Hartman Short Term Income Properties XX (HARXX) 10-K 2 Apr 18 2017 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Jun. 30, 2017
Document and Entity Information:
Entity Registrant Name	Hartman Short Term Income Properties XX, Inc.
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Trading Symbol	harxx
Amendment Flag	false
Entity Central Index Key	1,446,687
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		17,117,000
Entity Public Float		$ 181,170,000
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	FY

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
ASSETS
Real estateInvestment property at cost	$ 259,963	$ 253,099
Real estate investment property accumulated depreciation	(73,141)	(49,872)
Real estate investment property at cost, net	186,822	203,227
Cash and cash equivalents	1,586	3,254
Restricted cash	2,371	2,371
Accrued rent and accounts receivable, net	7,271	5,266
Notes receivable - related party	9,715	11,431
Deferred lease commissions and loan costs, net	6,077	4,775
Goodwill	250	250
Prepaid expenses and other assets	1,906	1,662
Due from related parties	5,182
Real estate held for disposition		7,050
Investment in affiliate	8,978	8,978
Total assets	230,158	248,264
LIABILITIES
Note payable	117,237	114,151
Note payable - real estate held for disposition, net		3,458
Accounts payable and accrued expenses	10,999	12,057
Due to related parties		343
Tenants' security deposits	1,883	1,824
Total liabilities	130,119	131,833
Common stock	18	18
Additional paid in capital	167,871	169,406
Accumulated distributions and net loss	(81,188)	(59,674)
Total stockholders' equity	86,701	109,750
Noncontrolling interests in subsidiary	13,338	6,681
Total equity	100,039	116,431
Total liabilities and total stockholders' equity	$ 230,158	$ 248,264

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Revenues
Rental revenues	$ 38,831	$ 33,002
Tenant reimbursements and other revenues	5,478	5,568
Total revenues	44,309	38,570
Expenses
Property operating expenses	14,679	14,530
Asset management and acquisition fees	1,760	3,007
Organization and offering costs		(44)
Real estate taxes and insurance	6,529	4,510
Depreciation and amortization	23,268	22,488
General and administrative	2,726	2,382
Interest and dividend income	5,764	3,737
Interest expense	(1,332)	(1,147)
Total expenses	53,394	49,463
Loss from continuing operations	(9,085)	(10,893)
Loss from discontinued operations, net	50	(31)
Net loss	$ (9,035)	$ (10,924)

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities:
Net loss	$ (9,035)	$ (10,924)
Stock based compensation	74	104
Depreciation and amortization expense	23,268	22,488
Deferred loan and leasing commission costs amortization	1,662	1,128
Bad debt provision	508	713
Accrued rent and accounts receivable	(2,513)	(3,229)
Deferred leasing commmissions	(2,518)	(3,110)
Prepaid expenses and other assets	(313)	(415)
Accounts payable and accrued expenses	(1,040)	2,312
Due to/from related parties	(5,525)	550
Tenants' security deposits	59	498
Net cash provided by (used in) operating activities	4,627	10,115
Cash flows from investing activities:
Acquisition deposit	20	(20)
Advance to an affiliate		(4,200)
Investment in note receivable from affiliate	1,716	(7,231)
Investment in affiliates		(8,978)
Restricted cash		4,529
Investment in real estate held for disposition	7,050	(7,050)
Additions to real estate	(6,864)	(63,392)
Net cash provide from (used in) investing activities	1,922	(86,342)
Cash flows from financing activities:
Dividend distributions paid in cash	(13,193)	(9,126)
Payment of selling commissions		(2,103)
Noncontrolling interests capital	7,350	6,850
Payment of deferred loan costs	(124)	(501)
Proceeds under term loan notes		28,646
Borrowings under term loan notes - real estate held for disposition		3,525
Repayments under term loan notes	(4,694)	(1,200)
Borrowings under revolving credit facility	5,500	56,225
Repayment of revolving credit advances	(1,500)	(44,471)
Proceeds from issuance of common stock	(1,556)	40,256
Net cash provided by (used in) financing activities	(8,217)	78,101
Net change in cash and cash equivalents	(1,668)	1,874
Cash and cash equivalents at the beginning of period	3,254	1,380
Cash and cash equivalents at the end of period	$ 1,586	$ 3,254

Organization and Business

Organization and Business	12 Months Ended
	Dec. 31, 2017
Notes
Organization and Business	Organization and Business Hartman Short Term Income Properties XX, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009. The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2011. Effective March 31, 2016, the Company terminated the offer and sale of its common shares to the public in its follow-on offering. The sale of shares of the Company’s common stock to its stockholders pursuant to the Company’s distribution reinvestment plan continued until July 16, 2016. The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc. (“XX Holdings”), a Texas corporation wholly owned by Allen R. Hartman. The Company sold 19,000 shares of common stock to XX Holdings at a price of $10.00 per share. As of December 31, 2017, the ownership of XX Holdings is approximately 0.1% of the issued and outstanding shares of the Company. The Company issued 1,000 shares of the Company’s convertible preferred stock to the Company’s advisor, Hartman Advisors LLC (“Advisor”), at a price of $10.00 per share. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc. (the “Property Manager”). The Property Manager is a wholly owned subsidiary of Hartman Income REIT, Inc. Allen R. Hartman, the Company’s Chief Executive Officer and Chairman of the Board of Directors, beneficially owns approximately 20% of Hartman Income REIT, Inc. Substantially all of the Company’s business is conducted through the Company’s wholly owned subsidiary, Hartman XX Limited Partnership, a Texas limited partnership (the “Operating Partnership”). The Company’s wholly-owned subsidiary, Hartman XX REIT GP LLC, a Texas limited liability company, is the sole general partner of the Operating Partnership. The Company is the sole limited partner of the Operating Partnership. The Company’s single member interests in the Company’s limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries. On April 11, 2017, the Operating Partnership entered into a membership interest purchase agreement with Hartman vREIT XXI, Inc. (“vREIT XXI”), an affiliate of the Company. Pursuant to the terms of a membership interest purchase agreement between vREIT XXI and the Company, vREIT XXI may acquire up to $10,000,000 of the equity membership interest of Operating Partnership in Hartman Three Forest Plaza, LLC (“Three Forest Plaza LLC”). As of December 31, 2017, vREIT XXI has acquired an approximately 48.8% equity interest in Three Forest Plaza LLC for $8,700,000. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company’s 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 Company’s properties is through the Property Manager. As of December 31, 2017, the Company owned or held a majority interest in 17 commercial properties comprising approximately 2,928,000 square feet plus three pad sites, all located in Texas. As of December 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 December 31, 2016, the Company owned or held a majority interest in 18 commercial properties comprising approximately 2,983,000 square feet plus three pad sites, all located in Texas. As of December 31, 2016, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and three properties located in San Antonio, Texas. On July 21, 2017, the Company and Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), entered into an agreement and plan of merger (the “XIX Merger Agreement”) and (ii) the Company, the Operating Partnership, Hartman Income REIT, Inc. (“HIREIT”) and Hartman Income REIT Operating Partnership LP, the operating partnership of HIREIT, (“HIROP”), entered into an agreement and plan of merger (the “HIREIT Merger Agreement,” and together with the XIX Merger Agreement, the “Merger Agreements”). Subject to the terms and conditions of the XIX Merger Agreement, including the satisfaction of all closing conditions set forth in the Merger Agreements, Hartman XIX will merge with and into the Company, with the Company surviving the merger (the “Hartman XIX Merger”). Subject to the terms and conditions of the HIREIT Merger Agreement, (i) HIREIT will merge with and into the Company, with the Company surviving the merger (the “HIREIT Merger,” and together with the Hartman XIX Merger, the “REIT Mergers”), and (ii) HIROP will merge and with and into the Operating Partnership, with the Operating Partnership surviving the merger (the “Partnership Merger,” and together with the REIT Mergers, the “Mergers”). The REIT Mergers are intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Partnership Merger is intended to be treated as a tax-deferred exchange under Section 721 of the Code. Subject to the terms and conditions of the XIX Merger Agreement, (i) each share of common stock of Hartman XIX (the “XIX Common Stock”) issued and outstanding immediately prior to the Effective Time (as defined in the XIX Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 9,171.98 shares of common stock, $0.01 par value per share, of the Company (“Company Common Stock”), (ii) each share of 8% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of Company Common Stock, and (iii) each share of 9% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of Company Common Stock. Subject to the terms and conditions of the HIREIT Merger Agreement, (a) in connection with the HIREIT Merger, (i) each share of common stock of HIREIT (the “HIREIT Common Stock”) issued and outstanding immediately prior to the REIT Merger Effective Time (as defined in the HIREIT Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of Company Common Stock, and (ii) each share of subordinate common stock of HIREIT will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of Company Common Stock, and (b) in connection with the Partnership Merger, each unit of limited partnership interest in HIREIT Operating Partnership (“HIREIT OP Units”) issued and outstanding immediately prior to the Partnership Merger Effective Time (as defined in the HIREIT Merger Agreement) (other than any HIREIT OP Units held by HIREIT) will be automatically cancelled and retired and converted into the right to receive 0.752222 validly issued, fully paid and non-assessable units of limited partnership interests in XX Operating Partnership. Each Merger Agreement contains customary covenants, including covenants prohibiting HIREIT and Hartman XIX and their respective subsidiaries and representatives from soliciting, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions. The Merger Agreements may be terminated under certain circumstances, including but not limited to (i) by the mutual written consent of all the parties to a Merger Agreement, (ii) by either the Company or HIREIT or Hartman XIX, as applicable, if a final and non-appealable order is entered prohibiting or disapproving the applicable Mergers, (iii) by either the Company or HIREIT or Hartman XIX, as applicable, if the required approval of the applicable Mergers by the stockholders of the Company or HIREIT or Hartman XIX, as applicable (the “Stockholder Approvals”), have not been obtained, (iv) by either the Company or HIREIT or Hartman XIX, as applicable, upon a material uncured breach by the other party that would cause the closing conditions in the applicable Merger Agreement not to be satisfied, or (v) by either the Company or HIREIT or Hartman XIX, as applicable, if the applicable Mergers have not been completed on or before September 30, 2018. No termination fees or penalties are payable by any party to any Merger Agreement in the event of the termination of any Merger Agreement. The Merger Agreements contain certain representations and warranties made by the parties thereto. The representations and warranties of the parties were made solely for purposes of the contract among the parties, and are subject to certain important qualifications and limitations set forth in confidential disclosure letters delivered by the parties to the Mergers to the other parties to the Mergers. Moreover, certain of the representations and warranties are subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders, and the representations and warranties are primarily intended to establish circumstances in which either of the parties may not be obligated to consummate the Mergers, rather than establishing matters as facts. Each Merger Agreement sets forth certain conditions of the parties thereto to consummate the Mergers contemplated by such Merger Agreement, including (i) receipt of the applicable Stockholder Approvals, (ii) receipt of all regulatory approvals, (iii) the absence of any judgments, orders or laws prohibiting or restraining the consummation of the applicable Mergers, (iv) the effectiveness with the Securities and Exchange Commission (the “SEC”) of the registration statement on Form S-4 to be filed by the Company to register the shares of Company Common Stock to be issued as consideration in the REIT Mergers, (v) the delivery of certain documents, consents and legal opinions, and (vi) the truth and correctness of the representations and warranties of the respective parties, subject to the materiality standards contained in the Merger Agreements. In addition, the consummation of the HIREIT Merger and the Partnership Merger is a condition to the consummation of the Hartman XIX Merger, and vice versa. There can be no guarantee that the conditions to the closing of the Mergers set forth in the Merger Agreements will be satisfied.

Summary of Significant Accounti

Summary of Significant Accounting Policies	12 Months Ended
	Dec. 31, 2017
Notes
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements as of December 31, 2017 and 2016 and for the years then ended have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-K and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. These consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of December 31, 2017 and 2016 consisted of demand deposits at commercial banks. Restricted Cash - The lender has the right to draw any of the remaining funds and apply the same to the outstanding loans at the lender’s sole discretion. The Company’s right to draw upon the restricted funds expires June 30, 2018. Restricted funds not drawn as of that date will be applied as prepayments of loan principal. Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, accrued rent and accounts receivable, accounts payable and accrued expenses and balances with related parties. The Company considers the carrying value of these financial instruments to approximate their respective fair values due to their short-term nature and such fair values are considered estimated per Level 1 basis as provided by Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. The fair value of the Company’s fixed rate notes payable, variable rate notes payable and secured revolving credit facilities aggregates to $116,777,000 and $113,972,000 as compared to book value of $118,358,000 and $115,618,000 as of December 31, 2017 and 2016, respectively. The fair value of our debt instruments is estimated on a Level 2 basis, as provided by ASC 820, using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments. Disclosure about the fair value of financial instruments is based on relevant information available as of December 31, 2017 and 2016. Revenue Recognition The Company’s leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (“ASC”) 605-10-S99, Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursements and other revenue in the period the related costs are incurred. Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental revenue over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s 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 Company’s reported net loss. Depreciation and amortization Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years calculated in terms of all of the leases in-place when acquired. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of the Company’s real estate assets as of December 31, 2017 and 2016. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of the Company’s 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 Company’s 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, net Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of the Company’s claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Deferred Leasing Commissions Costs, net Leasing commissions are capitalized and amortized using the straight-line method over the term of the related lease agreements. Goodwill Generally accepted accounting principles in the United States require the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount. If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. For the years ended December 31, 2017 and 2016, no goodwill impairment was recognized in the accompanying consolidated financial statements. 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 stockholders’ equity is included for financial statements, including beginning balances, activity for the period and ending balances for stockholders' equity, noncontrolling interests and total equity. Organization and Offering Costs The Company has incurred certain expenses in connection with organizing the company. These costs principally relate to professional and filing fees. For the years ended December 31, 2017 and 2016, such costs totaled $0 and $20,000, respectively, which have been expensed as incurred. Organization and offering expenses of the Company are paid directly by the Company or incurred by Advisor on behalf of the Company and reimbursed by the Company to the Advisor (subject to certain limitations). Pursuant to the Advisory Agreement, organization and offering expenses will be reimbursed by the Advisor to the Company following the completion of a public offering of the Company to the extent that total organization and offering expenses incurred by the Company in connection with such public offerings (excluding selling commissions and dealer manager fees) exceed 1.5% of gross offering proceeds from the completed public offerings. As of December 31, 2017 and 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 Company’s 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 recorded a receivable from the Advisor and recorded a contra expense of $858,000 resulting in a net credit for organization and offering expenses of ($44,000) for the year ended December 31, 2016. Stock-Based Compensation The Company follows ASC 718- Compensation- Stock Compensation with regard to issuance of stock in payment of services. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the estimated grant date fair value, as of the grant date of the Company’s common stock, of the equity or liability instruments issued. Stock-based compensation expense are recorded over the vesting period and is included in general and administrative expense in the accompanying consolidated statements of operations. Advertising The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. Advertising costs totaled $74,000 and $183,000 for the years ended December 31, 2017 and 2016, respectively. Income Taxes The Company has elected to be treated as a REIT under the Internal Revenue Code, as amended, beginning with its taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s 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 Company’s net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT. For the years ended December 31, 2017 and 2016, the Company incurred a net loss of $9,035,000 and $10,924. 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 in light of 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 Company’s 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. On December 22, 2017, H.R. 1, known as the Tax Cuts and Jobs Act (the “TCJA”) was signed into law and included wide-scale changes to individual, pass-through and corporation tax laws, including those that impact the real estate industry, the ownership of real estate and real estate investments, and REITs. The Company has reviewed the provisions of the law that pertain to the Company and have determined them to have no material income tax effect for financial statement purposes for the year ended December 31, 2017. 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 Company’s potentially dilutive securities include preferred shares that are convertible into the Company’s common stock. As of December 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 years ended December 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. As of December 31, 2017, the Company had two depository accounts with a total of $654,000 in excess of the federally insured limits. No losses have been incurred in connection with these deposits. The geographic concentration of the Company’s 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 Company’s operating results and its ability to make distributions to stockholders Going Concern Evaluation Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one-year after the date that these consolidated financial statements are issued. The TCB Credit Facility, the EWB Credit Facility and the EWB II Credit Facility have maturity dates, each of which is less than twelve months from the date these consolidated financial statements were issued. Management has considered whether the conditions of the credit facility maturity dates raise substantial doubt that the Company’s ability to continue as a going concern and meet these debt obligations when they become due. Management has a plan to refinance the TCB Credit Facility, the EWB Credit Facility and the EWB II Credit Facility, either as a comprehensive plan to refinance the credit facilities of the Company in connection with or following the proposed merger of the Company and its Hartman affiliates or on a standalone basis without regard to the approval and completion of the proposed mergers. Inasmuch as management’s plan has not been fully implemented, the guidance provided by ASU 2014-15 requires that management must conclude that the fact of the loan maturity dates within one-year of the issuance date of these consolidated financial statements raises the issue of substantial doubt. Management believes that management’s plan to renew, extend or refinance the credit facilities is likely based upon its history of successfully financing and refinancing the Company’s debt and will mitigate the maturity date issue within one year of the issuance date of these consolidated financial statements Recent Accounting Pronouncements On January 1, 2017, the Company adopted ASU (“Accounting Standards Update”) No. 2017-01, “Clarifying the Definition of a Business,” which provides guidance for determining whether an integrated set of assets and activities meets the definition of a business. Acquisitions of integrated assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. The Company believes most of its future acquisitions of operating properties will qualify as asset acquisitions. Third party transaction costs, including acquisition fees paid to Advisor, associated with asset acquisitions will be capitalized while internal acquisition costs will continue to be expenses as incurred. There is no effect of the adoption of this ASU in the accompanying consolidated financial statements as there were no 2017 acquisitions. This accounting standard will be applicable to future property acquisitions. In October 2016, the Financial Accounting Standards Board, or 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 VIE’s 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. The Company has adopted this guidance for all periods presented. 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. The effect of this amendment is to be applied retrospectively and early adoption is permitted. The Company has adopted this guidance in the fourth quarter of fiscal year 2017 and applied this presentation retroactively to all periods presented in these consolidated financial statements. The effect of adopting this guidance is that changes in restricted cash previously reported as a change in investing activities are no longer presented as such and the balance of restricted cash is included with cash and cash equivalents in the Consolidated Statements of Cash Flows. Recently Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued 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 issued ASU No. 2015-14 which deferred the effective date of ASU No. 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company expects to adopt ASU No. 2014-09 using the modified retrospective approach. The Company has evaluated the impact of the new guidance and does not expect the adoption of the guidance to be material to its financial results of operations. Additional information about the Company’s revenue streams and other considerations are summarized below. Rental revenues – Tenant reimbursements and other revenue – 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 the Company’s fiscal year commencing on January 1, 2018. The Company does not anticipate that the adoption of ASU No. 2016-01 will have a material effect on its consolidated financial position or 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 the Company’s fiscal year commencing on January 1, 2019, but early adoption is permitted. The Company does not anticipate that the adoption of ASU No. 2016-02 will have a material effect on its consolidated financial position or consolidated results of operations.

Real Estate

Real Estate	12 Months Ended
	Dec. 31, 2017
Notes
Real Estate	Real Estate Real estate assets consisted of the following, in thousands: December 31, 2017 2016 Land $ 62,320 $ 62,320 Buildings and improvements 134,069 127,206 In-place lease value intangible 63,573 63,573 259,962 253,099 Less accumulated depreciation and amortization (73,140) (49,872) Total real estate assets $ 186,822 $ 203,227 Depreciation expense for the years ended December 31, 2017 and 2016 was $7,713,000 and $6,581,000, respectively. The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms. With respect to all properties owned by the Company, the Company considers all of the in-place leases to be market rate leases. The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands: December 31, 2017 2016 In-place lease value intangible $ 63,573 $ 63,573 Less: In-place leases – accumulated amortization (50,190) (34,635) Acquired lease intangible assets, net $ 13,383 $ 28,938 The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands: Year ending December 31, In-place lease amortization 2018 5,937 2019 3,452 2020 3,016 2021 967 2022 11 Total $ 13,383 Amortization expense for the year ended December 31, 2017 and 2016 was $15,555,000 and $15,907,000, respectively. As of December 31, 2017 the Company owned or held a majority interest in 17 commercial properties comprising approximately 2,928,000 square feet plus three pad sites, all located in Texas. As of December 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 December 31, 2016 the Company owned 18 commercial properties comprising approximately 2,983,000 square feet plus three pad sites, all located in Texas. As of December 31, 2016, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and three properties located in San Antonio, Texas. Acquisition fees earned by the Advisor were $0 and $1,574,000 for the years ended December 31, 2017 and 2016, respectively. Asset management fees earned by the Advisor were $1,760,000 and $1,433,000 for the years ended December 31, 2017 and 2016, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations for the years ended December 31, 2017 and 2016, respectively. On June 1, 2016, Hartman Westway One, LLC, a wholly owned subsidiary of the Operating Partnership, acquired a three-story office building containing approximately 165,982 square feet of office space located in Irving, Texas, commonly known as Westway One. The Westway One property was acquired for $21,638,000, exclusive of closing costs and liabilities assumed, from an unaffiliated third-party seller. The Westway One property was 100% occupied at the acquisition date. An acquisition fee of $541,000 was earned by the Advisor in connection with the purchase of the Westway One property. On June 17, 2016, Hartman Westway One, LLC admitted an unrelated independent investor as a member for $5,500,000 in exchange for a 45.67% noncontrolling member interest. On November 14, 2016, the Operating Partnership contributed $3,675,000 cash to Hartman Village Pointe, LLC, in exchange for a 97.35% membership in a joint venture investment among the Operating Partnership and Hartman vREIT XXI, Inc. Hartman vREIT XXI contributed $100,000 to Hartman Village Pointe, LLC in exchange for a 2.65% membership interest in the joint venture. On November 14, 2016, Hartman Village Pointe, LLC acquired a retail shopping center comprising approximately 54,246 square feet located in San Antonio, Texas, commonly known as Village Pointe, for $7,050,000, exclusive of closing costs and liabilities assumed. The acquisition price for the Village Pointe property was funded by members’ capital and a $3,525,000 mortgage loan provided by the Operating Partnership. On December 1, 2016, Hartman vREIT XXI acquired an additional 33.11% membership interest in the joint venture from the Operating Partnership for $1,250,000. An acquisition fee of $142,500 was earned by the Advisor in connection with the purchase of the of the Operating Partnership’s interest as of December 31, 2016 in the Village Pointe property. As of February 8, 2017, Hartman vREIT XXI, Inc. has acquired all of the Operating Partnership’s interests in the joint venture for $3,775,000. See Note 11- Real Estate Held for Disposition. On December 22, 2016, the Company, through Hartman Three Forest Plaza, LLC, a majority owned subsidiary of Hartman XX Limited Partnership, our operating partnership, acquired a fee simple interest in a 19-story suburban office building comprising approximately 366,549 square feet and located in Dallas, Texas. The property is commonly referred to as Three Forest Plaza with a purchase price of $35,655,000, exclusive of closing costs and liabilities assumed. The Three Forest property was 74% occupied at the acquisition date. An acquisition fee of $891,000 was earned by the Advisor in connection with the purchase of the Three Forest property. On April 11, 2017, the Operating Partnership entered into a membership interest purchase agreement with Hartman vREIT XXI, Inc. (“vREIT XXI”), an affiliate of the Company. Pursuant to the terms of a membership interest purchase agreement between vREIT XXI and the Company, vREIT XXI may acquire up to $10,000,000 of the equity membership interest of Operating Partnership in Hartman Three Forest Plaza, LLC (“Three Forest Plaza LLC”). As of December 31, 2017, vREIT XXI has acquired an approximately 48.8% equity interest in Three Forest Plaza LLC for $8,700,000. The following table summarizes the fair value of the assets acquired and the liabilities assumed based upon the Company’s purchase price allocations of the Company’s 2016 property acquisitions as of the respective acquisition dates, in thousands: Westway One Three Forest Plaza Total Assets acquired: Real estate assets $ 21,638 $ 35,655 $ 57,293 Liabilities assumed: Accounts payable and accrued expenses 232 1,303 1,535 Security deposits 38 283 321 Total liabilities assumed 270 1,586 1,856 Fair value of net assets acquired $ 21,368 $ 34,069 $ 55,437 The Company’s indirect wholly owned subsidiary, Hartman Richardson Heights Properties, LLC (“HRHP LLC”), and the City of Richardson, Texas are parties to an economic development incentive agreement. Under the terms of the agreement, the City of Richardson will pay annual grants to HRHP LLC in equal installments over a five-year period of up to $1.5 million and sales tax grants to be paid annually over the first 10 years of the Alamo Draft House lease. The first economic development installment was received in September 2013. The Company received installments of $300,000 in each of the years ended December 31, 2017 and 2016, respectively, which are included in tenant reimbursements and other revenues on the consolidated statements of operations. The company has made application to receive a sales tax grant of $82,000 for the 2017 fiscal year of the economic development agreement. For the years ended December 31, 2017 and 2016, respectively, the Company received sales tax grants of $0 and $73,000 pursuant to the economic development incentive agreement, which is included in tenant reimbursements and other revenues on the consolidated statements of operations. Payments received by the Company in the form of annual grants and annual sales tax grants are subject to refund or adjustment during the term of the economic development incentive agreement. In general, the incentive agreement provides that the Company must continue to be in good standing with respect to the terms and conditions of the agreement and that the Alamo Draft House lessee must continue as a tenant of the Richardson Heights Property during the term of its lease agreement. As of December 31, 2017, no uncured breach or default exists under the terms of the incentive agreement and the Company has no liability or other obligation to repay any grants received under the agreement.

Accrued Rent and Accounts Recei

Accrued Rent and Accounts Receivable, Net	12 Months Ended
	Dec. 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: Years ended December 31, 2017 2016 Tenant receivables $ 3,609 $ 2,889 Accrued rent 5,376 3,583 Allowance for doubtful accounts (1,714) (1,206) Accrued rents and accounts receivable, net $ 7,271 $ 5,266 As of December 31, 2017 and 2016, the Company had an allowance for uncollectible accounts of $1,715,000 and $1,206,000, respectively. For the years ended December 31, 2017 and 2016, the Company recorded bad debt expense of $508,000 and $713,000, respectively, related to tenant receivables that the Company have specifically identified as potentially uncollectible based on the Company’s assessment of each tenant’s credit-worthiness. Bad debt expenses and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

Deferred Leasing Commission Cos

Deferred Leasing Commission Costs, Net	12 Months Ended
	Dec. 31, 2017
Notes
Deferred Leasing Commission Costs, Net	Deferred Leasing Commission Costs, net Costs which have been deferred consist of the following, in thousands: Years ended December 31, 2017 2016 Deferred leasing commissions $ 8,634 $ 6,116 Less: accumulated amortization (2,557) (1,341) Deferred leasing commission costs, net $ 6,077 $ 4,775

Future Minimum Rents

Future Minimum Rents	12 Months Ended
	Dec. 31, 2017
Notes
Future Minimum Rents	Future Minimum Rents The Company leases the majority of its properties under noncancelable operating leases which provide for minimum base rentals. A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancelable operating leases in existence at December 31, 2017 is as follows, in thousands: Year ending December 31, Minimum Future Rents 2018 $ 34,634 2019 27,534 2020 23,255 2021 19,961 2022 14,617 Thereafter 28,064 Total $ 148,065

Notes Payable

Notes Payable	12 Months Ended
	Dec. 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 bank’s prime rate plus 1% per annum. The interest rate was 5.25% and 4.75% per annum as of December 31, 2017 and 2016, respectively. All borrowings under the TCB Credit Facility mature on May 9, 2018. The outstanding balance under the TCB Credit Facility was $11,800,000 and $7,800,000 as of December 31, 2017 and December 31, 2016, respectively. As of December 31, 2017, the amount available to be borrowed is $9,125,000. As of December 31, 2017, the Company was in compliance with all loan covenants. The Company is a party to a $15.525 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 lender’s 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 bank’s prime rate plus 0.50%. The interest rate was 4.75% and 4.25% per annum as of December 31, 2017 and 2016, respectively. The loan matures on November 22, 2018. 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 lender’s underwriting with respect to the real property collateral. The EWB 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 bank’s prime rate plus 0.50%. The interest rate was 4.75% and 4.25% per annum as of December 31, 2017 and 2016, respectively. The loan matures on November 22, 2018. The outstanding balance under the EWB Credit Facility and EWB II Credit Facility was $21,900,000 as of December 31, 2017 and 2016, respectively. As of December 31, 2017, the amount available to be borrowed was $3,525,000, respectively. As of December 31, 2017, the Company was in compliance with all loan covenants. On June 13, 2014, the Company, through the Operating Partnership, entered into four term loan agreements with an insurance company, each loan being secured by a collateral property. Each of the loans secured by the Richardson Heights Property, the Cooper Street Property, the Bent Tree Green Property and the Mitchelldale Property require monthly payments of principal and interest due and payable on the first day of each month. Monthly payments are based on a 27-year loan amortization. Each of the loan agreements are subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements. Each of the loan agreements provides for a fixed interest rate of 4.61%. As of December 31, 2017, we were in compliance with all loan covenants. Each of the loan agreements are secured by a deed of trust, assignment of licenses, permits and contracts, assignment and subordination of the management agreements and assignment of rents. The terms of the security instruments provide for the cross collateralization/cross default of the each of the loans. The outstanding balance of the four loans was $46,288,000 and $47,264,000 as of December 31, 2017 and 2016, respectively. On December 30, 2014, Hartman Energy LLC and the Company entered into a loan assumption agreement by and among U.S. Bank National Association, as Trustee for Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 2011-C-3, as lender; BRI 1841 Energy Plaza, LLC, as borrower; Ariel Bentata, as guarantor; Hartman Energy LLC, as buyer; and the Company, as the new guarantor. The loan in the original amount of $10,900,000 and dated May 20, 2011, is evidenced by a promissory note, a deed of trust, assignment of leases and rents and security agreement. The loan agreement provides for a fixed interest rate of 5.30% per annum. The outstanding balance of the loan assumed was $10,363,000. The loan maturity date is June 10, 2021. Monthly payments of principal and interest are due and payable on the tenth day of each month beginning January 11, 2015 until June 10, 2021 based on a 30-year loan amortization. The loan agreement is subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreement. As of December 31, 2017, we were in compliance with all loan covenants. The loan agreement is secured by a deed of trust; assignment of licenses, permits and contracts; assignment and subordination of the management agreements; and assignment of rents. The outstanding balance was $9,814,000 and $10,007,000 as of December 31, 2017 and 2016, respectively. On June 1, 2016, Hartman Westway One, LLC, entered into a three-year loan agreement with Southside Bank for the principal sum of $10,819,000, having a maturity date of June 1, 2019. The interest rate is the lesser of one-month LIBOR plus 2.50% or 2.50%. The interest rate was 3.73% and 3.12% per annum as of December 31, 2017 and 2016, respectively. The outstanding balance was $10,819,000 as of December 31, 2017 and 2016, respectively. On December 22, 2016, Hartman Three Forest Plaza, LLC, entered into a three-year loan agreement with Southside Bank for the principal sum of $19,828,000, having a maturity date of December 31, 2019 with an extension of one year possible. The interest rate is the lesser of one-month LIBOR plus 2.80% or 2.80%. The interest rate was 4.17% and 3.56% per annum as of December 31, 2017 and 2016, respectively. The loan agreement requires monthly deposits of $30,500 to a capital reserve account, subject to a maximum capital reserve account balance of $366,600. Mortgage proceeds funded at closing were $17,828,000. The outstanding balance was $17,828,000 as of December 31, 2017 and 2016, respectively. The remaining $2,000,000 of loan proceeds are available, subject to the terms of loan agreement, to fund tenant improvements and leasing commissions. The following is a summary of the mortgage notes payable as of December 31, 2017, in thousands: December 31, Property/Facility Payment (1) Maturity Date Rate 2017 2016 Richardson Heights (2) P&I July 1, 2041 4.61% $ 18,804 $ 19,200 Cooper Street (2) P&I July 1, 2041 4.61% 7,819 7,984 Bent Tree Green (2) P&I July 1, 2041 4.61% 7,819 7,984 Mitchelldale (2) P&I July 1, 2041 4.61% 11,846 12,096 Energy Plaza I & II P&I June 10, 2021 5.30% 9,814 10,007 Westway One IO June 1, 2019 3.73% 10,819 10,819 Three Forest Plaza IO December 31, 2019 4.17% 17,828 17,828 TCB Credit Facility IO May 9, 2018 5.25% 11,800 7,800 EWB Credit Facility IO November 22, 2018 4.75% 12,000 12,000 EWB II Credit Facility IO November 22 2018 4.75% 9,900 9,900 $ 118,449 $ 115,618 Less unamortized deferred loan costs (1,212) (1,467) $ 117,237 $ 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. Annual maturities of notes payable as of December 31, 2017 are as follows, in thousands: Year ending December 31, Amount Due 2018 $ 35,111 2019 30,030 2020 1,450 2021 10,451 2022 1,342 Thereafter 40,065 Total $ 118,449 The Company’s loan costs are amortized using the straight-line method over the term of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands: Years ended December 31, 2017 2016 Deferred loan costs $ 2,348 $ 2,160 Less: deferred loan cost accumulated amortization (1,136) (693) Total cost, net of accumulated amortization $ 1,212 $ 1,467 Interest expense incurred for the year ending December 31, 2017 and 2016 was $5,764,000 and $3,737,000, respectively. Interest expense of $283,000 and $224,000 was payable as of December 31, 2017 and 2016, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Loss Per Share

Loss Per Share	12 Months Ended
	Dec. 31, 2017
Notes
Loss Per Share	Loss Per Share Basic earnings (loss) per share is computed using net income (loss) attributable to common stockholders and the weighted average number of common shares outstanding. Diluted weighted average shares outstanding reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings (loss) per share are included in the diluted earnings (loss) per share. Years ended December 31, 2017 2016 Numerator: Net loss attributable to common stockholders ($8,982,000) ($11,046,000) Denominator: Basic and diluted weighted average shares outstanding 18,109,553 17,361,594 Basic and diluted loss per common share: Net loss attributable to common stockholders ($0.49) ($0.64)

Income Taxes

Income Taxes	12 Months Ended
	Dec. 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. The Company’s federal income tax returns for the years ended December 31, 2014, 2015 and 2016 have not been examined by the Internal Revenue Service. The Company’s federal income tax return for the year ended December 31, 2014 may be examined on or before September 15, 2018. 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 Company’s 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 differs from net income for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and amortization and rental revenue. For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31: 2017 2016 Ordinary income (unaudited) 29.4% 34.8% Return of capital (unaudited) 70.6% 65.2% Capital gains distribution (unaudited) - - Total 100.0% 100.0% A provision for Texas Franchise tax under the Texas Margin Tax Bill in the amount of $244,000 and $197,000 was recorded in the consolidated financial statements for the years ended December 31, 2017 and 2016, respectively, with a corresponding charge to real estate taxes and insurance.

Related Party Transactions

Related Party Transactions	12 Months Ended
	Dec. 31, 2017
Notes
Related Party Transactions	Related Party Transactions Hartman Advisors LLC, is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. and Subsidiaries of which approximately 20% is owned by Allen R. Hartman who is the Chief Executive Officer and Chairman of the Board of Directors. The Company pays acquisition fees and asset management fees to the Advisor in connection with the acquisition of properties and management of the Company. The Company pays property management and leasing commissions to the Property Manager in connection with the management and leasing of the Company’s properties. For the years ended December 31, 2017 and 2016 the Company incurred property management fees and reimbursements of $4,038,000 and $3,611,000, respectively, and $2,518,000 and $3,110,000, respectively for leasing commissions owed to our Property Manager. We incurred asset management fees of $1,760,000 and $1,433,000, respectively owed to Advisor. Acquisition fees incurred to the Advisor were $0 and $1,574,000 for the years ended December 31, 2017 and 2016, respectively. Property management fees and reimbursements are included in property operating expense in the accompanying consolidated statements of operations. Asset management fees and acquisition fees are captioned as such in the accompanying consolidated statements of operations. The Company had a balance due (from) to the Property Manager of ($3,207,000) and $518,000 as of December 31, 2017 and December 31, 2016, respectively. The Company had a balance due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), of $6,229,000 and $4,474,000 as of December 31, 2017 and 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 $2,029,000 balance due from Hartman XIX 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 $252,000 which is included in interest income in the accompanying consolidated statements of operations. The Company owed the Advisor $554,000 and $243,000 for asset management fees as of December 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 Company’s investment in an asset, if the Company do not own all or a majority of an asset. On January 26, 2016, the Company’s 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 Hartman XIX’s contemplated acquisition of HIREIT shares. As of December 31, 2016, the Company acquired 1,561,523 shares of the common stock of HIREIT for $8,978,000. The Company’s investment in HIREIT is accounted for under the cost method. The Company’s approximately 11% ownership interest in HIREIT is less than a controlling stake, and is reflected as “Investment in Affiliate” on the accompanying consolidated balance sheets. . The Company received dividend distributions from HIREIT of $425,000 and $283,000 for the years ended December 31, 2017 and 2016, respectively, which is included in interest and dividend income in the accompanying consolidated statements of operations. 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 years ended December 31, 2017 and 2016, respectively, interest and dividend income in the accompanying consolidated statements of operations, includes $908,000 and $456,000 of interest income. As of December 31, 2017 and 2016, respectively, the balance due from TRS by Retail II Holdings is $264,000 and $144,000, respectively. 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 December 31, 2017 and 2016, respectively, the Company had a net balance due to Hartman vREIT XXI of $236,000 and $0, related to the acquisition of joint venture interests from the Company.

Real Estate Held For Dispositio

Real Estate Held For Disposition	12 Months Ended
	Dec. 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 Partnership’s 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 Partnership’s investment cost. As of February 8, 2017, the Operating Partnership sold all of its interest in the joint venture for $3,675,000. The Company’s investment in the Village Pointe property joint venture is presented as real estate held for disposition in the accompanying consolidated balance sheets. The Company’s share of operations for the year ended December 31, 2017 and 2016, respectively, 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: Years ended December 31, 2017 2016 Total revenues $ 44 $ 118 Property operating expenses 6 12 Real estate taxes and insurance 8 18 Asset management fees 3 7 General and administrative 1 7 Interest expense 7 105 Total expenses 25 149 Gain on disposition 31 - Net income (loss) from discontinued operations $ 50 $ (31) Property operating expenses include $2,000 and $8,000 in property management fees and reimbursements earned by the Property Manager for the years ended December 31, 2017 and 2016, respectively. Asset management fees were earned by Advisor. Interest expense for the year ended December 31, 2016 includes $70,500 to the Operating Partnership for the bridge loan to Hartman Village Pointe, LLC and $34,000 of mortgage loan interest expense for the bridge loan for the period from November 14, 2016 to December 14, 2016.

Stockholders' Equity

Stockholders' Equity	12 Months Ended
	Dec. 31, 2017
Notes
Stockholders' Equity	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 Company’s 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 articles of incorporation, the Company has authority to issue 750,000,000 common shares of beneficial interest, $0.001 par value per share, and 200,000,000 preferred shares of beneficial interest, $0.001 par value per share. The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc. Hartman XX Holdings, Inc. is a Texas corporation wholly owned by Allen R. Hartman. The Company sold 19,000 shares of common stock to Hartman XX Holdings, Inc. at a price of $10.00 per share. The Company has also issued 1,000 shares of the Company’s convertible preferred stock to the Company’s advisor, Hartman Advisors LLC (“Advisor”), at a price of $10.00 per share. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc. (the “Property Manager”). The Property Manager is a wholly owned subsidiary of Hartman Income REIT, Inc. Allen R. Hartman, the Company’s Chief Executive Officer and Chairman of the Board of Directors, beneficially owns approximately 20% of Hartman Income REIT, Inc. Preferred Stock Under the Company’s articles of incorporation the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors shall have the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares. As of December 31, 2017 and 2016 the Company has issued 1,000 shares of convertible preferred shares to Hartman Advisors LLC at a price of $10.00 per share. Common Stock Issuable Upon Conversion of Convertible Preferred Stock The convertible preferred stock will convert to shares of common stock if (1) the Company has made total distributions on then outstanding shares of the Company’s 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 Company’s common stock plus the aggregate market value of the Company’s common stock (based on the 30-day average closing price) meets the same 6% performance threshold, or (3) the Company’s advisory agreement with Hartman Advisors, LLC expires without renewal or is terminated (other than because of a material breach by the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s 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 Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all. Stock-Based Compensation The Company awards vested restricted common shares to non-employee directors as compensation in part for their service as members of the board of directors of the Company. These shares are fully vested when granted. These shares may not be sold while an independent director is serving on the board of directors. For the years ended December 31, 2017 and 2016, respectively, the Company granted 6,000 and 6,000 shares of restricted common stock to independent directors as compensation for services. The Company recognized $79,000 and $79,000 as stock-based compensation expense for the years ended December 31, 2017 and 2016, respectively, based upon the estimated fair value per share. Stock-based compensation also includes incentive plan awards discussed at Note 13. These amounts are included in general and administrative expenses for the years ended December 31, 2017 and 2016, respectively in the accompanying consolidated statements of operations. Distributions The following table reflects the total distributions the Company has paid in cash and through the distribution reinvestment plan, including the total amount paid and amount paid per common share, in each indicated quarter: Quarter Paid Distributions per Common Share Total Distributions Paid 2017 4 th $ 0.175 $ 3,166 3 rd 0.175 3,169 2 nd 0.175 3,180 1 st 0.175 3,135 Total $ 0.700 $ 12,650 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	12 Months Ended
	Dec. 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 Company’s common stock for the issuance of awards under the Company’s stock incentive plan, but in no event more than ten (10%) percent of the Company’s issued and outstanding shares. The number of shares reserved under the Company’s stock incentive plan is also subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. Generally, shares that are forfeited or canceled from awards under the Company’s stock incentive plan also will be available for future awards. The Compensation Committee of the Board of Directors approved awards of 1,000 shares of restricted common stock that were effective January 1, 2016 each of two executives of Hartman Income REIT Management, the Property Manager for the Company. The Company recognized stock-based compensation expense of $25,000 with respect to these awards based on the estimated net asset value per share of $12.40 for the year ended December 31, 2016. No similar award or expenses is recognized in 2017.

Commitments and Contingencies

Commitments and Contingencies	12 Months Ended
	Dec. 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 Company’s 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.

Summary of Significant Accoun19

Summary of Significant Accounting Policies: Basis of Presentation (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Basis of Presentation	Basis of Presentation The accompanying consolidated financial statements as of December 31, 2017 and 2016 and for the years then ended have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-K and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. These consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Summary of Significant Accoun20

Summary of Significant Accounting Policies: Use of Estimates (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Summary of Significant Accoun21

Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies)	12 Months Ended
	Dec. 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 December 31, 2017 and 2016 consisted of demand deposits at commercial banks. Restricted Cash - The lender has the right to draw any of the remaining funds and apply the same to the outstanding loans at the lender’s sole discretion. The Company’s right to draw upon the restricted funds expires June 30, 2018. Restricted funds not drawn as of that date will be applied as prepayments of loan principal.

Summary of Significant Accoun22

Summary of Significant Accounting Policies: Financial Instruments (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Financial Instruments	Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, accrued rent and accounts receivable, accounts payable and accrued expenses and balances with related parties. The Company considers the carrying value of these financial instruments to approximate their respective fair values due to their short-term nature and such fair values are considered estimated per Level 1 basis as provided by Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. The fair value of the Company’s fixed rate notes payable, variable rate notes payable and secured revolving credit facilities aggregates to $116,777,000 and $113,972,000 as compared to book value of $118,358,000 and $115,618,000 as of December 31, 2017 and 2016, respectively. The fair value of our debt instruments is estimated on a Level 2 basis, as provided by ASC 820, using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments. Disclosure about the fair value of financial instruments is based on relevant information available as of December 31, 2017 and 2016.

Summary of Significant Accoun23

Summary of Significant Accounting Policies: Revenue Recognition (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Revenue Recognition	Revenue Recognition The Company’s leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (“ASC”) 605-10-S99, Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursements and other revenue in the period the related costs are incurred.

Summary of Significant Accoun24

Summary of Significant Accounting Policies: Real Estate (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Real Estate	Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental revenue over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s 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 Company’s reported net loss. Depreciation and amortization Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years calculated in terms of all of the leases in-place when acquired. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of the Company’s real estate assets as of December 31, 2017 and 2016. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of the Company’s 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 Company’s 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 Accoun25

Summary of Significant Accounting Policies: Accrued Rent and Accounts Receivable, Net (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Accrued Rent and Accounts Receivable, Net	Accrued Rent and Accounts Receivable, net Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of the Company’s claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Summary of Significant Accoun26

Summary of Significant Accounting Policies: Goodwill (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Goodwill	Goodwill Generally accepted accounting principles in the United States require the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount. If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. For the years ended December 31, 2017 and 2016, no goodwill impairment was recognized in the accompanying consolidated financial statements.

Summary of Significant Accoun27

Summary of Significant Accounting Policies: Organization and Offering Costs (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Organization and Offering Costs	Organization and Offering Costs The Company has incurred certain expenses in connection with organizing the company. These costs principally relate to professional and filing fees. For the years ended December 31, 2017 and 2016, such costs totaled $0 and $20,000, respectively, which have been expensed as incurred. Organization and offering expenses of the Company are paid directly by the Company or incurred by Advisor on behalf of the Company and reimbursed by the Company to the Advisor (subject to certain limitations). Pursuant to the Advisory Agreement, organization and offering expenses will be reimbursed by the Advisor to the Company following the completion of a public offering of the Company to the extent that total organization and offering expenses incurred by the Company in connection with such public offerings (excluding selling commissions and dealer manager fees) exceed 1.5% of gross offering proceeds from the completed public offerings. As of December 31, 2017 and 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 Company’s 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 recorded a receivable from the Advisor and recorded a contra expense of $858,000 resulting in a net credit for organization and offering expenses of ($44,000) for the year ended December 31, 2016.

Summary of Significant Accoun28

Summary of Significant Accounting Policies: Advertising (Policies)	12 Months Ended
	Dec. 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 $74,000 and $183,000 for the years ended December 31, 2017 and 2016, respectively.

Summary of Significant Accoun29

Summary of Significant Accounting Policies: Loss Per Share (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Loss Per Share	Loss Per Share The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Company’s potentially dilutive securities include preferred shares that are convertible into the Company’s common stock. As of December 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 years ended December 31, 2017 and 2016 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.

Summary of Significant Accoun30

Summary of Significant Accounting Policies: Going Concern Evaluation (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Going Concern Evaluation	Going Concern Evaluation Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one-year after the date that these consolidated financial statements are issued. The TCB Credit Facility, the EWB Credit Facility and the EWB II Credit Facility have maturity dates, each of which is less than twelve months from the date these consolidated financial statements were issued. Management has considered whether the conditions of the credit facility maturity dates raise substantial doubt that the Company’s ability to continue as a going concern and meet these debt obligations when they become due. Management has a plan to refinance the TCB Credit Facility, the EWB Credit Facility and the EWB II Credit Facility, either as a comprehensive plan to refinance the credit facilities of the Company in connection with or following the proposed merger of the Company and its Hartman affiliates or on a standalone basis without regard to the approval and completion of the proposed mergers. Inasmuch as management’s plan has not been fully implemented, the guidance provided by ASU 2014-15 requires that management must conclude that the fact of the loan maturity dates within one-year of the issuance date of these consolidated financial statements raises the issue of substantial doubt. Management believes that management’s plan to renew, extend or refinance the credit facilities is likely based upon its history of successfully financing and refinancing the Company’s debt and will mitigate the maturity date issue within one year of the issuance date of these consolidated financial statements

Summary of Significant Accoun31

Summary of Significant Accounting Policies: Recently Accounting Pronouncements Not Yet Adopted (Policies)	12 Months Ended
	Dec. 31, 2017
Policies
Recently Accounting Pronouncements Not Yet Adopted	Recently Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued 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 issued ASU No. 2015-14 which deferred the effective date of ASU No. 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company expects to adopt ASU No. 2014-09 using the modified retrospective approach. The Company has evaluated the impact of the new guidance and does not expect the adoption of the guidance to be material to its financial results of operations. Additional information about the Company’s revenue streams and other considerations are summarized below. Rental revenues – Tenant reimbursements and other revenue – 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 the Company’s fiscal year commencing on January 1, 2018. The Company does not anticipate that the adoption of ASU No. 2016-01 will have a material effect on its consolidated financial position or 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 the Company’s fiscal year commencing on January 1, 2019, but early adoption is permitted. The Company does not anticipate that the adoption of ASU No. 2016-02 will have a material effect on its consolidated financial position or consolidated results of operations.

Real Estate_ Real estate assets

Real Estate: Real estate assets (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Real estate assets	Real estate assets consisted of the following, in thousands: December 31, 2017 2016 Land $ 62,320 $ 62,320 Buildings and improvements 134,069 127,206 In-place lease value intangible 63,573 63,573 259,962 253,099 Less accumulated depreciation and amortization (73,140) (49,872) Total real estate assets $ 186,822 $ 203,227

Real Estate_ Iintangible asset

Real Estate: Iintangible asset (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Iintangible asset	The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands: December 31, 2017 2016 In-place lease value intangible $ 63,573 $ 63,573 Less: In-place leases – accumulated amortization (50,190) (34,635) Acquired lease intangible assets, net $ 13,383 $ 28,938

Real Estate_ Future amortizatio

Real Estate: Future amortization on in-place lease (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Future amortization on in-place lease	The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands: Year ending December 31, In-place lease amortization 2018 5,937 2019 3,452 2020 3,016 2021 967 2022 11 Total $ 13,383

Accrued Rent and Accounts Rec35

Accrued Rent and Accounts Receivable, Net: Accrued rent and accounts receivable (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Accrued rent and accounts receivable	Accrued rent and accounts receivable, net, consisted of the following, in thousands: Years ended December 31, 2017 2016 Tenant receivables $ 3,609 $ 2,889 Accrued rent 5,376 3,583 Allowance for doubtful accounts (1,714) (1,206) Accrued rents and accounts receivable, net $ 7,271 $ 5,266

Deferred Leasing Commission C36

Deferred Leasing Commission Costs, Net: Deferred Leasing Commission Costs, net (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Deferred Leasing Commission Costs, net	Costs which have been deferred consist of the following, in thousands: Years ended December 31, 2017 2016 Deferred leasing commissions $ 8,634 $ 6,116 Less: accumulated amortization (2,557) (1,341) Deferred leasing commission costs, net $ 6,077 $ 4,775

Future Minimum Rents_ Future re

Future Minimum Rents: Future rent (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Future rent	The Company leases the majority of its properties under noncancelable operating leases which provide for minimum base rentals. A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancelable operating leases in existence at December 31, 2017 is as follows, in thousands: Year ending December 31, Minimum Future Rents 2018 $ 34,634 2019 27,534 2020 23,255 2021 19,961 2022 14,617 Thereafter 28,064 Total $ 148,065

Notes Payable_ Mortgage notes p

Notes Payable: Mortgage notes payable (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Mortgage notes payable	The following is a summary of the mortgage notes payable as of December 31, 2017, in thousands: December 31, Property/Facility Payment (1) Maturity Date Rate 2017 2016 Richardson Heights (2) P&I July 1, 2041 4.61% $ 18,804 $ 19,200 Cooper Street (2) P&I July 1, 2041 4.61% 7,819 7,984 Bent Tree Green (2) P&I July 1, 2041 4.61% 7,819 7,984 Mitchelldale (2) P&I July 1, 2041 4.61% 11,846 12,096 Energy Plaza I & II P&I June 10, 2021 5.30% 9,814 10,007 Westway One IO June 1, 2019 3.73% 10,819 10,819 Three Forest Plaza IO December 31, 2019 4.17% 17,828 17,828 TCB Credit Facility IO May 9, 2018 5.25% 11,800 7,800 EWB Credit Facility IO November 22, 2018 4.75% 12,000 12,000 EWB II Credit Facility IO November 22 2018 4.75% 9,900 9,900 $ 118,449 $ 115,618 Less unamortized deferred loan costs (1,212) (1,467) $ 117,237 $ 114,151

Notes Payable_ Annual maturitie

Notes Payable: Annual maturities of notes (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Annual maturities of notes	Annual maturities of notes payable as of December 31, 2017 are as follows, in thousands: Year ending December 31, Amount Due 2018 $ 35,111 2019 30,030 2020 1,450 2021 10,451 2022 1,342 Thereafter 40,065 Total $ 118,449

Notes Payable_ Amortize loan co

Notes Payable: Amortize loan cost (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Amortize loan cost	The Company’s loan costs are amortized using the straight-line method over the term of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands: Years ended December 31, 2017 2016 Deferred loan costs $ 2,348 $ 2,160 Less: deferred loan cost accumulated amortization (1,136) (693) Total cost, net of accumulated amortization $ 1,212 $ 1,467

Income Taxes_ Cash distribution

Income Taxes: Cash distribution percentage (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Cash distribution percentage	For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31: 2017 2016 Ordinary income (unaudited) 29.4% 34.8% Return of capital (unaudited) 70.6% 65.2% Capital gains distribution (unaudited) - - Total 100.0% 100.0%

Stockholders' Equity_ Distribut

Stockholders' Equity: Distribution (Tables)	12 Months Ended
	Dec. 31, 2017
Tables/Schedules
Distribution	The following table reflects the total distributions the Company has paid in cash and through the distribution reinvestment plan, including the total amount paid and amount paid per common share, in each indicated quarter: Quarter Paid Distributions per Common Share Total Distributions Paid 2017 4 th $ 0.175 $ 3,166 3 rd 0.175 3,169 2 nd 0.175 3,180 1 st 0.175 3,135 Total $ 0.700 $ 12,650 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)	Dec. 31, 2017
Details
Commercial properties	17
Square feet	2,928,000

Summary of Significant Accoun44

Summary of Significant Accounting Policies: Organization and Offering Costs (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Details
Organization and Offering expense	$ 0	$ 20,000

Summary of Significant Accoun45

Summary of Significant Accounting Policies: Advertising (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Details
Advertising Expense	$ 74,000	$ 183,000

Real Estate_ Real estate asse46

Real Estate: Real estate assets (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Details
Land	$ 62,320	$ 62,320
Buildings and Improvements, Gross	134,069	127,206
In-place lease value intangible	$ 63,573	$ 63,573

Real Estate (Details)

Real Estate (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Details
Depreciation Expense on Reclassified Assets	$ 7,713,000	$ 6,581,000
Amortization expense on in-place lease	15,555,000	15,907,000
Acquisition fees	0	1,574,000
Asset management fees to advisor	$ 1,760,000	$ 1,433,000

Real Estate_ Iintangible asse48

Real Estate: Iintangible asset (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Details
In-place lease value intangible	$ 63,573	$ 63,573
In-place leases amortization	(50,190)	(34,635)
Acquired lease intangible assets, net	$ 13,383	$ 28,938

Accrued Rent and Accounts Rec49

Accrued Rent and Accounts Receivable, Net: Accrued rent and accounts receivable (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Details
Tenant receivables	$ 3,609	$ 2,889
Accrued Rent, Current	5,376	3,583
Allowance for Doubtful Accounts Receivable	$ (1,714)	$ (1,206)

Deferred Leasing Commission C50

Deferred Leasing Commission Costs, Net: Deferred Leasing Commission Costs, net (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Details
Deferred Leasing Commissions	$ 8,634	$ 6,116
Accumulated amortization on leasing commission	$ (2,557)	$ (1,341)

Notes Payable_ Amortize loan 51

Notes Payable: Amortize loan cost (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Details
Deferred loan costs	$ 2,348	$ 2,160
Less: deferred loan cost accumulated amortization	(1,136)	(693)
Net of accumulated amortization	$ 1,212	$ 1,467

Notes Payable (Details)

Notes Payable (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Details
Financing Interest Expense	$ 5,764,000	$ 3,737,000
Interest expense payable	$ 283,000	$ 224,000

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Details
Property management fees and reimbursements	$ 4,038,000	$ 3,611,000
Leasing commission expense	$ 2,518,000	$ 3,110,000