Document and Entity Information
Document and Entity Information - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Jun. 30, 2016 | |
Document and Entity Information: | ||
Entity Registrant Name | Hartman Short Term Income Properties XX, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
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 | 181,648,760 | |
Entity Public Float | $ 18,164,876 | |
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 | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
ASSETS | ||
Real estateInvestment property at cost | $ 255,094 | $ 253,099 |
Real estate investment property accumulated depreciation | (56,031) | (49,872) |
Real estate investment property at cost, net | 199,063 | 203,227 |
Cash and cash equivalents | 3,254 | |
Restricted cash | 2,371 | 2,371 |
Accrued rent and accounts receivable, net | 6,113 | 5,266 |
Note receivable | 11,431 | 11,431 |
Deferred lease commissions and loan costs, net | 5,329 | 4,775 |
Goodwill | 250 | 250 |
Prepaid expenses and other assets | 2,376 | 1,662 |
Real estate held for disposition | 7,050 | |
Investment in affiliate | 8,978 | 8,978 |
Total assets | 235,911 | 248,264 |
LIABILITIES | ||
Note payable | 114,967 | 114,151 |
Note payable due to real estate held for disposition | 3,458 | |
Accounts payable and accrued expenses | 8,508 | 12,057 |
Due to related parties | 403 | 343 |
Tenants' security deposits | 1,843 | 1,824 |
Total liabilities | 125,721 | 131,833 |
Common stock | 18 | 18 |
Additional paid in capital | 169,485 | 169,406 |
Accumulated distributions and net loss | (64,572) | (59,674) |
Total stockholders' equity | 104,931 | 109,750 |
Noncontrolling interests in subsidiary | 5,259 | 6,681 |
Total equity | 110,190 | 116,431 |
Total liabilities and total stockholders' equity | $ 235,911 | $ 248,264 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Rental revenues | $ 9,685 | $ 7,935 |
Tenant reimbursements and other revenues | 1,537 | 1,315 |
Total revenues | 11,222 | 9,250 |
Expenses | ||
Property operating expenses | 3,199 | 3,226 |
Asset management and acquisition fees | 440 | 333 |
Organization and offering costs | (250) | |
Real estate taxes and insurance | 1,504 | 1,187 |
Depreciation and amortization | 6,158 | 5,302 |
General and administrative | 577 | 575 |
Interest expense | 1,383 | 868 |
Interest and dividend income | (352) | (22) |
Total expenses | 12,909 | 11,219 |
Loss from continuing operations | (1,687) | (1,969) |
Income from discontinued operations, net | (8) | |
Net loss | $ (1,695) | $ (1,969) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (1,695) | $ (1,969) |
Stock based compensation | 46 | 35 |
Depreciation and amortization expense | 6,158 | 5,302 |
Deferred loan and leasing commission costs amortization | 394 | 224 |
Loss on real estate held for disposition | 27 | |
(Increase) decrease accrued rent and accounts receivable | (998) | (968) |
Deferred leasing commmission costs | (822) | (367) |
(Increase) decrease prepaid expenses and other assets | (734) | (506) |
Increase (decrease) accounts payable and accrued expenses | (4,061) | (3,178) |
Increase (decrease) on due to related parties | 60 | (5,731) |
Increase (decrease) tenants' security deposits | 19 | 14 |
Net cash provided by (used in) operating activities | (1,455) | (6,926) |
Cash flows from investing activities: | ||
Acquisition deposit | 20 | (1,500) |
Proceeds received - disposition of joint venture real estate held for disposition | 2,425 | |
Investment in note receivable from affiliate | (8,959) | |
Additions to real estate | (2,119) | (936) |
Net cash provide from (used in) investing activities | 326 | (11,395) |
Cash flows from financing activities: | ||
Dividend distributions paid in cash | (3,265) | (1,269) |
Payment of selling commissions | (1,353) | |
Repayment of insurance premium finance note | (112) | (84) |
Borrowings under insurance premium finance note | 562 | 421 |
Repayments under term loan notes | (311) | (295) |
Proceeds from revolving credit facility | 1,000 | 11,500 |
Repayment of revolving credit advances | (15,438) | |
Proceeds from issuance of common stock | 26,421 | |
Net cash provided by (used in) financing activities | (2,126) | 19,903 |
Net change in cash | (3,254) | 1,582 |
Cash and cash equivalents, beginning of period | $ 3,254 | 1,380 |
Cash and cash equivalents, end of period | $ 2,962 |
Organization and Business
Organization and Business | 3 Months Ended |
Mar. 31, 2017 | |
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. Effective March 31, 2016, the Company terminated the offer and sale of its common stock 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 terminated July 16, 2016. As of March 31, 2017, the Company had issued 18,574,461 shares of its common stock in its initial and follow-on offerings, including 1,216,240 shares of common stock pursuant to its distribution reinvestment plan, resulting in aggregate gross offering proceeds of $181,336,480. Total shares issued and outstanding as of March 31, 2017 include 58,875 shares of common stock issued as non-employee compensation to members of the Companys board of directors and certain executives of the Property Manager (defined below). 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 to Hartman XX Holdings, Inc. at a price of $10.00 per share. The Company has also issued 1,000 shares of convertible preferred stock to its advisor, Hartman Advisors LLC (Advisor), at a price of $10.00 per share. The Advisor is owned 70% by Allen R. Hartman, the Companys Chief Executive Officer and Chairman of the Board of Directors and 30% by Hartman Income REIT Management, Inc. (the Property Manager). The Property Manager is a wholly owned subsidiary of Hartman Income REIT, Inc. of which Allen R. Hartman owns approximately 16% of the voting common stock. 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 its 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 offerings. These parties receive compensation and fees for services related to the investment, management and disposition of the Companys assets. As of March 31, 2017, the Company owned or held a majority interest in 17 commercial properties comprising approximately 2,928,441 square feet plus three pad sites, all located in Texas. As of March 31, 2017, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas. As of March 31, 2016, the Company owned 15 commercial properties comprising approximately 2,395,910 square feet plus three pad sites, all located in Texas. As of March 31, 2016, 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 | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2016 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of March 31, 2017 have been prepared by the Company in accordance with accounting principles generally accepted in the United States (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of March 31, 2017, and the results of consolidated operations for the three months ended March 31, 2017 and 2016, the consolidated statement of equity for the three months ended March 31, 2017 and the consolidated statements of cash flows for the three months ended March 31, 2017 and 2016. The results of the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2016. These unaudited consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications The Company has reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on the previously reported working capital or results of operations. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of March 31, 2017 and December 31, 2016 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 March 31, 2017, and December 31, 2016, the Company had a restricted cash balance of $2,371,000, respectively, which represents amounts set aside as impounds to be disbursed to the Company upon achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property. 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. No action was taken by the lender as of March 31, 2017. As of May 3, 2017, the lender has offered to modify the yield maintenance provision of the original loan agreements and apply the currently restricted cash balance to the outstanding loans or to permit an 18-month extension of the Companys right to draw upon the restricted funds until June 30, 2018 subject to the draw provisions of the original loan agreements. 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, notes payable and due from (to) related parties. The Company considers the carrying value to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value. Revenue Recognition The Companys leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (ASC) 605-10-S99, Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursement and other revenues in the period the related costs are incurred. Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Companys policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and managements consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases. The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Companys reported net loss. Depreciation and amortization Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years calculated on terms of all of the leases in-place when acquired. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of our real estate assets as of March 31, 2017. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market Approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost Approach: Amount required to replace the service capacity of an asset (replacement cost). Income Approach: Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Companys estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Accrued Rent and Accounts Receivable Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Deferred Leasing Commission Costs Leasing commissions are amortized using the straight-line method over the term of the related lease agreements. Goodwill GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount. If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements. Organization and Offering Costs The Company incurred certain organization and offering expenses in connection with the organization of the Company and the offering of the Companys shares of common stock in the Companys public offering. These costs principally relate to professional and filing fees. For the three months ended March 31, 2017 and 2016, such costs totaled $0 and ($250,000), 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 March 31, 2017, and December 31, 2016, respectively, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds was cumulatively $858,000 for the Companys initial and follow-on public offerings, respectively. The Company terminated the offer and sale of its common stock to the public in its follow-on offering on March 31, 2016. 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 $786,000 resulting in a net credit for organization and offering expenses of $250,000 for the quarter ended March 31, 2016. Selling commissions in connection with the Companys public offering were recorded and charged to additional paid-in capital. Real Estate Held for Disposition and Discontinued Operations The Company considers a commercial property to be held for sale when it meets all of the criteria established under ASC 205, Presentation of Financial Statements. For commercial properties classified as held for sale, assets and liabilities are presented separately for all periods presented. In accordance with ASC 205, a discontinued operation may include a component of an entity or a group of components of an entity. A disposal of a component of an entity or a group of components of an entity is reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component of an entity or group of components of an entity is classified as held for sale, disposed of by sale or disposed of other than by sale, respectively. In addition, ASC 205 requires us to provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not meet the criteria for a discontinued operation. Noncontrolling Interests Noncontrolling interests is the portion of equity in a subsidiary not attributable to a parent. The ownership interests not held by the parent are considered noncontrolling interests. Accordingly, the Company has reported noncontrolling interests in equity on the consolidated balance sheets but separate from the Company's equity. On the consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests. The consolidated statement of changes in equity is included for quarterly financial statements, including beginning balances, activity for the period and ending balances for shareholders' equity, noncontrolling interests and total equity. Stock-Based Compensation The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) with regard to issuance of stock in payment of services. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the fair value of the equity or liability instruments issued. 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 $55,000 and $50,000 for the three months ended March 31, 2017 and 2016, respectively. Income Taxes The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Companys annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Companys net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT. For the three months ended March 31, 2017 and 2016, the Company incurred a net loss of $1,427,000 and $1,969,000 respectively. The Company formed one taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded considering the net loss carry forward would be properly offset by an equal valuation allowance in that no material current or 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 March 31, 2017, and 2016, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three months ended March 31, 2017 and 2016 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive. Concentration of Risk The Company maintains cash accounts in two U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts may exceed the federally insured limits. No losses have been incurred in connection with these deposits. The geographic concentration of the Companys real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition or any other changes, could adversely affect the Companys operating results and its ability to make distributions to stockholders Major tenants are defined as those tenants which individually comprise more than 10% of the Companys total rental revenues. No tenant represents more than 10% of total rental revenues for three months ended March 31, 2017 and 2016, 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. ASU 2015-03, Interest Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. We have adopted this guidance for all periods presented. In 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 | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Real Estate | Real Estate The Companys real estate assets consisted of the following, in thousands: March 31, 2017 December 31, 2016 Land $62,320 $62,320 Buildings and improvements 129,201 127,206 In-place lease value intangible 63,573 63,573 255,094 253,099 Less accumulated depreciation and amortization (55,831) (49,872) Total real estate assets $199,263 $203,227 Depreciation expense for the three months ended March 31, 2017 and 2016 was $1,406,000 and $1,459,000, respectively. Amortization expense of in-place lease value intangible was $4,553,000 and $3,843,000 for the three months ended March 31, 2017 and 2016, respectively. No acquisition fees were paid to Advisor for the three months ended March 31, 2017 and 2016, respectively. Asset management fees paid to Advisor were $440,000 and $333,000 for the three months ended March 31, 2017 and 2016, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the Company owned or held a majority interest in 17 commercial properties comprising approximately 2,928,441 square feet plus three pad sites, all located in Texas. As of March 31, 2017, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas. As of March 31, 2016, the Company owned 15 commercial properties comprising approximately 2,295,910 square feet plus three pad sites, all located in Texas. As of March 31, 2016, the Company owned seven properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two property located in San Antonio, Texas. The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms. With respect to all properties owned by the Company, we consider all of the in-place leases to be market rate leases. The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands: March 31, 2017 December 31, 2016 In-place lease value intangible $ 63,573 $ 63,573 In-place leases accumulated amortization (39,188) (34,635) Acquired lease intangible assets, net $ 24,385 $ 28,938 |
Accrued Rent and Accounts Recei
Accrued Rent and Accounts Receivable, Net | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Accrued Rent and Accounts Receivable, Net | Accrued Rent and Accounts Receivable, net Accrued rent and accounts receivable, net, consisted of the following, in thousands: March 31, 2017 December 31, 2016 Tenant receivables $ 3,265 $ 2,889 Accrued rent 4,205 3,583 Allowance for doubtful accounts (1,357) (1,206) Accrued Rents and Accounts Receivable, net $ 6,113 $ 5,266 As of March 31, 2017, and December 31, 2016, the Company had an allowance for uncollectible accounts of $1,357,000 and $1,206,000, respectively. For the three months ended March 31, 2017 and 2016, the Company recorded bad debt expense in the amount of $151,000 and $218,000, respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenants credit-worthiness. For the three months ended March 31, 2017 and 2016, the Company recorded write-offs of $0 and $42,000, respectively. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations. |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Notes Payable | Notes Payable The Company is a party to a $30.0 million revolving credit agreement (the TCB Credit Facility) with Texas Capital Bank. The TCB Credit Facility is secured by the Gulf Plaza, Timbercreek, Copperfield and One Technology Center properties. The borrowing base based on the collateral properties is $20.925 million. The TCB Credit Facility note, bears interest at the greater of 4.25% per annum or the banks prime rate plus 1% per annum. The interest rate was 5.00% and 4.75% per annum as of March 31, 2017 and December 31, 2016. All borrowings under the TCB Credit Facility mature on May 9, 2017. The Company and the bank have agreed to a one-year extension and modification of the TCB Credit Facility. As modified the TCB Credit Facility will mature on May 9, 2018. The outstanding balance under the TCB Credit Facility was $8,800,000 as of March 31, 2017 and $7,800,000 as of December 31, 2016, respectively. As of March 31, 2017 the amount available to be borrowed is $12,125,000. As of March 31, 2017, the Company was in compliance with all loan covenants under the TCB Credit Facility. The Company is a party to a $15.52 million revolving credit agreement (the EWB Credit Facility) with East West Bank. The borrowing base of the EWB Credit Facility may be adjusted from time to time subject to the lenders underwriting with respect to real property collateral. The EWB Credit Facility is secured by the Commerce Plaza Hillcrest, Corporate Park Place and 400 North Belt properties. The EWB Credit Facility note bears interest at the greater of 3.75% per annum or the banks prime rate plus 0.50%. The interest rate was 4.50% and 4.25% per annum as of March 31, 2017 and as of December 31, 2016, respectively. All loans under the EWB Credit Facility mature on August 24, 2017. On October 8, 2015, the Company entered into a second revolving credit agreement with East West Bank (the EWB II Credit Facility). The borrowing base of the EWB II Credit Facility is $9.9 million and may be adjusted from time to time subject to the lenders underwriting with respect to the real property collateral. The EWB II Credit Facility is secured by the Ashford Crossing and Skymark Tower properties. The EWB II Credit Facility note bears interest at the greater of 3.75% per annum or the banks prime rate plus 0.50%. The interest rate was 4.50% and 4.25% per annum as of March 31, 2017 and as of December 31, 2016, respectively. All loans under the EWB II Credit Facility mature on August 24, 2017. The aggregate outstanding balance under the EWB Credit Facility and EWB II Credit Facility was $21,900,000 as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017, the aggregate amount available to be borrowed under the EWB Credit Facility and EWB II Credit Facility is $3,525,000. As of March 31, 2017, the Company was in compliance with all loan covenants under the EWB Credit Facility and EWB II Credit Facility. Loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands: March 31, 2017 December 31, 2016 Deferred loan costs $ 2,160 $ 2,160 Less: deferred loan cost accumulated amortization (820) (693) Total cost, net of accumulated amortization $ 1,340 $ 1,467 The following is a summary of the Companys notes payable as of March 31, 2017, in thousands: Property/Facility Payment (1) Maturity Date Rate March 31, 2017 December 31, 2016 Richardson Heights (2)(3) P&I July 1, 2041 4.61% $ 19,094 19,094 $ 19,200 Cooper Street (2) P&I July 1, 2041 4.61% 7,940 7,984 Bent Tree Green (2)(3) P&I July 1, 2041 4.61% 7,940 7,984 Mitchelldale (2) P&I July 1, 2041 4.61% 12,028 12,096 Energy Plaza I & II P&I June 10, 2021 5.30% 9,958 10,007 Westway One IO June 1, 2019 3.29% 10,819 10,819 Three Forest Plaza IO December 31, 2019 3.59% 17,828 17,828 TCB Credit Facility IO May 9, 2017 5.00% 8,800 7,800 EWB Credit Facility IO August 24, 2017 4.50% 12,000 12,000 EWB II Credit Facility IO August 24, 2017 4.50% 9,900 9,900 $ 116,307 $ 115,618 Less unamortized deferred loan costs (1,340) (1,467) $ 114,967 $ 114,151 (1) Principal and interest (P&I) or interest only (IO). (2) Each promissory note contains a call option wherein the holder of the promissory note may declare the outstanding balance due and payable on either July 1, 2024, July 1, 2029, July 1, 2034, or July 1, 2039. (3) In connection with the loans secured by the Richardson Heights Property and the Bent Tree Green Property, the Company entered into a reserve agreement with the lender which requires that loan proceeds of $6,500,000, be deposited with the loan servicer. The escrowed loan proceeds will be released to us upon satisfactory showing of increased annualized rental income from new lease agreements as set forth in the reserve agreement. Under the terms of the reserve agreement, the Company may draw upon the escrow reserve funds until December 31, 2016. As of December 31, 2016, the Company has drawn $4,129,000 of the escrowed loan proceeds and there remains a balance of $2,371,000 as of December 31, 2016. The lender has the right to draw any remaining escrow reserve funds and apply such funds to one or more of the loans as the lender may determine in its sole discretion. See Note 2 Restricted Cash. Loan proceeds held pursuant to the reserve agreement are recorded as restricted cash in the accompanying consolidated balance sheets. Annual maturities of notes payable as of March 31, 2017 are as follows, in thousands: Year ending December 31, Amount Due 2017 $ 31,648 2018 1,320 2019 30,031 2020 1,450 2021 10,451 Thereafter 41,407 Total $ 116,307 Interest expense incurred for the three months ended March 31, 2017 and 2016 was $1,383,000 and $846,000, respectively. Interest expense of $220,000 and $224,000 was payable as of March 31, 2017 and December 31, 2016, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. |
Loss Per Share
Loss Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Loss Per Share | Loss Per Share Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings (loss) per share. Three months ended March 31, 2017 2016 Numerator: Net loss attributable to common stockholders $ (1,522,000) $ (1,969,000) Denominator: Basic and diluted weighted average shares outstanding 18,165,831 15,088,950 Basic and diluted loss per common share: Net loss attributable to common stockholders $ (0.08) $ (0.13) |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Income Taxes | 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. For the three months ended March 31, 2017 and 2016, the Company incurred a net loss of $1,427,000 and $1,969,000 respectively. The Company formed one taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded considering the net loss carry forward would be properly offset by an equal valuation allowance in that no material current or 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. Taxable income (loss) differs from net income (loss) for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and rental revenue. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Related Party Transactions | Related Party Transactions The Advisor is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Advisor is a variable interest entity which consolidates for financial reporting purposes with Hartman Income REIT, Inc. and subsidiaries, of which Allen R. Hartman, our Chief Executive Officer and Chairman of the Board of Directors, owns approximately 16% of the voting common stock. For the three months ended March 31, 2017 and 2016 the Company incurred $440,000 and $333,000, respectively, for asset management fees payable to the Advisor. Acquisition fees paid to Advisor were $0 for the three months ended March 31, 2017 and 2016, respectively. Property operating expenses include property management fees charged by the Property Manager of $379,000 and $327,000 for the three months ended March 31, 2017 and 2016, respectively. March 31, 2017 and 2016 As of March 31, 2017, and December 31, 2016, respectively, the Company had a net balance due to the Property Manager and the Advisor of $222,000 and $518,000. The Company had a balance due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (Hartman XIX), of $4,470,000 and $4,474,000 as of March 31, 2017 and December 31, 2016, respectively. 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. The $270,000 and $274,000 balance due from Hartman XIX as of March 31 2017 and December 31, 2016, respectively, is included in Due to related parties, and the principal balance of the affiliate loan of $4,200,000 and is included in Notes receivable related party, in the accompanying consolidated balance sheets. The Company recognized interest income on the affiliate note in the amount of $62,000 and $0 for the three months ended March 31, 2017 and 2016, respectively, which is included in interest income in the accompanying consolidated statements of operations. The Company owed the Advisor $319,000 and $243,000 for asset management fees as of March 31, 2017 and December 31, 2016, 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. 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 $5,250,000 to Hartman XIX in connection with the contemplated acquisition of HIREIT shares. The Company acquired 1,561,523 shares of the common stock of HIREIT for $8,978,000. The shares were acquired by the Company in connection with a tender offer for shares of the common stock of HIREIT by Hartman XIX. The Companys investment in the affiliate is accounted for under the cost method, ownership interest at 11% in HIREIT is less than a controlling stake, and is reflected as Investment in Affiliate on the accompanying consolidated balance sheets. 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 three months ended March 31, 2017 and 2016, respectively, interest and dividend income in the accompanying consolidated statements of operations, includes $178,000 and $0 of interest income. As of March 31, 2017 and 2016, respectively, the balance due to TRS by Retail II Holdings is $144,000. 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. 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. As of March 31, 2017, the Company had a net balance due to Hartman Village Pointe, LLC of $84,000. |
Real Estate Held For Dispositio
Real Estate Held For Disposition | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Real Estate Held For Disposition | 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 and liabilities assumed. 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. 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. 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 three months ended March 31, 2017 is presented as loss from discontinued operations in the accompanying consolidated statements of operations. Loss from discontinued operations with respect to the Village Pointe Property is as follows, in thousands: Three Months Ended March 31, 2017 Total revenues $ 250 Property operating expenses 77 Real estate taxes and insurance 39 Asset management fees 13 General and administrative 7 Interest expense 26 Total expenses 162 Loss on disposition (27) Net income from discontinued operations $ 61 Property operating expenses include $14,000 in property management fees and reimbursements earned by the Property Manager. Asset management fees were earned by Advisor. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Stockholders' Equity | Note 11 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 the Companys articles of incorporation, the Company has authority to issue 750,000,000 shares of common stock, $0.001 par value per share, and 200,000,000 shares of preferred stock, $0.001 par value per share. As of March 31, 2017, 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 March 31, 2017, and December 31, 2016, respectively, the Company has issued 1,000 shares of convertible preferred stock to the Advisor at a price of $10.00 per share. Common Stock Issuable Upon Conversion of Convertible Preferred Stock The convertible preferred stock issued to the Advisor will convert to shares of the Companys common stock if (1) the Company has made total distributions on then outstanding shares of the Companys common stock equal to the issue price of those shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares, (2) the Company lists its common stock for trading on a national securities exchange if the sum of prior distributions on then outstanding shares of the Companys common stock plus the aggregate market value of the Companys common stock (based on the 30-day average closing meets the same 6% performance threshold, or (3) the Companys advisory agreement with the Advisor expires without renewal or is terminated (other than because of a material breach by the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Companys enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Companys enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all. Stock-Based Compensation The Company awards shares of restricted common stock to non-employee directors as compensation in part for their service as members of the board of directors of the Company. These shares are fully vested when granted. These shares may not be sold while an independent director is serving on the board of directors. For the three months ended March 31, 2017 and 2016, respectively, the Company granted 1,500 and 1,500 shares of restricted common stock to independent directors as compensation for services. The Company recognized $19,000 and $15,000 as stock-based compensation expense for the three months ended March 31, 2017 and 2016, respectively, based upon the estimated fair value per share. Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations. Distributions The following table reflects the total distributions the Company has paid, including the total amount paid and amount paid per common share, in each indicated quarter: Quarter Paid Distributions per Common Share Total Distributions 2017 1 st $ 0.175 $ 3,131 2016 4 th $ 0.175 $ 3,173 3 rd 0.175 3,213 2 nd 0.175 3,042 1 st 0.175 2,478 Total $ 0.700 $ 11,906 |
Incentive Awards Plan
Incentive Awards Plan | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Incentive Awards Plan | 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 for each of two executives of Hartman Income REIT Management, the Property Manager for the Company, for the quarter ended March 31, 2016. The Company recognized stock-based compensation expense of $0 and $20,000, respectively, for the three months ended March 31, 2017 and 2016, based on the issue price of $10.00 per share. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Commitments and Contingencies | 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. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Subsequent Events | Subsequent Events Three Forest Plaza Joint Venture On December 22, 2016, the Operating Partnership, through its wholly-owned subsidiary, Hartman Three Forest Plaza LLC, acquired a fee simple interest in an office building located in Dallas, Texas commonly referred to as Three Forest Plaza. Three Forest Plaza was acquired by Hartman Three Forest Plaza LLC from Massachusetts Mutual Life Insurance Company for a purchase price of $35,655,000, exclusive of closing costs and liabilities assumed. On April 11, 2017, the Operating Partnership entered into a membership interest purchase agreement with Hartman vREIT XXI (vREIT XXI) pursuant to which vREIT XXI may acquire up to $10,000,000 of the Operating Partnerships ownership interest in Hartman Three Forest Plaza LLC. On April 11, 2017, pursuant to the membership interest purchase agreement, vREIT XXI acquired 160,000 membership units of Hartman Three Forest Plaza LLC, representing an approximately 9% membership interest in Hartman Three Forest Plaza LLC, from the Operating Partnership for $1,600,000. |
Deferred Leasing Commission Cos
Deferred Leasing Commission Costs, Net | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Deferred Leasing Commission Costs, Net | Deferred Leasing Commission Costs, net Costs which have been deferred consist of the following, in thousands: March 31, 2017 December 31, 2016 Deferred leasing commissions $ 6,725 $ 6,116 Less: accumulated amortization (1,608) (1,341) Deferred leasing commission cost, net $ 5,117 $ 4,775 |
Summary of Significant Accoun19
Summary of Significant Accounting Policies: Use of Estimates (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies: Reclassifications (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Reclassifications | Reclassifications The Company has reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on the previously reported working capital or results of operations. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 and December 31, 2016 consisted of demand deposits at commercial banks. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies: Restricted Cash (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Restricted Cash | Restricted Cash Restricted cash represents cash for which the use of funds is restricted by certain loan documents. As of March 31, 2017, and December 31, 2016, the Company had a restricted cash balance of $2,371,000, respectively, which represents amounts set aside as impounds to be disbursed to the Company upon achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property. 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. No action was taken by the lender as of March 31, 2017. As of May 3, 2017, the lender has offered to modify the yield maintenance provision of the original loan agreements and apply the currently restricted cash balance to the outstanding loans or to permit an 18-month extension of the Companys right to draw upon the restricted funds until June 30, 2018 subject to the draw provisions of the original loan agreements. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies: Financial Instruments (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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, notes payable and due from (to) related parties. The Company considers the carrying value to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Revenue Recognition | Revenue Recognition The Companys leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (ASC) 605-10-S99, Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursement and other revenues in the period the related costs are incurred. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies: Real Estate (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Real Estate | Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Companys policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and managements consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases. The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Companys reported net loss. Depreciation and amortization Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years calculated on terms of all of the leases in-place when acquired. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of our real estate assets as of March 31, 2017. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market Approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost Approach: Amount required to replace the service capacity of an asset (replacement cost). Income Approach: Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Companys estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies: Goodwill (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Goodwill | Goodwill GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount. If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements. |
Summary of Significant Accoun27
Summary of Significant Accounting Policies: Organization and Offering Costs (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Organization and Offering Costs | Organization and Offering Costs The Company incurred certain organization and offering expenses in connection with the organization of the Company and the offering of the Companys shares of common stock in the Companys public offering. These costs principally relate to professional and filing fees. For the three months ended March 31, 2017 and 2016, such costs totaled $0 and ($250,000), 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 March 31, 2017, and December 31, 2016, respectively, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds was cumulatively $858,000 for the Companys initial and follow-on public offerings, respectively. The Company terminated the offer and sale of its common stock to the public in its follow-on offering on March 31, 2016. 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 $786,000 resulting in a net credit for organization and offering expenses of $250,000 for the quarter ended March 31, 2016. Selling commissions in connection with the Companys public offering were recorded and charged to additional paid-in capital. |
Summary of Significant Accoun28
Summary of Significant Accounting Policies: Real Estate Held For Disposition and Discontinued Operations (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Real Estate Held For Disposition and Discontinued Operations | Real Estate Held for Disposition and Discontinued Operations The Company considers a commercial property to be held for sale when it meets all of the criteria established under ASC 205, Presentation of Financial Statements. For commercial properties classified as held for sale, assets and liabilities are presented separately for all periods presented. In accordance with ASC 205, a discontinued operation may include a component of an entity or a group of components of an entity. A disposal of a component of an entity or a group of components of an entity is reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component of an entity or group of components of an entity is classified as held for sale, disposed of by sale or disposed of other than by sale, respectively. In addition, ASC 205 requires us to provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not meet the criteria for a discontinued operation. |
Summary of Significant Accoun29
Summary of Significant Accounting Policies: Stock-based Compensation (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Stock-based Compensation | Stock-Based Compensation The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) with regard to issuance of stock in payment of services. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the fair value of the equity or liability instruments issued. |
Summary of Significant Accoun30
Summary of Significant Accounting Policies: Advertising (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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 $55,000 and $50,000 for the three months ended March 31, 2017 and 2016, respectively. |
Summary of Significant Accoun31
Summary of Significant Accounting Policies: Income Taxes (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Income Taxes | 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. For the three months ended March 31, 2017 and 2016, the Company incurred a net loss of $1,427,000 and $1,969,000 respectively. The Company formed one taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded considering the net loss carry forward would be properly offset by an equal valuation allowance in that no material current or 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. Taxable income (loss) differs from net income (loss) for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and rental revenue. |
Summary of Significant Accoun32
Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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. ASU 2015-03, Interest Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. We have adopted this guidance for all periods presented. In 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_ Schedule of Real E
Real Estate: Schedule of Real Estate Properties (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Schedule of Real Estate Properties | March 31, 2017 December 31, 2016 Land $62,320 $62,320 Buildings and improvements 129,201 127,206 In-place lease value intangible 63,573 63,573 255,094 253,099 Less accumulated depreciation and amortization (55,831) (49,872) Total real estate assets $199,263 $203,227 |
Real Estate_ In-place lease val
Real Estate: In-place lease value intangible (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
In-place lease value intangible | March 31, 2017 December 31, 2016 In-place lease value intangible $ 63,573 $ 63,573 In-place leases accumulated amortization (39,188) (34,635) Acquired lease intangible assets, net $ 24,385 $ 28,938 |
Accrued Rent and Accounts Rec35
Accrued Rent and Accounts Receivable, Net: Accrued rent and accounts receivable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Accrued rent and accounts receivable | March 31, 2017 December 31, 2016 Tenant receivables $ 3,265 $ 2,889 Accrued rent 4,205 3,583 Allowance for doubtful accounts (1,357) (1,206) Accrued Rents and Accounts Receivable, net $ 6,113 $ 5,266 |
Deferred Leasing Commission C36
Deferred Leasing Commission Costs, Net: Leasing commission costs (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Leasing commission costs | Costs which have been deferred consist of the following, in thousands: March 31, 2017 December 31, 2016 Deferred leasing commissions $ 6,725 $ 6,116 Less: accumulated amortization (1,608) (1,341) Deferred leasing commission cost, net $ 5,117 $ 4,775 |
Notes Payable_ Loan costs and a
Notes Payable: Loan costs and amortization table (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Loan costs and amortization table | Loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands: March 31, 2017 December 31, 2016 Deferred loan costs $ 2,160 $ 2,160 Less: deferred loan cost accumulated amortization (820) (693) Total cost, net of accumulated amortization $ 1,340 $ 1,467 |
Notes Payable_ Notes payable su
Notes Payable: Notes payable summary (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Notes payable summary | The following is a summary of the Companys notes payable as of March 31, 2017, in thousands: Property/Facility Payment (1) Maturity Date Rate March 31, 2017 December 31, 2016 Richardson Heights (2)(3) P&I July 1, 2041 4.61% $ 19,094 19,094 $ 19,200 Cooper Street (2) P&I July 1, 2041 4.61% 7,940 7,984 Bent Tree Green (2)(3) P&I July 1, 2041 4.61% 7,940 7,984 Mitchelldale (2) P&I July 1, 2041 4.61% 12,028 12,096 Energy Plaza I & II P&I June 10, 2021 5.30% 9,958 10,007 Westway One IO June 1, 2019 3.29% 10,819 10,819 Three Forest Plaza IO December 31, 2019 3.59% 17,828 17,828 TCB Credit Facility IO May 9, 2017 5.00% 8,800 7,800 EWB Credit Facility IO August 24, 2017 4.50% 12,000 12,000 EWB II Credit Facility IO August 24, 2017 4.50% 9,900 9,900 $ 116,307 $ 115,618 Less unamortized deferred loan costs (1,340) (1,467) $ 114,967 $ 114,151 |
Notes Payable_ Annual maturitie
Notes Payable: Annual maturities of notes payable table (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Annual maturities of notes payable table | Annual maturities of notes payable as of March 31, 2017 are as follows, in thousands: Year ending December 31, Amount Due 2017 $ 31,648 2018 1,320 2019 30,031 2020 1,450 2021 10,451 Thereafter 41,407 Total $ 116,307 |
Loss Per Share_ Schedule of Ear
Loss Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Schedule of Earnings Per Share, Basic and Diluted | Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings (loss) per share. Three months ended March 31, 2017 2016 Numerator: Net loss attributable to common stockholders $ (1,522,000) $ (1,969,000) Denominator: Basic and diluted weighted average shares outstanding 18,165,831 15,088,950 Basic and diluted loss per common share: Net loss attributable to common stockholders $ (0.08) $ (0.13) |
Real Estate Held For Disposit41
Real Estate Held For Disposition: Loss from discontinued operations table (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Loss from discontinued operations table | Loss from discontinued operations with respect to the Village Pointe Property is as follows, in thousands: Three Months Ended March 31, 2017 Total revenues $ 250 Property operating expenses 77 Real estate taxes and insurance 39 Asset management fees 13 General and administrative 7 Interest expense 26 Total expenses 162 Loss on disposition (27) Net income from discontinued operations $ 61 |
Stockholders' Equity_ Distribut
Stockholders' Equity: Distributions schedule (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Distributions schedule | Quarter Paid Distributions per Common Share Total Distributions 2017 1 st $ 0.175 $ 3,131 2016 4 th $ 0.175 $ 3,173 3 rd 0.175 3,213 2 nd 0.175 3,042 1 st 0.175 2,478 Total $ 0.700 $ 11,906 |
Organization and Business (Deta
Organization and Business (Details) | Mar. 31, 2017USD ($)$ / sharesshares |
Details | |
Shares, Issued | 18,574,461 |
Distribution reinvestment shares | 1,216,240 |
Gross offering proceeds | $ | $ 181,336,480 |
Share Price | $ / shares | $ 10 |
Summary of Significant Accoun44
Summary of Significant Accounting Policies: Restricted Cash (Details) | Mar. 31, 2017USD ($) |
Details | |
Restricted cash balance | $ 2,371,000 |
Real Estate_ Schedule of Real45
Real Estate: Schedule of Real Estate Properties (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Details | ||
Land | $ 62,320 | $ 62,320 |
Buildings and Improvements, Gross | 129,201 | 127,206 |
Intangible Assets, Current | $ 63,573 | $ 63,573 |
Real Estate (Details)
Real Estate (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Details | ||
Depreciation expense | $ 1,406,000 | $ 1,459,000 |
Asset management fees paid to Advisor | $ 440,000 | $ 333,000 |
Real Estate_ In-place lease v47
Real Estate: In-place lease value intangible (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Details | ||
In-place leases - accumulated amortization | $ (39,188) | $ (34,635) |
Acquired lease intangible assets, net | $ 24,385 | $ 28,938 |
Accrued Rent and Accounts Rec48
Accrued Rent and Accounts Receivable, Net: Accrued rent and accounts receivable (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Details | ||
Tenant receivables | $ 3,265 | $ 2,889 |
Accrued Rent, Current | 4,205 | 3,583 |
Allowance for Doubtful Accounts Receivable | $ (1,357) | $ (1,206) |
Accrued Rent and Accounts Rec49
Accrued Rent and Accounts Receivable, Net (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Details | ||
Bad debt expense | $ 151,000 | $ 218,000 |
Deferred Leasing Commission C50
Deferred Leasing Commission Costs, Net: Leasing commission costs (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Details | ||
Deferred leasing commissions cost | $ 6,725 | $ 6,116 |
Leasing commission accumulated amortization | (1,608) | (1,341) |
Deferred leasing commission cost, net | $ 5,117 | $ 4,775 |
Notes Payable_ Loan costs and51
Notes Payable: Loan costs and amortization table (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Details | ||
Deferred loan costs | $ 2,160 | $ 2,160 |
Deferred loan cost accumulated amortization | (820) | (693) |
Total cost, net of accumulated amortization | $ 1,340 | $ 1,467 |