing the Indies House the first week it was opened. I was a small boy with my Father... and it seems to me that I remember him taking me up to the top floor and the room was filled with casino equipment. I remember a gaming wheel on its side. After Haydon Burns got in as Governor and he changed his mind about gambling, well... we never heard anything more about the casino. I heard that all that money went over to the islands where gambling was legal."

State Rep. Ron Saunders, the House Democratic leader from Key West

Saunders is quoted in the Miami Herald, "It's possible a gaming bill could pass that might affect us, but there's no movement on my part. At this point...casinos could not be allowed unless there's a constitutional amendment."

Slot machines at pari-mutuels are authorized in Broward and Miami-Dade counties, but required a referendum, A county-wide vote would be required in Monroe County before a pari-mutuel operation could be undertaken. A pari-mutuel betting parlors can have horse racing, greyhound racing, jai alai and poker games.


NEGATIVE PRESS FOR BEHRINGER HARVARD AND NONLISTED REITS - suspended distributions and redemptions, reduced value and limited secondary market.


Vinocur says equity REIT share prices suggest that underlying real estate values have declined by as much as 35% since early 2007. That market-wide depreciation will eventually show up in unlisted REITs, he says, when those companies come to the end of their investment term and attempt to liquidate at market prices.

REIT Wrecks

Several internet posts have written very negative observations about Behringer Harvard REITS. One such article dated May 2, 2011 by REIT Wrecks asks "‪Will Behringer Harvard REITs Ever Make Money?‬"

Some of REIT Wrecks comments appear below:

About Behringer Harvard Opportunity REIT I Reit Wrecks wrote,

"In 2010 the book value of Behringer Harvard Opportunity REIT I,had "dropped to an estimated $5.50 per share, which is about half what investors originally paid."

About Behringer Harvard REIT I REIT Wreck wrote, "

"In January 2011, Behringer Harvard announced a revised estimated share value of $4.55 per share for . . . Behringer Harvard REIT I.. . . . still less than half of the roughly $10 per share that investors paid."

For the Behringer Harvard Mid-Term Value Enhancement Fund I

" . . . Behringer Harvard Mid-Term Value Enhancement Fund I . . . recently reset the value of its common shares to $6.46 . . . well below the $10 paid by its investors.

REIT Wreck also writes

"Meanwhile, Behinger Harvard REIT management was busy giving properties back to the bank and restructuring mortgage loans. Foreclosure actions initiated in 2010 included One Financial Plaza in Minneapolis, which Behringer Harvard bought for $57.1 million (it's now 60% leased and estimated to be worth about $20 million), Ferncroft Corporate Center in Middleton, Massachusetts, the Aston Kauai Beach hotel (now known as the Courtyard by Marriott at Coconut Beach), and the Paces West office complex located in the Buckhead section of Atlanta. Behringer Harvard bought the Paces West property in 2006 for $104 million, or about $176/sf. The two-building property was recently only 82% occupied".

REIT Wreck writes that BH REIT funds did not produce positive cash flows in recent years and investors are paid "dividends" from new shareholder money and money borrowed from banks. REIT Wreck further points out that retirees and investors are sold non-listed funds by broker dealers who are paid

"key money a low to mid-six figure "due diligence fee." "Then, Behringer Harvard will use their fictitious 6% dividend and a 7% commission to entice the independent financial advisors who work at these bucket shops to sell this brand new pile of turd to clients who don't know any better."

A February 24,2010 blog entitled "Behringer Harvard REIT, Risky Investments for Investors" as written on stated,

"Investors turned to the Behringer Harvard REIT for safe investing, but are now stuck holding essentially worthless positions".

The blog also guestioned financial advisors selling REITS and not disclosing the REITs underlying financial condition

"One such example is the Behringer Harvard REIT I. This REIT never made any money and is now completely illiquid, thereby preventing investors from selling their positions. The REIT was sold to inexperienced and conservative investors, who are now stuck holding essentially worthless positions.."

MORE CRITICAL COMMENTS ABOUT Non-traded REITS and mentioning Behringer Harvard - "paying old investors with new investors' money, Behringer Harvard was creating a false yield simply to make investing in its REITs more attractive to the investor seeking income from his investments, according to the claim." article - reported about Behringer defaulting on a Behringer Harvard REIT I loan, being delinquent in payments purposely because it " wasn't happy with the mortgage on the building and thought it would be better to have a different loan."