Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 01, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 000-53912 | |
Entity Registrant Name | HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 26-3455189 | |
Entity Address, Address Line One | 2909 Hillcroft | |
Entity Address, Address Line Two | Suite 420 | |
Entity Address, City or Town | Houston | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 77057 | |
City Area Code | 713 | |
Local Phone Number | 467-2222 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Smaller Reporting Company | true | |
Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 35,313,239 | |
Amendment Flag | false | |
Entity Central Index Key | 0001446687 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
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: | ||
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 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Convertible, non-voting shares authorized (in shares) | 200,000,000 | 200,000,000 |
Preferred stock, shares issued (in shares) | 1,000 | 1,000 |
Preferred stock, shares outstanding (in shares) | 1,000 | 1,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock, shares issued (in shares) | 35,306,889 | 18,417,687 |
Common stock, shares outstanding (in shares) | 35,306,889 | 18,417,687 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 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 (in dollars per share) | $ (0.06) | $ 0.02 | $ 0.01 | $ 0.02 |
Weighted average number of common shares outstanding, basic and diluted (in shares) | 35,307 | 18,418 | 29,168 | 18,265 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Distributions and Net Loss | Total Stockholders' Equity | Noncontrolling Interests |
Beginning balance (in shares) at Dec. 31, 2018 | 1 | 17,712 | |||||
Beginning balance at Dec. 31, 2018 | $ 248,481 | $ 0 | $ 18 | $ 165,084 | $ (95,162) | $ 69,940 | $ 178,541 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common shares (in shares) | 6 | ||||||
Issuance of common shares | 76 | 76 | 76 | ||||
Purchase of non-controlling interest (in shares) | 700 | ||||||
Purchase of non-controlling interest | (68) | 8,790 | 8,790 | (8,858) | |||
Dividends and distributions (cash) | (14,105) | (9,590) | (9,590) | (4,515) | |||
Net income | (904) | 381 | 381 | (1,285) | |||
Ending balance (in shares) at Sep. 30, 2019 | 1 | 18,418 | |||||
Ending balance at Sep. 30, 2019 | 233,480 | $ 0 | $ 18 | 173,950 | (104,371) | 69,597 | 163,883 |
Beginning balance (in shares) at Jun. 30, 2019 | 1 | 18,418 | |||||
Beginning balance at Jun. 30, 2019 | 237,270 | $ 0 | $ 18 | 173,950 | (101,436) | 72,532 | 164,738 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Dividends and distributions (cash) | (3,457) | (3,224) | (3,224) | (233) | |||
Net income | (333) | 289 | 289 | (622) | |||
Ending balance (in shares) at Sep. 30, 2019 | 1 | 18,418 | |||||
Ending balance at Sep. 30, 2019 | 233,480 | $ 0 | $ 18 | 173,950 | (104,371) | 69,597 | 163,883 |
Beginning balance (in shares) at Dec. 31, 2019 | 1 | 18,418 | |||||
Beginning balance at Dec. 31, 2019 | 225,006 | $ 0 | $ 18 | 174,019 | (109,406) | 64,631 | 160,375 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
HIREIT and XIX merger (in shares) | 16,889 | ||||||
HIREIT and XIX merger | (9,251) | $ 17 | 136,799 | 1,264 | 138,080 | (147,331) | |
Dividends and distributions (cash) | (17,120) | (12,605) | (12,605) | (4,515) | |||
Net income | 2,417 | 328 | 328 | 2,089 | |||
Ending balance (in shares) at Sep. 30, 2020 | 1 | 35,307 | |||||
Ending balance at Sep. 30, 2020 | 201,052 | $ 0 | $ 35 | 310,818 | (120,419) | 190,434 | 10,618 |
Beginning balance (in shares) at Jun. 30, 2020 | 1 | 18,418 | |||||
Beginning balance at Jun. 30, 2020 | 218,870 | $ 0 | $ 18 | 174,019 | (113,373) | 60,664 | 158,206 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
HIREIT and XIX merger (in shares) | 16,889 | ||||||
HIREIT and XIX merger | (9,251) | $ 17 | 136,799 | 1,264 | 138,080 | (147,331) | |
Dividends and distributions (cash) | (6,394) | (6,162) | (6,162) | (232) | |||
Net income | (2,173) | (2,148) | (2,148) | (25) | |||
Ending balance (in shares) at Sep. 30, 2020 | 1 | 35,307 | |||||
Ending balance at Sep. 30, 2020 | $ 201,052 | $ 0 | $ 35 | $ 310,818 | $ (120,419) | $ 190,434 | $ 10,618 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 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) |
Organization and Business
Organization and Business | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Organization and Business Hartman Short Term Income Properties XX, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009. The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2011. 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 four and three pad sites and two and zero 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 three 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 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. 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 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 no 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. No 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. 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 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 three 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 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 Instrument s — 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. |
Real Estate
Real Estate | 9 Months Ended |
Sep. 30, 2020 | |
Real Estate [Abstract] | |
Real Estate | 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 four and three pad sites and two and none 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 three 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 Effective July 1, 2020, in connection with the Mergers, the Company acquired interests in (i) one commercial real estate property, (ii) one 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) two 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 — 3,900 3,900 Acquired intangibles 8,514 171 8,685 Investment in HIREIT — 2,845 2,845 Investment in SPE LLC 111,369 87,430 198,799 Investment in other affiliates 201 — 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 — 3,868 3,868 Total Liabilities $ 10,859 $ 16,543 $ 27,402 Net assets acquired $ 117,544 $ 82,688 $ 200,232 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 payabl e – 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. |
Accrued Rent and Accounts Recei
Accrued Rent and Accounts Receivable, net | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Accrued Rent and Accounts Receivable, net | 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. |
Deferred Leasing Commission Cos
Deferred Leasing Commission Costs, net | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Deferred Leasing Commission Costs, net | 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 |
Future Minimum Rents
Future Minimum Rents | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Future Minimum Rents | 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 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | Notes Payable The Operating Partnership is a party to four, 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 four 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 three 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 two 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%. 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 — % 2,492 — 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 two 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. 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. |
Income Per Share
Income Per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Income Per Share | 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 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates. The Company’s federal income tax returns for the years ended December 31, 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, no deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements. The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the 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. |
Real Estate Held for Developmen
Real Estate Held for Development | 9 Months Ended |
Sep. 30, 2020 | |
Real Estate [Abstract] | |
Real Estate Held for Development | Real Estate Held for DevelopmentThe 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. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 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: September 30, 2020 December 31, 2019 Due (to) from HIREIT $ — $ 10,359 Due to Hartman XIX — (4,059) Due from (to) vREIT XXI 655 (420) Due from (to) Advisor — (2,077) Due to the Property Manager — (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 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. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | 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 one vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights. Preferred Stock Under the Company’s articles of incorporation, the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors 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. 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. |
Incentive Award Plan
Incentive Award Plan | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Incentive Award Plan | 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. |
Defined Contribution Plan | Defined Contribution PlanThe 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. |
Defined Contribution Plan
Defined Contribution Plan | 9 Months Ended |
Sep. 30, 2020 | |
Retirement Benefits [Abstract] | |
Defined Contribution Plan | Defined Contribution PlanThe 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. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 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. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 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 | 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 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 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 | Financial InstrumentsThe 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. |
Revenue Recognition | Revenue Recognition The Company’s leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for 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 | 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 | 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 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 and amortizationDepreciation 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 | ImpairmentThe 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. |
Accrued Rent and Accounts Receivable | 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 | Deferred Leasing Commission Costs Leasing commissions are amortized using the straight-line method over the term of the related lease agreements. |
Goodwill | GoodwillGAAP 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. |
Noncontrolling Interests | Noncontrolling InterestsNoncontrolling 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 | 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 | 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 | 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 | Concentration of Risk 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 | 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 three 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 and Not Yet Adopted Accounting Pronouncements | 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 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 Instrument s — 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. |
Fair Value Measurement, Policy | 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 payabl e – 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. |
Real Estate (Tables)
Real Estate (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Real Estate [Abstract] | |
Schedule of Real Estate Assets | 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 |
Schedule of Intangible Assets Acquired | 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 |
Schedule of Business Acquisitions, by Acquisition | 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 — 3,900 3,900 Acquired intangibles 8,514 171 8,685 Investment in HIREIT — 2,845 2,845 Investment in SPE LLC 111,369 87,430 198,799 Investment in other affiliates 201 — 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 — 3,868 3,868 Total Liabilities $ 10,859 $ 16,543 $ 27,402 Net assets acquired $ 117,544 $ 82,688 $ 200,232 |
Accrued Rent and Accounts Rec_2
Accrued Rent and Accounts Receivable, net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Schedule of Acquired Indefinite-lived Intangible Assets | 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 |
Deferred Leasing Commission C_2
Deferred Leasing Commission Costs, net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Summary of Deferred Leasing Commission Costs | 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 |
Future Minimum Rents (Tables)
Future Minimum Rents (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Lessor, Operating Lease, Payments to be Received, Maturity | 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 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Summary of Notes Payable | 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 — % 2,492 — 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 two 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. |
Summary of Deferred Loan Costs | 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 |
Income Per Share (Tables)
Income Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share | 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 |
Related Party Disclosures (Tabl
Related Party Disclosures (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | The table below shows the related party balances the Company owes to and is owed by, in thousands: September 30, 2020 December 31, 2019 Due (to) from HIREIT $ — $ 10,359 Due to Hartman XIX — (4,059) Due from (to) vREIT XXI 655 (420) Due from (to) Advisor — (2,077) Due to the Property Manager — (1,168) Due from(to) other related parties 487 (505) $ 1,142 $ 2,130 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 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Summary of 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 |
Organization and Business (Deta
Organization and Business (Details) ft² in Millions | Oct. 01, 2020USD ($) | Sep. 30, 2020property | Sep. 30, 2020 | Sep. 30, 2020ft² | Sep. 30, 2020padSite | Sep. 30, 2020landDevelopment | Sep. 30, 2019property | Sep. 30, 2019ft² | Sep. 30, 2019padSite | Sep. 30, 2019landDevelopment | Oct. 01, 2018USD ($)property |
Advisor | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Ownership percentage acquired | 70.00% | ||||||||||
Subsequent Event | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Value of share-based compensation | $ | $ 100,000 | ||||||||||
Texas | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Number of real estate properties | 4 | 2 | 3 | 0 | |||||||
Number of commercial properties | 44 | 43 | |||||||||
Area of real estate property (in sq ft) | ft² | 6.8 | 6.7 | |||||||||
Richardson, Arlington And Dallas, Texas | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Number of real estate properties | 15 | 15 | |||||||||
Houston, Texas | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Number of real estate properties | 26 | 25 | |||||||||
San Antonio, Texas | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Number of real estate properties | 3 | 3 | |||||||||
Variable Interest Entity, Not Primary Beneficiary | Hartman SPE, LLC | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Number of real estate properties | 39 | ||||||||||
Hartman SPE, LLC | Notes Payable to Banks | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Debt instrument, face amount | $ | $ 259,000,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) | Oct. 01, 2018extension | Sep. 30, 2020USD ($)monthlyPayment | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)extensionmonthlyPayment | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Jun. 30, 2020 |
Property, Plant and Equipment [Line Items] | |||||||
Impairment of real estate | $ 0 | $ 0 | |||||
Goodwill impairment loss | $ 0 | $ 0 | 0 | $ 0 | |||
Net income | $ (2,173,000) | $ (333,000) | $ 2,417,000 | $ (904,000) | |||
Number of lease payments remaining | monthlyPayment | 60 | 60 | |||||
Total payments under lease | $ 240,000 | $ 240,000 | |||||
Through September 30, 2020 | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Monthly payment due | 3,500 | 3,500 | |||||
October 1, 2020 through September 30, 2025 | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Monthly payment due | $ 4,000 | $ 4,000 | |||||
Notes Payable to Banks | Hartman SPE, LLC | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Number of extensions | extension | 3 | 3 | |||||
Extension term | 1 year | 1 year | |||||
Debt yield, minimum | 12.50% | ||||||
Debt yield | 13.25% | ||||||
Building and Building Improvements | Minimum | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Estimated useful life | 5 years | ||||||
Building and Building Improvements | Maximum | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Estimated useful life | 39 years |
Real Estate - Assets (Details)
Real Estate - Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Real Estate [Abstract] | ||
Land | $ 146,008 | $ 145,050 |
Buildings and improvements | 359,408 | 348,729 |
In-place lease value intangible | 102,054 | 100,790 |
Real estate assets, at cost | 607,470 | 594,569 |
Less: accumulated depreciation and amortization | (138,894) | (117,652) |
Real estate assets, net | $ 468,576 | $ 476,917 |
Real Estate - Additional Inform
Real Estate - Additional Information (Details) $ / shares in Units, $ in Thousands, ft² in Millions | Jul. 01, 2020USD ($)shares | Sep. 30, 2020USD ($)shares | Sep. 30, 2019USD ($)property | Sep. 30, 2020USD ($)shares | Sep. 30, 2019USD ($)property | Sep. 30, 2020property | Sep. 30, 2020ft² | Sep. 30, 2020padSite | Sep. 30, 2020landDevelopment | Jul. 01, 2020padSite | Jul. 01, 2020commercialProperty | Jul. 01, 2020 | Jul. 01, 2020commercialLandDevelopment | Jul. 01, 2020$ / shares | Jun. 30, 2020USD ($) | Dec. 31, 2019$ / sharesshares | Sep. 30, 2019ft² | Sep. 30, 2019padSite | Sep. 30, 2019landDevelopment |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Depreciation | $ | $ 4,567 | $ 4,116 | $ 13,239 | $ 12,337 | |||||||||||||||
Amortization expense of in-place lease value intangible | $ | 2,673 | 2,873 | 8,003 | 8,315 | |||||||||||||||
Asset management fees | $ | $ 0 | 440 | $ 880 | 1,320 | |||||||||||||||
Preferred stock, shares issued (in shares) | 1,000 | 1,000 | 1,000 | ||||||||||||||||
Preferred stock, shares outstanding (in shares) | 1,000 | 1,000 | 1,000 | ||||||||||||||||
Common stock, shares issued (in shares) | 35,306,889 | 35,306,889 | 18,417,687 | ||||||||||||||||
Common stock, shares outstanding (in shares) | 35,306,889 | 35,306,889 | 18,417,687 | ||||||||||||||||
Acquisition costs | $ | $ 0 | $ 15 | $ 132 | $ 26 | |||||||||||||||
Actual revenue included in statements | $ | 1,270 | ||||||||||||||||||
Acquiree loss included in income | $ | $ 1,103 | ||||||||||||||||||
HIREIT | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Common stock, shares issued (in shares) | 347,826 | ||||||||||||||||||
Hartman SPE, LLC | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Net asset value | $ | $ 323,934 | ||||||||||||||||||
Common Stock | HIREIT | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Net asset value (USD per share) | $ / shares | $ 8.18 | ||||||||||||||||||
HIREIT Acquisition | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Number of real estate properties | 1 | 1 | |||||||||||||||||
Consideration | $ | $ 117,544 | ||||||||||||||||||
HIREIT Acquisition | Hartman SPE, LLC | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Ownership percentage | 34.38% | ||||||||||||||||||
HIREIT Acquisition | Advisor | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Ownership percentage | 30.00% | ||||||||||||||||||
HIREIT Acquisition | Common Stock | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Issued (in shares) | 9,525,691 | ||||||||||||||||||
HIREIT Acquisition | Common Stock | HIREIT | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Issued (in shares) | 12,378,718 | ||||||||||||||||||
Outstanding (in shares) | 12,378,718 | ||||||||||||||||||
HIREIT Acquisition | OP Unit | HIROP | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Issued (in shares) | 1,214,197 | ||||||||||||||||||
Outstanding (in shares) | 1,214,197 | ||||||||||||||||||
HIREIT Acquisition | OP Unit | Hartman XX | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Issued (in shares) | 913,346 | ||||||||||||||||||
Hartman XIX | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Number of real estate properties | commercialLandDevelopment | 2 | ||||||||||||||||||
Consideration | $ | $ 82,688 | ||||||||||||||||||
Acquisition share price (USD per share) | $ / shares | $ 11.26 | ||||||||||||||||||
Hartman XIX | Hartman XIX | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Preferred stock, shares issued (in shares) | 5,895,967 | ||||||||||||||||||
Preferred stock, shares outstanding (in shares) | 5,895,967 | ||||||||||||||||||
Common stock, shares issued (in shares) | 100 | ||||||||||||||||||
Common stock, shares outstanding (in shares) | 100 | ||||||||||||||||||
Hartman XIX | Hartman SPE, LLC | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Ownership percentage | 26.99% | ||||||||||||||||||
Hartman XIX | Common Stock | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Issued (in shares) | 7,343,511 | ||||||||||||||||||
Texas | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Number of commercial properties | property | 43 | 43 | 44 | ||||||||||||||||
Area of real estate property (in sq ft) | ft² | 6.8 | 6.7 | |||||||||||||||||
Number of real estate properties | 4 | 2 | 3 | 0 | |||||||||||||||
Richardson, Arlington And Dallas, Texas | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Number of real estate properties | property | 15 | 15 | 15 | ||||||||||||||||
Houston, Texas | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Number of real estate properties | property | 25 | 25 | 26 | ||||||||||||||||
San Antonio, Texas | |||||||||||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |||||||||||||||||||
Number of real estate properties | property | 3 | 3 | 3 |
Real Estate - In-place Intangib
Real Estate - In-place Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Real Estate [Abstract] | ||
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 |
Real Estate - Acquisition Asset
Real Estate - Acquisition Assets and Liabilities (Details) $ in Thousands | Jul. 01, 2020USD ($) |
Business Acquisition [Line Items] | |
Real estate assets | $ 8,150 |
Cash and cash equivalents, accounts receivable, prepaid expenses and other assets, and due from related parties | 5,054 |
Notes receivable – related party | 3,900 |
Total Assets | 227,634 |
Notes payable | 10,593 |
Accounts payable and accrued expenses, and due to related parties | 12,941 |
Unpaid preferred dividends due to Hartman XIX shareholders | 3,868 |
Total Liabilities | 27,402 |
Net assets acquired | 200,232 |
Property Manager | |
Business Acquisition [Line Items] | |
Acquired intangibles | 8,685 |
HIREIT | |
Business Acquisition [Line Items] | |
Investment acquired | 2,845 |
Hartman SPE, LLC | |
Business Acquisition [Line Items] | |
Investment acquired | 198,799 |
Other Affiliates | |
Business Acquisition [Line Items] | |
Investment acquired | 201 |
HIREIT Acquisition | |
Business Acquisition [Line Items] | |
Real estate assets | 3,376 |
Cash and cash equivalents, accounts receivable, prepaid expenses and other assets, and due from related parties | 4,943 |
Notes receivable – related party | 0 |
Total Assets | 128,403 |
Notes payable | 6,393 |
Accounts payable and accrued expenses, and due to related parties | 4,466 |
Unpaid preferred dividends due to Hartman XIX shareholders | 0 |
Total Liabilities | 10,859 |
Net assets acquired | 117,544 |
HIREIT Acquisition | Property Manager | |
Business Acquisition [Line Items] | |
Acquired intangibles | 8,514 |
HIREIT Acquisition | HIREIT | |
Business Acquisition [Line Items] | |
Investment acquired | 0 |
HIREIT Acquisition | Hartman SPE, LLC | |
Business Acquisition [Line Items] | |
Investment acquired | 111,369 |
HIREIT Acquisition | Other Affiliates | |
Business Acquisition [Line Items] | |
Investment acquired | 201 |
Hartman XIX | |
Business Acquisition [Line Items] | |
Real estate assets | 4,774 |
Cash and cash equivalents, accounts receivable, prepaid expenses and other assets, and due from related parties | 111 |
Notes receivable – related party | 3,900 |
Total Assets | 99,231 |
Notes payable | 4,200 |
Accounts payable and accrued expenses, and due to related parties | 8,475 |
Unpaid preferred dividends due to Hartman XIX shareholders | 3,868 |
Total Liabilities | 16,543 |
Net assets acquired | 82,688 |
Hartman XIX | Property Manager | |
Business Acquisition [Line Items] | |
Acquired intangibles | 171 |
Hartman XIX | HIREIT | |
Business Acquisition [Line Items] | |
Investment acquired | 2,845 |
Hartman XIX | Hartman SPE, LLC | |
Business Acquisition [Line Items] | |
Investment acquired | 87,430 |
Hartman XIX | Other Affiliates | |
Business Acquisition [Line Items] | |
Investment acquired | $ 0 |
Accrued Rent and Accounts Rec_3
Accrued Rent and Accounts Receivable, net - Summary of Accounts Receivable (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Tenant receivables | $ 7,221 | $ 5,929 |
Accrued rent | 9,970 | 9,244 |
Allowance for uncollectible accounts | (2,922) | (2,597) |
Deferred leasing commission costs, net | $ 14,269 | $ 12,576 |
Accrued Rent and Accounts Rec_4
Accrued Rent and Accounts Receivable, net - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Receivables [Abstract] | |||||
Allowance for uncollectible accounts | $ 2,922 | $ 2,922 | $ 2,597 | ||
Bad debt expense | $ 852 | $ 140 | 875 | $ 39 | |
Write-offs | $ 550 | $ 0 |
Deferred Leasing Commission C_3
Deferred Leasing Commission Costs, net (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred leasing commissions costs | $ 19,154 | $ 17,620 |
Less: accumulated amortization | (8,006) | (6,830) |
Deferred leasing commission costs, net | $ 11,148 | $ 10,790 |
Future Minimum Rents (Details)
Future Minimum Rents (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Leases [Abstract] | |
2021 | $ 68,993 |
2022 | 58,534 |
2023 | 45,989 |
2024 | 34,952 |
2025 | 21,653 |
Thereafter | 34,104 |
Total | $ 264,225 |
Notes Payable - Additional Info
Notes Payable - Additional Information (Details) | Oct. 09, 2020dayextension | Oct. 01, 2018USD ($)extensionproperty | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)loanextension | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) |
Short-term Debt [Line Items] | |||||||
Outstanding balance | $ 306,637,000 | $ 306,637,000 | $ 306,793,000 | ||||
Interest expense | 2,272,000 | $ 3,433,000 | 7,954,000 | $ 10,625,000 | |||
Interest expense payable | 891,000 | 891,000 | 516,000 | ||||
Estimate of Fair Value Measurement | |||||||
Short-term Debt [Line Items] | |||||||
Fair value of debt | $ 319,431,000 | $ 319,431,000 | 308,671,000 | ||||
Variable Interest Entity, Not Primary Beneficiary | Hartman SPE, LLC | |||||||
Short-term Debt [Line Items] | |||||||
Number of real estate properties | property | 39 | ||||||
Secured debt | Richardson Heights, Cooper Street, Bent Tree Green And Mitchelldale Property Loans | |||||||
Short-term Debt [Line Items] | |||||||
Number of cross-collateralized term loan agreements | loan | 4 | ||||||
Amortization term | 27 years | ||||||
Fixed interest rate | 4.61% | 4.61% | |||||
Outstanding balance | $ 42,356,000 | $ 42,356,000 | $ 43,393,000 | ||||
Notes Payable to Banks | Hartman SPE, LLC | |||||||
Short-term Debt [Line Items] | |||||||
Debt instrument, face amount | $ 259,000,000 | ||||||
Term of loan | 5 years | ||||||
Initial term of loan | 2 years | ||||||
Number of extensions | extension | 3 | 3 | |||||
Extension term | 1 year | 1 year | |||||
Debt yield, minimum | 12.50% | ||||||
Notes Payable to Banks | Hartman SPE, LLC | Subsequent Event | |||||||
Short-term Debt [Line Items] | |||||||
Number of extensions | extension | 2 | ||||||
Extension term | 1 year | ||||||
Notes Payable to Banks | Minimum | Hartman SPE, LLC | Subsequent Event | |||||||
Short-term Debt [Line Items] | |||||||
Days from current maturity date to exercise extension option | day | 30 | ||||||
Notes Payable to Banks | Minimum | Hartman SPE, LLC | London Interbank Offered Rate (LIBOR) | |||||||
Short-term Debt [Line Items] | |||||||
Basis spread | 1.80% | ||||||
Notes Payable to Banks | Maximum | Hartman SPE, LLC | Subsequent Event | |||||||
Short-term Debt [Line Items] | |||||||
Days from current maturity date to exercise extension option | day | 60 | ||||||
Notes Payable to Banks | Maximum | Hartman SPE, LLC | London Interbank Offered Rate (LIBOR) | |||||||
Short-term Debt [Line Items] | |||||||
Basis spread | 3.75% |
Notes Payable - Summary of Note
Notes Payable - Summary of Notes Payable (Details) $ in Thousands | Oct. 09, 2020dayextension | Oct. 01, 2018extension | Sep. 30, 2020USD ($)extension | Dec. 31, 2019USD ($) |
Debt Instrument [Line Items] | ||||
Long-term debt, gross | $ 306,637 | $ 306,793 | ||
Less: unamortized deferred loan costs | (3,009) | (3,754) | ||
Long-term debt | $ 303,628 | 303,039 | ||
Notes Payable to Banks | Hartman SPE, LLC | ||||
Debt Instrument [Line Items] | ||||
Number of extensions | extension | 3 | 3 | ||
Extension term | 1 year | 1 year | ||
Debt yield, minimum | 12.50% | |||
Notes Payable to Banks | Hartman SPE, LLC | Subsequent Event | ||||
Debt Instrument [Line Items] | ||||
Number of extensions | extension | 2 | |||
Extension term | 1 year | |||
Minimum | Notes Payable to Banks | Hartman SPE, LLC | Subsequent Event | ||||
Debt Instrument [Line Items] | ||||
Days from current maturity date to exercise extension option | day | 30 | |||
Maximum | Notes Payable to Banks | Hartman SPE, LLC | Subsequent Event | ||||
Debt Instrument [Line Items] | ||||
Days from current maturity date to exercise extension option | day | 60 | |||
Richardson Heights | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 4.61% | |||
Long-term debt, gross | $ 16,824 | 17,260 | ||
Cooper Street | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 4.61% | |||
Long-term debt, gross | $ 7,264 | 7,435 | ||
Bent Tree Green | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 4.61% | |||
Long-term debt, gross | $ 7,264 | 7,435 | ||
Mitchelldale | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 4.61% | |||
Long-term debt, gross | $ 11,004 | 11,263 | ||
Hartman SPE, LLC | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 1.95% | |||
Long-term debt, gross | $ 259,000 | 259,000 | ||
Extension term | 1 year | |||
Debt yield, minimum | 12.50% | |||
EWB - SBA PPP | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 0.00% | |||
Long-term debt, gross | $ 2,492 | 0 | ||
Hartman XXI - Maturing October 31, 2021 | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 10.00% | |||
Long-term debt, gross | $ 2,789 | $ 4,400 |
Notes Payable - Deferred Loan C
Notes Payable - Deferred Loan Costs (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
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 |
Income Per Share (Details)
Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Numerator: | ||||
Net Income (Loss) Attributable to Parent | $ (2,148) | $ 289 | $ 328 | $ 381 |
Denominator: | ||||
Weighted average number of common shares outstanding, basic and diluted (in shares) | 35,307 | 18,418 | 29,168 | 18,265 |
Basic and diluted loss per common share: | ||||
Net (loss) income attributable to common stockholders per share (in dollars per share) | $ (0.06) | $ 0.02 | $ 0.01 | $ 0.02 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||||
Deferred tax benefit | $ 0 | $ 0 | $ 0 | $ 0 | |
Deferred tax asset | $ 0 | $ 0 | $ 0 |
Real Estate Held for Developm_2
Real Estate Held for Development (Details) | Sep. 30, 2020a |
Fort Worth, Texas | |
Real Estate [Line Items] | |
Area of real estate (in acres) | 17 |
Grand Prairie, Texas | |
Real Estate [Line Items] | |
Area of real estate (in acres) | 10 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Mar. 01, 2019 | Feb. 28, 2019 | Mar. 31, 2019 | Feb. 28, 2019 | May 31, 2016 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Jul. 01, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Related Party Transaction [Line Items] | ||||||||||||
Property management fees and reimbursements due | $ 0 | $ 1,645,000 | $ 1,534,000 | $ 3,849,000 | ||||||||
Payments for leasing commissions | 0 | 440,000 | 880,000 | |||||||||
Long-term debt, gross | 306,637,000 | 306,637,000 | $ 306,793,000 | |||||||||
Notes receivable - related party | 1,726,000 | 1,726,000 | 17,288,000 | |||||||||
Hartman XXI - Maturing October 31, 2021 | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Long-term debt, gross | 2,789,000 | 2,789,000 | 4,400,000 | |||||||||
Hartman SPE, LLC | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Share price (in dollars per share) | $ 12.65 | |||||||||||
Common Stock | Hartman SPE, LLC | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Stock issued in exchange for ownership (in shares) | 700,302 | |||||||||||
Value of shares issued | $ 8,858,826 | |||||||||||
Affiliated Entity | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Due from related parties | 1,142,000 | $ 1,142,000 | 2,130,000 | |||||||||
Allen R Hartman | Chief Executive Officer | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Ownership percentage | 70.00% | |||||||||||
Shares acquired (in shares) | 602,842 | |||||||||||
Shares acquired, value | $ 7,626,000 | |||||||||||
Property Manager | Affiliated Entity | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Ownership percentage | 30.00% | |||||||||||
Due from related parties | 0 | $ 0 | (1,168,000) | |||||||||
Texas Limited Liability Company | Affiliated Entity | Asset Management Fees Payable | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Expenses from transactions with related party | 0 | 2,049,000 | $ 4,118,000 | 6,021,000 | ||||||||
Due to related parties, monthly fees, percentage of asset cost or value | 0.0625% | |||||||||||
Texas Limited Liability Company | Affiliated Entity | Construction Management Fees Payable | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Expenses from transactions with related party | 0 | 166,000 | $ 309,000 | 527,000 | ||||||||
HIREIT, Inc. | Affiliated Entity | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Due from related parties | $ 0 | $ 0 | 10,359,000 | |||||||||
HIREIT, Inc. | Affiliated Entity | Acquisition Of Related Party Common Stock | Common Stock | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Shares acquired (in shares) | 1,561,523 | 1,561,523 | ||||||||||
Shares acquired, value | $ 8,978,000 | $ 8,978,000 | ||||||||||
Hartman TRS, Inc. | Affiliated Entity | Loan from Company to related party | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Proceeds from distributions | 213,000 | 319,000 | ||||||||||
Hartman TRS, Inc. | Affiliated Entity | Loan From Company To Related Party Hartman Retail II Holdings Co | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loans receivable | $ 7,231,000 | 1,726,000 | 1,726,000 | 2,476,000 | ||||||||
Loans receivable, face amount | $ 8,820,000 | |||||||||||
Origination fees, percentage | 2.00% | |||||||||||
Loans receivable, interest rate | 10.00% | |||||||||||
Interest income, related parties | 44,000 | 49,000 | 130,000 | 168,000 | ||||||||
Hartman TRS, Inc. | Affiliated Entity | Loan From Company To Related Party Hartman Retail III Holdings Co | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loans receivable | 0 | 0 | 6,782,000 | |||||||||
Interest income, related parties | 171,000 | 181,000 | 509,000 | 425,000 | ||||||||
Hartman TRS, Inc. | Affiliated Entity | Loan from Company to related party | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loans receivable | 0 | 0 | 3,830,000 | |||||||||
Interest income, related parties | 96,000 | 83,000 | $ 287,000 | 176,000 | ||||||||
Hartman XIX | Affiliated Entity | Loan from Company to related party | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loans receivable, interest rate | 6.00% | |||||||||||
Interest income, related parties | 0 | $ 64,000 | $ 126,000 | $ 189,000 | ||||||||
Hartman XIX | Affiliated Entity | Loan From Company To Related Party Hartman Retail II Holdings Co | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loans receivable | 4,200,000 | 4,200,000 | 4,200,000 | |||||||||
Hartman vREIT XXI | Affiliated Entity | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Due from related parties | $ 655,000 | $ 655,000 | (420,000) | |||||||||
Hartman vREIT XXI | Affiliated Entity | Loan From Related Party To Company | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Notes payable to related party | 10,000,000 | |||||||||||
Stated interest rate | 10.00% | 10.00% | ||||||||||
Interest Expense, Related Party | $ 207,000 | $ 521,000 | ||||||||||
Advisor | Affiliated Entity | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Due from related parties | 0 | 0 | (2,077,000) | |||||||||
Other Related Party | Affiliated Entity | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Due from related parties | 487,000 | 487,000 | (505,000) | |||||||||
Hartman Retail III Holdings Company, Inc. | Affiliated Entity | Loan From Company To Related Party Hartman Retail III Holdings Co | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loans receivable | $ 6,782,455 | $ 6,782,455 | ||||||||||
Loans receivable, face amount | $ 7,500,000 | $ 7,500,000 | ||||||||||
Origination fees, percentage | 2.00% | 2.00% | ||||||||||
Loans receivable, interest rate | 10.00% | |||||||||||
Hartman Ashford Bayou, LLC | Affiliated Entity | Loan from Company to related party | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loans receivable | $ 3,830,000 | |||||||||||
Loans receivable, face amount | $ 3,500,000 | |||||||||||
Origination fees, percentage | 2.00% | |||||||||||
Loans receivable, interest rate | 10.00% | |||||||||||
Hartman XIX | Affiliated Entity | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Due from related parties | 0 | 0 | (4,059,000) | |||||||||
Variable Interest Entity, Not Primary Beneficiary | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Notes receivable - related party | 1,726,000 | 1,726,000 | 17,288,000 | |||||||||
Maximum loss exposure | $ 24,998,000 | $ 24,998,000 | $ 25,141,000 | |||||||||
Variable Interest Entity, Not Primary Beneficiary | Hartman SPE, LLC | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Additional ownership percentage | 3.42% | |||||||||||
Ownership interest | 36.16% | 32.74% |
Stockholders' Equity - Narrativ
Stockholders' Equity - Narrative (Details) $ / shares in Units, $ in Thousands | Jul. 28, 2020USD ($) | Jul. 21, 2017$ / shares | Sep. 30, 2020USD ($)$ / sharesshares | Sep. 30, 2019USD ($)shares | Sep. 30, 2020USD ($)vote$ / sharesshares | Sep. 30, 2019USD ($)shares | Dec. 31, 2019$ / sharesshares |
Class of Stock [Line Items] | |||||||
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 | 750,000,000 | ||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||
Preferred stock, shares authorized (in shares) | 200,000,000 | 200,000,000 | 200,000,000 | ||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||
Number or votes per share | vote | 1 | ||||||
Preferred stock, shares issued (in shares) | 1,000 | 1,000 | 1,000 | ||||
Preferred stock, shares outstanding (in shares) | 1,000 | 1,000 | 1,000 | ||||
Richard Ruskey | |||||||
Class of Stock [Line Items] | |||||||
Stock issued for services | $ | $ 100 | ||||||
John Ostroot | |||||||
Class of Stock [Line Items] | |||||||
Stock issued for services | $ | 100 | ||||||
Jack Tompkins | |||||||
Class of Stock [Line Items] | |||||||
Stock issued for services | $ | 100 | ||||||
Jack Cardwell | |||||||
Class of Stock [Line Items] | |||||||
Stock issued for services | $ | $ 100 | ||||||
XIX Merger Agreement | |||||||
Class of Stock [Line Items] | |||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | ||||||
Stock conversion ratio | 9,171.98 | ||||||
HIREIT Merger | |||||||
Class of Stock [Line Items] | |||||||
Stock conversion ratio | 0.752222 | ||||||
HIREIT Merger | Common Stock | |||||||
Class of Stock [Line Items] | |||||||
Stock conversion ratio | 0.863235 | ||||||
HIREIT Merger | Subordinated Common Stock | |||||||
Class of Stock [Line Items] | |||||||
Stock conversion ratio | 0.752222 | ||||||
Convertible Preferred Stock | |||||||
Class of Stock [Line Items] | |||||||
Preferred stock, shares issued (in shares) | 1,000 | 1,000 | 1,000 | ||||
Preferred stock, shares outstanding (in shares) | 1,000 | 1,000 | 1,000 | ||||
Conversion terms, cumulative annual return on issue price, percentage | 6.00% | ||||||
Conversion terms, performance threshold | 6.00% | ||||||
Conversion terms, percentage of excess enterprise value | 15.00% | ||||||
8 Percent Cumulative Preferred Stock | XIX Merger Agreement | |||||||
Class of Stock [Line Items] | |||||||
Stock conversion ratio | 1.238477 | ||||||
Dividend rate | 8.00% | ||||||
9 Percent Cumulative Preferred Stock | XIX Merger Agreement | |||||||
Class of Stock [Line Items] | |||||||
Stock conversion ratio | 1.238477 | ||||||
Dividend rate | 9.00% | ||||||
Restricted common stock | |||||||
Class of Stock [Line Items] | |||||||
Grants in period (shares) | 39,964 | 1,500 | 42,964 | 4,500 | |||
Stock-based compensation expense | $ | $ 450 | $ 19 | $ 488 | $ 57 |
Stockholders' Equity - Distribu
Stockholders' Equity - Distributions (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | |
Equity [Abstract] | |||||||||
Distributions per Common Share (in dollars per share) | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.175 | $ 0.525 | $ 0.700 |
Total Distributions | $ 6,164 | $ 3,220 | $ 3,223 | $ 3,182 | $ 3,224 | $ 3,225 | $ 3,141 | $ 12,607 | $ 12,772 |
Incentive Award Plan (Details)
Incentive Award Plan (Details) | 9 Months Ended |
Sep. 30, 2020shares | |
Share-based Payment Arrangement [Abstract] | |
Shares reserved for issuance (in shares) | 5,000,000 |
Percentage of outstanding stock maximum | 10.00% |
Defined Contribution Plan (Deta
Defined Contribution Plan (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Retirement Benefits [Abstract] | |
Discretionary contribution amount | $ 398 |