Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Jun. 30, 2016 | |
Document and Entity Information: | ||
Entity Registrant Name | HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Trading Symbol | hartman | |
Amendment Flag | false | |
Entity Central Index Key | 1,446,687 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 18,180,251 | |
Entity Public Float | $ 181,802,510 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
ASSETS | ||
Real estateInvestment property at cost | $ 215,198 | $ 189,707 |
Real estate investment property accumulated depreciation | (43,876) | (27,384) |
Real estate investment property at cost, net | 171,322 | 162,323 |
Cash and cash equivalents | 629 | 1,380 |
Restricted cash | 2,371 | 6,900 |
Accrued rent and accounts receivable, net | 4,097 | 2,750 |
Note receivable | 7,231 | |
Deferred lease commissions and loan costs, net | 4,195 | 2,403 |
Goodwill | 250 | 250 |
Prepaid expenses and other assets | 1,972 | 1,390 |
Due from related parties | 4,721 | 199 |
Investment in affiliate | 8,959 | |
Total assets | 205,747 | 177,595 |
LIABILITIES | ||
Note payable | 73,522 | 74,995 |
Accounts payable and accrued expenses | 8,115 | 9,367 |
Tenants' security deposits | 1,504 | 1,326 |
Total liabilities | 83,141 | 85,688 |
Common stock | 18 | 14 |
Additional paid in capital | 169,472 | 128,336 |
Accumulated distributions and net loss | (52,330) | (36,443) |
Total stockholders' equity | 117,160 | 91,907 |
Noncontrolling interests in subsidiary | 5,446 | |
Total equity | 122,606 | 91,907 |
Total liabilities and total stockholders' equity | $ 205,747 | $ 177,595 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues | ||||
Rental revenues | $ 8,480 | $ 6,068 | $ 24,473 | $ 15,041 |
Tenant reimbursements and other revenues | 1,452 | 855 | 3,855 | 2,401 |
Total revenues | 9,932 | 6,923 | 28,328 | 17,442 |
Expenses | ||||
Property operating expenses | 3,688 | 2,242 | 9,756 | 4,945 |
Asset management and acquisition fees | 372 | 991 | 1,593 | 1,958 |
Organization and offering costs | 296 | (44) | 653 | |
Real estate taxes and insurance | 1,263 | 976 | 3,612 | 2,522 |
Depreciation and amortization | 5,808 | 4,012 | 16,492 | 9,523 |
General and administrative | 539 | 338 | 1,785 | 959 |
Interest and dividend income | (291) | (3) | (704) | (20) |
Interest expense | 961 | 825 | 2,649 | 2,359 |
Total expenses | 12,340 | 9,677 | 35,139 | 22,899 |
Net loss | (2,408) | $ (2,754) | (6,811) | $ (5,457) |
Net income attributable to noncontrolling interests | $ 47 | $ 97 | ||
Basic and diluted loss per common share: | ||||
Loss attributable to common stockholders | $ (0.13) | $ (0.24) | $ (0.40) | $ (0.54) |
Weighted average number of common shares outstanding, basic and diluted | 18,215 | 11,460 | 17,076 | 10,050 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2016 - USD ($) shares in Thousands, $ in Thousands | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Distributions In Excess Of Net Income | Noncontroll interst | Total |
Stockholders' equity, starting balance (value) at Dec. 31, 2015 | $ 14 | $ 128,336 | $ (36,443) | $ 0 | $ 91,907 | |
Beginning balance - preferred Stock (shares) at Dec. 31 2015 at Dec. 31, 2015 | 1 | 1 | ||||
Beginning balance - common Stock (shares) at Dec. 31 2015 at Dec. 31, 2015 | 13,769 | 13,769 | ||||
Issuance of common shares, net of redemption (value) | $ 0 | $ 4 | 43,239 | 0 | $ 43,243 | |
Issuance of common shares, net of redemption (shares) | 4,411 | 4,411 | ||||
Selling commissions | 0 | $ 0 | (2,103) | 0 | 0 | $ (2,103) |
investement of noncontrolling interest | 0 | 0 | 0 | 0 | 5,500 | 5,500 |
Dividends and distributions | 0 | 0 | 0 | (8,979) | 0 | (8,979) |
Net loss | $ 0 | 0 | 0 | (6,958) | 97 | (6,811) |
Total equity, ending balance at Sep. 30, 2016 | $ 18 | $ 169,472 | $ (52,330) | $ 5,446 | $ 122,606 | |
Ending balance - preferred Stock (in shares) at September 30, 2016 at Sep. 30, 2016 | 1 | 1 | ||||
Ending balance - common Stock (in shares) at September 30, 2016 at Sep. 30, 2016 | 18,180 | 18,180 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (6,811) | $ (5,457) |
Stock based compensation | 76 | 65 |
Depreciation and amortization expense | 16,492 | 9,523 |
Deferred loan and leasing commission costs amortization | 805 | 384 |
(Increase) decrease accrued rent and accounts receivable | (1,813) | (662) |
Deferred leasing commmission costs | (2,311) | (758) |
(Increase) decrease prepaid expenses and other assets | (745) | 289 |
Increase (decrease) accounts payable and accrued expenses | (1,803) | 341 |
Increase (decrease) on due to related parties | (4,522) | (359) |
Increase (decrease) tenants' security deposits | 178 | 423 |
Net cash provided by (used in) operating activities | (15) | 3,959 |
Cash flows from investing activities: | ||
Acquisition deposit | (470) | |
(increase) decrease Note receivable | (7,231) | |
(increase) decrease Investment in affiliates | (8,959) | |
Resctricted cash | 4,529 | |
Additions to real estate | (25,491) | (51,846) |
Net cash provide from (used in) investing activities | (37,152) | (52,316) |
Cash flows from financing activities: | ||
Dividend distributions paid in cash | (5,745) | (2,434) |
Payment of selling commissions | (2,103) | (1,722) |
Proceeds from insurance premium finance note | 421 | 293 |
Repayment of insurance premium finance note | (337) | (244) |
Noncontrolling interests capital | 5,500 | |
Payment of deferred loan costs | (139) | (298) |
Proceeds under term loan notes | 10,819 | |
Repayments under term loan notes | (894) | (854) |
Proceeds from revolving credit facility | 29,400 | 29,425 |
Repayment of revolving credit advances | (40,946) | (12,185) |
Proceeds from issuance of common stock | 41,618 | 36,464 |
Redemption of common shares | (1,179) | (181) |
Net cash provided by (used in) financing activities | 36,416 | 48,264 |
Net change in cash | (751) | (93) |
Cash and cash equivalents, beginning of period | 1,380 | 4,429 |
Cash and cash equivalents, end of period | $ 629 | $ 4,336 |
Organization and Business
Organization and Business | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Organization and Business | Organization and Business Hartman Short Term Income Properties XX, Inc. (the Company), is a Maryland corporation formed on February 5, 2009. The Company elected to be treated as a real estate investment trust (REIT) beginning with the taxable year ending December 31, 2011. Effective March 31, 2016, the Company terminated the offer and sale of its common stock to the public in its follow-on public offering. The sale of shares of the Companys common stock to its stockholders pursuant to the Companys distribution reinvestment plan was discontinued as of July 16, 2016. As of September 30, 2016, the Company had issued 18,574,461 shares of its common stock in its initial and follow-on public offerings, including 1,174,761 shares of common stock pursuant to its distribution reinvestment plan, resulting in aggregate gross offering proceeds of $181,336,480. Total shares issued and outstanding as of September 30, 2016 include 34,875 shares of common stock issued as non-employee compensation to members of the Companys board of directors and certain executives of the Property Manager (as defined below). The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc., a Texas corporation wholly owned by Allen R. Hartman, the Companys Chief Executive Officer and Chairman of the Board of Directors. The Company sold 19,000 shares of common stock to Hartman XX Holdings, Inc. at a price of $10.00 per share. The Company issued 1,000 shares of convertible preferred stock to its advisor, Hartman Advisors LLC (Advisor), at a price of $10.00 per share. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc. (the Property Manager). The Property Manager is a wholly owned subsidiary of Hartman Income REIT, Inc. of which approximately 20% is beneficially owned by Allen R. Hartman. On April 11, 2014, the Company formed Hartman XX Limited Partnership, a Texas limited partnership (the Operating Partnership). On March 7, 2014, the Company formed Hartman XX REIT GP LLC, a Texas limited liability company, to serve as the sole general partner of the Operating Partnership. The Company is the sole limited partner of the Operating Partnership. The Operating Partnership or its wholly owned subsidiaries own 100% of the membership interests in the limited liability companies through which the Company owns its properties, except for Hartman Westway One, LLC which is 54.33% owned by the Operating Partnership and 45.67% owned by a noncontrolling interest investor. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Companys affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company pursuant to an advisory agreement (the Advisory Agreement) by and among the Company and Advisor. Management of the Companys properties is through the Property Manager. These parties receive compensation and fees for services related to the investment, management and disposition of the Companys assets. On April 7, 2016, the Companys board of directors determined an estimated value per share of the Companys common stock of $12.40 as of December 31, 2015. In connection with its determination of an estimated value per common share, on April 26, 2016 the Companys board of directors also determined to increase the purchase price of shares offered pursuant to the Companys distribution reinvestment plan to $12.40 per common share, which became effective for shares purchased on or after June 1, 2016. Effective July 16, 2016, the Companys distribution reinvestment plan was terminated concurrent with the termination of the effective registration of the Companys common shares. On April 26, 2016, the Companys board of directors approved the formation of a special committee comprised on the Companys two independent directors (the Special Committee), to consider potential strategic transactions. The Special Committees responsibilities include (i) the identification and investigation of potential strategic transactions, (ii) conducting negotiations with respect to any strategic transactions, (iii) the review and analysis of potential strategic transactions and (iv) making recommendations to the board of directors concerning any strategic transactions. The Special Committee is authorized to engage experts and advisors in connection with the foregoing responsibilities. As of September 30, 2016, the Company owned 16 commercial properties comprising approximately 2,562,000 square feet plus three pad sites, all located in Texas. As of September 30, 2016, the Company owned eight properties located in Richardson, Arlington, Irving and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas. As of September 30, 2015, the Company owned 14 commercial properties comprising approximately 2,200,000 square feet plus three pad sites, all located in Texas. As of September 30, 2015, the Company owned seven properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and one property located in San Antonio, Texas. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2015 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of September 30, 2016 have been prepared by the Company in accordance with accounting principles generally accepted in the United States (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of September 30, 2016, and the results of consolidated operations for the three and nine months ended September 30, 2016 and 2015, the consolidated statement of stockholders equity for the nine months ended September 30, 2016 and the consolidated statements of cash flows for the nine months ended September 30, 2016 and 2015. The results of the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016. The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2015. These unaudited consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications The Company has reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on the previously reported working capital or results of operations. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of September 30, 2016 and December 31, 2015 consisted of demand deposits at commercial banks. Restricted Cash Restricted cash represents cash for which the use of funds is restricted by certain loan documents. As of September 30, 2016 and December 31, 2015, the Company had a restricted cash balance of $2,371,000 and $6,900,000, respectively, representing amounts set aside as impounds to be disbursed to the Company (i) upon its achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property, and (ii) the completion of certain agreed upon capital repairs at the Cooper Street Property and the Mitchelldale Property. Restricted cash as of December 31, 2015 included $6,500,000 of loan proceeds and $400,000 in cash, in an escrow account with a loan servicer. During the three months ended September 30, 2016, the Company applied for and received $4,129,000 of the restricted loan proceeds and $400,000 of the capital repair escrow. The Company does not expect to meet the agreed upon requirements for the disbursement of any of the remaining $2,371,000 and such amount will be applied to the outstanding term loan balance on or before December 31, 2016. Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, note receivable, accounts payable and accrued expenses, notes payable and due from (to) related parties. The Company considers the carrying value to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value. Revenue Recognition The Companys leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (ASC) 605-10-S99, Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursement and other revenues in the period the related costs are incurred. Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Companys policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and managements consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases. The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Companys reported net loss. Depreciation and amortization Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years remaining calculated on terms of all of the leases in-place when acquired. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of our real estate assets as of September 30, 2016. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market Approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost Approach: Amount required to replace the service capacity of an asset (replacement cost). Income Approach: Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Companys estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Accrued Rent and Accounts Receivable Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Deferred Leasing Commission Costs Leasing commissions are amortized using the straight-line method over the term of the related lease agreements. Goodwill GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount. If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements. Organization and Offering Expenses The Company has incurred certain organization and offering expenses in connection with the organization of the Company and the offering of the Companys shares of common stock in the Companys public offerings. These costs principally relate to professional and filing fees. For the three months ended September 30, 2016 and 2015, such costs totaled $0 and $296,000, respectively. For the nine months ended September 30, 2016 and 2015, such costs totaled ($44,000) and $653,000, respectively. Organization and offering expenses of the Company are paid directly by the Company or incurred by Advisor on behalf of the Company and reimbursed by the Company to the Advisor (subject to certain limitations). Pursuant to the Advisory Agreement, organization and offering expenses will be reimbursed by the Advisor to the Company following the completion of a public offering of the Company to the extent that total organization and offering expenses incurred by the Company in connection with such public offerings (excluding selling commissions and dealer manager fees) exceed 1.5% of gross offering proceeds from the completed public offerings. As of September 30, 2016 and December 31, 2015, respectively, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds was cumulatively $858,000 and $668,000 for the Companys initial and follow-on public offerings, respectively. The Company terminated the offer and sale of its common stock to the public in its follow-on offering on March 31, 2016.; provided, that the Company continued to process subscriptions dated on or before March 31, 2016 through June 30, 2016. The Company has recorded a receivable from the Advisor and recorded a contra expense of $858,000 resulting in a net credit for organization and offering expenses of ($44,000) during the nine months ended September 30, 2016. Stock-Based Compensation The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) with regard to issuance of stock in payment of services. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the fair value of the equity or liability instruments issued. Stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations. Advertising The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. Advertising costs totaled $15,000 and $23,000 for the three months ended September 30, 2016 and 2015, respectively. Advertising costs totaled $52,000 and $68,000 for the nine months ended September 30, 2016 and 2015, respectively. Income Taxes The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with its taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Companys annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Companys net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT. For the three months ended September 30, 2016 and 2015, the Company incurred a net loss of $2,408,000 and $2,754,000, respectively. For the nine months ended September 30, 2016 and 2015, the Company incurred a net loss of $6,811,000 and $5,457,000, respectively. The Company has formed a taxable REIT subsidiary which may generate future taxable income, which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements. The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the Companys tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions. Loss Per Share The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Companys potentially dilutive securities include preferred shares that are convertible into the Companys common stock. As of September 30, 2016 and 2015, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and nine months ended September 30, 2016 and 2015 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive. Concentration of Risk The Company maintains cash accounts in two U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts may exceed the federally insured limits. No losses have been incurred in connection with these deposits. The geographic concentration of the Companys real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition or any other changes, could adversely affect the Companys operating results and its ability to make distributions to stockholders Major tenants are defined as those tenants which individually comprise more that 10% of the Companys total rental revenues. The sole tenant of the Companys Gulf Plaza property represented 7.3% and 10.2% of total rental revenues for nine months ended September 30, 2016 and 2015, respectively. Recent Accounting Pronouncements ASU 2015-03, Interest Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. We have adopted this guidance for all periods presented. In February 2016, the FASB issued guidance requiring lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting will remain largely unchanged. The guidance will also require new qualitative and quantitative disclosures to help financial statement users better understand the timing, amount and uncertainty of cash flows arising from leases. This guidance will be effective for reporting periods beginning on or after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of this guidance and its impact on our consolidated financial statements. |
Real Estate
Real Estate | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Real Estate | Real Estate The Companys real estate assets consisted of the following, in thousands: September 30, 2016 December 31, 2015 Land $53,406 $47,997 Buildings and improvements 106,776 91,645 In-place lease value intangible 55,016 50,065 215,198 189,707 Less accumulated depreciation and amortization (43,876) (27,384) Total real estate assets $171,322 $162,323 Depreciation expense for the three months ended September 30, 2016 and 2015 was $1,742,000 and $1,182,000, respectively. Depreciation expense for the nine months ended September 30, 2016 and 2015 was $4,705,000 and $2,914,000, respectively. Amortization expense of in-place lease value intangible was $4,066,000 and $2,830,000 for the three months ended September 30, 2016 and 2015, respectively. Amortization expense of in-place lease value intangible was $11,787,000 and $6,609,000 for the nine months ended September 30, 2016 and 2015, respectively. Acquisition fees paid to Advisor were $0 and $724,000 for the three months ended September 30, 2016 and 2015, respectively. Acquisition fees paid to Advisor were $541,000 and $1,262,000 for the nine months ended September 30, 2016 and 2015, respectively. Asset management fees paid to Advisor were $372,000 and $267,000 for the three months ended September 30, 2016 and 2015, respectively. Asset management fees paid to Advisor were $1,052,000 and $696,000 for the nine months ended September 30, 2016 and 2015, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations for the three and six months ended September 30, 2016 and 2015, respectively. On June 1, 2016, Hartman Westway One, LLC, a wholly owned subsidiary of the Operating Partnership, acquired a three story office building containing approximately 166,000 square feet of office space located in Irving, Texas, commonly known as Westway One (the Westway One Property). The Westway One Property was acquired for $21,638,000, exclusive of closing costs, from an unaffiliated third party seller. The Westway One Property was 100% occupied at the acquisition date. An acquisition fee of $541,000 was earned by the Advisor in connection with the purchase of the Westway One Property. The following table summarizes the fair value of the assets acquired and liabilities assumed based upon the Companys initial purchase price allocation as of the acquisition date, in thousands: Westway One Assets acquired: Real estate assets $ 21,638 Other assets - Total assets acquired 21,638 Liabilities assumed: Accounts payable and accrued expenses 232 Security deposits 38 Total liabilities assumed 270 Fair value of net assets acquired $ 21,368 On June 17, 2016, Hartman Westway One, LLC admitted an unrelated independent investor as a member for $5,500,000 in exchange for a 45.67% noncontrolling member interest. As of September 30, 2016, the Company owned 16 commercial properties comprising approximately 2,562,000 square feet plus three pad sites, all located in Texas. As of September 30, 2016, the Company owned eight properties located in Richardson, Arlington, Irving and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas. As of September 30, 2015, the Company owned 14 commercial properties comprising approximately 2,200,000 square feet plus three pad sites, all located in Texas. As of September 30, 2015, the Company owned seven properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and one property located in San Antonio, Texas. The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms. With respect to all properties owned by the Company, we consider all of the in-place leases to be market rate leases. The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands: September 30, 2016 December 31, 2015 In-place lease value intangible $ 55,016 $ 50,065 In-place leases accumulated amortization (30,515) (18,728) Acquired lease intangible assets, net $ 24,501 $ 31,337 |
Accrued Rent and Accounts Recei
Accrued Rent and Accounts Receivable, Net | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Accrued Rent and Accounts Receivable, Net | September 30, 2016 December 31, 2015 Tenant receivables $ 1,559 $ 1,176 Accrued rent 3,051 2,065 Other receivable 446 2 Allowance for uncollectible accounts (959) (493) Accrued rents and accounts receivable, net $ 4,097 $ 2,750 |
Deferred Leasing Commission Cos
Deferred Leasing Commission Costs, Net | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Deferred Leasing Commission Costs, Net | Deferred Leasing Commission Costs, net Costs which have been deferred consist of the following, in thousands: September 30, 2016 December 31, 2015 Deferred leasing commissions $ 5,317 $ 3,006 Less: accumulated amortization (1,122) (603) Deferred leasing commission cost, net $ 4,195 $ 2,403 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Notes Payable | Notes Payable The Company is a party to a $30.0 million revolving credit agreement (the TCB Credit Facility) with Texas Capital Bank. The borrowing base of the TCB Credit Facility may be adjusted from time to time subject to the lenders underwriting with respect to real property collateral. On July 2, 2014, the Company entered into a modification agreement of the TCB Credit Facility to add the Gulf Plaza Property as the sole collateral property and the borrowing base of the TCB Credit Facility was $7.0 million. On January 23, 2015, the TCB Credit Facility was modified to add the Timbercreek and Copperfield properties as collateral and the borrowing base of the TCB Credit Facility was increased to $9.9 million. On November 10, 2015, the TCB Credit Facility was modified to add the One Technology Center property to the borrowing base. As modified, the borrowing base is $20.925 million. The TCB Credit Facility note, as currently modified, bears interest at the greater of 4.25% per annum or the banks prime rate plus 1% per annum. The interest rate was 4.50% per annum as of September 30, 2016 and December 31, 2015. All borrowings under the TCB Credit Facility mature on May 9, 2017. The outstanding balance under the TCB Credit Facility was $1.3 million as of September 30, 2016 and $4.0 million as of December 31, 2015. As of September 30, 2016 the amount available to be borrowed under the TCB Credit Facility is $19.6 million. As of September 30, 2016, the Company was in compliance with all loan covenants under the TCB Credit Facility. The Company is a party to a $15.52 million revolving credit agreement (the EWB Credit Facility) with East West Bank. The borrowing base of the EWB Credit Facility may be adjusted from time to time subject to the lenders underwriting with respect to real property collateral. The EWB Credit Facility is secured by the Commerce Plaza Hillcrest, Corporate Park Place and 400 North Belt properties. The EWB Credit Facility note bears interest at the greater of 3.75% per annum or the banks prime rate plus 0.50%. The interest rate was 4% per annum as of September 30, 2016 and as of December 31, 2015. All loans under the EWB Credit Facility mature on August 24, 2017. On October 8, 2015 the Company entered into a second revolving credit agreement with East West Bank (the EWB II Credit Facility). The borrowing base of the EWB II Credit Facility is $9.9 million and may be adjusted from time to time subject to the lenders underwriting with respect to the real property collateral. The EWB II Credit Facility is secured by the Ashford Crossing and Skymark Tower properties. The EWB II Credit Facility note bears interest at the greater of 3.75% per annum or the banks prime rate plus 0.50%. The interest rate was 4% per annum as of September 30, 2016 and as of December 31, 2015. All loans under the EWB II Credit Facility mature on August 24, 2017. The aggregate outstanding balance under the EWB Credit Facility and EWB II Credit Facility was $5.1 million as of September 30, 2016 and $14.0 million as of December 31, 2015. As of September 30, 2016, the aggregate amount available to be borrowed under the EWB Credit Facility and EWB II Credit Facility is $20.3 million. As of September 30, 2016, the Company was in compliance with all loan covenants under the EWB Credit Facility and EWB II Credit Facility. In connection with the acquisition of Westway One property, the Company entered into a mortgage loan agreement with Southside Bank dated June 1, 2016, providing mortgage loan proceeds of $10.8 million (the Westway One Loan). The Westway One Loan is evidenced by a loan agreement and a promissory note and secured by a deed of trust, security agreement and assignment of rents of the Westway One property. The Westway one Loan matures and is due and payable in full on June 1, 2019. Payments of interest only on the Westway One Loan are due monthly beginning on July 1, 2016. The Westway One Loan bears interest at the greater of the floating rate index plus 2.50% or 2.50%. The floating rate index is the one month London Interbank Offered Rate (LIBOR) adjusted each month as of the first day of such month. The floating rate index as of June 1, 2016 was 0.456% for an applicable interest rate of 2.956% as of that date and the interest rate was 3.027% per annum as of September 30, 2016. The Companys loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands: September 30, 2016 December 31, 2015 Deferred loan costs $ 1,865 $ 1,726 Less: deferred loan cost accumulated amortization (590) (304) Total cost, net of accumulated amortization $ 1,275 $ 1,422 The following is a summary of the Companys notes payable as of September 30, 2016, in thousands: Collateral Property or Credit Facility Payment Type Maturity Date Rate Principal Balance Richardson Heights Property (1)(2) Principal and interest July 1, 2041 4.61% $ 19,306 Cooper Street Property (1)(3) Principal and interest July 1, 2041 4.61% 8,028 Bent Tree Green Property (1)(2) Principal and interest July 1, 2041 4.61% 8,028 Mitchelldale Property (1)(3) Principal and interest July 1, 2041 4.61% 12,162 Energy Plaza I & II Principal and interest June 10, 2021 5.30% 10,054 Westway One Interest only June 1, 2019 3.03% 10,819 TCB Credit Facility Interest only May 9, 2017 4.50% 1,300 EWB Credit Facility Interest only August 24, 2017 4.00% - EWB II Credit Facility Interest only August 24, 2017 4.00% 5,100 $ 74,797 Less unamortized deferred loan costs (1,275) $ 73,522 (1) Each promissory note contains a call option wherein the holder of the promissory note may declare the outstanding balance due and payable on either July 1, 2024, July 1, 2029, July 1, 2034, or July 1, 2039. (2) In connection with the loans secured by the Richardson Heights Property and the Bent Tree Green Property, the Company entered into a reserve agreement with the lender which requires that loan proceeds of $5,525,000 and $975,000, respectively, be deposited with the loan servicer. The escrowed loan proceeds will be released to the Company upon satisfactory showing of increased annualized rental income from new lease agreements as set forth in the reserve agreement. Under the terms of the reserve agreement, the Company may draw upon the escrow reserve funds until December 31, 2016. Thereafter, the lender shall have the right to draw any remaining escrow reserve funds and apply such funds to one or more of the loans as the lender may determine in its sole discretion. On August 29, 2016, the Company received $4.1 million of the restricted cash balance. Loan proceeds and other reserve funds held pursuant to the reserve agreement and the post-closing agreement are recorded as restricted cash on the accompanying consolidated balance sheets. (3) In connection with the loans secured by the Cooper Street Property and the Mitchelldale Property, the Company entered into a post-closing agreement with the lender requiring the short term escrow of $600,000 for certain capital repairs to be completed during 2014 together with the delivery of certain other documents as set forth in the post-closing agreement. The Company received $200,000 of the escrow proceeds in 2015 as partial recovery for the work completed at the Mitchelldale property. The Company received $400,000 of the escrow proceeds in July 2016. Interest expense incurred for the three months ended September 30, 2016 and 2015 was $961,000 and $825,000, respectively. Interest expense incurred for the nine months ended September 30, 2016 and 2015 was $2,649,000 and $2,359,000, respectively. Interest expense of $96,000 and $212,000 was payable as of September 30, 2016 and December 31, 2015, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. |
Loss Per Share
Loss Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Loss Per Share | Loss Per Share Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share, in thousands except shares and per share data. Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Numerator: Net loss attributable to common stockholders $(2,505) $(2,754) $(6,958) $(5,457) Denominator: Basic and diluted weighted average common shares outstanding 18,215 11,460 17,076 10,050 Basic and diluted loss per common share: Net loss attributable to common stockholders $(0.14) $(0.24) $(0.41) $(0.54) |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Income Taxes | Income Taxes Federal income taxes are not provided for because the Company qualifies as a REIT under the provisions of the Internal Revenue Code and because the Company has distributed and intends to continue to distribute all of its taxable income to its stockholders. The Companys stockholders include their proportionate taxable income in their individual tax returns. As a REIT, the Company must distribute at least 90% of its real estate investment trust taxable income to its stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. Taxable income (loss) differs from net income (loss) for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and rental revenue. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Related Party Transactions | Related Party Transactions The Advisor is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Advisor is a variable interest entity which consolidates for financial reporting purposes with Hartman Income REIT, Inc. and subsidiaries, of which approximately 20% is beneficially owned by Allen R. Hartman, our Chief Executive Officer and Chairman of the Board of Directors. For the three months ended September 30, 2016 and 2015 the Company paid the Advisor $372,000 and $267,000, respectively, in asset management fees. For the nine months ended September 30, 2016 and 2015 the Company paid the Advisor $1,052,000 and $696,000, respectively, in asset management fees. Acquisition fees paid to Advisor were $0 and $724,000 for the three months ended September 30, 2016 and 2015, respectively, and $541,000 and $1,262,000 for the nine months ended September 30, 2016 and 2015, respectively. Property operating expenses include property management fees and expense reimbursements paid to the Property Manager of $1,810,000 and $1,021,000 for the three months ended September 30, 2016 and 2015, respectively and $5,060,000 and $2,318,000 for the nine months ended September 30, 2016 and 2015, respectively. September 30, 2016 and 2015 $ $ As of September 30, 2016, the Company had a net balance due from the Property Manager and the Advisor of $47,000. As of December 31, 2015, the Company had a net balance due from the Property Manager and the Advisor of $103,000. The Company had a balance due from Hartman XX Holdings, Inc. of $0 and $100,000 as of September 30, 2016 and December 31, 2015, respectively. The Company had a net balance due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (Hartman XIX), of $4,480,000 as of September 30, 2016. The Company had a net balance due to Hartman XIX of $4,000 as of December 31, 2015. The balance due from Hartman XIX includes a loan from the Company to Hartman XIX of $5,250,000, which is not evidenced by a promissory note. Interest has been accrued on the loan amount at an annual rate of 6%. The amount was advanced to Hartman XIX in connection with the affiliate stock purchase described below in this note. On January 26, 2016, the Companys board of directors approved the acquisition by the Company of up to $15.0 million in shares of common stock of Hartman Income REIT, Inc. (HIREIT), an affiliate of the Company, in connection with a tender offer by Hartman XIX to acquire for its account up to $2.0 million in shares of HIREIT common stock. On February 5, 2016, the Company advanced $5,250,000 to Hartman XIX in connection with Hartman XIXs contemplated acquisition of HIREIT shares. On March 15, 2016, the Company acquired 1,558,014 shares of the common stock of HIREIT for $8,959,000. The Companys investment in HIREIT is accounted for under the cost method. The Companys approximately 11% ownership interest in HIREIT is less than a controlling stake, and is reflected as Investment in Affiliate on the accompanying consolidated balance sheets. Variable interest entities (VIEs) are defined as entities with a level of invested equity that is not sufficient to fund future operations on a stand-alone basis, or whose equity holders lack certain characteristics of a controlling financial interest. For identified VIEs, an assessment must be made to determine which party to the VIE, if any, has both the power to direct the activities of the VIE that most significantly impacts the performance of the VIE and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. On May 16, 2016, the Company, through its taxable REIT subsidiary, Hartman TRS, Inc. (TRS), loaned $7,231,000 pursuant to a promissory note in the face amount of up to $8,820,000 to Hartman Retail II Holdings Company, Inc. (Retail II Holdings), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of a retail shopping center by Hartman Retail II DST, a Delaware statutory trust sponsored by the Property Manager. Pursuant to the terms of the promissory note, TRS will receive a two percent (2%) origination fee of amounts advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The outstanding principal balance of the promissory note will be repaid as investor funds are raised by Hartman Retail II DST. The maturity date of the promissory note is May 17, 2019. For the three and nine months ending September 30, 2016, interest and dividend income includes $122,000 and $356,000 representing the origination fee under the promissory note together with interest for the period from May 16, 2016 to September 30, 2016. As of September 30, 2016, the balance due to TRS by Retail II Holdings, including the earned but unpaid interest is $356,000. The Company is not deemed to be the primary beneficiary of Retail II Holdings, which qualifies as a VIE. Accordingly, the assets and liabilities and revenues and expenses of Retail II Holdings have not been included in the accompanying consolidated financial statements. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Stockholders' Equity | Stockholders Equity Common Stock Shares of the Companys common stock entitle the holders to one vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Companys board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights. Under the Companys articles of incorporation, the Company has authority to issue 750,000,000 shares of common stock, $0.001 par value per share, and 200,000,000 shares of preferred stock, $0.001 par value per share. As of September 30, 2016, the Company has accepted investors subscriptions for and issued 18,574,461 shares of the Companys common stock in its initial and follow-on public offerings, including common shares issued pursuant to the Companys distribution reinvestment plan, resulting in aggregate gross proceeds to the Company of $181,336,480. Preferred Stock Under the Companys articles of incorporation, the Companys board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors shall have the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares. As of September 30, 2016 and December 31, 2015, respectively, the Company has issued 1,000 shares of convertible preferred stock to the Advisor at a price of $10.00 per share. Common Stock Issuable Upon Conversion of Convertible Preferred Stock The convertible preferred stock issued to the Advisor will convert to shares of the Companys common stock if (1) the Company has made total distributions on then outstanding shares of the Companys common stock equal to the issue price of those shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares, (2) the Company lists its common stock for trading on a national securities exchange if the sum of prior distributions on then outstanding shares of the Companys common stock plus the aggregate market value of the Companys common stock (based on the 30-day average closing price meets the same 6% performance threshold, or (3) the Companys advisory agreement with the Advisor expires without renewal or is terminated (other than because of a material breach by the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Companys enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Companys enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all. Stock-Based Compensation The Company awards shares of restricted common stock to non-employee directors as compensation in part for their service as members of the board of directors of the Company. These shares are fully vested when granted. These shares may not be sold while an independent director is serving on the board of directors. For the three and nine months ended September 30, 2016 and 2015, respectively, the Company granted 1,500 and 1,500 shares and 4,500 and 4,500 shares of restricted common stock to independent directors as compensation for services. The Company recognized $18,600 and $15,000 and $55,800 and $45,000 as stock-based compensation expense for the three and nine months ended September 30, 2016 and 2015, respectively, based upon the estimated fair value per share. Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations. Distributions The following table reflects the total distributions the Company has paid, including the total amount paid and amount paid per common share, in each indicated quarter, in thousands except per share data: Quarter Paid Distributions per Common Share Total Distributions Paid 2016 3 rd 0.175 3,213 2 nd 0.175 3,042 1 st 0.175 2,478 Total 2016 0.525 8,733 2015 4 th 0.175 2,150 3 rd 0.175 1,947 2 nd 0.175 1,679 1 st 0.175 1,417 Total 2015 0.700 7,193 |
Incentive Awards Plan
Incentive Awards Plan | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Incentive Awards Plan | Incentive Awards Plan The Company has adopted an incentive plan (the Incentive Plan) that provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards within the meaning of Internal Revenue Code Section 422, or any combination of the foregoing. The Company has initially reserved 5,000,000 shares of its common stock for the issuance of awards under the Incentive Plan, but in no event may the Company grant awards with respect to more than ten (10%) percent of its issued and outstanding shares. The number of shares reserved under the Incentive Plan is also subject to adjustment in the event of a stock split, stock dividend or other change in the Companys capitalization. Generally, shares that are forfeited or canceled from awards under the Incentive Plan also will be available for future awards. The Compensation Committee of the Board of Directors also approved an award of 1,000 shares of restricted common stock issued to each of two executives of the Property Manager during the nine months ended September 30, 2016. The Company recognized stock-based compensation expense of $0 and $0 and $20,000 and $20,000 with respect to these awards based on the offering price of $10 per share for the three and nine months ended September 30, 2016 and 2015, respectively. Incentive Plan compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Notes | |
Commitments and Contingencies | Commitments and Contingencies Economic Dependency The Company is dependent on the Advisor and the Property Manager for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the Companys real estate portfolio, and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other providers. Litigation The Company is subject to various claims and legal actions that arise in the ordinary course of business. Management of the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position of the Company. Subsequent Events On November 14, 2016, the Company, through the Operating Partnership, entered into a limited liability agreement with Hartman vREIT XXI, Inc., an affiliate of the Company, for the purpose of acquiring a retail shopping center under contract for purchase by the Operating Partnership. Under the terms of the limited liability agreement of Hartman Village Pointe, LLC (Village Pointe), the Operating Partnership will assign its interest in the contract for purchase to Village Pointe and contribute $3,675,000 in exchange for a 97.35% members interest. Hartman vREIT XXI, Inc. will contribute $100,000 in exchange for a 2.65% members interest. The Operating Partnership will make a secured mortgage loan of $3,525,000 to Village Pointe, to be evidenced by a promissory note, deed of trust and assignment of leases and rents. The terms of the mortgage loan will require a 2% origination fee and payment of interest only at a rate of 10% per annum. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2015 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of September 30, 2016 have been prepared by the Company in accordance with accounting principles generally accepted in the United States (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of September 30, 2016, and the results of consolidated operations for the three and nine months ended September 30, 2016 and 2015, the consolidated statement of stockholders equity for the nine months ended September 30, 2016 and the consolidated statements of cash flows for the nine months ended September 30, 2016 and 2015. The results of the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016. The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2015. These unaudited consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies: Use of Estimates (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies: Reclassifications (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Reclassifications | Reclassifications The Company has reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on the previously reported working capital or results of operations. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Cash and Cash Equivalents | Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of September 30, 2016 and December 31, 2015 consisted of demand deposits at commercial banks. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies: Restricted Cash (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Restricted Cash | Restricted Cash Restricted cash represents cash for which the use of funds is restricted by certain loan documents. As of September 30, 2016 and December 31, 2015, the Company had a restricted cash balance of $2,371,000 and $6,900,000, respectively, representing amounts set aside as impounds to be disbursed to the Company (i) upon its achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property, and (ii) the completion of certain agreed upon capital repairs at the Cooper Street Property and the Mitchelldale Property. Restricted cash as of December 31, 2015 included $6,500,000 of loan proceeds and $400,000 in cash, in an escrow account with a loan servicer. During the three months ended September 30, 2016, the Company applied for and received $4,129,000 of the restricted loan proceeds and $400,000 of the capital repair escrow. The Company does not expect to meet the agreed upon requirements for the disbursement of any of the remaining $2,371,000 and such amount will be applied to the outstanding term loan balance on or before December 31, 2016. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies: Financial Instruments (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Financial Instruments | Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, note receivable, accounts payable and accrued expenses, notes payable and due from (to) related parties. The Company considers the carrying value to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Revenue Recognition | Revenue Recognition The Companys leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (ASC) 605-10-S99, Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursement and other revenues in the period the related costs are incurred. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies: Real Estate (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Policies | |
Real Estate | Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Companys policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and managements consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases. The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Companys reported net loss. Depreciation and amortization Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years remaining calculated on terms of all of the leases in-place when acquired. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of our real estate assets as of September 30, 2016. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market Approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost Approach: Amount required to replace the service capacity of an asset (replacement cost). Income Approach: Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Companys estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Accrued Rent and Accounts Receivable Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Deferred Leasing Commission Costs Leasing commissions are amortized using the straight-line method over the term of the related lease agreements. Goodwill GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount. If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements. Organization and Offering Expenses The Company has incurred certain organization and offering expenses in connection with the organization of the Company and the offering of the Companys shares of common stock in the Companys public offerings. These costs principally relate to professional and filing fees. For the three months ended September 30, 2016 and 2015, such costs totaled $0 and $296,000, respectively. For the nine months ended September 30, 2016 and 2015, such costs totaled ($44,000) and $653,000, respectively. Organization and offering expenses of the Company are paid directly by the Company or incurred by Advisor on behalf of the Company and reimbursed by the Company to the Advisor (subject to certain limitations). Pursuant to the Advisory Agreement, organization and offering expenses will be reimbursed by the Advisor to the Company following the completion of a public offering of the Company to the extent that total organization and offering expenses incurred by the Company in connection with such public offerings (excluding selling commissions and dealer manager fees) exceed 1.5% of gross offering proceeds from the completed public offerings. As of September 30, 2016 and December 31, 2015, respectively, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds was cumulatively $858,000 and $668,000 for the Companys initial and follow-on public offerings, respectively. The Company terminated the offer and sale of its common stock to the public in its follow-on offering on March 31, 2016.; provided, that the Company continued to process subscriptions dated on or before March 31, 2016 through June 30, 2016. The Company has recorded a receivable from the Advisor and recorded a contra expense of $858,000 resulting in a net credit for organization and offering expenses of ($44,000) during the nine months ended September 30, 2016. Stock-Based Compensation The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) with regard to issuance of stock in payment of services. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the fair value of the equity or liability instruments issued. Stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations. Advertising The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. Advertising costs totaled $15,000 and $23,000 for the three months ended September 30, 2016 and 2015, respectively. Advertising costs totaled $52,000 and $68,000 for the nine months ended September 30, 2016 and 2015, respectively. Income Taxes The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with its taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Companys annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Companys net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT. For the three months ended September 30, 2016 and 2015, the Company incurred a net loss of $2,408,000 and $2,754,000, respectively. For the nine months ended September 30, 2016 and 2015, the Company incurred a net loss of $6,811,000 and $5,457,000, respectively. The Company has formed a taxable REIT subsidiary which may generate future taxable income, which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements. The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the Companys tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions. Loss Per Share The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Companys potentially dilutive securities include preferred shares that are convertible into the Companys common stock. As of September 30, 2016 and 2015, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and nine months ended September 30, 2016 and 2015 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive. Concentration of Risk The Company maintains cash accounts in two U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts may exceed the federally insured limits. No losses have been incurred in connection with these deposits. The geographic concentration of the Companys real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition or any other changes, could adversely affect the Companys operating results and its ability to make distributions to stockholders Major tenants are defined as those tenants which individually comprise more that 10% of the Companys total rental revenues. The sole tenant of the Companys Gulf Plaza property represented 7.3% and 10.2% of total rental revenues for nine months ended September 30, 2016 and 2015, respectively. Recent Accounting Pronouncements ASU 2015-03, Interest Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. We have adopted this guidance for all periods presented. In February 2016, the FASB issued guidance requiring lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting will remain largely unchanged. The guidance will also require new qualitative and quantitative disclosures to help financial statement users better understand the timing, amount and uncertainty of cash flows arising from leases. This guidance will be effective for reporting periods beginning on or after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of this guidance and its impact on our consolidated financial statements. |
Real Estate_ Schedule of Real E
Real Estate: Schedule of Real Estate Properties (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Schedule of Real Estate Properties | September 30, 2016 December 31, 2015 Land $53,406 $47,997 Buildings and improvements 106,776 91,645 In-place lease value intangible 55,016 50,065 215,198 189,707 Less accumulated depreciation and amortization (43,876) (27,384) Total real estate assets $171,322 $162,323 |
Real Estate_ Fair value of the
Real Estate: Fair value of the assets acquired and liabilities assumed (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Fair value of the assets acquired and liabilities assumed | Westway One Assets acquired: Real estate assets $ 21,638 Other assets - Total assets acquired 21,638 Liabilities assumed: Accounts payable and accrued expenses 232 Security deposits 38 Total liabilities assumed 270 Fair value of net assets acquired $ 21,368 |
Real Estate_ In-place lease int
Real Estate: In-place lease intangible table (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
In-place lease intangible table | September 30, 2016 December 31, 2015 In-place lease value intangible $ 55,016 $ 50,065 In-place leases accumulated amortization (30,515) (18,728) Acquired lease intangible assets, net $ 24,501 $ 31,337 |
Accrued Rent and Accounts Rec29
Accrued Rent and Accounts Receivable, Net: Accrued Rent and Accounts Receivable, Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Accrued Rent and Accounts Receivable, Net | September 30, 2016 December 31, 2015 Tenant receivables $ 1,559 $ 1,176 Accrued rent 3,051 2,065 Other receivable 446 2 Allowance for uncollectible accounts (959) (493) Accrued rents and accounts receivable, net $ 4,097 $ 2,750 |
Deferred Leasing Commission C30
Deferred Leasing Commission Costs, Net: Deferred Leasing Commission Costs, net schedule (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Deferred Leasing Commission Costs, net schedule | September 30, 2016 December 31, 2015 Deferred leasing commissions $ 5,317 $ 3,006 Less: accumulated amortization (1,122) (603) Deferred leasing commission cost, net $ 4,195 $ 2,403 |
Notes Payable_ Loan costs (Tabl
Notes Payable: Loan costs (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Loan costs | The Companys loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands: September 30, 2016 December 31, 2015 Deferred loan costs $ 1,865 $ 1,726 Less: deferred loan cost accumulated amortization (590) (304) Total cost, net of accumulated amortization $ 1,275 $ 1,422 |
Notes Payable_ Notes payable ta
Notes Payable: Notes payable table (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Notes payable table | The following is a summary of the Companys notes payable as of September 30, 2016, in thousands: Collateral Property or Credit Facility Payment Type Maturity Date Rate Principal Balance Richardson Heights Property (1)(2) Principal and interest July 1, 2041 4.61% $ 19,306 Cooper Street Property (1)(3) Principal and interest July 1, 2041 4.61% 8,028 Bent Tree Green Property (1)(2) Principal and interest July 1, 2041 4.61% 8,028 Mitchelldale Property (1)(3) Principal and interest July 1, 2041 4.61% 12,162 Energy Plaza I & II Principal and interest June 10, 2021 5.30% 10,054 Westway One Interest only June 1, 2019 3.03% 10,819 TCB Credit Facility Interest only May 9, 2017 4.50% 1,300 EWB Credit Facility Interest only August 24, 2017 4.00% - EWB II Credit Facility Interest only August 24, 2017 4.00% 5,100 $ 74,797 Less unamortized deferred loan costs (1,275) $ 73,522 |
Loss Per Share_ Schedule of Ear
Loss Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Schedule of Earnings Per Share, Basic and Diluted | Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Numerator: Net loss attributable to common stockholders $(2,505) $(2,754) $(6,958) $(5,457) Denominator: Basic and diluted weighted average common shares outstanding 18,215 11,460 17,076 10,050 Basic and diluted loss per common share: Net loss attributable to common stockholders $(0.14) $(0.24) $(0.41) $(0.54) |
Stockholders' Equity_ Distribut
Stockholders' Equity: Distribution table (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Distribution table | The following table reflects the total distributions the Company has paid, including the total amount paid and amount paid per common share, in each indicated quarter, in thousands except per share data: Quarter Paid Distributions per Common Share Total Distributions Paid 2016 3 rd 0.175 3,213 2 nd 0.175 3,042 1 st 0.175 2,478 Total 2016 0.525 8,733 2015 4 th 0.175 2,150 3 rd 0.175 1,947 2 nd 0.175 1,679 1 st 0.175 1,417 Total 2015 0.700 7,193 |
Organization and Business (Deta
Organization and Business (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Details | ||
Shares, Issued | 18,574,461 | |
Distribution reinvestment plan shares | 1,174,761 | |
Aggregate gross offering proceeds | $ 181,336,480 | |
Common stock issued as non-employee compensation and certain executives | 34,875 | |
Stock to Hartman XX Holdings | 19,000 | |
Shares Issued, Price Per Share | $ 10 | |
Preferred Stock, Shares Issued | 1,000 | |
Estimated value per share | $ 12.40 |
Summary of Significant Accoun36
Summary of Significant Accounting Policies: Restricted Cash (Details) | Dec. 31, 2015USD ($) |
Details | |
Loan in restricted cash | $ 6,500,000 |
Summary of Significant Accoun37
Summary of Significant Accounting Policies: Real Estate (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Details | ||||
Receivable from the Advisor | $ 858,000 | $ 858,000 | ||
Advertising Expense | $ 15,000 | $ 23,000 | $ 52,000 | $ 68,000 |
Real Estate_ Schedule of Real38
Real Estate: Schedule of Real Estate Properties (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Details | ||
Land | $ 53,406 | $ 47,997 |
Buildings and Improvements, Gross | 106,776 | 91,645 |
In-place lease value intangible | 55,016 | 50,065 |
Accumulated depreciation and amortization | $ (43,876) | $ (27,384) |
Real Estate (Details)
Real Estate (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Details | |||||
Depreciation expense | $ 1,742,000 | $ 1,182,000 | $ 4,705,000 | $ 2,914,000 | |
Amortization on in-placed leases | $ 4,066,000 | 2,830,000 | 11,787,000 | 6,609,000 | |
Acquisition fees paid to Advisor | 0 | 724,000 | 541,000 | 1,262,000 | |
Asset management fees paid to Advisor | $ 372,000 | $ 267,000 | 1,052,000 | $ 696,000 | |
Acquired a three story office building | 21,638,000 | ||||
Acquisition fee due to Westway one | $ 541,000 |
Deferred Leasing Commission C40
Deferred Leasing Commission Costs, Net: Deferred Leasing Commission Costs, net schedule (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Details | ||
Deferred Leasing Commissions | $ 5,317 | $ 3,006 |
Deferred Costs, Leasing, Accumulated Amortization | (1,122) | (603) |
Deferred Costs, Leasing, Net | $ 4,195 | $ 2,403 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Details | ||
Outstanding balance under the TCB Credit Facility | $ 1.3 | $ 4 |
Aggregate outstanding balance under the EWB Credit Facility | 5.1 | $ 14 |
Amount available to be borrowed under the EWB Credit Facility | $ 20.3 |
Notes Payable_ Loan costs (Deta
Notes Payable: Loan costs (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Details | ||
Deferred loan costs | $ 1,865 | $ 1,726 |
Deferred loan cost accumulated amortization | (590) | (304) |
Loan Cost, net of accumulated amortization | $ 1,275 | $ 1,422 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Details | ||||||
Property management fees and expense reimbursements | $ 1,810,000 | $ 1,021,000 | $ 5,060,000 | $ 2,318,000 | ||
Leasing Commissions Expense | $ 823,000 | 382,000 | 2,311,000 | 748,000 | ||
Construction management fees | 47,000 | $ 103,000 | 115,000 | $ 76,000 | 254,000 | $ 142,000 |
Balance due from Hartman XX Holdings | $ 0 | $ 100,000 | $ 0 | $ 0 |
Stockholders' Equity_ Distrib44
Stockholders' Equity: Distribution table (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Details | |||||||||
Distributions per Common Share | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.525 | $ 0.700 |
Distribution Made to Limited Partner, Cash Distributions Paid | $ 3,213 | $ 3,042 | $ 2,478 | $ 2,150 | $ 1,947 | $ 1,679 | $ 1,417 | $ 8,733 | $ 7,193 |