Hartman Short Term Income Properties XX (HARXX) 10-Q 2020 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________

FORM 10-Q

____________

☒ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020

☐ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-53912

__________

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.

(Exact name of registrant as specified in its charter)

Maryland	26-3455189
(State of Organization)	(I.R.S. Employer Identification Number)
2909 Hillcroft
Suite 420
Houston
Texas	77057
(Address of principal executive offices)	(Zip Code)

_______________

(713) 467-2222

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging Growth Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

As of November 1, 2020, there were 35,313,239 shares of the Registrant’s common stock issued and outstanding, 19,000 of which were held by an affiliate of the Registrant.

Hartman Short Term Income Properties XX, Inc. and Subsidiaries

Table of Contents

PART I   FINANCIAL INFORMATION
Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II  OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
	SIGNATURES

1

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	September 30, 2020		December 31, 2019
ASSETS	Unaudited
Real estate assets, at cost	$	607,470	$	594,569
Accumulated depreciation and amortization	(138,894)		(117,652)
Real estate assets, net	468,576		476,917
Cash and cash equivalents	321		1,033
Restricted cash	24,125		26,078
Accrued rent and accounts receivable, net	14,269		12,576
Notes receivable - related party	1,726		17,288
Deferred leasing commission costs, net	11,148		10,790
Goodwill	250		250
Acquired intangibles	8,685		0
Prepaid expenses and other assets	2,142		735
Real estate held for development	5,130		0
Due from related parties	1,142		2,130
Investment in affiliate	201		8,978
Total assets	$	537,715	$	556,775
LIABILITIES AND EQUITY
Liabilities:
Notes payable, net	$	303,628	$	303,039
Accounts payable and accrued expenses	27,749		23,444
Tenants' security deposits	5,286		5,286
Total liabilities	336,663		331,769
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	0		0
Common stock, $0.001 par value, 750,000,000 authorized, 35,306,889 shares and 18,417,687 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	35		18
Additional paid-in capital	310,818		174,019
Accumulated distributions and net loss	(120,419)		(109,406)
Total stockholders' equity	190,434		64,631
Noncontrolling interests in subsidiary	10,618		160,375
Total equity	201,052		225,006
Total liabilities and equity	$	537,715	$	556,775

The accompanying notes are an integral part of these consolidated financial statements.

2

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues
Rental revenues	$	18,174	$	18,444	$	55,617	$	53,787
Tenant reimbursements and other revenues	3,119		3,497		10,864		10,713
Management and advisory income	1,039		0		1,039		0
Total revenues	22,332		21,941		67,520		64,500
Expenses (income)
Property operating expenses	5,911		7,770		17,870		20,780
Organization and offering costs	115		0		115		0
Asset management fees	0		440		880		1,320
Real estate taxes and insurance	3,063		3,087		9,831		9,321
Depreciation and amortization	7,240		6,989		21,242		20,653
Management and advisory expenses	2,590		0		2,590		0
General and administrative	3,625		1,388		5,884		4,051
Interest expense	2,272		3,433		7,954		10,625
Interest and dividend income	(311)		(833)		(1,263)		(1,346)
Total expenses, net	24,505		22,274		65,103		65,404
Net (loss) income	(2,173)		(333)		2,417		(904)
Net (loss) income attributable to noncontrolling interests	(25)		(622)		2,089		(1,285)
Net (loss) income attributable to common stockholders	$	(2,148)	$	289	$	328	$	381
Net (loss) income attributable to common stockholders per share	$	(0.06)	$	0.02	$	0.01	$	0.02
Weighted average number of common shares outstanding, basic and diluted	35,307		18,418		29,168		18,265
The accompanying notes are an integral part of these consolidated financial statements.

3

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands)
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at June 30, 2019	1	$	0	18,418	$	18	$	173,950	$	(101,436)	$	72,532	$	164,738	$	237,270
Dividends and distributions (cash)	—	—		—	—		—		(3,224)		(3,224)		(233)		(3,457)
Net income (loss)	—	—		—	—		—		289		289		(622)		(333)
Balance at September 30, 2019	1	$	0	18,418	$	18	$	173,950	$	(104,371)	$	69,597	$	163,883	$	233,480
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at June 30, 2020	1	$	0	18,418	$	18	$	174,019	$	(113,373)	$	60,664	$	158,206	$	218,870
HIREIT and XIX merger	—	—		16,889	17		136,799		1,264		138,080		(147,331)		(9,251)
Dividends and distributions (cash)	—	—		—	—		—		(6,162)		(6,162)		(232)		(6,394)
Net loss	—	—		—	—		—		(2,148)		(2,148)		(25)		(2,173)
Balance at September 30, 2020	1	$	0	35,307	$	35	$	310,818	$	(120,419)	$	190,434	$	10,618	$	201,052

The accompanying notes are an integral part of these consolidated financial statements.

4

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands)
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance, December 31, 2018	1	$	0	17,712	$	18	$	165,084	$	(95,162)	$	69,940	$	178,541	$	248,481
Issuance of common shares	—	—		6	—		76		—		76		—		76
Purchase of non-controlling interest	—	—		700	—		8,790				8,790		(8,858)		(68)
Dividends and distributions (cash)	—	—		—	—		—		(9,590)		(9,590)		(4,515)		(14,105)
Net income (loss)	—	—		—	—		—		381		381		(1,285)		(904)
Balance, September 30, 2019	1	$	0	18,418	$	18	$	173,950	$	(104,371)	$	69,597	$	163,883	$	233,480
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance, December 31, 2019	1	$	0	18,418	$	18	$	174,019	$	(109,406)	$	64,631	$	160,375	$	225,006
HIREIT and XIX merger	—	—		16,889	17		136,799		1,264		138,080		(147,331)		(9,251)
Dividends and distributions (cash)	—	—		—	—		—		(12,605)		(12,605)		(4,515)		(17,120)
Net income	—	—		—	—		—		328		328		2,089		2,417
Balance, September 30, 2020	1	$	0	35,307	$	35	$	310,818	$	(120,419)	$	190,434	$	10,618	$	201,052

The accompanying notes are an integral part of these consolidated financial statements.

5

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income (loss)	$	2,417	$	(904)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock based compensation	488		58
Depreciation and amortization	21,242		20,653
Deferred loan and lease commission costs amortization	1,936		2,572
Bad debt expense	875		39
Changes in operating assets and liabilities:
Accrued rent and accounts receivable	(3,551)		(2,626)
Deferred leasing commissions	(1,534)		(3,849)
Prepaid expenses and other assets	(1,317)		(246)
Accounts payable and accrued expenses	(5,551)		(6,144)
Due to/from related parties	(1,514)		1,276
Tenants' security deposits	0		314
Net cash provided by operating activities	13,491		11,143
Cash flows from investing activities:
Acquisition deposits	0		529
Repayment of note receivable - related party	11,362		950
Investment in affiliate - related party	0		(10,546)
Additions to real estate	(8,460)		(8,412)
Net cash provided by (used in) investing activities	2,902		(17,479)
Cash flows from financing activities:
Distributions to common stockholders	(12,607)		(9,590)
Distributions to non-controlling interest	(4,076)		(4,515)
Repayment to an affiliate	(1,611)		0
Repayment under insurance premium finance note	(1,924)		(1,261)
Repayments under term loan notes	(1,038)		(8,092)
Borrowings under insurance premium finance note	2,213		1,577
Payments of deferred loan costs	(15)		(72)
Net cash used in financing activities	(19,058)		(21,953)
Net change in cash and cash equivalents and restricted cash	(2,665)		(28,289)
Cash and cash equivalents and restricted cash, beginning of period	27,111		51,476
Cash and cash equivalents and restricted cash, end of period	$	24,446	$	23,187
Supplemental cash flow information:
Cash paid for interest	$	7,339	$	9,879
Supplemental disclosure of non-cash activities:
HIREIT and XIX merger	$	200,232	$	0
Issuance of Hartman XX OP units for 70% interest in Hartman Advisors	$	6,788	$	0
Issuance of Hartman XX OP units for HIREIT OP units	$	10,284	$	0
Value of Common shares issued to acquire non-controlling interest	$	0	$	8,790
Acquisition of non-controlling interest	$	0	$	(8,858)
The accompanying notes are an integral part of these consolidated financial statements.

6

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Organization and Business

Hartman Short Term Income Properties XX, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009.  The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2011. As used herein, the “Company,” “we,” “us,” or “our”refer to Hartman Short Term Income Properties XX, Inc. and its consolidated subsidiaries, including the Operating Partnership, except where context otherwise requires.

On July 19, 2018, we entered into a limited liability company agreement with our affiliates Hartman Income REIT, Inc. (“HIREIT”), Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”) and Hartman vREIT XXI, Inc. (“vREIT XXI”) to form Hartman SPE, LLC ("SPE LLC"), a special purpose entity.

On October 1, 2018, SPE LLC, as borrower, and Goldman Sachs Mortgage Company entered into a term loan agreement pursuant to which the lender made a term loan to SPE LLC in the principal amount of $259,000,000.

Contemporaneously therewith and together with our affiliates HIREIT, Hartman XIX and vREIT XXI, we contributed a total of 39 commercial real estate properties ("Properties") to SPE, LLC, subject to the then existing mortgage indebtedness encumbering the Properties, in exchange for membership interests in SPE LLC. Proceeds of the Loan were immediately used to extinguish the existing mortgage indebtedness encumbering the Properties.

On July 21, 2017, the Company and Hartman XIX, entered into an agreement and plan of merger (the “XIX Merger Agreement”). On July 21, 2017, as subsequently modified on May 8, 2018, the Company, the Operating Partnership, 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”).

On May 14, 2020, the Merger Agreements were approved by the respective company shareholders. The effective date of the Mergers for financial reporting is July 1, 2020.

Substantially all of our business is conducted through our wholly owned subsidiary, the Operating Partnership and SPE LLC. Our wholly-owned subsidiary, Hartman XX REIT GP LLC, a Texas limited liability company, is the sole general partner of the Operating Partnership. We are the sole limited partner of the Operating Partnership. Our wholly-owned subsidiary, Hartman SPE Management, LLC ("SPE Management") is the manager of SPE LLC. Our single member interests in our limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries.

Prior to July 1, 2020 and subject to certain restrictions and limitations, Hartman Advisors LLC ("Advisor") was responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf pursuant to an advisory agreement. Management of the Company’s properties and the Properties, is provided pursuant to property management agreements with Hartman Income REIT Management, Inc. (the "Property Manager"), formerly a wholly-owned subsidiary of HIREIT and effective July 1, 2020, our wholly owned subsidiary. Effective with the Mergers and the acquisition of the 70% interest of Advisor not acquired as part of the Mergers, we are a self advised and self-managed REIT.

As of September 30, 2020 and 2019, respectively, the Company owned 44 and 43 commercial properties comprising approximately 6.8 and 6.7 million square feet plus 4 and 3 pad sites and 2 and 0 land developments, all located in Texas. As of September 30, 2020 and 2019, respectively, the Company owned 15 properties located in Richardson, Arlington and Dallas, Texas, 26 and 25 properties located in Houston, Texas and 3 properties located in San Antonio, Texas.

Previously, the Board of Directors (the "Board") of the Company established a share redemption program (the "Redemption Plan"), which permitted stockholders to sell their shares back to the Company, subject to certain significant conditions and limitations. On May 31, 2018, the Board voted to suspend the Redemption Plan. On July 28, 2020, the Board reopened the Redemption Plan for the death and disability or financial hardship of a shareholder. On October 1, 2020, the Board approved by unanimous written consent to further reopen the Redemption Plan, subject to certain significant conditions and limitations for additional shareholders.

On October 1, 2020, the Board approved a new compensation plan for independent directors of the Board which was effective July 1, 2020. The plan revised compensation for independent directors with respect to both cash and annual equity compensation and included a one-time award of $100,000 in stock to current and former directors who participated in the mergers of HIREIT and Hartman XIX with and into the Company.

7

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2019 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of September 30, 2020 have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of September 30, 2020, and the results of consolidated operations for the three and nine months ended September 30, 2020 and 2019, the consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and the consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019. The results of the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

On May 14, 2020, the Merger Agreements were approved by the respective company shareholders. The accompanying consolidated financial statements reflect the financial condition and results of operations of the Company with an effective Mergers date of July 1, 2020.

These unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, the Operating Partnership and its subsidiaries, and Hartman SPE, LLC.  All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents on the accompanying consolidated balance sheets include all cash and liquid investments with maturities of three months or less. Cash and cash equivalents as of September 30, 2020 and December 31, 2019 consisted of demand deposits at commercial banks. We maintain accounts which may from time to time exceed federally insured limits. We have not experienced any losses in these accounts and believe that the Company is not exposed to any significant credit risk and regularly monitors the financial stability of these financial institutions.

Restricted Cash

Restricted cash on the accompanying consolidated balance sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements.

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 due to/due from related parties, as well as related party notes receivable. The Company considers the carrying value of these financial instruments to approximate their respective fair values due to their short-term nature. Disclosure about the fair value of financial instruments is based on relevant information available as of September 30, 2020 and December 31, 2019.

8

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 purposes of this calculation. The Company’s accrued rents are included in accrued rent and accounts receivable, net.  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. Additionally, cost recoveries from tenants are included in the tenant Reimbursement and other revenues line item in the consolidated statement of operations in the period the related costs are incurred.

The Property Manager recognizes revenue attributable to property management fees and reimbursements, leasing fees and commissions, and development and construction fees for services provided to non-consolidated Hartman affiliates. The Advisor, through its wholly owned subsidiary Hartman vREIT XXI Advisor, LLC, recognizes acquisition fees and asset management fees for property acquisitions and company management of affiliated and sponsored, non-consolidated Hartman affiliates.

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 to rental revenues 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 income (loss).

Real Estate Joint Ventures and Partnerships

To determine the method of accounting for partially owned real estate joint ventures and partnerships, management determines whether an entity is a variable interest entity ("VIE") and, if so, determines which party is the primary beneficiary by analyzing whether we have both the power to direct the entity’s significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the design of the entity structure, the nature of the entity’s operations, future cash flow projections, the entity’s

9

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

financing and capital structure, and contractual relationships and terms. We consolidate a VIE when we have determined that we are the primary beneficiary.

Primary risks associated with our involvement with our VIEs include the potential funding of the entities’ debt obligations or making additional contributions to fund the entities’ operations or capital activities.

Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights. Partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

Management continually analyzes and assesses reconsideration events, including changes in the factors mentioned above, to determine if the consolidation or equity method treatment remains appropriate.

Depreciation and amortization

Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years’ remaining calculated on terms of all of the leases in-place when acquired.

Impairment

The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there is 0 impairment indicated in the carrying value of our real estate assets as of September 30, 2020 and December 31, 2019.

Accrued Rent and Accounts Receivable

       Accrued rent and accounts receivable includes base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Deferred Leasing Commission Costs

       Leasing commissions are amortized using the straight-line method over the term of the related lease agreements.

Goodwill

GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired.  The Company applies a one-step quantitative test to determine if the estimated fair value is less than the carrying amount.  If the carrying amount exceeds the estimated fair value, the Company will record a goodwill impairment equal to such excess, not to exceed the total amount of goodwill. NaN goodwill impairment has been recognized in the accompanying consolidated financial statements.

Acquired intangibles

Acquired intangibles are the fair value of the interests in Property Manager and Advisor contributed to the Company on July 1, 2020 during the merger.

10

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. 

Stock-Based Compensation

The Company follows Accounting Standards Codification ("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.

Income Taxes

The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with its taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the 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 continue to operate in such a manner as to qualify for treatment as a REIT. 

For the three and nine months ended September 30, 2020 and 2019, the Company incurred net (loss) income of $(2,173,000) and $(333,000), respectively, and $2,417,000 and $(904,000), respectively. The Company formed a taxable REIT subsidiary which may generate future taxable income which may offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the 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.

Income Per Share

The computations of basic and diluted income 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 September 30, 2020 and 2019, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net income per share for the three and nine months ended September 30, 2020 and 2019 because no shares are issuable.

Concentration of Risk

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, relocation 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 Hartman SPE, LLC loan agreement (the “SASB Loan”) had an initial maturity date of October 9, 2020. The SASB Loan provides for 3 successive one-year maturity date extensions. On October 9, 2020, SPE LLC executed a maturity date extension agreement to extend the maturity date to October 9, 2021.

The SASB Loan requires that SPE LLC have a debt yield, as defined, greater than or equal to 12.50% The first SASB Loan extension was completed on the basis that the debt yield as of June 30, 2020 was 13.25%. Debt yield is calculated by dividing annual net operating income by debt. The second one-year SASB Loan extension is within one year of the issuance of these consolidated financial statements. Uncertainty as to the debt yield calculation as of June 30, 2021 and the Company's ability to exercise the next remaining SASB Loan extension option, require management to conclude, in accordance with guidance provided by ASU 2014-15, that there is a substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial statements solely on the basis of the uncertainty regarding the loan maturity extension of the SASB Loan. Management believes that SPE LLC will be able to extend the maturity date for the next one year period which will mitigate the maturity date issue.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in the same manner as operating leases today.

The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition method such that we applied the standard as of the adoption date. The Company adopted the new standard using the practical expedient package which allowed the Company, as both the lessor and lessee to 1) not reassess whether any expired or existing contracts are or contain leases; 2) not reassess the lease classification for any expired or existing leases; and 3) not reassess initial direct costs for any existing leases.

As of December 31, 2019, the Company has a ground lease for a parking lot located adjacent to the property at 601 Sawyer, Houston, Texas. The parking lot lease agreement has been renewed and now expires at the end of September 2025. The Sawyer property is included in the Company’s financial statements as of September 30, 2020 and December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019.

Lease payments under the parking lot lease agreement are $3,500 per month through September 30, 2020 and $4,000 per month from October 1, 2020 through September 30, 2025. As of September 30, 2020, there are 60    monthly payments remaining under the lease agreement for a total of $240,000.

The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In connection with the new revenue guidance (ASC 606), the new revenue standard will apply to other components of revenue deemed to be non-lease components, such as reimbursement for certain expenses which are based on usage. Under the new guidance, we will continue to recognize the lease components of lease revenue on a straight-line basis over the respective lease terms as we do under prior guidance. However, we would recognize these non-lease components under the new revenue guidance as the related services are delivered. As a

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

result, the total revenue recognized over time would not differ under the new guidance. This does not result in a difference from how the Company has historically recognized revenue for these lease and non-lease components.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) :Measurement of Credit Losses on Financial Instruments. The updated guidance requires measurement and recognition of expected credit losses for financial assets, including trade and other receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Generally, the pronouncement requires a modified retrospective method of adoption. This guidance is effective for fiscal years and interim periods within those years beginning after January 2023, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements when adopted.

Note 3 — Real Estate

The Company’s real estate assets consisted of the following, in thousands:

	September 30, 2020		December 31, 2019
Land	$	146,008	$	145,050
Buildings and improvements	359,408		348,729
In-place lease value intangible	102,054		100,790
	607,470		594,569
Less: accumulated depreciation and amortization	(138,894)		(117,652)
Total real estate assets	$	468,576	$	476,917

       Depreciation expense for the three months ended September 30, 2020 and 2019 was $4,567,000 and $4,116,000, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 was $13,239,000 and $12,337,000, respectively. Amortization expense of in-place lease value intangible was $2,673,000 and $2,873,000 for the three months ended September 30, 2020 and 2019, respectively. Amortization expense of in-place lease value intangible was $8,003,000 and $8,315,000 for the nine months ended September 30, 2020 and 2019, 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, we consider all of the in-place leases to be market rate leases.

The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands:

	September 30, 2020		December 31, 2019
In-place lease value intangible	$	102,054	$	100,790
In-place leases – accumulated amortization	(76,887)		(68,884)
Acquired lease intangible assets, net	$	25,167	$	31,906

As of September 30, 2020 and 2019, respectively, the Company owned 44 and 43 commercial properties comprising approximately 6.8 and 6.7 million square feet plus 4 and 3 pad sites and 2 and NaN land developments, all located in Texas. As of September 30, 2020 and 2019, respectively, the Company owned 15 properties located in Richardson, Arlington and Dallas, Texas, 26 and 25 properties located in Houston, Texas and 3 properties located in San Antonio, Texas.

Asset management fees incurred and paid to Advisor were $0 and $440,000, $880,000 and $1,320,000 for the three and nine months ended September 30, 2020 and 2019, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations.

Acquisition of HIREIT

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Effective July 1, 2020, in connection with the Mergers, the Company acquired interests in (i) 1 commercial real estate property, (ii) 1 pad site development in progress, (iii) a 34.38% member interest in SPE LLC, (iv) the Property Manager and (v) a 30% interest in Advisor.

As of the date of the Mergers, there were 12,378,718 shares of HIREIT common stock issued and outstanding and 1,214,197 HIROP OP units, which converted to 9,525,691 shares of Company stock and 913,346 OP units of Hartman XX Operating Partnership units ("XX OP units"); resulting in aggregate merger consideration of $117,544,000.

Acquisition of Hartman XIX

Effective July 1, 2020, in connection with the Mergers, the Company acquired interests in (i) 2 commercial land developments in progress and (ii) a 26.99% interest in SPE LLC.

As of the date of the Mergers, there were 5,895,967 shares of Hartman XIX preferred stock and 100 common shares issued and outstanding, which converted to 7,343,511 shares of Company stock, resulting in aggregate merger consideration of $82,688,000.

After consideration of all applicable factors pursuant to ASC 805, the Company is considered the “legal acquirer” because the Company is issuing common stock to HIREIT and Hartman XIX stockholders, and also due to various factors including that the Company’s stockholders immediately preceding the Merger hold the largest portion of the voting rights in the Company immediately after the Merger.

The value of the Company’s common shares and Hartman XX Operating Partnership units is presented based on the most recent net asset value (“NAV”) determination by the Company which is $11.26 per common share and OP unit.

For the three and nine months ended September 30, 2020 and 2019, in connection with our acquisitions, we incurred acquisition costs of $0 and $15,000, and $132,000 and $26,000, respectively, recorded in general and administrative costs and expenses. We included the operating results of HIREIT and Hartman XIX in our consolidated results of operations, effective July 1, 2020. During the three months ended September 30, 2020, our consolidated statement of operations includes revenues of $1,270,000 and net loss of $1,103,000 associated with the operations of HIREIT and Hartman XIX.

The following table illustrates the fair value of assets and liabilities of HIREIT and Hartman XIX contributed in the merger on July 1, 2020, in thousands:

	HIREIT		XIX		Combined
Assets
Real estate assets	$	3,376	$	4,774	$	8,150
Cash and cash equivalents, accounts receivable, prepaid expenses and other assets, and due from related parties	4,943		111		5,054
Notes receivable – related party	0		3,900		3,900
Acquired intangibles	8,514		171		8,685
Investment in HIREIT	0		2,845		2,845
Investment in SPE LLC	111,369		87,430		198,799
Investment in other affiliates	201		0		201
Total Assets	$	128,403	$	99,231	$	227,634
Liabilities
Notes payable	$	6,393	$	4,200	$	10,593
Accounts payable and accrued expenses, and due to related parties	4,466		8,475		12,941
Unpaid preferred dividends due to Hartman XIX shareholders	0		3,868		3,868
Total Liabilities	$	10,859	$	16,543	$	27,402
Net assets acquired	$	117,544	$	82,688	$	200,232

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The fair value of all assets and liabilities presented above is management's best estimate and is subject to change during the measurement period due to management's receiving the final valuations performed by the third party.

The purchase price allocation was based on the Company’s assessment of the fair value of the acquired assets and liabilities, as summarized below.

Real estate assets – the fair value is based on the independent third party appraisal. The fair value cost of real estate assets added as of July 1, 2020 was segregated and allocated to land, buildings and improvements and in-place lease value intangible. Depreciation and amortization of the real estate assets added on July 1, 2020 commenced as of that date.

Cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other assets, and due from related parties – recorded at cost basis which approximates fair value.

Notes receivable from related parties – recorded at cost basis which approximates fair value.

Acquired intangibles - the fair value was estimated to be equal to the fair value per the Company's registration statement on Form S-4.

Investment in HIREIT - the fair value is based on 347,826 HIREIT common shares time the estimated net asset value of $8.18 per share determined by HIREIT as of December 31, 2019.

Investment in SPE LLC - the fair value is based on the net asset value of SPE LLC of $323,934,000 determined by the Company as of June 30, 2020.

Investment in other affiliates - recorded at cost basis which approximates fair value.

Notes payable – recorded at cost basis which approximates fair value.

Accounts payable and accrued expenses, and due to related parties - recorded at cost basis which approximates fair value.

Unpaid preferred dividends due to Hartman XIX shareholders - recorded at cost basis which approximates fair value.

Note 4 - Accrued Rent and Accounts Receivable, net

Accrued rent and accounts receivable, net, consisted of the following, in thousands:

	September 30, 2020		December 31, 2019
Tenant receivables	$	7,221	$	5,929
Accrued rent	9,970		9,244
Allowance for uncollectible accounts	(2,922)		(2,597)
Accrued rents and accounts receivable, net	$	14,269	$	12,576

As of September 30, 2020 and December 31, 2019, the Company had an allowance for uncollectible accounts of $2,922,000 and $2,597,000, respectively.  For the three months ended September 30, 2020 and 2019, the Company recorded bad debt expense in the amount of $852,000 and $140,000, respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenant’s credit-worthiness. For the nine months ended September 30, 2020 and 2019, the Company recorded bad debt expense in the amount of $875,000 and $39,000, respectively. For the nine months ended September 30, 2020 and 2019, the Company recorded $550,000 and $0 in write-offs, respectively. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5 — Deferred Leasing Commission Costs, net

Costs which have been deferred consist of the following, in thousands:

	September 30, 2020		December 31, 2019
Deferred leasing commissions costs	$	19,154	$	17,620
Less: accumulated amortization	(8,006)		(6,830)
Deferred leasing commission costs, net	$	11,148	$	10,790

Note 6 — Future Minimum Rents

The Company leases the majority of its properties under noncancellable 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 noncancellable operating leases in existence at September 30, 2020 is as follows, in thousands:

September 30,	Minimum Future Rents
2021	$	68,993
2022	58,534
2023	45,989
2024	34,952
2025	21,653
Thereafter	34,104
Total	$	264,225

Note 7 — Notes Payable

The Operating Partnership is a party to 4, cross-collateralized, term loan agreements with an insurance company. The term loans are secured by the Richardson Heights Property, the Cooper Street Property, the Bent Tree Green Property and the Mitchelldale Property. The loans 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 September 30, 2020, the Company was in compliance with all loan covenants, with respect to the loans above. 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 4 loans was $42,356,000 and $43,393,000 as of September 30, 2020 and December 31, 2019, respectively.

On October 1, 2018, the Company through SPE LLC and Goldman Sachs Mortgage Company entered into a $259,000,000 term loan agreement (the "SASB Loan". The Company together with its affiliates HIREIT, Hartman XIX and vREIT XXI, contributed a total of 39 commercial real estate properties to Hartman SPE, LLC in exchange for membership interests in SPE LLC.

The term of the SASB loan is five years, comprised of an initial two-year term with 3 one-year extension options. Each extension option shall be subject to certain conditions precedent including (i) no default then outstanding, (ii) 30 days prior written notice, (iii) the properties must have a specified in-place net operating income debt yield and (iv) purchase of an interest rate cap as described below for the exercised option term or terms.

The outstanding principal of the SASB loan bears interest at the one-month LIBOR rate plus 1.8%. The SASB Loan is subject to an interest rate cap arrangement with caps LIBOR at 3.75% during the initial term of the SASB Loan.

On October 9, 2020, the Company signed a maturity date extension agreement to extend the maturity date for one additional year to October 9, 2021. Options remain to extend for 2 additional one-year terms. Notice to exercise the next

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

one-year maturity extension option is due not less than 30 days nor more than 60 days from the current maturity date. Exercise of each extension option is subject to certain compliance and non-default requirements and a minimum debt yield of 12.5%.

The SASB Loan contains various customary covenants, including but not limited to financial covenants, covenants requiring monthly deposits in respect of certain property costs, such as taxes, insurance, tenant improvements, and leasing commissions, covenants imposing restrictions on indebtedness and liens, and restrictions on investments and participation in other asset disposition, merger or business combination or dissolution transactions.

The SASB Loan is secured by, among other things, mortgages on the Properties. The Company, HIREIT and Hartman XIX, entered into a guaranty agreement in favor of the lender, whereby each guarantor unconditionally guaranties the full and timely performance of the obligations set forth in the loan agreement and all other loan documents, including the payment of all indebtedness and obligations due under the loan agreement. As a result of the Mergers, the Company is the sole guarantor.

The following is a summary of the Company’s notes payable, in thousands:

Property/Facility	Payment (1)	Maturity Date	Rate		September 30, 2020			December 31, 2019
Richardson Heights (2)	P&I	July 1, 2041	4.61	%	$	16,824	$	$	17,260
Cooper Street (2)	P&I	July 1, 2041	4.61	%	7,264			7,435
Bent Tree Green (2)	P&I	July 1, 2041	4.61	%	7,264			7,435
Mitchelldale (2)	P&I	July 1, 2041	4.61	%	11,004			11,263
Hartman SPE LLC (3)	IO	October 9, 2021	1.95	%	259,000			259,000
EWB - SBA PPP (4)		December 31, 2020	0	%	2,492			0
Hartman XXI	IO	October 31, 2021	10.00	%	2,789			4,400
					$	306,637		$	306,793
Less: unamortized deferred loan costs					(3,009)			(3,754)
					$	303,628		$	303,039

(1)    Principal and interest (P&I) or interest only (IO).  

(2)    Each promissory note contains a call option wherein the holder of the promissory note may declare the outstanding balance due and payable on either July 1, 2024, July 1, 2029, July 1, 2034, or July 1, 2039.  

(3)    On October 9, 2020, the Company signed a maturity date extension agreement to extend the maturity date for one additional year to October 9, 2021. Options remain to extend for 2 additional one-year terms. Notice to exercise the next one-year maturity extension option is due not less than 30 days nor more than 60 days from the current maturity date. Exercise of each extension option is subject to certain compliance and non-default requirements and a minimum debt yield of 12.5%.

(4)    The EWB-SBA PPP was originated by Texan REIT Manager, LLC, a subsidiary of HIREIT. Texan REIT Manager payroll for the 12 weeks following the funding of the PPP loan, exceeds the PPP loan amount. The Company is in the process of applying for full forgiveness of the PPP loan amount pursuant to the CARES Act and regulations promulgated by the SBA.

The Company's loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method.  Costs which have been deferred consist of the following, in thousands:

	September 30, 2020		December 31, 2019
Deferred loan costs	$	5,287	$	7,155
Less:  deferred loan cost accumulated amortization	(2,278)		(3,401)
Total cost, net of accumulated amortization	$	3,009	$	3,754

Interest expense incurred for the three months ended September 30, 2020 and 2019 was $2,272,000 and $3,433,000, respectively, which includes amortization expense of deferred loan costs. Interest expense incurred for the nine months ended September 30, 2020 and 2019 was $7,954,000 and $10,625,000, respectively, which includes amortization expense of deferred loan costs. Interest expense of $891,000 and $516,000 was payable as of September 30, 2020 and December 31, 2019, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

The Company is required to provide audited financial statements for Hartman SPE, LLC within 120 days after the end of its fiscal year, which is December 31. The servicer for the lender has extended the time for delivery of the audited annual financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value of Debt

The fair value of the Company’s fixed rate notes payable, variable rate notes payable and secured revolving credit facilities aggregates to $319,431,000 and $308,671,000 as compared to book value of $306,637,000 and $306,793,000 as of September 30, 2020 and December 31, 2019, 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 notes payable is based on relevant information available as of September 30, 2020 and December 31, 2019.

Note 8 — Income Per Share

Basic income per share is computed using net income 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 per share are included in the diluted earnings per share.

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to common stockholders (in thousands)	$	(2,148)	$	289	$	328	$	381
Denominator:
Weighted average number of common shares outstanding, basic and diluted (in thousands)	35,307		18,418		29,168		18,265
Basic and diluted loss per common share:
Net (loss) income attributable to common stockholders per share	$	(0.06)	$	0.02	$	0.01	$	0.02

Note 9 — Income Taxes

Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates. The Company’s federal income tax returns for the years ended December 31, 2017, 2018 and 2019 have not been examined by the Internal Revenue Service. The Company’s federal income tax return for the year ended December 31, 2017 may be examined on or before September 15, 2021.

The Company has formed a taxable REIT subsidiary which may generate future taxable income, which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance.  Accordingly, 0 deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements.

The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  Management has reviewed the 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 (loss) differs from net income (loss) for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and amortization and rental revenue.

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(Unaudited)

Note 10 — Real Estate Held for Development

The Company’s investment in real estate assets held for development consists of an approximately 17-acres land parcel located in Fort Worth, Texas, currently being developed, and a 10-acre land development located in Grand Prairie, Texas, to be developed and which was previously held for disposition by Hartman XIX.

Note 11 — Related Party Transactions

Hartman Advisors LLC ("Advisor"), is a Texas limited liability company. Prior to the Mergers, the Advisor was owned 70% by Allen Hartman and his affiliates and 30% by the Property Manager.  Effective July 1, 2020, the Company acquired the Advisor's interest of the Property Manager, which was a wholly owned subsidiary of Hartman Income REIT Management, LLC, which was wholly owned by Hartman Income REIT, Inc., as a result of the HIREIT Merger. In a separate transaction, the Company acquired the Advisor's interest of affiliates of Allen Hartman in exchange for 602,842 Operating Partnership OP units with an agreed value of $7,626,000. The Property Manager was acquired by the Company as a result of the HIREIT Merger. Effective July 1, 2020 the Company is self advised and self managed.

Advisor is the sole member of Hartman vREIT XXI Advisor, LLC ("XXI Advisor"), which is the advisor for Hartman vREIT XXI, Inc. Hartman vREIT XXI, Inc. ("vREIT XXI") pays acquisition fees and asset management fees to the Advisor in connection with the acquisition of properties and management of the Company. vREIT XXI pays property management and leasing commissions to the Property Manager in connection with the management and leasing of vREIT XXI's properties.

Prior to the Mergers, the Company paid acquisition fees and asset management fees to Advisor in connection with the acquisition of properties and management of the Company. The Company paid property management and leasing commissions to the Property Manager in connection with the management and leasing of the Company’s properties. For the three months ended September 30, 2020 and 2019 the Company incurred property management fees and reimbursements of $0 and $2,049,000, respectively, and $0 and $1,645,000, respectively for leasing commissions owed to our Property Manager. We incurred asset management fees of $0 and $440,000, respectively, owned to the Advisor. For the nine months ended September 30, 2020 and 2019 the Company incurred property management fees and reimbursements of $4,118,000 and $6,021,000, respectively, and $1,534,000 and $3,849,000, respectively for leasing commissions owed to our Property Manager. We incurred asset management fees of $880,000, respectively, owed to the Advisor. These fees are monthly fees equal to one-twelfth of 0.75% of the sum of the higher of the cost or value of the 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 doesn't own all or majority of an asset. There were no acquisition fees incurred to the Advisor for the nine months ended September 30, 2020 and 2019, respectively. Property management fees and reimbursements are included in property operating expense in the accompanying consolidated statements of operations through June 30, 2020. Asset management fees are captioned as such in the accompanying consolidated statements of operations through June 30, 2020.

The Company also pays construction management fees to the Property Manager in connection with the construction management of the Company's properties. As of July 1, 2020, due to the merger of the Property Manager into the Company as part of the HIREIT merger, all construction management fees are now being eliminated beginning with the third quarter of 2020. For the three months ended September 30, 2020 and 2019, the Company incurred construction of $0 and $166,000, respectively. For the nine months ended September 30, 2020 and 2019, the Company incurred construction management fees of $309,000 and $527,000, respectively. Construction management fees are capitalized and included in real estate assets in the consolidated balance sheets through June 30, 2020.

The table below shows the related party balances the Company owes to and is owed by, in thousands:

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HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	September 30, 2020		December 31, 2019
Due (to) from HIREIT	$	0	$	10,359
Due to Hartman XIX	0		(4,059)
Due from (to) vREIT XXI	655		(420)
Due from (to) Advisor	0		(2,077)
Due to the Property Manager	0		(1,168)
Due from(to) other related parties	487		(505)
	$	1,142	$	2,130

Prior to the HIREIT Merger, the Company owned 1,561,523 shares of the common stock of HIREIT which it acquired for cash consideration of $8,978,000. The Company’s investment in HIREIT was accounted for under the cost method. The Company has cancelled the HIREIT shares in connection with the HIREIT Merger effective July 1, 2020. The Company received dividend distributions from HIREIT of $213,000 and $319,000 for the nine months ended September 30, 2020 and 2019, respectively, which is included in interest and dividend income in the accompanying consolidated statements of operations.

During the fourth quarter of 2019, the Company borrowed under an unsecured promissory note payable to Hartman vREIT XXI, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $10,000,000. This note payable had an outstanding balance of $2,789,000 and $4,400,000 as of September 30, 2020 and December 31, 2019, respectively, which is included in notes payable, net, in the accompanying consolidated balance sheets. Interest has been accrued on the loan amount at an annual rate of 10%. The Company recognized interest expense on the affiliate note in the amount of $207,000 and $521,000 for the three and nine months ended September 30, 2020, which is included in interest expense in the accompanying consolidated statements of operations.

In May 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 received 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, as amended, is December 31, 2020. This note receivable had an outstanding balance of $1,726,000 and $2,476,000 as of September 30, 2020 and December 31, 2019, respectively, which is included in notes receivable – related party in the accompanying consolidated balance sheets. For the three months ended September 30, 2020 and 2019, respectively, the Company recognized interest income on this affiliate note in the amount of $44,000 and $49,000, respectively. For the nine months ended September 30, 2020 and 2019, the Company recognized interest income on this affiliate note in the amount of $130,000 and $168,000, respectively.

The Company had a note receivable due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), of $4,200,000 as of June 30, 2020 and December 31, 2019. The balance of the note was eliminated on July 1, 2020, in connection with the Hartman XIX Merger. The balance of the note as of December 31, 2019 is included in notes receivable - related party in the accompanying consolidated balance sheets. Interest has been accrued on the loan amount at an annual rate of six percent (6%). For the three months ended September 30, 2020 and 2019, respectively, the Company recognized interest income on the affiliate note in the amount of $0 and $64,000. For the nine months ended September 30, 2020 and 2019, respectively, the Company recognized interest income on this affiliate note in the amount of $126,000 and $189,000, which is included in interest and dividend income in the accompanying consolidated statements of operations.

In February 2019, the Company through TRS, loaned $6,782,455 pursuant to a promissory note in the face amount of up to $7,500,000 to Hartman Retail III Holdings Company, Inc. (“Retail III Holdings”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of a retail shopping center by Hartman Retail III DST, a Delaware statutory trust sponsored by the Advisor. Effective August 4, 2020, the Company conveyed this note receivable to Hartman vREIT XXI TRS, Inc. ("vREIT TRS"). This note receivable had an outstanding balance of $0 and $6,782,000 as of September 30, 2020 and December 31, 2019, respectively, which is included in notes receivable – related party in the accompanying consolidated balance sheets. Pursuant to the terms of the promissory note, TRS receives a two percent (2%) origination fee of amounts

20

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The original maturity date of the promissory note was February 29, 2021. The Company recognized interest income on this affiliate note in the amount of $171,000 and $181,000, respectively, for the three months ended September 30, 2020 and 2019. For the nine months ended September 30, 2020 and 2019, respectively, interest income of $509,000 and $425,000 has been recognized by the Company, which is included in interest and dividend income in the accompanying consolidated statements of operations.

In March 2019, the Company through TRS, loaned $3,830,000 pursuant to a promissory note in the face amount of up to $3,500,000 to Hartman Ashford Bayou, LLC (“Ashford Bayou”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of office building by Ashford Bayou, a wholly owned subsidiary of Hartman Total Return, Inc. Effective August 4, 2020, the Company conveyed this note receivable to vREIT TRS. This note receivable had an outstanding balance of $0 and $3,830,000 as of September 30, 2020 and December 31, 2019, respectively, which is included in Notes receivable – related party in the accompanying consolidated balance sheets. Pursuant to the terms of the promissory note, TRS receives 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 original maturity date of the promissory note was March 31, 2021. The Company recognized interest income on this affiliate note in the amount of $96,000 and $83,000 for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, interest income of $287,000 and $176,000 has been recognized by the Company, which is included in interest and dividend income in the accompanying consolidated statements of operations.

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 (as of September 30, 2020 and December 31, 2019), Retail III Holdings (as of June 30, 2020 and prior) or Ashford Bayou (as of June 30, 2020 and prior), each of which qualifies as a VIE. Accordingly, the assets and liabilities and revenues and expenses of Retail II Holdings , Retail III Holdings and Ashford Bayou have not been included in the accompanying consolidated financial statements. The Company is a covenant guarantor for the secured mortgage indebtedness of each of the VIEs in the total amount of $24,998,000 as of September 30, 2020.

The following table reflects the net note receivable asset due to the Company, reflected in the accompanying consolidated balance sheets and the Company's maximum exposure to debt guarantees, in thousands:

	September 30, 2020		December 31, 2019
Note receivable, net	$	1,726	$	17,288
Maximum exposure	$	24,998	$	25,141

The Board approved the acquisition of an additional 3.42% ownership interest of Hartman SPE, LLC from Hartman vREIT XXI, Inc. in exchange for 700,302 shares of the Company’s common stock with a total value of $8,858,826 ($12.65 per share). The exchange increased the Company’s ownership interest in Hartman SPE, LLC from 32.74% to 36.16%. The transaction was effective March 1, 2019.

Note 12 - Stockholders’ Equity

Under the Company’s articles of incorporation, the Company has authority to issue 750,000,000 shares of common stock, $0.001 par value per share, and 200,000,000 shares of preferred stock, $0.001 par value per share.

Common Stock

Shares of common stock entitle the holders to 1 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.

Preferred Stock

21

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 has the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares.  As of September 30, 2020, and December 31, 2019, respectively, the Company has 1,000 shares of convertible preferred stock issued and outstanding.

Common Stock Issuable Upon Conversion of Convertible Preferred Stock

The convertible preferred stock issued to the Advisor will convert to shares of the Company’s 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 meets the same 6% performance threshold, or  (3)  the Company’s advisory agreement with the Advisor expires without renewal or is terminated (other than because of a material breach by the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the 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 shares of restricted common stock to non-employee directors as compensation in part for their service as members of the board of directors of the Company.  These shares are fully vested when granted.  These shares may not be sold while an independent director is serving on the board of directors. For the three and nine months ended September 30, 2020, respectively, the Company granted 39,964 and 42,964 shares of restricted common stock to independent directors as compensation for services and recognized $450,000 and $488,000 as stock-based compensation expense for each period. For the three and nine months ended September 30, 2019, respectively, the Company granted 1,500 and 4,500 shares of restricted common stock to independent directors as compensation for services and recognized $19,000 and $57,000 as stock-based compensation expense for each period. On July 28, 2020 the board voted to grant Richard Ruskey, John Ostroot, Jack Tompkins and Jack Cardwell, each being independent directors of the companies involved in the Merger, each to receive $100,000 in shares of the Company upon and as a compensation for closure of the merger. Share based compensation expense is based upon the estimated fair value per share.  Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations.

22

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Distributions

The following table reflects the total distributions the Company has paid in cash (in thousands, except per share amounts) and the amount paid per common share, in each indicated quarter:

Quarter Paid	Distributions per Common Share		Total Distributions
2020
3rd Quarter	$	0.175	$	6,164
2nd Quarter	0.175		3,220
1st Quarter	0.175		3,223
Total 2020	$	0.525	$	12,607
2019
4th Quarter	$	0.175	$	3,182
3rd Quarter	$	0.175	3,224
2nd Quarter	$	0.175	3,225
1st Quarter	$	0.175	3,141
Total 2019	$	0.700	$	12,772

Mergers

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 merged 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 merged 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 0.863235 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 shares validly issued, fully paid and non-assessable units of limited partnership interests in Hartman XX Operating Partnership.

For financial reporting purposes, the Mergers are treated as effective July 1, 2020.

23

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 13 - Incentive Award 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.  

 Incentive Plan compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations.

Note 14 - Defined Contribution Plan

The Company sponsors a defined contribution pension plan, the Hartman 401(k) Profit Sharing Plan, covering substantially all of its full-time employees who are at least 21 years of age. Participants may annually contribute up to 100% of pretax annual compensation and any applicable catch-up contributions, as defined in the plan and subject to deferral limitations as set forth in Section 401(k) of the Internal Revenue Code. Participants may also contribute amounts representing distributions from other qualified benefit or defined contribution plans. The Company may make discretionary matching contributions. For the year ended December 31, 2019, the Company matched $398,000 in the form of Company stock.

Note 15 - Commitments and Contingencies

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.

Note 16 - Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that no events have occurred, other than as disclosed herein above, that would require adjustments to our disclosures in these consolidated financial statements.

On November 6, 2020, the Boards of the Company and Hartman vREIT XXI, voted affirmatively to merge the Company with and into Hartman vREIT XXI as the surviving company. Previously the Boards had established special committees to consider the potential merger and after deliberation, determined that a merger would be to the benefit of the shareholders of both parties.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

       Unless the context otherwise requires, all references in this report to the “Company,” “we,” “us” or “our” are to Hartman Short Term Income Properties XX, Inc.

Forward-Looking Statements

          Certain statements included in this quarterly report on Form 10-Q (this “Quarterly Report”) that are not historical facts (including statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions, or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events on our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

          Forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the fact that we have had a net loss for each annual period since our inception;

• the risk that the pending Mergers will not be consummated within the expected time period or at all;

• the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreements;

• the failure to satisfy the conditions to completion of the pending Mergers;

• risks related to disruption of management’s attention from the ongoing business operations due to the pending Mergers;

• the effect of the announcement of the pending Mergers on our operating results and business generally;

• the outcome of any legal proceedings relating to the pending Mergers;

• the imposition of federal taxes if we fail to qualify as a REIT in any taxable year or forego an opportunity to ensure REIT status;

• uncertainties related to the national economy, the real estate industry in general and in our specific markets;

• legislative or regulatory changes, including changes to laws governing REITS;

• construction costs that may exceed estimates or construction delays;

• increases in interest rates;

• availability of credit or significant disruption in the credit markets;

• litigation risks;

• risks inherent to the real estate business, including tenant defaults, potential liability related to environmental matters and the lack of liquidity of real estate investments;

• inability to obtain new tenants upon the expiration of existing leases at our properties;

• inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws;

• the continuing adverse impact of the novel coronavirus (“COVID-19”) on the U.S.and Texas economies and our financial condition and results of operations;

• the potential need to fund tenant improvements or other capital expenditures out of operating cash flow;

• the fact that we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to generate sufficient cash flows to pay distributions to our stockholders;

• our ability to retain our executive officers and other key personnel of our advisor and other affiliates of our advisor; and

25

• changes to generally accepted accounting principles, or GAAP.

          The forward-looking statements should be read in light of these factors and the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on May 13, 2020.

The following discussion and analysis should be read in conjunction with the accompanying interim consolidated financial information.

Overview

We were formed as a Maryland corporation on February 5, 2009 to invest in and operate real estate and real estate-related assets on an opportunistic basis. We may acquire a wide variety of commercial properties, including office, industrial, retail, and other real properties. These properties may be existing, income-producing properties, newly constructed properties or properties under development or construction. In particular, we focus on acquiring properties with significant possibilities for short-term capital appreciation, such as those requiring development, redevelopment or repositioning or those located in markets with high growth potential. We also may invest in real estate-related securities and, to the extent that our advisor determines that it is advantageous, we may invest in mortgage loans.

On February 9, 2010, we commenced our initial public offering of up to $250,000,000 in shares of our common stock to the public at a price of $10 per share and up to $23,750,000 in shares of common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. On April 25, 2013, we terminated our initial public offering. As of the termination of our initial public offering on April 25, 2013, we had accepted subscriptions for and issued shares of our common stock, including shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross offering proceeds of $43,943,731.

On July 16, 2013, we commenced our follow-on public offering, or our “follow-on offering,” of up to $200,000,000 in shares of our common stock to the public at a price of $10.00 per share and up to $19,000,000 in shares of our common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. Effective March 31, 2016, we terminated the offer and sale of our common shares to the public in our follow-on offering. Effective July 16, 2016, we terminated the sale of additional shares of our common stock to our stockholders pursuant to our distribution reinvestment plan. As of September 30, 2020, we had accepted subscriptions for, and issued shares of our common stock in our follow-on offering, including shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross proceeds of $181,800,895.

As of September 30, 2020 we owned 44 commercial real properties comprising approximately 6.8 million square feet plus four pad sites, all located in Texas.

The SASB Loan outstanding as of September 30, 2020 has a maturity date of October 9, 2021, which is within one year of the date that this Quarterly Report was available to be issued. Management has considered whether there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial statement due to the uncertainty regarding the SASB Loan maturity, as set forth in Accounting Standards Update (ASU) 2014-15, “Presentation of Financial Statements – Going Concern.”

Without limiting the foregoing, we believe that we will have sufficient capital to meet our existing debt service and other operating obligations for the next year and that we have adequate resources to fund our cash needs. However, our operations are subject to a variety of risks, including, but not limited to, changes in national economic conditions, the restricted availability of financing, changes in demographic trends and interest rates and declining real estate valuations. As a result of these uncertainties, there can be no assurance that we will meet our investment objectives or that the risks described above will not have an adverse effect on our properties or results of operations.

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders. Effective July 1, 2020, we are internally managed by Hartman Advisors, LLC. Effective July 1, 2020, our properties are managed by our subsidiary, Hartman Income REIT Management, Inc. Our property manager is responsible for operating, leasing and maintaining our properties.  The Company is now internally advised and managed.

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Mergers

On July 21, 2017, we entered into (i) an agreement and plan of merger (the “XIX Merger Agreement”) between us and Short Term Income Properties XIX, Inc. (“Hartman XIX”), and (ii) an agreement and plan of merger (the “HIREIT Merger Agreement,” and together with the XIX Merger Agreement, the “Merger Agreements”) by and among us, our operating partnership, Hartman Income REIT, Inc. (“HIREIT”), and Hartman Income REIT Operating Partnership LP, the operating partnership of HIREIT (“HIREIT Operating Partnership”).

Subject to the terms and conditions of the XIX Merger Agreement, Hartman XIX merged with and into us, with our company surviving the merger (the “Hartman XIX Merger”). Subject to the terms and conditions of the HIREIT Merger Agreement, (i) HIREIT merged with and into us, with our company surviving the merger (the “HIREIT Merger,” and together with the Hartman XIX Merger, the “REIT Mergers”), and (ii) HIREIT Operating Partnership merged with and into our operating partnership, with our operating partnership surviving the merger (the “Partnership Merger,” and together with the REIT Mergers, the “Mergers”).

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) was automatically canceled and retired and converted into the right to receive 9,171.98 shares of our common stock, (ii) each share of 8% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time was automatically canceled and retired and converted into the right to receive 1.238477 shares of our common stock, and (iii) each share of 9% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time was automatically canceled and retired and converted into the right to receive 1.238477 shares of our 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) was automatically cancelled and retired and converted into the right to receive 0.752222 shares of our common stock, and (ii) as provided in the HIREIT Merger Agreement, as amended May 8, 2018, each share of subordinate common stock of HIREIT was automatically cancelled and retired and converted into the right to receive 0.863235 shares of our 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) was automatically cancelled and retired and converted into the right to receive 0.752222 shares validly issued, fully paid and non-assessable units of limited partnership interests in our operating partnership.

On May 14, 2020, the Merger Agreements were approved by the respective company shareholders. The effective date of the Mergers for financial reporting is July 1, 2020.

Impact of the COVID-19 Pandemic

The coronavirus, or COVID-19, pandemic, has caused and continues to cause significant disruptions to the United States and the Texas economy. The effects of COVID-19 and other adverse public health developments continue to effect and, in some instances, have materially affected the operational and financial viability of several our tenants.

We continue to carefully monitor the impact of the COVID-19 pandemic and its impact on our business. We are following guidelines established by the Centers for Disease Control and orders issued by the State of Texas and local governments where we operate. We have taken steps to safeguard our business and personnel from COVID-19, including among other initiatives, implementing non-essential travel restrictions and facilitating telecommuting arrangements for our personnel.

We are working closely with our tenants to facilitate their on-going operations or re-opening of their operations, safely and in accordance with guidelines issued by state and local governments. When we have learned of a confirmed case of COVID-19 involving an individual known to have been in one of our properties, we have promptly taken steps in cooperation with our tenants and vendors to disinfect and sanitize the affected areas and all common areas in the affected building or property.

To date, the effect of the COVID-19 pandemic on our business and financial condition has been moderate. Substantially all our revenue is generated through the receipt of rental and other tenant reimbursement payments from our tenants. Tenant collections by property type, beginning in April, are presented in the table below. Tenant collections have met or exceeded our expectations given the economic disruption of the local economies in which our tenants operate. We have adequate capital

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reserves for on-going commission costs associated with new and renewal leases as well as tenant improvements and other capital costs.

The future impact of the COVID-19 pandemic on our operations and financial condition will however depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain or mitigate the impact and effects of the pandemic, and the direct and indirect economic effects of the pandemic and containment measures. See “Item 1A. Risk Factors” for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.

Our collections of tenant rents, reimbursements and other income billed for the months of July, August, September and October 2020 were as follows:

Property Type	July	August	September	October
Retail	85.9%	83.1%	90.5%	84.2%
Flex	98.5%	95.1%	99.2%	83.1%
Office	97.8%	94.9%	98.3%	94.0%
Industrial	100.0%	93.9%	100.0%	99.4%
Total	95.2%	92.2%	96.6%	91.2%

Collections for July 2020 are as of August 28, 2020. Collections for August 2020 are as of September 15, 2020. Collections for September and October 2020 are as of November 4, 2020. Collections for each period continue to increase as tenant payments are received as a result of collection efforts and deferred payment arrangements.

Investment Objectives and Strategy: Hartman Advantage

Our primary investment objectives are to:

• realize growth in the value of our investments;

• preserve, protect and return stockholders’ capital contributions; and

• grow net cash from operations and pay regular cash distributions to our stockholders.

We cannot assure our stockholders that we will achieve these objectives.

The cornerstone of our investment strategy is our advisor’s discipline in acquiring a portfolio of real estate properties, specifically properties that are located in Texas, that offer a blend of current and potential income based on in place occupancy plus relatively significant potential for growth in income and value from re-tenanting; repositioning or redevelopment. We refer to this strategy as “value add” or the “Hartman Advantage.”

We rely upon the value add or Hartman Advantage strategy to evaluate numerous potential commercial real estate acquisition and investment opportunities per completed acquisition or investment.

Our board of directors continually evaluates potential liquidity events to maximize the total potential return to our stockholders, including, but not limited to, a listing of our shares of common stock on a national securities exchange. However, our board of directors has not made a decision to pursue any specific liquidity event, and there can be no assurance that we will complete a liquidity event on the terms described above, or at all.

We do not anticipate that there will be any market for our shares of common stock unless they are listed on a national securities exchange. In the event that our shares of common stock are not listed or traded on an established securities exchange prior to the tenth anniversary of the termination of our initial public offering, which terminated on April 25, 2013, our charter requires that the board of directors must seek the approval of our stockholders of a plan to liquidate our assets, unless the board of directors has obtained the approval of our stockholders (1) to defer the liquidation of our assets or (2) of an alternate strategy.

We believe that we have sufficient capital to meet our existing debt service and other operating obligations for the next year and that we have adequate resources to fund our cash needs. However, our operations are subject to a variety of risks, including, but not limited to, changes in national economic conditions, the restricted availability of financing, changes in demographic trends and interest rates and declining real estate valuations. As a result of these uncertainties, there can be no

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assurance that we will meet our investment objectives or that the risks described above will not have an adverse effect on our properties or results of operations.

We elected under Section 856(c) of the Internal Revenue Code to be taxed as a REIT beginning with the taxable year ending December 31, 2011. As a REIT we generally are not subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year after the year in which we initially elected to be treated as a REIT, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income. However, we believe that we are organized and will operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes and we intend to operate so as to remain qualified as a REIT for federal income tax purposes.

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Our Real Estate Portfolio

As of September 30, 2020, we owned 44 commercial properties listed below.

Property Name	Location	Gross Leasable Area SF	Percent Occupied		Annualized Base Rental Revenue (in thousand)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF
Retail:
Promenade	Dallas	176,585	79	%	$	1,480	$	10.62	$	10.14
Prestonwood Park	Dallas	105,783	76	%	$	1,803	$	22.29	$	22.57
Richardson Heights	Dallas	201,433	76	%	$	3,150	$	20.56	$	20.62
Cooper Street	Dallas	127,696	100	%	$	1,572	$	12.31	$	12.39
One Mason SC	Houston	75,183	84	%	$	830	$	13.20	$	13.04
Chelsea Square SC	Houston	70,275	79	%	$	625	$	11.32	$	11.01
Mission Center SC	Houston	112,971	89	%	$	838	$	8.30	$	7.52
Garden Oaks SC	Houston	106,858	87	%	$	970	$	10.39	$	10.35
Harwin	Houston	38,813	51	%	$	222	$	11.19	$	12.96
Fondren	Houston	93,196	89	%	$	806	$	9.71	$	9.47
Northeast Square SC	Houston	40,525	73	%	$	409	$	13.75	$	14.15
Walzem Plaza SC	San Antonio	182,713	73	%	$	1,509	$	11.27	$	11.28
Total - Retail		1,332,031	81	%	$	14,214	$	13.16	$	13.06
Office:
North Central Plaza	Dallas	198,374	69	%	$	2,198	$	16.10	$	15.06
Gateway Tower	Dallas	266,412	59	%	$	2,452	$	15.54	$	14.66
Bent Tree Green	Dallas	139,609	81	%	$	2,275	$	20.15	$	19.82
Parkway Plaza I&II	Dallas	136,506	77	%	$	1,758	$	16.76	$	16.95
Hillcrest	Dallas	203,688	79	%	$	2,523	$	15.63	$	15.60
Skymark	Dallas	115,700	79	%	$	1,691	$	18.45	$	18.02
Corporate Park Place	Dallas	113,429	71	%	$	1,354	$	16.78	$	17.49
Westway One	Dallas	165,982	86	%	$	2,941	$	20.70	$	20.63
Three Forest Plaza	Dallas	366,549	83	%	$	5,834	$	19.15	$	19.24
Spring Valley	Dallas	94,304	73	%	$	834	$	12.13	$	12.38
Tower Pavilion	Houston	87,589	86	%	$	991	$	13.15	$	13.10
The Preserve	Houston	218,689	86	%	$	3,115	$	16.49	$	16.39
Westheimer Central	Houston	182,506	69	%	$	1,522	$	12.08	$	11.40
11811 N Freeway	Houston	156,362	78	%	$	1,946	$	15.99	$	15.88
Atrium I	Houston	118,461	83	%	$	1,458	$	14.78	$	13.91
Atrium II	Houston	111,853	64	%	$	797	$	11.16	$	11.48
3100 Timmons	Houston	111,265	80	%	$	1,332	$	15.05	$	15.03
Cornerstone	Houston	71,008	56	%	$	508	$	12.69	$	13.05
Northchase	Houston	128,981	86	%	$	1,611	$	14.53	$	14.16
616 FM 1960	Houston	142,194	40	%	$	1,034	$	18.06	$	18.30
601 Sawyer	Houston	88,258	85	%	$	1,081	$	14.38	$	13.13
Gulf Plaza	Houston	120,651	89	%	$	2,301	$	21.44	$	21.84
Timbercreek Atrium	Houston	51,035	77	%	$	650	$	16.51	$	17.25
Copperfield	Houston	42,621	89	%	$	725	$	19.03	$	19.09
400 N. Belt	Houston	230,872	55	%	$	1,370	$	10.69	$	10.92
Ashford Crossing	Houston	158,451	75	%	$	2,031	$	17.00	$	16.80
Regency Square	Houston	64,063	79	%	$	675	$	13.28	$	13.10
Energy Plaza	San Antonio	180,119	83	%	$	3,043	$	20.24	$	20.41
One Technology Ctr	San Antonio	196,348	100	%	$	4,928	$	25.10	$	24.88
Total -office		4,261,879	76	%	54,978		16.94		16.79
Industrial/Flex
Central Park	Dallas	73,099	91	%	$	492	$	7.40	$	7.03
Quitman	Houston	736,957	88	%	$	1,283	$	1.97	$	1.94
Mitchelldale	Houston	377,752	93	%	$	2,338	$	6.67	$	6.59
Total -Industrial/Flex		1,187,808	90	%	$	4,113	$	3.86	$	3.79
Grand Total		6,781,718	80	%	$	73,305	$	13.60	$	13.47

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related notes, require us to make estimates and assumptions that are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions and other factors related to the ongoing viability of our customers. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on May 13, 2020, in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations."  There have been no significant changes to these policies during the nine months ended September 30, 2020.  See also Note 2 to our consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of our significant accounting policies.

RESULTS OF OPERATIONS

Comparison of the three and nine months ended September 30, 2020 versus September 30, 2019.

       As of September 30, 2020 and 2019, respectively, we owned 44 and 43 commercial properties comprising approximately 6.8 and 6.7 million square feet plus four and three pad sites and two and none land developments, all located in Texas. As of September 30, 2020 and 2019, respectively, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 26 and 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.

We define same store ("Same Store") properties as 43 commercial properties, which we owned for the entirety of the nine months ended September 30, 2020 and 2019.

Net operating income (property revenues minus property expenses), or “NOI,” is the measure used by management to assess property performance. NOI is not a measure of operating income or cash flows from operating activities as measured by accounting principles generally accepted in the United States, or “GAAP,” and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the operating results of our real estate. Set forth below is a reconciliation of NOI to net loss.

(in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		Change		2020		2019		Change
Revenue	$	21,062	$	21,941	$	(879)	$	66,250	$	64,500	$	1,750
Property operating expenses	7,777		7,770		7		19,736		20,780		(1,044)
Asset management fees	440		440		—		1,320		1,320		—
Real estate taxes and insurance	2,959		3,087		(128)		9,727		9,321		406
General and administrative	1,826		1,388		438		4,085		4,051		34
Same Store NOI	$	8,060	$	9,256	$	(1,196)	$	31,382	$	29,028	$	2,354
Reconciliation of Net loss to Property NOI
Net (loss) income	$	(2,173)	$	(333)	$	(1,840)	$	2,417	$	(904)	$	3,321
Net income from HIREIT and XIX operations	917		—		917		917		—		917
Organization and offering costs	115		—		115		115		—		115
Depreciation and amortization	7,240		6,989		251		21,242		20,653		589
Interest expense	2,272		3,433		(1,161)		7,954		10,625		(2,671)
Interest and dividend income	(311)		(833)		522		(1,263)		(1,346)		83
Same Store NOI	$	8,060	$	9,256	$	(1,196)	$	31,382	$	29,028	$	2,354

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Revenues - The primary source of our revenue is rental revenues and tenant reimbursements. For the three months ended September 30, 2020 and 2019, we had total rental revenues and tenant reimbursements of $21,062,000 and $21,941,000, respectively. The difference is primarily attributable to the decrease in tenant reimbursements. For the nine months ended September 30, 2020 and 2019, we had total rental revenues and tenant reimbursements of $66,250,000 and $64,500,000, respectively. The increase in rental revenue is primarily due to increased occupancy. The same store occupancy for the period nine months ended September 30, 2020 and 2019 was 81.06% and 80.30%, respectively.

Property operating expenses - Property operating expenses consist of contract services, repairs and maintenance, utilities and management fees and property level administrative expenses including bad debt expense. For the three months ended September 30, 2020 and 2019, we had property operating expenses of $7,777,000 and $7,770,000, respectively. For the nine months ended September 30, 2020 and 2019, we had property operating expenses of $19,736,000 and $20,780,000, respectively. The decrease is mainly due to decrease in hurricane and flood damage related expenses and significant decrease in electricity expenses.

Asset management fees - We pay asset management fees to our advisor in connection with the management of our properties. With the merger of HIREIT, and as a result the Advisors, with the Company, the asset management fee is eliminated starting on July 1, 2020. For the three months ended September 30, 2020 and 2019, same store asset management fees incurred to our advisor were $440,000 and $440,000, respectively. For the nine months ended September 30, 2020 and 2019, respectively, we had asset management fees of $1,320,000 and $1,320,000, respectively.

Real estate taxes and insurance - Same store real estate taxes and insurance for the three months ended September 30, 2020 and 2019 were $2,959,000 and $3,087,000, respectively, and $9,727,000 and $9,321,000 for the nine months ended September 30, 2020 and 2019, respectively. The increase is attributable to an increase in insurance premium for the insurance policy fiscal year 2020.

Depreciation and amortization - Depreciation and amortization for the three months ended September 30, 2020 and 2019 were $7,240,000 and $6,989,000, respectively, and $21,242,000 and $20,653,000 for the nine months ended September 30, 2020 and 2019, respectively. The increase is due to addition of Atrium II as a result of HIREIT merger into the Company.

General and administrative expenses - General and administrative expenses consist primarily of audit fees, transfer agent fees, other professional fees, and independent director compensation. Same store general and administrative expenses for the three months ended September 30, 2020 and 2019 were $1,826,000 and $1,388,000, respectively. The increase is primarily due to the increase in directors fees in cash and stock and other professional fees. For the nine months ended September 30, 2020 and 2019, general and administrative expenses were $4,085,000 and $4,051,000, respectively.

Interest expense - Interest expense for the three months ended September 30, 2020 and 2019, were $2,272,000 and $3,433,000, respectively, and 7,954,000 and 10,625,000 for the nine months ended September 30, 2020 and 2019, respectively. Interest decreased by $1,161,000 and $2,671,000, respectively, for the three and nine months ended September 30, 2020 compared to the same periods ended in 2019, mainly due to one-month LIBOR decrease due to the COVID-19 pandemic effect on the capital markets.

Net income (loss) - We generated a net loss of $2,173,000 and $333,000 for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, respectively, we generated a net income (loss) of $2,417,000 and $(904,000). The difference is primarily attributable to an increase in total revenues, a decrease in property operating expenses and a decrease in interest expenses, as explained above.

Funds From Operations and Modified Funds From Operations

Funds From Operations, or FFO, is a non-GAAP financial measure defined by the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, which we believe is an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT in conjunction with net income. FFO is used by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

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Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses. We do not currently exclude amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued acquisition fees and expenses negatively impact our operating performance during the period in which properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. Accordingly, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. MFFO that excludes such costs and expenses would only be comparable to non-listed REITs that have completed their acquisition activities and have similar operating characteristics to us. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. Acquisition fees and expenses will not be reimbursed by the advisor if there are no further proceeds from the sale of shares in our public offering, and therefore such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

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Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of its liquidity, or indicative of funds available to fund its cash needs including its ability to make distributions to its stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO or MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT, or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and as a result we may have to adjust our calculation and characterization of FFO or MFFO.

The table below summarizes our calculation of FFO and MFFO for the three and nine months ended September 30, 2020 and 2019 including a reconciliation of such non-GAAP financial performance measures to our net income (loss), in thousands.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net (loss) income	$	(2,173)	$	(333)	$	2,417	$	(904)
Depreciation and amortization of real estate assets	7,240		6,989		21,242		20,653
Funds from operations (FFO)	5,067		6,656		23,659		19,749
Modified funds from operations (MFFO)	$	5,067	$	6,656	$	23,659	$	19,749

Distributions

The following table summarizes the distributions we paid in cash and pursuant to our distribution reinvestment plan for the period from January 2011 (the month we first paid distributions) through September 30, 2020, in thousands:

Period	Cash (1)		DRIP (2)(3)		Total
Year ended December 31, 2011	$	255	$	242	$	497
Year ended December 31, 2012	891		869		1,760
Year ended December 31, 2013	1,681		1,594		3,275
Year ended December 31, 2014	2,479		2,358		4,837
Year ended December 31, 2015	3,475		3,718		7,193
Year ended December 31, 2016	8,918		2,988		11,906
Year ended December 31, 2017	12,650		—		12,650
Year ended December 31, 2018	12,555		—		12,555
Year ended December 31, 2019	12,772		—		12,772
Quarter ended March 31, 2020	3,223		—		3,223
Quarter ended June 30, 2020	3,222				3,222
Quarter ended September 30, 2020	6,164		—		6,164
Total	$	68,285	$	11,769	$	80,054

(1)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 20 days following the end of such month.

(2)Distributions accrued for the period from December 27, 2010 through December 31, 2010 were paid on January 20, 2011, the date we first paid a distribution.

(3)Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan. Effective July 16,

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2016, we terminated the sale of additional shares of our common stock to our stockholders pursuant to our distribution reinvestment plan.

Distributions to non-controlling interests were $232,000 and $233,000 for the three months ended September 30, 2020 and 2019, respectively. Distributions to non-controlling interests were $4,515,000 and $4,515,000 for the nine months ended September 30, 2020 and 2019, respectively.

For the nine months ended September 30, 2020, we paid aggregate distributions of $12,609,000 in cash to common stockholders. During the same period, cash provided by operating activities was $13,491,000 and our FFO was $5,067,000. For the nine months ended September 30, 2019, 100% of distributions were paid from cash provided by operating activities. For the nine months ended September 30, 2019, we paid aggregate distributions of $9,590,000. During the same period, cash provided by operating activities was $11,143,000 and our FFO was $19,749,000. For the nine months ended September 30, 2019, 100% of distributions were paid from cash provided by operating activities. 

Liquidity and Capital Resources

Our principal demands for funds are and will continue to be for real estate and real estate-related acquisitions, for the payment of operating expenses, for the payment of interest on our outstanding indebtedness, and for the payment of distributions. Generally, we expect to meet cash needs for items other than acquisitions from our cash flow from operations; provided, that some or all of our distributions have been and may continue to be paid from sources other than cash from operations (as discussed below). We expect to meet cash needs for acquisitions from the remaining net proceeds of our follow-on offering and from financings.

There may be a delay between the sale of our shares of common stock and the purchase of properties or other investments, which could result in a delay in our ability to make distributions to our stockholders. Some or all of our distributions have been and may continue to be paid from sources other than cash flow from operations, including proceeds of our public offerings, cash advances to us by our advisor, cash resulting from a waiver of asset management fees and borrowings secured by our assets in anticipation of future operating cash flow. We may have little, if any, cash flow from operations available for distribution until we make substantial investments and those investments stabilize. In addition, to the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted, especially during our early periods of operation.

We use, and intend to use in the future, secured and unsecured debt to acquire properties and make other investments. As of September 30, 2020, our outstanding secured debt is $301,356,000. There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment. Under our charter, we are prohibited from borrowing in excess of 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors and if such excess is disclosed to the stockholders in the next quarterly report along with the explanation for such excess borrowings. Our board of directors has adopted a policy to limit our aggregate borrowings to approximately 50% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Such limitation, however, does not apply to individual real estate assets and only will apply once we have ceased raising capital in our public offering and invested substantially all our capital. As a result, we expect to borrow more than 50% of the contract purchase price of each real estate asset we acquire to the extent our board of directors determines that borrowing these amounts is prudent.

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 SASB Loan a currently extended maturity date of October 9, 2020 2021. The SASB Loan provides for two remaining one-year maturity date extensions. In order to exercise each successive one-year extension options, SPE LLC must meet five conditions in order to extend the maturity date without any further qualification. One of the five conditions is that Hartman SPE must have a debt yield, as defined, of 12.5% or greater as of September 30, 2020.

Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial statements due to the fact of the uncertainty regarding the loan maturity of the SASB Loan. Management believes that Hartman SPE will be able to extend the maturity date for one year which will mitigate the maturity date issue within one year of the issuance date of these consolidated financial statement.

We may, but is not required to, establish capital reserves from remaining gross offering proceeds, out of cash flow generated by operating properties and other investments or out of non-liquidating net sale proceeds from the sale of our

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properties and other investments. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures. Alternatively, a lender may require its own formula for escrow of capital reserves.

Potential future sources of capital include proceeds from additional private or public offerings of our securities, secured or unsecured financings from banks or other lenders, proceeds from the sale of properties and undistributed funds from operations. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.

The consolidated financial statements as of September 30, 2020 include the accounts of the Company, our operating partnership and its subsidiaries, Hartman SPE, LLC, HIREIT, Advisor and Hartman XIX. Prior to October 1, 2018, our consolidated financial statements did not include Hartman SPE, LLC. Prior to July 1, 2020, our consolidated financial statements did not include HIREIT, Advisor and Hartman XIX.

Cash Flows from Operating Activities

For the nine months ended September 30, 2020 and 2019, net cash provided by operating activities was $13,491,000 versus $11,143,000, respectively. The increase is mainly due to an increase in net income of $3,321,000 and an increase in deferred leasing commissions of $2,315,000, offset by a decrease in due to/from related parties of $2,790,000 and a decrease of $1,071,000 in prepaid expenses and other assets.

Cash Flows from Investing Activities

For the nine months ended September 30, 2020 and 2019, net cash provided by (used in) investing activities was $2,902,000 versus $(17,479,000), respectively. The increase in cash provided by is mainly due to third quarter 2020 reassignment of notes receivable to vREIT XXI and 2019 cash outflow for related party note investments by Hartman TRS for affiliate Hartman investment programs and no such outflow in 2020.

Cash Flows from Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2020 and 2019, respectively, was $19,058,000 and $21,953,000. The decrease in cash used in financing activities is primarily due to the retirement of the pre Hartman SPE Promenade loan in 2019, offset by increase of $3,017,000 in distributions to common stockholders.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt, as a means of providing additional funds for the acquisition of our properties and our real estate-related assets. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2020, our borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor. We expect to make payments to our advisor or its affiliates in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of September 30, 2020, we had notes payable totaling an aggregate principal amount of $306,637,000. For more information on our outstanding indebtedness, see Note 7 (Notes payable) to the consolidated financial statements included in this report.

Off-Balance Sheet Arrangements

As of September 30, 2020 and December 31, 2019, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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The Company is a covenant guarantor for the secured mortgage indebtedness of VIEs in the total amount of $24,998,000 and $25,141,000 as of September 30, 2020 and December 31, 2019, respectively. The Company is not deemed to be the primary beneficiary of the VIEs. See Note 10 (Related Party Transactions).

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements. See Note 2 to the notes to the accompanying consolidated financial statements included in this quarterly report.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our advisor and its affiliates. See Item 13, “Certain Relationships and Related Transactions and Director Independence” in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on May 13, 2020, and Note 10 (Related Party Transactions) to the consolidated financial statements included in this Quarterly Report for a discussion of the various related-party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We will be exposed to interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other permitted investments. Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we expect to borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-Q, as of September 30, 2020, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). In performing this evaluation, management reviewed the selection, application and monitoring of our historical accounting policies. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2020, these disclosure controls and procedures were effective and designed to ensure that the information required to be disclosed in our reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported as and when required.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financing reporting.

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PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item 1A. Risk Factors

The outbreak of the novel coronavirus, COVID-19, has caused and could continue to cause severe disruptions in the United States as well as Texas state and local economies and could have a material adverse effect on our business, financial condition and results of operations.

The COVID-19 pandemic has caused significant disruptions to the United States economy as well as the economies of the State of Texas and major Texas communities and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the United States, have reacted by instituting quarantines, restrictions on travel and mandatory closures of businesses. Certain cities where we own properties and/or have development sites, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue.

The future impact of the COVID-19 pandemic on our operations and financial condition will however depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain or mitigate the impact and effects of the pandemic, and the direct and indirect economic effects of the pandemic and containment measures. Nevertheless, the COVID-19 pandemic may adversely affect our business, financial condition and results of operations, and may have the effect of heightening many of the risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019, including:

•failure of our tenants to perform tenant obligations under our leases including but not limited to timely payment of rent and other charges;

•the disruptive impact on tenant personnel resources, which could hinder our ability to renew expiring leases, initiate or complete tenant build-out and construction projects and otherwise interfere with our tenant relationships;

•disruptions in the supply of materials or products or the inability of contractors to perform on timely basis tenant improvement construction or other construction and development;

•a general decline in business activity and demand for real estate transactions, which could adversely affect our ability or desire to continue growing our portfolio of properties;

•the likelihood that the impact of COVID-19 could result in an event or change in circumstances that results in an impairment charge in the value of one or more of our properties, which would result in an immediately negative adjustment to our earnings and could have a material adverse effect on our business, financial conditions and results of operations in the period in which the charge takes place;

•uncertainty as to whether business interruption, loss of rental income and/or other associated expenses related to our operations across our portfolio will be covered by our insurance policies, which may increase unreimbursed liabilities; and

•the potential negative impact on the health of our personnel, including our senior management team, particularly if a significant number of our employees or key members of our senior management are impacted, which could result in a deterioration in our ability to ensure business continuity during a disruption.

Our stockholders were diluted by the Mergers.

The Mergers diluted the ownership position of our pre-merger stockholders and result in our stockholders (excluding stockholders affiliated with our advisor or sponsor) having an ownership stake in us that is smaller than their current stake in our company. In connection with the Mergers, we issued approximately 16,889,000 shares of our common stock to the holders of shares of Hartman XIX and HIREIT capital stock, based on the exchange ratios set forth in the Merger Agreements and the shares of Hartman XIX and HIREIT capital stock issued and outstanding as of September 30, 2020. Our pre-merger stockholders (excluding stockholders affiliated with our advisor or sponsor) hold post-merger shares in the aggregate approximately 50% of the issued and outstanding shares of our common stock following the Mergers. In addition, approximately 1,516,000 units of limited partnership interest in our operating partnership are issuable in connection with the Partnership Merger and acquisition of Advisor. Consequently, our stockholders (excluding stockholders affiliated with our

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advisor or sponsor), as a general matter, will have less influence over the management and policies of us after the Mergers than they exercised over the management and policies of us immediately prior to the Mergers.

Following the consummation of the Mergers, we will assume certain potential liabilities relating to Hartman XIX and HIREIT.

When the Mergers are consummated, we will have assumed certain potential liabilities relating to Hartman XIX and HIREIT. These liabilities could have a material adverse effect on our business to the extent we have not identified such liabilities or have underestimated the amount of such liabilities.

The future results of the combined company will suffer if the combined company does not effectively integrate and manage its expanded operations following the Mergers.

Following the Mergers, we expect to continue to expand our operations through additional acquisitions and other strategic transactions, some of which may involve complex challenges. Our future success will depend, in part, upon our ability to manage expansion opportunities, which may pose substantial challenges to integrate new operations into our existing business in an efficient and timely manner, and upon our ability to successfully monitor our operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls. There is no assurance that our expansion or acquisition opportunities will be successful, or that we will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities    

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6.  Exhibits

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Exhibit	Description
3.1	First Articles of Amendment to Third Amended and Restated Articles of Incorporation of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K filed on April 12, 2012)
3.2	Third Amended and Restated Articles of Incorporation of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 1 to the Company’s registration statement on Form 8-A (SEC File No. 000-53912) filed on March 22, 2010)
3.3	Certificate of Correction - Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 3.3 to the Company's form 10-Q filed on May 11, 2018
3.4	Bylaws of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 2 to the Company’s registration statement on Form 8-A (SEC File No. 000-53912) filed on March 22, 2010)
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.

Date: November 20, 2020                                                   

By: /s/ Allen R. Hartman

Allen R. Hartman,

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

Date: November 20, 2020                                               

By: /s/ Louis T. Fox, III

Louis T. Fox, III,

Chief Financial Officer,

(Principal Financial and Principal Accounting Officer)

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