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DALLAS-Behringer Harvard Opportunity REIT II Inc. has provided a mezzanine loan of up to $25 million to a joint venture between the United States Army and Actus Lend Lease LLC as part of the Army’s Privatization of Army Lodging, or PAL. The venture will spend the next three years upgrading and rehabbing transient lodging facilities on 10 U.S. Army bases, which will be managed by InterContinental Hotels Group.According to a Security and Exchange Commission filing by the REIT, the loan is specifically being used to finance construction renovation and development costs to help improve 3,200 lodging units at Army installations at Fort Rucker, AL; Yuma Proving Ground, AZ; Tripler Army Medical Center and Fort Shafter in Hawaii; Fort Leavenworth and Fort Riley in Kansas; Fort Polk, LA; Fort Sill, OK Fort Hood and Fort Sam Houston in Texas and Fort Myer, VA. The filing goes on to say that approximately $12.8 million of the loan was handed over at the closing. The loan accrues interest at 18% a year, with a maturity date of Sept. 2016. The loan is interest only for two years beginning Oct. 1.Behringer Harvard chief administrative officer Jason Mattox tells GlobeSt.com that the renovations will be fairly significant, given the age of some of the lodgings. “A number of them were built decades ago, and a lot of improvement will be necessary,” he adds. Mattox says renovations will focus on room and common area upgrades, replacement of soft goods and other amenities. The goal, he continues, is to convert the utilitarian lodgings into something similar to a branded hotel. “The Army intends to offer breakfast, too, similar to normal offerings of branded hotels,” Mattox comments. The PAL program is modeled after the Army’s Residential Communities Initiative, a program geared to upgrade and improve permanent residential housing for soldiers and their families. Actus Lend Lease was brought in on the private front, as it has previous experience in similar programs with the Army and Department of Defense. The loan is the first of its type for Behringer Harvard REIT II, which targets value-add projects involving commercial properties with value creation potential over the short term. Mattox says the funding made sense for the REIT because it satisfies many different aspects, not the least of which is providing a solid investment and a good rate of return for those who are involved.”There’s also something appealing about improving the quality of life for service men and women through something like this,” Mattox says. “As the market provides a similar type of opportunity, we’d like to capitalize on it again.”

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