Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Jun. 30, 2016 | |
Document and Entity Information: | ||
Entity Registrant Name | Hartman Short Term Income Properties XX, Inc. | |
Document Type | 10-K | |
Document Period End Date | Dec. 31, 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 | 18,164,876 | |
Entity Public Float | $ 181,648,760 | |
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 | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
ASSETS | ||
Real estateInvestment property at cost | $ 253,099 | $ 189,707 |
Real estate investment property accumulated depreciation | (49,891) | (27,384) |
Real estate investment property at cost, net | 203,208 | 162,323 |
Cash and cash equivalents | 3,254 | 1,380 |
Restricted cash | 2,371 | 6,900 |
Accrued rent and accounts receivable, net | 5,266 | 2,750 |
Note receivable | 11,431 | |
Deferred lease commissions and loan costs, net | 4,775 | 2,403 |
Goodwill | 250 | 250 |
Prepaid expenses and other assets | 1,662 | 1,390 |
Due from related parties | 199 | |
Real estate held for disposition | 7,050 | |
Investment in affiliate | 8,978 | |
Total assets | 248,245 | 177,595 |
LIABILITIES | ||
Note payable | 114,151 | 74,995 |
Note payable due to real estate held for disposition | 3,458 | |
Accounts payable and accrued expenses | 12,090 | 9,367 |
Due to related parties | 351 | |
Tenants' security deposits | 1,824 | 1,326 |
Total liabilities | 131,874 | 85,688 |
Common stock | 18 | 14 |
Additional paid in capital | 169,404 | 128,336 |
Accumulated distributions and net loss | (59,728) | (36,443) |
Total stockholders' equity | 109,694 | 91,907 |
Noncontrolling interests in subsidiary | 6,677 | |
Total equity | 116,371 | 91,907 |
Total liabilities and total stockholders' equity | $ 248,245 | $ 177,595 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues | ||
Rental revenues | $ 33,002 | $ 22,353 |
Tenant reimbursements and other revenues | 5,568 | 3,851 |
Total revenues | 38,570 | 26,204 |
Expenses | ||
Property operating expenses | 14,530 | 7,593 |
Asset management and acquisition fees | 3,007 | 2,764 |
Organization and offering costs | 20 | 963 |
Real estate taxes and insurance | 4,510 | 4,080 |
Depreciation and amortization | 22,507 | 14,480 |
General and administrative | 2,357 | 1,419 |
Interest expense | 3,737 | 3,393 |
Interest and dividend income | (1,147) | |
Total expenses | 49,521 | 34,692 |
Loss from continuing operations | (10,951) | (8,488) |
Income from discontinued operations, net | (31) | |
Net loss | (10,982) | (8,488) |
Net income attributable to noncontrolling interests | 118 | |
Net loss attributable to common stockholders | $ (11,100) | $ (8,488) |
Basic and diluted loss per common share: | ||
Loss attributable to common stockholders | $ (0.64) | $ (0.79) |
Weighted average number of common shares outstanding, basic and diluted | 17,362 | 10,734 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - 12 months ended Dec. 31, 2016 - USD ($) $ 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 | 43,171 | 0 | $ 43,175 | |
Issuance of common shares, net of redemption (shares) | 4,396 | 4,396 | ||||
Selling commissions | 0 | $ 0 | (2,103) | 0 | 0 | $ (2,103) |
investement of noncontrolling interest | 0 | 0 | 0 | 0 | 6,850 | 5,500 |
Dividends and distributions | 0 | 0 | 0 | (12,185) | 0 | (12,185) |
Net loss | $ 0 | 0 | 0 | (11,100) | 118 | (10,982) |
Total equity, ending balance at Dec. 31, 2016 | $ 18 | $ 169,404 | $ (59,728) | $ 6,677 | $ 116,371 | |
Ending balance - preferred Stock (in shares) at December 31, 2016 at Dec. 31, 2016 | 1 | 1 | ||||
Ending balance - common Stock (in shares) at December 31, 2016 at Dec. 31, 2016 | 18,165 | 18,165 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (10,982) | $ (8,488) |
Stock based compensation | 113 | 80 |
Depreciation and amortization expense | 22,507 | 14,480 |
Deferred loan and leasing commission costs amortization | 1,056 | 580 |
(Increase) decrease accrued rent and accounts receivable | (3,229) | (1,638) |
Deferred leasing commmission costs | (3,110) | (1,049) |
(Increase) decrease prepaid expenses and other assets | (415) | 168 |
Increase (decrease) accounts payable and accrued expenses | 2,244 | 4,096 |
Increase (decrease) on due to related parties | 551 | (708) |
Increase (decrease) tenants' security deposits | 499 | 528 |
Net cash provided by (used in) operating activities | 9,947 | 8,325 |
Cash flows from investing activities: | ||
Acquisition deposit | (20) | 50 |
(increase) decrease Note receivable | (11,431) | |
(increase) decrease Investment in affiliates | (8,978) | |
Resctricted cash | 4,529 | 200 |
Additions to real estate | (70,442) | (73,779) |
Net cash provide from (used in) investing activities | (86,342) | (73,529) |
Cash flows from financing activities: | ||
Dividend distributions paid in cash | (9,126) | (3,476) |
Payment of selling commissions | (2,103) | (2,469) |
Noncontrolling interest's capital | 6,850 | |
Payment of deferred loan costs | (429) | (554) |
Proceeds under term loan notes | 32,171 | |
Repayments under term loan notes | (1,200) | (1,146) |
Proceeds from revolving credit facility | 56,225 | 42,831 |
Repayment of revolving credit advances | (44,471) | (24,885) |
Proceeds from issuance of common stock | 41,692 | 52,117 |
Redemption of common shares | (1,340) | (263) |
Net cash provided by (used in) financing activities | 78,269 | 62,155 |
Net change in cash | 1,874 | (3,049) |
Cash and cash equivalents, beginning of period | 1,380 | 4,429 |
Cash and cash equivalents, end of period | $ 3,254 | $ 1,380 |
Organization and Business
Organization and Business | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Organization and Business | Note 1 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. On February 9, 2010, the Company commenced its initial public offering to sell a maximum of $250,000,000 in shares of the Companys common stock to the public at a price of $10.00 per share and up to $23,750,000 in shares of common stock to the Companys stockholders pursuant to the Companys distribution reinvestment plan at a price of $9.50 per share. On April 25, 2013, the Company terminated its initial public offering. Effective July 16, 2013, the Company commenced its follow-on public offering of up to $200,000,000 in shares of its common stock to the public in its primary offering at a price of $10.00 per share and up to $19,000,000 in shares of its common stock to its stockholders pursuant to the Companys distribution reinvestment plan at a price of $9.50 per share. The offering price for shares offered in the follow-on offering was arbitrarily determined by the Companys board of directors. Effective March 31, 2016, the Company terminated the offer and sale of its common shares to the public in its follow-on offering. The sale of shares of the Companys common stock to its stockholders pursuant to the Companys distribution reinvestment plan continued until July 16, 2016. As of December 31, 2016, the Company had issued 18,547,461 shares of common stock in its initial and follow-on public offerings, including 1,216,240 shares of common stock pursuant to the Companys distribution reinvestment plan, resulting in gross offering proceeds of $181,366,480. Total shares issued and outstanding as of December 31, 2016 included 52,875 shares of common stock issued as non-employee compensation to members of the Companys board of directors and certain executives of our Property Manager. The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc. Hartman XX Holdings, Inc. is a Texas corporation wholly owned by Allen R. Hartman. The Company sold 19,000 shares of common stock to Hartman XX Holdings, Inc. at a price of $10.00 per share. The Company has also issued 1,000 shares of the Companys convertible preferred stock to the Companys 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. Allen R. Hartman, the Companys Chief Executive Officer and Chairman of the Board of Directors, beneficially owns approximately 20% of Hartman Income REIT, Inc. 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 Companys single member interests in the Companys limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries. 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. D.H. Hill Securities, LLLP was the dealer manager for the Companys public offering. These parties receive compensation and fees for services related to the offering and for the investment and management of the Companys assets. These entities will receive fees during the offering, acquisition, operational and liquidation stages. As of December 31, 2016, the Company owned or held a majority interest in 18 commercial properties comprising approximately 2,982,687 square feet plus three pad sites, all located in Texas. As of December 31, 2016, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and three properties located in San Antonio, Texas. As of December 31, 2015, the Company owned 15 commercial properties comprising approximately 2,395,910 square feet plus three pad sites, all located in Texas. As of December 31, 2015, the Company owned seven properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Summary of Significant Accounting Policies | Note 2 Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements as of December 31, 2016 and 2015 and for the years then ended have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-K and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. These 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 generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent 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 fiscal year amounts in the accompanying consolidated financial statements in order to be consistent with the current fiscal year 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 December 31, 2016 and 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 December 31, 2016 and December 31, 2015, the Company had a restricted cash balance of $2,371,000 and $6,900,000, respectively, which represent 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. As of December 31, 2016 and 2015, respectively, restricted cash includes $2,371,000 and $6,500,000 of loan proceeds and $0 and $400,000 in cash, which are on deposit in escrow accounts with the loan servicer. For the year ended December 31, 2016, the Company received restricted cash loan proceeds of $4,129,000 and $400,000 in cash as reimbursement following the completion of certain agreed upon capital repairs. Pursuant to a reserve agreement among the Company and the lender, the Companys right to draw upon restricted funds expired on December 31, 2016. The lender has the right to draw any of the remaining funds and apply the same to the outstanding loans at the lenders sole discretion. Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, accounts payable and accrued expenses 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 note 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 reimbursements and other revenue 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 revenue 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 calculated in 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 the Companys real estate assets as of December 31, 2016 and 2015. 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 the Companys 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 the Companys claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Deferred Loan and Leasing Commissions Costs Loan costs are capitalized and amortized using the straight-line method over the terms of the loans, which approximates the interest method. Leasing commissions are capitalized and amortized using the straight-line method over the term of the related lease agreements. Goodwill Generally accepted accounting principles in the United States require 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. For the years ended December 31, 2016 and 2015, no goodwill impairment was recognized in the accompanying consolidated financial statements. Organization and Offering Costs The Company has incurred certain expenses in connection with organizing the company. These costs principally relate to professional and filing fees. For the years ended December 31, 2016 and 2015, such costs totaled $20,000 and $963,000, respectively, which have been expensed as incurred. 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 December 31, 2016 and 2015, respectively, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds was cumulatively 1.5% 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. 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 organization and offering expenses of $(44,000) for the year months ended December 31, 2016. Stock-Based Compensation The Company follows ASC 718- Compensation- Stock Compensation 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 $183,000 and $162,000 for the years ended December 31, 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 years ended December 31, 2016 and 2015, the Company incurred a net loss of $10,924,000 and $8,488,000, respectively. The Company does anticipate forming any taxable REIT subsidiaries or otherwise generating 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 in that no future taxable income is expected. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the 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 December 31, 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 years ended December 31, 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 The sole tenant of the Gulf Plaza property represents 7.3% and 10.7% of the Companys rental revenues for the year ended December 31, 2016 and 2015, respectively. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to January 1, 2018 with early adoption beginning January 1, 2017. We have begun to evaluate each of our revenue streams under the new model. Based on preliminary assessments, we do not expect the adoption of ASU No. 2014-09 to have a material effect on our consolidated financial position or our consolidated results of operations. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities, which enhances the reporting requirements surrounding the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. ASU No. 2016-01 is effective for our fiscal year commencing on January 1, 2018. We do not anticipate that the adoption of ASU No. 2016-01 will have a material effect on our consolidated financial position or our consolidated results of operations. In February 2016, the FASB issued ASU No. 2016-02, Leases, which changes lessee accounting to reflect the financial liability and right-of-use asset that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for our fiscal year commencing on January 1, 2019, but early adoption is permitted. The effect that the adoption of ASU No. 2016-02 will have on our consolidated financial position or our consolidated results of operations is not currently reasonably estimable. In October 2016, the FASB issued ASU No. 2016-17, Interest Held Through Related Parties That Are Under Common Control, which amends the accounting guidance when determining the treatment of certain VIEs to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. ASU No. 2016-17 is effective for our fiscal year commencing on January 1, 2017. The adoption of ASU No. 2016-17 will not have a material effect on our consolidated financial position or our consolidated results of operations. In November 2016, the FASB issued ASU No. 2016-18, Classification of Restricted Cash, which addresses the Statement of Cash Flow classification and presentation of restricted cash transactions. ASU No. 2016-18 is effective for our fiscal year commencing on January 1, 2018. The effect of this amendment is to be applied retrospectively and early adoption is permitted. We expect to adopt ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-18 will not have a material effect on our consolidated financial position or our consolidated results of operations. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as an acquisition of assets or a business. ASU No. 2017-01 is effective for our fiscal year commencing on January 1, 2018. The effect of this guidance is to be applied prospectively and early adoption is permitted. The adoption of ASU No. 2017-01 will not have a material effect on our consolidated financial position or our consolidated results of operations. |
Real Estate
Real Estate | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Real Estate | Note 3 Real Estate Real estate assets consisted of the following, in thousands: December 31, 2016 2015 Land $ 62,320 $ 47,997 Buildings and improvements 127,206 91,645 In-place lease value intangible 63,573 50,065 253,099 189,707 Less accumulated depreciation and amortization (49,872) (27,384) Total real estate assets $ 203,227 $ 162,323 Depreciation expense for the years ended December 31, 2016 and 2015 was $6,581,000 and $4,347,000, respectively. 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, the Company considers 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: December 31, 2016 2015 In-place lease value intangible 63,573 50,065 In-place leases accumulated amortization (35,635) (18,728) Acquired lease intangible assets, net $28,938 $31,337 The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands: Year ending December 31, In-place lease amortization 2017 14,957 2018 6,439 2019 3,414 2020 2978 2021 929 Thereafter 221 Total $ 31,938 Amortization expense for the year ended December 31, 2016 and 2015 was $15,907,000 and $10,133,000, respectively. As of December 31, 2016 the Company owned or held a majority interest in 18 commercial properties comprising approximately 2,982,687 square feet plus three pad sites, all located in Texas. As of December 31, 2016, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and three properties located in San Antonio, Texas. As of December 31, 2015 the Company owned 15 commercial properties comprising approximately 2,395,910 square feet plus three pad sites, all located in Texas. As of December 31, 2015, the Company owned seven properties located in Richardson, Arlington, and Dallas, Texas, seven properties located in Houston, Texas and four properties located in San Antonio, Texas. On June 1, 2016, Hartman Westway One, LLC, a wholly owned subsidiary of the Operating Partnership, acquired a three-story office building containing approximately 165,982 square feet of office space located in Irving, Texas, commonly known as Westway One. 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. 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. On November 14, 2016, the Operating Partnership contributed $3,675,000 cash to Hartman Village Pointe, LLC, in exchange for a 97.35% membership in a joint venture investment among the Operating Partnership and Hartman vREIT XXI, Inc. Hartman vREIT XXI contributed $100,000 to Hartman Village Pointe, LLC in exchange for a 2.65% membership interest in the joint venture. On November 14, 2016, Hartman Village Pointe, LLC acquired a retail shopping center comprising approximately 54,246 square feet located in San Antonio, Texas, commonly known as Village Pointe, for $7,050,000, exclusive of closing costs. The acquisition price for the Village Pointe property was funded by members capital and a $3,525,000 mortgage loan provided by the Operating Partnership. On December 1, 2016, Hartman vREIT XXI acquired an additional 33.11% membership interest in the joint venture from the Operating Partnership for $1,265,000. An acquisition fee of $142,500 was earned by the Advisor in connection with the purchase of the of the Operating Partnerships interest as of December 31, 2016 in the Village Pointe property. As of February 8, 2017, Hartman vREIT XXI, Inc. has acquired all of the Operating Partnerships interests in the joint venture for $3,675,000. See Note 11- Real Estate Held for Disposition. On December 22, 2016, the Company, through Hartman Three Forest Plaza, LLC, a majority owned subsidiary of Hartman XX Limited Partnership, our operating partnership, acquired a fee simple interest in a 19-story suburban office building comprising approximately 366,549 square feet and located in Dallas, Texas. The property is commonly referred to as Three Forest Plaza with a purchase price of $35,655,000. The Three Forest property was 74% occupied at the acquisition date. An acquisition fee of $891,000 was earned by the Advisor in connection with the purchase of the Three Forest property. The following table summarizes the fair value of the assets acquired and the liabilities assumed based upon the Companys purchase price allocations of the Companys 2016 property acquisitions as of the respective acquisition dates, in thousands: Westway One Three Forest Plaza Total Assets acquired: Real estate assets $ 21,638 $ 35,655 $ 57,293 Liabilities assumed: Accounts payable and accrued expenses 232 1,303 1,535 Security deposits 38 283 321 Total liabilities assumed 270 1,586 1,856 Fair value of net assets acquired $ 21,368 $ 34,069 $ 55,473 On May 1, 2015, the Operating Partnership acquired a nine-building office complex comprising approximately 203,688 square feet located in Dallas, Texas, commonly known as Commerce Plaza Hillcrest (Commerce Hillcrest) through Hartman Hillcrest, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for an aggregate purchase price of $11,400,000, exclusive of closing costs. The Commerce Hillcrest property was approximately 74% occupied at the acquisition date. An acquisition fee of $285,000 was earned by the Advisor in connection with the purchase of the Commerce Hillcrest property. On May 8, 2015, the Operating Partnership acquired an office building comprising approximately 230,872 square feet located in Houston, Texas, commonly known as 400 North Belt (400 North Belt) through Hartman 400 North Belt, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $710,150,000, exclusive of closing costs. The 400 North Belt property was approximately 67% occupied at the acquisition date. An acquisition fee of $254,000 was earned by the Advisor in connection with the purchase of the 400 North Belt property. On July 31, 2015, the Operating Partnership acquired an office building comprising approximately 158,451 square feet located in Houston, Texas, commonly known as Ashford Crossing (Ashford Crossing) through Hartman Ashford Crossing, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $10,600,000, exclusive of closing costs. The Ashford Crossing property was approximately 88% occupied at the acquisition date. An acquisition fee of $265,000 was earned by the Advisor in connection with the purchase of the Ashford Crossing property. On August 24, 2015, the Operating Partnership acquired an office building comprising approximately 113,429 square feet located in Dallas, Texas, commonly known as Corporate Park Place (Corporate Park Place) through Hartman Corporate Park Place, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $9,500,000, exclusive of closing costs. The Corporate Park Place property was approximately 79% occupied at the acquisition date. An acquisition fee of $238,000 was earned by the Advisor in connection with the purchase of the Corporate Park Place property. On September 2, 2015, the Operating Partnership acquired an office building comprising approximately 115,700 square feet located in Arlington, Texas, commonly known as Skymark Tower (Skymark Tower) through Hartman Skymark Tower, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $8,846,000, exclusive of closing costs. The Skymark Tower property was approximately 75% occupied at the acquisition date. An acquisition fee of $221,000 was earned by the Advisor in connection with the purchase of the Skymark Tower property. On November 10, 2015, the Operating Partnership acquired an office building comprising approximately 196,348 square feet located in San Antonio, Texas, commonly known as One Technology Center (One Technology Center) through Hartman One Technology, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $19,575,000 exclusive of closing costs. The One Technology Center property was approximately 85% occupied at the acquisition date. An acquisition fee of $489,000 was earned by the Advisor in connection with the purchase of the One Technology Center property. The following table summarizes the fair value of the assets acquired and the liabilities assumed based upon the Companys purchase price allocations of the Companys 2015 property acquisitions as of the respective acquisition dates: Commerce Plaza Hillcrest 400 North Belt Ashford Crossing Corporate Park Place Skymark Tower One Technology Center Total (in thousands) Assets acquired: Real estate assets $ 11,400 $ 10,150 $ 10,600 $ 9,500 $ 8,846 $ 19,575 $ 70,071 Liabilities assumed: Accounts payable and accrued expenses 74 640 723 138 122 117 1,814 Security deposits 129 55 90 71 63 93 501 Total liabilities assumed 203 695 813 209 185 210 2,315 Fair value of net assets acquired $ 11,197 $ 9,455 $ 9,787 $ 9,291 $ 8,661 $ 19,365 $ 67,756 Acquisition fees paid to Advisor were $1,574,000 and $1,752,000 for the years ended December 31, 2016 and 2015, respectively. Asset management fees paid to Advisor were $1,433,000 and $1,012,000 for the years ended December 31, 2016 and 2015, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations for the years ended December 31, 2016 and 2015, respectively. The Companys indirect wholly owned subsidiary, Hartman Richardson Heights Properties, LLC (HRHP LLC), and the City of Richardson, Texas are parties to an economic development incentive agreement. Under the terms of the agreement, the City of Richardson will pay annual grants to HRHP LLC in equal installments over a five-year period of up to $1.5 million and sales tax grants to be paid annually over the first 10 years of the Alamo Draft House lease. The Company has received installments of $300,000 in each of the years ended December 31, 2016 and 2015, respectively, which are included in tenant reimbursements and other revenues on the consolidated statements of operations. For the years ended December 31, 2016 and 2015, respectively, the Company received a sales tax grant of $73,000 and $64,000 pursuant to the economic development incentive agreement, which is included in tenant reimbursements and other revenues on the consolidated statements of operations. Payments received by the Company in the form of annual grants and annual sales tax grants are subject to refund or adjustment during the term of the economic development incentive agreement. In general, the incentive agreement provides that the Company must continue to be in good standing with respect to the terms and conditions of the agreement and that the Alamo Draft House lessee must continue as a tenant of the Richardson Heights Property during the term of its lease agreement. As of December 31, 2016, no uncured breach or default exists under the terms of the incentive agreement and the Company has no liability or other obligation to repay any grants received under the agreement. The following unaudited pro forma consolidated financial information for the years ended December 31, 2016 and 2015 is presented as if the Company acquired 400 North Belt, Commerce Plaza Hillcrest, Skymark Tower, Corporate Park Place, Ashford Crossing, One Technology Center, Westway One, and Three Forest Plaza on January 1, 2015. This information is not necessarily indicative of what the actual results of operations would have been had the Company completed the acquisition of 400 North Belt, Commerce Plaza Hillcrest, Skymark Tower, Corporate Park Place, Ashford Crossing, One Technology Center, Westway One, and Three Forest Plaza on January 1, 2015, nor does it purport to represent the Companys future operations, in thousands: Years ended December 31, 2016 (unaudited) 2015 (unaudited) Revenue $ 46,260 $ 43,092 Net loss $ (7,582) $ (10,866) |
Accrued Rent and Accounts Recei
Accrued Rent and Accounts Receivable, Net | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Accrued Rent and Accounts Receivable, Net | Note 4 Accrued Rent and Accounts Receivable, net Accrued rent and accounts receivable, net, consisted of the following, in thousands: Years ended December 31, 2016 2015 Tenant receivables $ 2,889 $ 1,178 Accrued rent 3,583 2,065 Allowance for doubtful accounts (1,207) (493) Accrued Rents and Accounts Receivable, net $ 5,266 $ 2,750 As of December 31, 2016 and 2015, the Company had an allowance for uncollectible accounts of $1,206,000 and $493,000, respectively. For the years ended December 31, 2016 and 2015, the Company recorded bad debt expense of $713,000 and $276,000, respectively, related to tenant receivables that the Company have specifically identified as potentially uncollectible based on the Companys assessment of each tenants credit-worthiness. Bad debt expenses and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations. |
Deferred Leasing Commission Cos
Deferred Leasing Commission Costs, Net | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Deferred Leasing Commission Costs, Net | Note 5 Deferred Leasing Commission Costs, net Costs which have been deferred consist of the following, in thousands: Years ended December 31, 2016 2015 Deferred Leasing Commissions $ 6,116 $ 3,006 Less: deferred leasing commissions accumulated amortization (1,341) (603) Total cost, net of accumulated amortization $ 4,775 $ 2,403 |
Future Minimum Rents
Future Minimum Rents | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Future Minimum Rents | Note 6 Future Minimum Rents The Company leases the majority of its properties under noncancelable operating leases which provide for minimum base rentals. A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancelable operating leases in existence at December 31, 2016 is as follows, in thousands: Year ending December 31, Minimum Future Rents 2017 $ 36,107 2018 30,601 2019 23,610 2020 18,871 2021 16,002 Thereafter 34,154 Total $ 159,345 |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Notes Payable | December 31, Property/Facility Payment (1) Maturity Date Rate 2016 2015 Richardson Heights (2)(3) P&I July 1, 2041 4.61% $ 19,200 19,200 $ 19,614 Cooper Street (2)(4) P&I July 1, 2041 4.61% 7,984 8,156 Bent Tree Green (2)(3) P&I July 1, 2041 4.61% 7,984 8,156 Mitchelldale (2)(4) P&I July 1, 2041 4.61% 12,096 12,356 Energy Plaza I & II P&I June 10, 2021 5.30% 10,007 10,189 Westway One IO June 1, 2019 3.12% 10,819 - Three Forest Plaza IO December 31, 2019 3.56% 17,828 - TCB Credit Facility IO May 9, 2017 4.75% 7,800 4,007 EWB Credit Facility IO August 24, 2017 4.25% 12,000 13,840 EWB II Credit Facility IO August 24, 2017 4.25% 9,900 100 $ 115,618 115,618 $ 76,418 Less unamortized deferred loan costs (1,467) (1,423) $ 114,151 $ 74,995 1,432 |
Loss Per Share
Loss Per Share | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Loss Per Share | 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 December 31, 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 years ended December 31, 2016 and 2015 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Income Taxes | Note 9 Income Taxes Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates. The Companys federal income tax returns for the years ended December 31, 2013, 2014 and 2015 have not been examined by the Internal Revenue Service. The Companys federal income tax return for the year ended December 31, 2013 may be examined on or before September 15, 2017. Taxable income differs from net income for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and amortization and rental revenue. For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31: 2016 2015 Ordinary income (unaudited) 34.8% 40.4% Return of capital (unaudited) 65.2% 59.6% Capital gains distribution (unaudited) - - Total 100.0% 100.0% A provision for Texas Franchise tax under the Texas Margin Tax Bill in the amount of $197,000 and $183,000 was recorded in the consolidated financial statements for the years ended December 31, 2016 and 2015, respectively, with a corresponding charge to real estate taxes and insurance. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Related Party Transactions | Note 10 Related Party Transactions Hartman Advisors LLC, is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. and Subsidiaries of which approximately 20% is owned by Allen R. Hartman who is the Chief Executive Officer and Chairman of the Board of Directors. The Company pays acquisition fees and asset management fees to the Advisor in connection with the acquisition of properties and management of the Company. The Company pays property management and leasing commissions to the Property Manager in connection with the management and leasing of the Companys properties. For the years ended December 31, 2016 and 2015 the Company incurred property management fees and reimbursements of $3,611,000 and $2,417,000, respectively, and $3,110,000 and $1,049,000, respectively for leasing commissions owed to our Property Manager. We incurred asset management fees of $1,433,000 and $1,012,000, respectively owed to Advisor. Acquisition fees incurred to the Advisor were $1,574,000 and $1,752,000 for the years ended December 31, 2016 and 2015, respectively. The Company had a balance due to(from) the Property Manager of $518,000 and ($729,000) as of December 31, 2016 and December 31, 2015, respectively. The Company owed the Advisor $250,000 and $625,000 for asset management fees as of December 31, 2016 and December 31, 2015, respectively. These fees are monthly fees equal to one-twelfth of 0.75% of the sum of the higher of the cost or value of each asset. The asset management fee will be based only on the portion of the cost or value attributable to the Companys investment in an asset, if the Company do not own all or a majority of an asset. The Company had a balance due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (Hartman XIX), of $4,474,000 as of December 31, 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 in the original amount of $4,500,000, 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 $13.0 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 $4,500,000 to Hartman XIX in connection with Hartman XIXs contemplated acquisition of HIREIT shares. On March 15, 2016, the Company acquired 1,561,523 shares of the common stock of HIREIT for $8,978,000. 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 17, 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 year ended December 31, 2016, interest and dividend income in the accompanying consolidated statements of operations, includes $456,000 of interest income for the period from May 16, 2016 to December 31, 2016 and $144,000 representing the origination fee under the promissory note. As of December 31, 2016, the balance due to TRS by Retail II Holdings consists of earned but unpaid origination fee of $144,000. 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. |
Real Estate Held For Dispositio
Real Estate Held For Disposition | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Real Estate Held For Disposition | Note 11 Real Estate Held for Disposition On November 14, 2016, the Operating Partnership contributed $3,675,000 cash to Hartman Village Pointe, LLC, in exchange for a 97.35% membership in a joint venture investment among the Operating Partnership and Hartman vREIT XXI, Inc. Hartman vREIT XXI contributed $100,000 to Hartman Village Pointe, LLC in exchange for a 2.65% membership interest in the joint venture. On November 14, 2016, Hartman Village Pointe, LLC acquired a retail shopping center comprising approximately 54,246 square feet located in San Antonio, Texas, commonly known as Village Pointe, for $7,050,000, exclusive of closing costs. The Village Pointe property was approximately 93% occupied at the acquisition date. The Operating Partnership made a mortgage loan of $3,525,000, secured by the Village Pointe Property, to Hartman Village Pointe LLC in connection with the property acquisition. On December 14, 2016, the acquisition financing provided by the Operating Partnership was refinanced with a $3,525,000 mortgage loan from a bank. The Company and the Operating Partnership are guarantors of the bank loan. Hartman Village Pointe, LLC paid the Advisor an acquisition fee of $142,500 in connection with the purchase of the Village Pointe property. Pursuant to the terms of a membership unit purchase agreement between the Operating Partnership and Hartman vREIT XXI, Hartman vREIT XXI had the option to acquire from time to time up to all of the membership interest of the Operating Partnership in Hartman Village Pointe at a price equal to the Operating Partnerships investment cost. As of February 8, 2017, the Operating Partnership sold all of its interest in the joint venture for $3,675,000. The Companys investment in the Village Pointe property joint venture is presented as real estate held for disposition in the accompanying consolidated balance sheets. The Companys share of operations for the year ended December 31, 2016 is presented as income from discontinued operations in the accompanying consolidated statements of operations. Income from discontinued operations with respect to the Village Pointe Property is as follows, in thousands: Year ended December 31,2016 Total revenues $ 118 Property operating expenses 12 Real estate taxes and insurance 18 Asset management fees 7 General and administrative 7 Interest expense 105 Total expenses 149 Net loss (31) Property operating expenses include $8,000 in property management fees and reimbursements earned by the Property Manager. Asset management fees were earned by Advisor. Interest expense includes $70,500 due to the Operating Partnership for the bridge loan to Hartman Village Pointe, LLC and $34,000 of mortgage loan interest expense for the bridge loan for the period from November 14, 2016 to December 14, 2016. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Stockholders' Equity | Note 12 Stockholders Equity Common Stock Shares of 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 our articles of incorporation, the Company has authority to issue 750,000,000 common shares of beneficial interest, $0.001 par value per share, and 200,000,000 preferred shares of beneficial interest, $0.001 par value per share. As of December 31, 2016, the Company had accepted subscriptions for, and issued 18,574,461 shares of the Companys common stock in the Companys initial public offering and the Companys follow-on offering, including 1,216,240 shares of the Companys common stock issued pursuant to the Companys distribution reinvestment plan, resulting in aggregate offering proceeds 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 December 31, 2016 and 2015 the Company has issued 1,000 shares of convertible preferred shares to Hartman Advisors LLC at a price of $10.00 per share. Common Stock Issuable Upon Conversion of Convertible Preferred Stock The convertible preferred stock will convert to shares of 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 Hartman Advisors, LLC 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 vested restricted common shares 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 years ended December 31, 2016 and 2015, respectively, the Company granted 6,000 and 6,000 shares of restricted common stock to independent directors as compensation for services. The Company recognized $79,000 and $60,000 as share-based compensation expense for the years ended December 31, 2016 and 2015, respectively, based upon the estimated fair value per share. Share based compensation also includes incentive plan awards discussed at Note 13. These amounts are included in general and administrative expenses for the years ending December 31, 2016 and 2015, respectively in the accompanying consolidated statements of operations. Distributions The following table reflects the total distributions the Company has paid in cash and through the distribution reinvestment plan, including the total amount paid and amount paid per common share, in each indicated quarter: Quarter Paid Distributions per Common Share Total Distributions Paid 2016 4 th $ 0.175 $ 3,381 3 rd 0.175 3,213 2 nd 0.175 3,042 1 st 0.175 2,478 Total $ 0.700 $ 12,114 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 $ 0.700 $ 7,193 |
Incentive Awards Plan
Incentive Awards Plan | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Incentive Awards Plan | Note 13 Incentive Awards Plan The Company has adopted an incentive plan (the Omnibus Stock Incentive Plan or 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 the Companys common stock for the issuance of awards under the Companys stock incentive plan, but in no event more than ten (10%) percent of the Companys issued and outstanding shares. The number of shares reserved under the Companys stock 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 Companys stock incentive plan also will be available for future awards. The Compensation Committee of the Board of Directors approved awards of 1,000 shares of restricted common stock that were effective January 1, 2016 and 2015 to each of two executives of Hartman Income REIT Management, the Property Manager for the Company. The Company recognized stock-based compensation expense of $25,000 and $20,000 with respect to these awards based on the offering price of $10.00 per share during the years ended December 31, 2016 and 2015, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Notes | |
Commitments and Contingencies | Note 14 Commitments and Contingencies Economic Dependency The Company is dependent on the Property Manager and the Advisor 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. SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION DECEMBER 31, 2016 Initial Cost to the Company Property Date Acquired Date of Construction Land Building and Improvements In-place lease value intangible Total Post acquisition Improvements Richardson Heights 11/1/2011 1958 $ 4,788 $ 10,890 $ 3,472 $ 19,150 $ 6,843 Cooper Street 5/11/2012 1992 2,653 5,768 2,192 10,613 457 Bent Tree Green 10/16/2012 1983 3,003 6,272 2,740 12,015 1,979 Parkway I&II 3/15/2013 1980 2,373 4,765 2,352 9,490 1,934 Gulf Plaza 3/11/2014 1983 3,488 6,006 4,457 13,950 88 Mitchelldale 6/13/2014 1977 4,793 9,816 4,566 19,175 1,717 Energy Plaza I&II 12/30/2014 1980/1982 4,403 6,841 6,366 17,610 589 Timbercreek 12/30/2014 1984 724 961 1,211 2,897 259 Copperfield 12/30/2014 1986 605 760 1,054 2,419 144 Commerce Hillcrest 5/1/2015 1973 6,500 1,031 3,869 11,400 609 400 North Belt 5/8/2015 1982 2,537 3,800 3,813 10,150 1,195 Ashford Crossing 7/31/2015 1983 2,650 4,240 3,710 10,600 610 Corporate Park Place 8/24/2015 1980 2,375 5,215 1,910 9,500 370 Skymark Tower 9/2/2015 1985 2,211 4,405 2,230 8,846 454 One Technology Center 11/10/2015 1984 4,894 8,558 6,123 19,575 1,118 Westway One 6/01/16 2001 5,409 11,278 4,951 21,638 10 Three Forest Plaza 12/22/16 1983 8,914 15,206 11,535 35,655 40 $ 62,320 $ 105,812 $ 66,551 $ 234,683 18,416 Gross Carrying Amount at December 31, 2016 Property Land Building and Improvements In-place lease value intangible Total Accumulated Depreciation & Amortization Net Book Carrying Value Encumbrances (1) Richardson Heights $ 4,788 $ 17,733 $ 3,472 $ 25,993 $ 6,918 $ 19,075 $ 19,200 Cooper Street 2,653 6,225 2,192 11,070 3,625 7,445 7,984 Bent Tree Green 3,003 8,250 2,740 13,993 4,254 9,739 7,984 Parkway I&II 2,373 6,699 2,352 11,424 3,174 8,250 (2) Gulf Plaza 3,488 6,093 4,457 14,038 3,977 10,061 (2) Mitchelldale 4,793 11,533 4,566 20,892 5,204 15,688 12,096 Energy Plaza I&II 4,403 7,430 6,366 18,199 4,595 13,604 10,007 Timbercreek 724 1,220 1,211 3,155 657 2,498 (2) Copperfield 605 904 1,054 2,563 432 2,131 (2) Commerce Hillcrest 6,500 1,640 3,869 12,009 3,921 8,088 (3) 400 North Belt 2,537 4,997 3,813 11,347 3,019 8,328 (3) Ashford Crossing 2,650 4,850 3,710 11,210 2,285 8,925 (3) Corporate Park Place 2,375 5,585 1,910 9,870 2,032 7,838 (3) Skymark Tower 2,211 4,859 2,230 9,300 1,498 7,802 (3) One Technology Center 4,894 9,676 6,123 20,693 3,486 17,207 (2) Westway One 5,409 11,288 4,951 21,648 733 20,915 10,819 Three Forest Plaza 8,914 15,246 11,535 35,695 81 35,614 17,828 TOTALS $ 62,320 $ 124,228 $ 66,551 $ 253,099 $ 49,891 $ 203,208 $ 85,918 (1) Specific encumbrances represent mortgage loans secured by the property indicated. (2) Property pledged as mortgage collateral for revolving credit facility with Texas Capital Bank. As of December 31, 2016, the borrowing base value of the collateral properties is $20,925,000. (3) Property pledged as mortgage collateral for revolving credit facilities with East West Bank. As of December 31, 2016, the borrowing base value of the collateral properties is $25,425,000. (4) The aggregate cost of real estate for federal income tax purposes was $253,099,000 as of December 31, 2016 Summary of activity for real estate assets for the years ended December 31, 2016 and 2015, in thousands: Years ended December 31, 2016 2015 Balance at beginning of period $ 189,707 $ 115,928 Additions during the period: Acquisitions 57,292 70,071 Improvements 6,100 3,708 63,392 73,779 Reductions cost of real estate assets sold - - Balance at end of period $ 253,099 $ 189,707 |
Financial Services, Banking and
Financial Services, Banking and Thrift | 12 Months Ended |
Dec. 31, 2016 | |
Financial Services, Banking and Thrift: | |
Real Estate | Note 3 Real Estate Real estate assets consisted of the following, in thousands: December 31, 2016 2015 Land $ 62,320 $ 47,997 Buildings and improvements 127,206 91,645 In-place lease value intangible 63,573 50,065 253,099 189,707 Less accumulated depreciation and amortization (49,872) (27,384) Total real estate assets $ 203,227 $ 162,323 Depreciation expense for the years ended December 31, 2016 and 2015 was $6,581,000 and $4,347,000, respectively. 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, the Company considers 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: December 31, 2016 2015 In-place lease value intangible 63,573 50,065 In-place leases accumulated amortization (35,635) (18,728) Acquired lease intangible assets, net $28,938 $31,337 The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands: Year ending December 31, In-place lease amortization 2017 14,957 2018 6,439 2019 3,414 2020 2978 2021 929 Thereafter 221 Total $ 31,938 Amortization expense for the year ended December 31, 2016 and 2015 was $15,907,000 and $10,133,000, respectively. As of December 31, 2016 the Company owned or held a majority interest in 18 commercial properties comprising approximately 2,982,687 square feet plus three pad sites, all located in Texas. As of December 31, 2016, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and three properties located in San Antonio, Texas. As of December 31, 2015 the Company owned 15 commercial properties comprising approximately 2,395,910 square feet plus three pad sites, all located in Texas. As of December 31, 2015, the Company owned seven properties located in Richardson, Arlington, and Dallas, Texas, seven properties located in Houston, Texas and four properties located in San Antonio, Texas. On June 1, 2016, Hartman Westway One, LLC, a wholly owned subsidiary of the Operating Partnership, acquired a three-story office building containing approximately 165,982 square feet of office space located in Irving, Texas, commonly known as Westway One. 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. 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. On November 14, 2016, the Operating Partnership contributed $3,675,000 cash to Hartman Village Pointe, LLC, in exchange for a 97.35% membership in a joint venture investment among the Operating Partnership and Hartman vREIT XXI, Inc. Hartman vREIT XXI contributed $100,000 to Hartman Village Pointe, LLC in exchange for a 2.65% membership interest in the joint venture. On November 14, 2016, Hartman Village Pointe, LLC acquired a retail shopping center comprising approximately 54,246 square feet located in San Antonio, Texas, commonly known as Village Pointe, for $7,050,000, exclusive of closing costs. The acquisition price for the Village Pointe property was funded by members capital and a $3,525,000 mortgage loan provided by the Operating Partnership. On December 1, 2016, Hartman vREIT XXI acquired an additional 33.11% membership interest in the joint venture from the Operating Partnership for $1,265,000. An acquisition fee of $142,500 was earned by the Advisor in connection with the purchase of the of the Operating Partnerships interest as of December 31, 2016 in the Village Pointe property. As of February 8, 2017, Hartman vREIT XXI, Inc. has acquired all of the Operating Partnerships interests in the joint venture for $3,675,000. See Note 11- Real Estate Held for Disposition. On December 22, 2016, the Company, through Hartman Three Forest Plaza, LLC, a majority owned subsidiary of Hartman XX Limited Partnership, our operating partnership, acquired a fee simple interest in a 19-story suburban office building comprising approximately 366,549 square feet and located in Dallas, Texas. The property is commonly referred to as Three Forest Plaza with a purchase price of $35,655,000. The Three Forest property was 74% occupied at the acquisition date. An acquisition fee of $891,000 was earned by the Advisor in connection with the purchase of the Three Forest property. The following table summarizes the fair value of the assets acquired and the liabilities assumed based upon the Companys purchase price allocations of the Companys 2016 property acquisitions as of the respective acquisition dates, in thousands: Westway One Three Forest Plaza Total Assets acquired: Real estate assets $ 21,638 $ 35,655 $ 57,293 Liabilities assumed: Accounts payable and accrued expenses 232 1,303 1,535 Security deposits 38 283 321 Total liabilities assumed 270 1,586 1,856 Fair value of net assets acquired $ 21,368 $ 34,069 $ 55,473 On May 1, 2015, the Operating Partnership acquired a nine-building office complex comprising approximately 203,688 square feet located in Dallas, Texas, commonly known as Commerce Plaza Hillcrest (Commerce Hillcrest) through Hartman Hillcrest, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for an aggregate purchase price of $11,400,000, exclusive of closing costs. The Commerce Hillcrest property was approximately 74% occupied at the acquisition date. An acquisition fee of $285,000 was earned by the Advisor in connection with the purchase of the Commerce Hillcrest property. On May 8, 2015, the Operating Partnership acquired an office building comprising approximately 230,872 square feet located in Houston, Texas, commonly known as 400 North Belt (400 North Belt) through Hartman 400 North Belt, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $710,150,000, exclusive of closing costs. The 400 North Belt property was approximately 67% occupied at the acquisition date. An acquisition fee of $254,000 was earned by the Advisor in connection with the purchase of the 400 North Belt property. On July 31, 2015, the Operating Partnership acquired an office building comprising approximately 158,451 square feet located in Houston, Texas, commonly known as Ashford Crossing (Ashford Crossing) through Hartman Ashford Crossing, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $10,600,000, exclusive of closing costs. The Ashford Crossing property was approximately 88% occupied at the acquisition date. An acquisition fee of $265,000 was earned by the Advisor in connection with the purchase of the Ashford Crossing property. On August 24, 2015, the Operating Partnership acquired an office building comprising approximately 113,429 square feet located in Dallas, Texas, commonly known as Corporate Park Place (Corporate Park Place) through Hartman Corporate Park Place, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $9,500,000, exclusive of closing costs. The Corporate Park Place property was approximately 79% occupied at the acquisition date. An acquisition fee of $238,000 was earned by the Advisor in connection with the purchase of the Corporate Park Place property. On September 2, 2015, the Operating Partnership acquired an office building comprising approximately 115,700 square feet located in Arlington, Texas, commonly known as Skymark Tower (Skymark Tower) through Hartman Skymark Tower, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $8,846,000, exclusive of closing costs. The Skymark Tower property was approximately 75% occupied at the acquisition date. An acquisition fee of $221,000 was earned by the Advisor in connection with the purchase of the Skymark Tower property. On November 10, 2015, the Operating Partnership acquired an office building comprising approximately 196,348 square feet located in San Antonio, Texas, commonly known as One Technology Center (One Technology Center) through Hartman One Technology, LLC, a wholly owned indirect subsidiary of the Operating Partnership, for $19,575,000 exclusive of closing costs. The One Technology Center property was approximately 85% occupied at the acquisition date. An acquisition fee of $489,000 was earned by the Advisor in connection with the purchase of the One Technology Center property. The following table summarizes the fair value of the assets acquired and the liabilities assumed based upon the Companys purchase price allocations of the Companys 2015 property acquisitions as of the respective acquisition dates: Commerce Plaza Hillcrest 400 North Belt Ashford Crossing Corporate Park Place Skymark Tower One Technology Center Total (in thousands) Assets acquired: Real estate assets $ 11,400 $ 10,150 $ 10,600 $ 9,500 $ 8,846 $ 19,575 $ 70,071 Liabilities assumed: Accounts payable and accrued expenses 74 640 723 138 122 117 1,814 Security deposits 129 55 90 71 63 93 501 Total liabilities assumed 203 695 813 209 185 210 2,315 Fair value of net assets acquired $ 11,197 $ 9,455 $ 9,787 $ 9,291 $ 8,661 $ 19,365 $ 67,756 Acquisition fees paid to Advisor were $1,574,000 and $1,752,000 for the years ended December 31, 2016 and 2015, respectively. Asset management fees paid to Advisor were $1,433,000 and $1,012,000 for the years ended December 31, 2016 and 2015, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations for the years ended December 31, 2016 and 2015, respectively. The Companys indirect wholly owned subsidiary, Hartman Richardson Heights Properties, LLC (HRHP LLC), and the City of Richardson, Texas are parties to an economic development incentive agreement. Under the terms of the agreement, the City of Richardson will pay annual grants to HRHP LLC in equal installments over a five-year period of up to $1.5 million and sales tax grants to be paid annually over the first 10 years of the Alamo Draft House lease. The Company has received installments of $300,000 in each of the years ended December 31, 2016 and 2015, respectively, which are included in tenant reimbursements and other revenues on the consolidated statements of operations. For the years ended December 31, 2016 and 2015, respectively, the Company received a sales tax grant of $73,000 and $64,000 pursuant to the economic development incentive agreement, which is included in tenant reimbursements and other revenues on the consolidated statements of operations. Payments received by the Company in the form of annual grants and annual sales tax grants are subject to refund or adjustment during the term of the economic development incentive agreement. In general, the incentive agreement provides that the Company must continue to be in good standing with respect to the terms and conditions of the agreement and that the Alamo Draft House lessee must continue as a tenant of the Richardson Heights Property during the term of its lease agreement. As of December 31, 2016, no uncured breach or default exists under the terms of the incentive agreement and the Company has no liability or other obligation to repay any grants received under the agreement. The following unaudited pro forma consolidated financial information for the years ended December 31, 2016 and 2015 is presented as if the Company acquired 400 North Belt, Commerce Plaza Hillcrest, Skymark Tower, Corporate Park Place, Ashford Crossing, One Technology Center, Westway One, and Three Forest Plaza on January 1, 2015. This information is not necessarily indicative of what the actual results of operations would have been had the Company completed the acquisition of 400 North Belt, Commerce Plaza Hillcrest, Skymark Tower, Corporate Park Place, Ashford Crossing, One Technology Center, Westway One, and Three Forest Plaza on January 1, 2015, nor does it purport to represent the Companys future operations, in thousands: Years ended December 31, 2016 (unaudited) 2015 (unaudited) Revenue $ 46,260 $ 43,092 Net loss $ (7,582) $ (10,866) |
Summary of Significant Accoun21
Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements as of December 31, 2016 and 2015 and for the years then ended have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-K and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. These 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 Accoun22
Summary of Significant Accounting Policies: Use of Estimates (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent 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 Accoun23
Summary of Significant Accounting Policies: Reclassifications (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Reclassifications | Reclassifications The Company has reclassified certain prior fiscal year amounts in the accompanying consolidated financial statements in order to be consistent with the current fiscal year presentation. These reclassifications had no effect on the previously reported working capital or results of operations. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 12 Months Ended |
Dec. 31, 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 December 31, 2016 and 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 December 31, 2016 and December 31, 2015, the Company had a restricted cash balance of $2,371,000 and $6,900,000, respectively, which represent 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. As of December 31, 2016 and 2015, respectively, restricted cash includes $2,371,000 and $6,500,000 of loan proceeds and $0 and $400,000 in cash, which are on deposit in escrow accounts with the loan servicer. For the year ended December 31, 2016, the Company received restricted cash loan proceeds of $4,129,000 and $400,000 in cash as reimbursement following the completion of certain agreed upon capital repairs. Pursuant to a reserve agreement among the Company and the lender, the Companys right to draw upon restricted funds expired on December 31, 2016. The lender has the right to draw any of the remaining funds and apply the same to the outstanding loans at the lenders sole discretion. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies: Financial Instruments (Policies) | 12 Months Ended |
Dec. 31, 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, accounts payable and accrued expenses 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 note payable approximates fair value. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 12 Months Ended |
Dec. 31, 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 reimbursements and other revenue in the period the related costs are incurred. |
Summary of Significant Accoun27
Summary of Significant Accounting Policies: Real Estate (Policies) | 12 Months Ended |
Dec. 31, 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 revenue 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 calculated in 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 the Companys real estate assets as of December 31, 2016 and 2015. 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 the Companys 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. |
Summary of Significant Accoun28
Summary of Significant Accounting Policies: Accrued Rent and Accounts Receivable (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Accrued Rent and Accounts Receivable | 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 the Companys claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. |
Summary of Significant Accoun29
Summary of Significant Accounting Policies: Goodwill (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Goodwill | Goodwill Generally accepted accounting principles in the United States require 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. For the years ended December 31, 2016 and 2015, no goodwill impairment was recognized in the accompanying consolidated financial statements. |
Summary of Significant Accoun30
Summary of Significant Accounting Policies: Organization and Offering Costs (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Organization and Offering Costs | Organization and Offering Costs The Company has incurred certain expenses in connection with organizing the company. These costs principally relate to professional and filing fees. For the years ended December 31, 2016 and 2015, such costs totaled $20,000 and $963,000, respectively, which have been expensed as incurred. 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 December 31, 2016 and 2015, respectively, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds was cumulatively 1.5% 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. 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 organization and offering expenses of $(44,000) for the year months ended December 31, 2016. |
Summary of Significant Accoun31
Summary of Significant Accounting Policies: Stock-based Compensation (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Stock-based Compensation | Stock-Based Compensation The Company follows ASC 718- Compensation- Stock Compensation 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. |
Summary of Significant Accoun32
Summary of Significant Accounting Policies: Advertising (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Advertising | 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 $183,000 and $162,000 for the years ended December 31, 2016 and 2015, respectively. |
Summary of Significant Accoun33
Summary of Significant Accounting Policies: Income Taxes (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Income Taxes | 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 years ended December 31, 2016 and 2015, the Company incurred a net loss of $10,924,000 and $8,488,000, respectively. The Company does anticipate forming any taxable REIT subsidiaries or otherwise generating 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 in that no future taxable income is expected. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the 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. |
Summary of Significant Accoun34
Summary of Significant Accounting Policies: Loss Per Share (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Loss Per Share | 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 December 31, 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 years ended December 31, 2016 and 2015 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive. |
Summary of Significant Accoun35
Summary of Significant Accounting Policies: Concentration of Risk (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Concentration of Risk | 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 The sole tenant of the Gulf Plaza property represents 7.3% and 10.7% of the Companys rental revenues for the year ended December 31, 2016 and 2015, respectively. |
Summary of Significant Accoun36
Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to January 1, 2018 with early adoption beginning January 1, 2017. We have begun to evaluate each of our revenue streams under the new model. Based on preliminary assessments, we do not expect the adoption of ASU No. 2014-09 to have a material effect on our consolidated financial position or our consolidated results of operations. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities, which enhances the reporting requirements surrounding the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. ASU No. 2016-01 is effective for our fiscal year commencing on January 1, 2018. We do not anticipate that the adoption of ASU No. 2016-01 will have a material effect on our consolidated financial position or our consolidated results of operations. In February 2016, the FASB issued ASU No. 2016-02, Leases, which changes lessee accounting to reflect the financial liability and right-of-use asset that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for our fiscal year commencing on January 1, 2019, but early adoption is permitted. The effect that the adoption of ASU No. 2016-02 will have on our consolidated financial position or our consolidated results of operations is not currently reasonably estimable. In October 2016, the FASB issued ASU No. 2016-17, Interest Held Through Related Parties That Are Under Common Control, which amends the accounting guidance when determining the treatment of certain VIEs to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. ASU No. 2016-17 is effective for our fiscal year commencing on January 1, 2017. The adoption of ASU No. 2016-17 will not have a material effect on our consolidated financial position or our consolidated results of operations. In November 2016, the FASB issued ASU No. 2016-18, Classification of Restricted Cash, which addresses the Statement of Cash Flow classification and presentation of restricted cash transactions. ASU No. 2016-18 is effective for our fiscal year commencing on January 1, 2018. The effect of this amendment is to be applied retrospectively and early adoption is permitted. We expect to adopt ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-18 will not have a material effect on our consolidated financial position or our consolidated results of operations. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as an acquisition of assets or a business. ASU No. 2017-01 is effective for our fiscal year commencing on January 1, 2018. The effect of this guidance is to be applied prospectively and early adoption is permitted. The adoption of ASU No. 2017-01 will not have a material effect on our consolidated financial position or our consolidated results of operations. |
Real Estate_ Real Estate Assets
Real Estate: Real Estate Assets Consisted of The Following, in Thousands (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Real Estate Assets Consisted of The Following, in Thousands: | Real estate assets consisted of the following, in thousands: December 31, 2016 2015 Land $ 62,320 $ 47,997 Buildings and improvements 127,206 91,645 In-place lease value intangible 63,573 50,065 253,099 189,707 Less accumulated depreciation and amortization (49,872) (27,384) Total real estate assets $ 203,227 $ 162,323 |
Real Estate_ In-place lease amo
Real Estate: In-place lease amortization in the future (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
In-place lease amortization in the future | The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands: Year ending December 31, In-place lease amortization 2017 14,957 2018 6,439 2019 3,414 2020 2978 2021 929 Thereafter 221 Total $ 31,938 |
Real Estate_ Fair value of the
Real Estate: Fair value of the assets acquired (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Fair value of the assets acquired | Westway One Three Forest Plaza Total Assets acquired: Real estate assets $ 21,638 $ 35,655 $ 57,293 Liabilities assumed: Accounts payable and accrued expenses 232 1,303 1,535 Security deposits 38 283 321 Total liabilities assumed 270 1,586 1,856 Fair value of net assets acquired $ 21,368 $ 34,069 $ 55,473 |
Accrued Rent and Accounts Rec40
Accrued Rent and Accounts Receivable, Net: Accrued rent accounts receivable, net (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Accrued rent accounts receivable, net | Accrued rent and accounts receivable, net, consisted of the following, in thousands: Years ended December 31, 2016 2015 Tenant receivables $ 2,889 $ 1,178 Accrued rent 3,583 2,065 Allowance for doubtful accounts (1,207) (493) Accrued Rents and Accounts Receivable, net $ 5,266 $ 2,750 |
Deferred Leasing Commission C41
Deferred Leasing Commission Costs, Net: Deferred Leasing Commission Costs table (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Deferred Leasing Commission Costs table | Years ended December 31, 2016 2015 Deferred Leasing Commissions $ 6,116 $ 3,006 Less: deferred leasing commissions accumulated amortization (1,341) (603) Total cost, net of accumulated amortization $ 4,775 $ 2,403 |
Future Minimum Rents_ Schedule
Future Minimum Rents: Schedule of Future Minimum Rental Payments for Operating Leases (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Schedule of Future Minimum Rental Payments for Operating Leases | Year ending December 31, Minimum Future Rents 2017 $ 36,107 2018 30,601 2019 23,610 2020 18,871 2021 16,002 Thereafter 34,154 Total $ 159,345 |
Notes Payable_ Notes Payable (T
Notes Payable: Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Notes Payable | December 31, Property/Facility Payment (1) Maturity Date Rate 2016 2015 Richardson Heights (2)(3) P&I July 1, 2041 4.61% $ 19,200 19,200 $ 19,614 Cooper Street (2)(4) P&I July 1, 2041 4.61% 7,984 8,156 Bent Tree Green (2)(3) P&I July 1, 2041 4.61% 7,984 8,156 Mitchelldale (2)(4) P&I July 1, 2041 4.61% 12,096 12,356 Energy Plaza I & II P&I June 10, 2021 5.30% 10,007 10,189 Westway One IO June 1, 2019 3.12% 10,819 - Three Forest Plaza IO December 31, 2019 3.56% 17,828 - TCB Credit Facility IO May 9, 2017 4.75% 7,800 4,007 EWB Credit Facility IO August 24, 2017 4.25% 12,000 13,840 EWB II Credit Facility IO August 24, 2017 4.25% 9,900 100 $ 115,618 115,618 $ 76,418 Less unamortized deferred loan costs (1,467) (1,423) $ 114,151 $ 74,995 1,432 |
Loss Per Share_ Basic earnings
Loss Per Share: Basic earnings (loss) per share table (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Basic earnings (loss) per share table | Basic earnings (loss) per share is computed using net income (loss) attributable to common stockholders and the weighted average number of common shares outstanding. Diluted weighted average shares outstanding 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 (loss) per share are included in the diluted earnings (loss) per share. Years ended December 31, 2016 2015 Numerator: Net loss attributable to common stockholders ($11,046,000) ($8,488,000) Denominator: Basic and diluted weighted average shares outstanding 17,361,594 10,733,833 Basic and diluted loss per common share: Net loss attributable to common stockholders ($0.64) ($0.79) |
Income Taxes_ For Federal Incom
Income Taxes: For Federal Income Tax Purposes, The Cash Distributed To Stockholders Was Characterized As Follows For The Years Ended December 31 (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
For Federal Income Tax Purposes, The Cash Distributed To Stockholders Was Characterized As Follows For The Years Ended December 31: | For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31: 2016 2015 Ordinary income (unaudited) 34.8% 40.4% Return of capital (unaudited) 65.2% 59.6% Capital gains distribution (unaudited) - - Total 100.0% 100.0% |
Real Estate Held For Disposit46
Real Estate Held For Disposition: Income From Discontinued Operations With Respect To The Village Pointe Property Is As Follows, in Thousands (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Income From Discontinued Operations With Respect To The Village Pointe Property Is As Follows, in Thousands: | Income from discontinued operations with respect to the Village Pointe Property is as follows, in thousands: Year ended December 31,2016 Total revenues $ 118 Property operating expenses 12 Real estate taxes and insurance 18 Asset management fees 7 General and administrative 7 Interest expense 105 Total expenses 149 Net loss (31) |
Real Estate Assets Consisted of
Real Estate Assets Consisted of The Following, in Thousands (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Real Estate Assets Consisted of The Following, in Thousands: | Real estate assets consisted of the following, in thousands: December 31, 2016 2015 Land $ 62,320 $ 47,997 Buildings and improvements 127,206 91,645 In-place lease value intangible 63,573 50,065 253,099 189,707 Less accumulated depreciation and amortization (49,872) (27,384) Total real estate assets $ 203,227 $ 162,323 |
In-place lease amortization in
In-place lease amortization in the future (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
In-place lease amortization in the future | The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands: Year ending December 31, In-place lease amortization 2017 15,715 2018 7,197 2019 4,172 2020 3,662 2021 929 Thereafter 223 Total $ 31,898 |
Fair value of the assets acquir
Fair value of the assets acquired (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Tables/Schedules | |
Fair value of the assets acquired | Westway One Three Forest Plaza Total Assets acquired: Real estate assets $ 21,638 $ 36,655 $ 58,923 Liabilities assumed: Accounts payable and accrued expenses 232 1,303 1,535 Security deposits 38 283 321 Total liabilities assumed 270 1,586 1,856 Fair value of net assets acquired $ 21,368 $ 35,069 $ 57,067 |
Organization and Business (Deta
Organization and Business (Details) | Dec. 31, 2016USD ($)$ / sharesshares |
Details | |
Shares, Issued | 18,547,461 |
Distribution reinvestment shares | 1,216,240 |
Gross offering proceeds | $ | $ 181,366,480 |
Common stock to Hartman XX Holdings | 19,000 |
Share Price | $ / shares | $ 10 |
Summary of Significant Accoun51
Summary of Significant Accounting Policies: Cash and Cash Equivalents (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Details | ||
Restricted cash from loan proceeds | $ 2,371,000 | $ 6,500,000 |
Loan proceeds in cash | $ 0 | $ 400,000 |
Summary of Significant Accoun52
Summary of Significant Accounting Policies: Organization and Offering Costs (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Details | ||
1.5% of gross offering proceeds | $ 183,000 | $ 162,000 |
Summary of Significant Accoun53
Summary of Significant Accounting Policies: Advertising (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Details | ||
1.5% of gross offering proceeds | $ 183,000 | $ 162,000 |
Real Estate_ Real Estate Asse54
Real Estate: Real Estate Assets (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Details | ||
Land | $ 62,320 | $ 47,997 |
Buildings and Improvements, Gross | 127,206 | 91,645 |
In-place lease value intangible | 63,573 | 50,065 |
Preconfirmation, Accumulated Depreciation and Amortization | $ (49,872) | $ (27,384) |
Real Estate (Details)
Real Estate (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Details | ||
Depreciation expense | $ 6,581,000 | $ 4,347,000 |
In-place lease value intangible | 63,573 | 50,065 |
Accumulated amortization | $ (35,635) | $ (18,728) |
Accrued Rent and Accounts Rec56
Accrued Rent and Accounts Receivable, Net: Accrued rent accounts receivable, net (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Details | ||
Tenant receivables | $ 2,889 | $ 1,178 |
Accrued Rent, Current | $ 3,583 | $ 2,065 |
Accrued Rent and Accounts Rec57
Accrued Rent and Accounts Receivable, Net (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Details | ||
Allowance for uncollectible | $ 1,206,000 | $ 493,000 |
Allowance for Loan and Lease Loss, Recovery of Bad Debts | $ 713,000 | $ 276,000 |
Real Estate Assets (Details)
Real Estate Assets (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Details | ||
Land | $ 62,320 | $ 47,997 |
Buildings and Improvements, Gross | 127,206 | 91,645 |
In-place lease value intangible | 63,573 | 50,065 |
Preconfirmation, Accumulated Depreciation and Amortization | $ (49,872) | $ (27,384) |
Items (Details)
Items (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Details | ||
Depreciation expense | $ 6,581,000 | $ 4,347,000 |
In-place lease value intangible | 63,573 | 50,065 |
Accumulated amortization | (35,635) | (18,728) |
Acquired lease intangible assets, net | $ 31,898 | $ 31,337 |