Cover Page
Cover Page - shares | 6 Months Ended | |
Jun. 30, 2023 | Aug. 01, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 000-53912 | |
Entity Registrant Name | SILVER STAR PROPERTIES REIT, 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 | |
Entity Filer Category | Non-accelerated Filer | |
Smaller Reporting Company | true | |
Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 34,894,496 | |
Amendment Flag | false | |
Entity Central Index Key | 0001446687 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
ASSETS | ||
Real estate assets, at cost | $ 559,061 | $ 580,602 |
Accumulated depreciation and amortization | (192,632) | (189,509) |
Real estate assets, net | 366,429 | 391,093 |
Cash and cash equivalents | 3,077 | 334 |
Restricted cash | 40,591 | 24,088 |
Accrued rent and accounts receivable, net | 12,451 | 16,507 |
Note receivable - related party | 1,726 | 1,726 |
Deferred leasing commission costs, net | 7,715 | 9,826 |
Goodwill | 4,766 | 250 |
Prepaid expenses and other assets | 8,189 | 6,019 |
Real estate held for development | 0 | 1,596 |
Real estate held for sale | 12,280 | 25,963 |
Due from related parties | 6,601 | 5,937 |
Investment in affiliate | 201 | 201 |
Other intangible assets | 1,006 | 0 |
Total assets | 465,032 | 483,540 |
Liabilities: | ||
Tenants' security deposits | 4,690 | 6,143 |
Acquisition consideration payable | 3,000 | 0 |
Total liabilities | 325,039 | 371,896 |
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 0 | 0 |
Common stock, $0.001 par value, 750,000,000 authorized, 34,894,496 shares and 34,894,496 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 35 | 35 |
Additional paid-in capital | 297,645 | 296,152 |
Accumulated distributions and net loss | (179,704) | (204,080) |
Total stockholders' equity | 117,976 | 92,107 |
Noncontrolling interests in subsidiaries | 22,017 | 19,537 |
Total equity | 139,993 | 111,644 |
Total liabilities and equity | 465,032 | 483,540 |
Nonrelated Party | ||
Liabilities: | ||
Notes payable, net | 250,366 | 297,692 |
Accounts payable and accrued expenses | 46,227 | 46,670 |
Related Party | ||
Liabilities: | ||
Notes payable, net | 15,336 | 17,168 |
Accounts payable | $ 5,420 | $ 4,223 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2023 | Dec. 31, 2022 |
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) | 34,894,496 | 34,894,496 |
Common stock, shares outstanding (in shares) | 34,894,496 | 34,894,496 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Revenues | ||||
Rental revenues | $ 21,805 | $ 21,320 | $ 45,511 | $ 44,486 |
Management and advisory income | 424 | 1,120 | 1,466 | 2,035 |
Total revenues | 22,229 | 22,440 | 46,977 | 46,521 |
Expenses | ||||
Property operating expenses | 6,965 | 7,525 | 11,786 | 13,049 |
Organization and offering costs | 1 | 14 | 1 | 23 |
Real estate taxes and insurance | 4,004 | 3,633 | 8,272 | 6,966 |
Depreciation and amortization | 5,970 | 6,535 | 11,690 | 13,052 |
Loss on impairment | 468 | 0 | 468 | 0 |
Management and advisory expenses | 2,260 | 3,620 | 4,618 | 6,838 |
General and administrative | 3,004 | 3,280 | 6,094 | 6,503 |
Interest expense | 4,733 | 2,655 | 10,803 | 4,738 |
Total expenses | 27,405 | 27,262 | 53,732 | 51,169 |
Other income | ||||
Interest and dividend income | 3 | 44 | 3 | 87 |
Gain on sale of property | 13,616 | 0 | 39,793 | 0 |
Income (loss) before income taxes | 8,443 | (4,778) | 33,041 | (4,561) |
Provision for income taxes | 6,185 | 0 | 6,185 | 0 |
Net income (loss) | 2,258 | (4,778) | 26,856 | (4,561) |
Net income (loss) attributable to noncontrolling interests | 536 | (112) | 2,480 | 90 |
Net income (loss) attributable to common stockholders | 1,722 | (4,666) | 24,376 | (4,651) |
Net income (loss) attributable to common stockholders | $ 1,722 | $ (4,666) | $ 24,376 | $ (4,651) |
Net income (loss) attributable to common stockholders per share, basic (in dollars per share) | $ 0.05 | $ (0.13) | $ 0.70 | $ (0.13) |
Net income (loss) attributable to common stockholders per share, diluted (in dollars per share) | $ 0.05 | $ (0.13) | $ 0.70 | $ (0.13) |
Weighted average number of common shares outstanding, basic (in shares) | 34,895 | 34,976 | 34,895 | 35,020 |
Weighted average number of common shares outstanding, diluted (in shares) | 35,197 | 34,976 | 35,197 | 35,020 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Total | Total Stockholders' Equity | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Distributions and Net Loss | Noncontrolling Interests in Subsidiaries |
Beginning balance (in shares) at Dec. 31, 2021 | 1,000 | 35,111,000 | |||||
Beginning balance at Dec. 31, 2021 | $ 157,318 | $ 135,015 | $ 35 | $ 297,335 | $ (162,355) | $ 22,303 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Redemption of common shares (in shares) | (135,000) | ||||||
Redemptions of common shares | (1,182) | (1,182) | (1,182) | ||||
Dividends and distributions (Cash) | (6,384) | (5,477) | (5,477) | (907) | |||
Net income (loss) | (4,561) | (4,651) | (4,651) | 90 | |||
Ending balance (in shares) at Jun. 30, 2022 | 1,000 | 34,976,000 | |||||
Ending balance at Jun. 30, 2022 | 145,191 | 123,705 | $ 35 | 296,153 | (172,483) | 21,486 | |
Beginning balance (in shares) at Mar. 31, 2022 | 1,000 | 34,976,000 | |||||
Beginning balance at Mar. 31, 2022 | 152,167 | 129,893 | $ 35 | 296,156 | (166,298) | 22,274 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Redemptions of common shares | (3) | (3) | (3) | ||||
Dividends and distributions (Cash) | (2,195) | (1,519) | (1,519) | (676) | |||
Net income (loss) | (4,778) | (4,666) | (4,666) | (112) | |||
Ending balance (in shares) at Jun. 30, 2022 | 1,000 | 34,976,000 | |||||
Ending balance at Jun. 30, 2022 | 145,191 | 123,705 | $ 35 | 296,153 | (172,483) | 21,486 | |
Beginning balance (in shares) at Dec. 31, 2022 | 1,000 | 34,895,000 | |||||
Beginning balance at Dec. 31, 2022 | 111,644 | 92,107 | $ 35 | 296,152 | (204,080) | 19,537 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of restricted common shares (in shares) | 0 | ||||||
Issuance of restricted common shares | 1,493 | 1,493 | 1,493 | ||||
Net income (loss) | 26,856 | 24,376 | 24,376 | 2,480 | |||
Ending balance (in shares) at Jun. 30, 2023 | 1,000 | 34,895,000 | |||||
Ending balance at Jun. 30, 2023 | 139,993 | 117,976 | $ 35 | 297,645 | (179,704) | 22,017 | |
Beginning balance (in shares) at Mar. 31, 2023 | 1,000 | 34,895,000 | |||||
Beginning balance at Mar. 31, 2023 | 136,242 | 114,761 | $ 35 | 296,152 | (181,426) | 21,481 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of restricted common shares (in shares) | 0 | ||||||
Issuance of restricted common shares | 1,493 | 1,493 | 1,493 | ||||
Net income (loss) | 2,258 | 1,722 | 1,722 | 536 | |||
Ending balance (in shares) at Jun. 30, 2023 | 1,000 | 34,895,000 | |||||
Ending balance at Jun. 30, 2023 | $ 139,993 | $ 117,976 | $ 35 | $ 297,645 | $ (179,704) | $ 22,017 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 26,856 | $ (4,561) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Stock based compensation | 254 | 299 |
Depreciation and amortization | 11,690 | 13,052 |
Deferred loan and lease commission costs amortization | 1,141 | 1,227 |
Deferred loan cost write-off | 541 | 0 |
Bad debt expense | 873 | 762 |
Straight-line rent | 1,009 | 654 |
Impairment of real estates assets | 468 | 0 |
Gain on disposed property | (39,793) | 0 |
Unrealized loss on derivative instruments | 1,125 | 0 |
Changes in operating assets and liabilities: | ||
Accrued rent and accounts receivable | 2,174 | (2,371) |
Deferred leasing commissions | (355) | (621) |
Prepaid expenses and other assets | (3,186) | (3,335) |
Accounts payable and accrued expenses | (3,310) | (3,040) |
Due to/from related parties | (769) | (2,619) |
Tenants' security deposits | (1,453) | 206 |
Net cash used in operating activities | (2,735) | (347) |
Cash flows from investing activities: | ||
Cash acquired from acquisition | 319 | 0 |
Additions to real estate | (2,534) | (8,159) |
Proceeds from sale of property, net | 71,959 | 0 |
Net cash provided by (used in) investing activities | 69,744 | (8,159) |
Cash flows from financing activities: | ||
Distributions to common stockholders | 0 | (8,458) |
Distributions to non-controlling interests | 0 | (890) |
Repayments to affiliates | (1,832) | (1,870) |
Borrowing from affiliate | 0 | 14,346 |
Borrowings under insurance premium finance note | 2,992 | 2,892 |
Repayment under insurance premium finance note | (404) | (1,252) |
Repayments under term loan notes | (48,419) | (1,328) |
Borrowings under term loan | 0 | 2,645 |
Redemptions of common stock | 0 | (1,182) |
Payment of deferred loan costs | (100) | (772) |
Net cash (used in) provided by financing activities | (47,763) | 4,131 |
Net change in cash and cash equivalents and restricted cash | 19,246 | (4,375) |
Cash and cash equivalents and restricted cash, beginning of period | 24,422 | 19,257 |
Cash and cash equivalents and restricted cash, end of period | 43,668 | 14,882 |
Supplemental cash flow information: | ||
Cash paid for interest | 9,048 | 4,170 |
Supplemental disclosure of non-cash activities: | ||
Unpaid acquisition consideration | 3,000 | 0 |
Issuance of restricted common stock in connection with Southern Star acquisition | 1,493 | 0 |
Decrease in interest payable from Hartman XXI settlement | 0 | 356 |
Decrease in due from related parties from Hartman XXI settlement | 0 | 1,601 |
Decrease in due from related parties from Hartman XXI settlement | $ 0 | $ 1,245 |
Organization and Business
Organization and Business | 6 Months Ended |
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Organization and Business Silver Star Properties REIT, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009. The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2011. As used herein, the "Company," "we," "us," or "our" refer to Silver Star Properties REIT, Inc. and its consolidated subsidiaries and partnerships, including Hartman XX Limited Partnership ("Operating Partnership") and Hartman SPE LLC ("SPE LLC"), except where context requires otherwise. Substantially all of our business is conducted through our subsidiaries, 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. 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. On May 5, 2023, the Company completed the acquisition of all equity interests of Southern Star Self-Storage Investment Company ("Southern Star"). Effective on December 20, 2022, Silver Star Properties REIT, Inc. (previously known as Hartman Short Term Income Properties XX, Inc.) amended its Articles of Amendment with the Maryland Secretary of State to change its name from “Hartman Short Term Income Properties XX, Inc.” to “Silver Star Properties REIT, Inc.” As of June 30, 2023 and 2022, respectively, the Company owned 41 and 44 income-producing commercial properties comprising approximately 5.5 million square feet and 6.8 million square feet, respectively, plus one pad site. As of June 30, 2023 and 2022, the Company owned one and two land developments, respectively. All of the properties are located in Texas. As of June 30, 2023 and 2022, respectively, the Company owned 14 and 15 properties located in Richardson, Arlington, Plano, and Dallas, Texas, 24 and 26 properties located in Houston, Texas and three properties located in San Antonio, Texas. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2023 | |
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, 2022 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of June 30, 2023 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 June 30, 2023, and the results of consolidated operations for the three and six months ended June 30, 2023 and 2022, consolidated statements of equity for the three and six months ended June 30, 2023 and 2022, and consolidated statements of cash flows for the six months ended June 30, 2023 and 2022. The results of the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023. 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, 2022. These unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, the Operating Partnership and its subsidiaries, Hartman SPE, LLC, and Southern Star. 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 June 30, 2023 and December 31, 2022 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 reserves, as required by certain of our mortgage debt agreements. As of June 30, 2023 and December 31, 2022, the Company had a restricted cash balance of $40,591,000 and $24,088,000, respectively. Restricted cash as of June 30, 2023 includes $14,000,000 of proceeds from the sale of the Cooper Street property which are held in a qualified intermediary account pending the potential replacement property which may be acquired in a 1031 like-kind exchange. The following provides a reconciliation of cash, cash equivalents, and restricted cash as of June 30, 2023 and December 31, 2022 to the corresponding consolidated statement of cash flows, in thousands: June 30, 2023 December 31, 2022 Cash and cash equivalents $ 3,077 $ 334 Restricted cash 40,591 24,088 Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows $ 43,668 $ 24,422 Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, notes payable, accounts payable and accrued expenses and balances due to/due from related parties, related party notes receivable, and derivatives. With the exception of derivative financial instruments and notes payable, the Company considers the carrying value to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Disclosure about the fair value of financial instruments is based on relevant information available as of June 30, 2023 and December 31, 2022. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. Under our single asset, single borrower ("SASB") loan, we are required to enter into an interest rate cap agreement. The interest rate cap is recorded at fair value on the consolidated balance sheets as an other asset. We have elected not to apply hedge accounting and the change in fair value of the interest rate cap is recognized as a component of interest expense on the accompanying statements of operations. 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 terms of existing leases are considered to commence as of the acquisition date for the purposes of this calculation. The Company's accrued rents are included in accrued rent and accounts receivable, net. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"). The Company’s rental revenue is also comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are also excluded from ASC 606 and accounted for under ASC 842 - Leases. The Company elected to utilize the practical expedient provided by Accounting Standards Update (“ASU”) 2018-11 related to the separation of lease and non-lease components and as a result, rental revenues related to leases are reported on one line in the presentation within the consolidated statements of operations. In addition to our rental income, the Company also earns fee revenues by providing certain management and advisory services to related parties. These fees are accounted for within the scope of ASC 606 and are recorded as management and advisory income on the consolidated statements of operations. Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment 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. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to re-lease the property and the number of years the property is held for investment. The use of inaccurate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of the Company’s real estate and related intangible assets and net income. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost approach: Amount required to replace the service capacity of an asset (replacement cost). Income approach: Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Recurring fair value measurements: The carrying values of cash and cash equivalents, restricted cash, accrued rent and accounts receivable, other assets and accounts payable and accrued expenses are reasonable estimates of fair values because of the short maturities of these instruments. For our disclosure of debt instrument fair value in Note 10, we use a discounted cash flow analysis based on borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments (categorized within Level 2 of the fair value hierarchy). For our disclosure of interest rate cap derivative fair value, refer to Note 7. Fair value determination of the interest rate cap derivative is based on Level 2 inputs. For our disclosure of fair value of certain equity based awards (categorized within Level 3 of the fair value hierarchy), refer to Noe 15. Nonrecurring fair value measurements: Property Impairments 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. Our estimated fair values are determined by utilizing cash flow models, market capitalization rates and market discount rates, obtaining third-party broker valuation estimates, or appraisals (categorized within Level 3 of the fair value hierarchy). Accrued Rent and Accounts Receivable, net 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. Goodwill evaluation is completed using either a qualitative or quantitative approach. Under a qualitative approach, the impairment review for goodwill consists of an assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value, including goodwill. If a qualitative approach indicates it is more likely-than-not that the estimated carrying value of a reporting unit (including goodwill) exceeds its fair value, or if we choose to bypass the qualitative approach for any reporting unit, we perform the quantitative approach. The Company may apply a 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. 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 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 is 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. A REIT may elect to retain rather than distribute all or a portion of net capital gains and pay tax on the gains. Through the implementation and execution of the previously-announced plan to reposition the Company’s assets into the self-storage asset class (the “New Direction Plans"), the Company has sold properties and incurred net capital gains which it used to reduce debt and does not anticipate distributing to stockholders. The Company has incurred an estimated $6,185,000 of current tax expense due on undistributed net capital gains from property sales through the six months ended June 30, 2023. For the three months ended June 30, 2023 and 2022, the Company incurred net income (loss) of $2,258,000 and $(4,778,000), respectively. For the six months ended June 30, 2023 and 2022, the Company incurred net income (loss) of $26,856,000 and $(4,561,000), 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 and unvested restricted common shares. 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. The product type concentration in office space, which accounts for approximately 76% of our base rental revenue for the three months ended June 30, 2023, is susceptible to any negative trends in the future demand for office space. Going Concern Evaluation Pursuant to ASC 205-40, “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, 2022, SPE LLC executed the third and final maturity date option to extend the maturity to October 9, 2023. The October 9, 2023 SASB Loan maturity date is within one year of the issuance of these consolidated financial statements. Uncertainty as to the Company's ability to obtain financing to satisfy the existing SASB Loan obligation requires 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. The Company is working with our third party advisor on refinancing options that align with a range of strategic alternatives under evaluation. Management believes that the SASB Loan Borrower will be able to obtain financing to replace the SASB Loan prior to the October 9, 2023 maturity date, however, no assurances can be given that the Company will be successful in achieving a refinance. The Company's ability to continue as a going concern is dependent upon the Company's ability to refinance the SASB Loan prior to the maturity date. Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The Company adopted ASU 2016-13 effective January 1, 2023. The amendments in this update replaced the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASC 2018-19, Financial Instruments — Credit Losses (Topic 326): Codification Improvements , clarified that receivables arising from operating leases are not within the scope of ASC Topic 326. Instead, impairment of receivables arising from operating leases will be accounted for in accordance with ASC 842. The adoption of this standard did not have a material impact on our consolidated financial statements as the majority of our financial instruments result from operating lease transactions, which are not within the scope of this standard. Recent Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . ASU 2020-04 provides optional expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective for all entities as of March 12, 2020 through December 31, 2022. An entity can elect to apply the amendments as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to that date that the consolidated financial statements are available to be issued. In October 2022, the FASB approved a two-year extension of the temporary accounting relief provided under ASU 2020-04 to December 31, 2024. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU 2020-04) through December 31, 2022, the Company did not have any contract modifications impacting current reference rates. The Company's SASB Loan and derivative instrument use LIBOR as the current reference rate. The optional expedients for hedging relationships described in ASU 2020-04 are not expected to have an impact to the Company as the Company has elected to not designate its derivative instrument as a hedge. Reclassification Certain items on the comparative consolidated balance sheet have been reclassified to conform to the presentation adopted in the current period. Related party balances have been reclassified to present on a gross basis due from or due to individual counterparties. |
Southern Star Acquisition
Southern Star Acquisition | 6 Months Ended |
Jun. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Southern Star Acquisition | Southern Star Acquisition On May 5, 2023, the Company completed the acquisition of all equity interests in Southern Star for $3,000,000 in cash and 301,659 restricted stock shares of the Company's common stock with an estimated fair value of $4.95 per share. The restricted stock shares vest over a three year period. Aggregate purchase price consideration for Southern Star totals $4,493,000. Under the terms of the transaction, the cash portion of the purchase price is to be paid when the Company is in a reasonable position to fund it. Southern Star is a privately held real estate company that specializes in the sponsorship and management of Delaware Statutory Trust investments in self-storage properties. After consideration of all applicable factors pursuant to the business combination accounting rules under ASC 805, Business Combinations ("ASC 805"), we have concluded that the Southern Star acquisition qualifies as a business combination under GAAP. For the six months ended June 30, 2023, we incurred acquisition costs of $66,000 which are recorded in general and administrative expense. We included the operating results of Southern Star in our consolidated results from operations, effective May 5, 2023. For the three and six months ended June 30, 2023, our consolidated statements of operations includes management and advisory income of $262,000 associated with the operations of Southern Star. The following table illustrates the fair value of assets and liabilities of Southern Star acquired, in thousands: Assets Real estate assets $ 7,061 Cash and cash equivalents 319 Prepaid expenses and other assets 109 Other intangible assets 1,065 Goodwill 4,516 Total Assets $ 13,070 Liabilities Account payable and accrued expenses $ 25 Due to related parties 1,302 Notes payable 7,250 Total Liabilities $ 8,577 Net identifiable assets acquired 4,493 Total consideration transferred 4,493 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 a third party. The purchase price allocation was based on the Company’s assessment of the fair value of the acquired assets and liabilities assumed, as summarized below. Real estate assets - Real estate assets consists of a single self-storage property Southern Star acquired on March 1, 2023, just prior to the Company's purchase of Southern Star. The property was transferred to a Delaware statutory trust sponsored by Southern Star in May 2023, where neither Southern Star nor the Company are the primary beneficiary. The fair value of the property is based on the March 1, 2023 purchase price. Cash and cash equivalents and prepaid expenses and other assets – recorded at cost basis which approximates fair value. Other intangible assets - consists of non-compete agreements valued under the income approach, specifically the with and without method, and are subject to amortization. Goodwill - In connection with the Southern Star acquisition, we recorded goodwill of $4,516,000 as a result of the consideration exceeding the fair value of the net identifiable assets acquired. Goodwill represents the estimated future benefits arising from other assets acquired that could not be individually identified and separately recognized. We do not expect that the goodwill will be deductible for tax purposes. Accounts payable and accrued expenses and due to related parties - recorded at cost basis which approximates fair value. Notes payable - recorded at cost which approximates fair value. Note that $7,050,000 of the acquired note payable balance consists of notes pertaining to the self-storage property referenced in the real estate assets section above. The property, along with related notes, were transferred to a Delaware statutory trust sponsored by Southern Star in May 2023, where neither Southern Star or the Company are the primary beneficiary. |
Real Estate
Real Estate | 6 Months Ended |
Jun. 30, 2023 | |
Real Estate [Abstract] | |
Real Estate | Real Estate The Company’s real estate assets consisted of the following, in thousands: June 30, 2023 December 31, 2022 Land $ 124,430 $ 132,533 Buildings and improvements 342,159 352,060 In-place lease value intangible 92,472 96,009 559,061 580,602 Less: accumulated depreciation and amortization (192,632) (189,509) Total real estate assets $ 366,429 $ 391,093 Depreciation expense for the three months ended June 30, 2023 and 2022 was $4,673,000 and $4,742,000, respectively. Depreciation expense for the six months ended June 30, 2023 and 2022 was $9,156,000 and $9,455,000, respectively. Amortization expense of in-place lease value intangible was $1,297,000 and $1,793,000 for the three months ended June 30, 2023 and 2022, respectively. Amortization expense of in-place lease value intangible for the six months ended June 30, 2023 and 2022 was $2,534,000 and $3,597,000, respectively. The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms. With respect to all properties owned by the Company, 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: June 30, 2023 December 31, 2022 In-place lease value intangible $ 92,472 $ 96,009 In-place leases – accumulated amortization (88,994) (89,926) Acquired lease intangible assets, net $ 3,478 $ 6,083 Real Estate Held for Sale The Company's real estate held for sale includes one land development, one pad site development, the Spring Valley property, and the Harwin property. Refer to Note 17 (Subsequent Events) for additional information. Impairment of Real Estate Assets Held for Sale On August 2, 2023, the Company sold its 10-acre land development located in Grand Prairie, Texas for a sales price of $1,800,000. Because the carrying value of the development site exceeded the net sale proceeds (including selling costs), the Company recorded a $468,000 impairment charge for the three and six months ended June 30, 2023. Dispositions On January 31, 2023, we sold the 17 acre development site located in Fort Worth, Texas to a third party. Proceeds from the sale of the development site were approximately $4,317,000 and no gain or loss was recognized on the sale as the property was impaired as an asset held for sale and recognized at fair value less cost to sell as of December 31, 2022. On March 10, 2023, we sold the Mitchelldale property to a third party. Proceeds from the sale were approximately $40,510,000 and we recognized a gain on the sale of property of approximately $26,177,000 for the six months ended June 30, 2023. On April 6, 2023, we sold the Quitman property to a third party. Proceeds from the sale were approximately $9,065,000 and we recognized a gain on the sale of property of approximately $2,802,000 for the three and six months ended June 30, 2023. |
Accrued Rent and Accounts Recei
Accrued Rent and Accounts Receivable, net | 6 Months Ended |
Jun. 30, 2023 | |
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: June 30, 2023 December 31, 2022 Tenant receivables $ 9,397 $ 11,617 Accrued rent 10,108 11,118 Allowance for uncollectible accounts (7,054) (6,228) Accrued rents and accounts receivable, net $ 12,451 $ 16,507 |
Deferred Leasing Commission Cos
Deferred Leasing Commission Costs, net | 6 Months Ended |
Jun. 30, 2023 | |
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: June 30, 2023 December 31, 2022 Deferred leasing commissions costs $ 18,427 $ 21,244 Less: accumulated amortization (10,712) (11,418) Deferred leasing commission costs, net $ 7,715 $ 9,826 |
Derivative Financial Instrument
Derivative Financial Instruments | 6 Months Ended |
Jun. 30, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial InstrumentsOn October 5, 2022, the Company entered into an interest rate cap agreement with respect to the $259 million SASB Loan through the maturity date of October 9, 2023. The agreement capped the underlying one-month LIBOR rate at 3.75%. The Company has elected not to apply hedge accounting and the change in fair value of the the interest rate cap is recognized as a component of interest expense on the accompanying consolidated statements of operations. The counterparty under the interest rate cap is a major financial institution. The Company paid a premium of $2,254,000 for the interest rate cap. As of June 30, 2023, the fair value of this cap was $1,227,000 and included in other assets in the Company's consolidated balance sheets. The Company recognized $1,227,000 of interest income from paid and accrued counterparty payments and $1,125,000 of loss from the change in fair value of the interest rate cap during the six months ended June 30, 2023. These amounts are recorded as a component of interest expense on the accompanying consolidated statements of operations. The fair value of this interest rate cap is determined using observable inputs other than quoted prices in active markets, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. These inputs are considered Level 2 inputs in the fair value hierarchy. In addition, any credit valuation adjustments are considered in the fair values to account for potential nonperformance risk to the extent they would be significant inputs to the calculation. It was determined that credit valuation adjustments were not considered to be significant inputs. |
Future Minimum Rents
Future Minimum Rents | 6 Months Ended |
Jun. 30, 2023 | |
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 leases in existence at June 30, 2023 is as follows, in thousands: June 30, Minimum Future Rents 2023 $ 54,096 2024 40,897 2025 28,643 2026 21,510 2027 12,534 Thereafter 19,067 Total $ 176,747 |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 6 Months Ended |
Jun. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets In connection with the Southern Star acquisition, we recorded goodwill of approximately $4,516,000. During the three and six months ended June 30, 2023 and 2022, we did not record any impairments to goodwill. Other intangible assets consisted of the following, in thousands. June 30, 2023 December 31, 2022 Intangible Assets Accumulated Amortization Intangible Assets, Net Intangible Assets Accumulated Amortization Intangible Assets, Net Non-compete agreements $ 1,065 $ (59) $ 1,006 $ — $ — $ — Total intangible assets subject to amortization $ 1,065 $ (59) $ 1,006 $ — $ — $ — |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2023 | |
Debt Disclosure [Abstract] | |
Notes Payable | Notes Payable The Operating Partnership was a party to four, cross-collateralized, term loan agreements with an insurance company. The term loans were secured by the Richardson Heights Property, the Cooper Street Property, the Bent Tree Green Property and the Mitchelldale Property. The loans required monthly payments of principal and interest due and payable on the first day of each month. Monthly payments were based on a 27-year loan amortization. Each of the loan agreements were subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements. Each of the loan agreements provided for a fixed interest rate of 4.61%. Each of the loan agreements were 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 provided for the cross collateralization/cross default of the each of the loans. On March 10, 2023, the Company completed the sale of its Mitchelldale property for a sale price of $40,510,000. Proceeds from the sale retired the four, cross collateralized term loans referenced above. The outstanding balance of the four loans was $0 and $39,324,000 as of June 30, 2023 and December 31, 2022, respectively. 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 which caps LIBOR at 3.75% during the initial term and any extensions of the SASB Loan. Effective July 1, 2023, the SASB Loan will transition to a one-month CME Term Secured Overnight Financing Rate ("SOFR") as LIBOR ceased publication on June 30, 2023. On October 9, 2022, the SASB Loan Borrower exercised the third and final one-year maturity date extension agreement to extend the maturity date to October 9, 2023. 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 is the sole guarantor. On October 19, 2022, the SASB Loan Borrower received a notice from the loan servicer of the SASB Loan in connection with an event of default due to the noncompliance with the loan agreement's insurance requirements relating to a single property. The event of default was previously waived for the sole purpose of exercising the option to extend the SASB Loan term. The event of default triggered cash management provisions under the SASB Loan agreement, which was implemented in November 2022. On April 6, 2023, the SASB Loan Borrower sold the single property responsible for the default, the Quitman property. To secure approval of the SASB Loan lender for the sale of the Quitman property, the SASB Loan Borrower agreed to continue the cash management provisions under the SASB Loan agreement until certain provisions are met. Cash management requires tenant receipts of the SASB Loan Borrower be deposited into a cash management account controlled by the loan servicer. On the 9th day of each month, distributions from the cash management account are made in the following priority: (i) property tax escrow, (ii) scheduled debt service (iii) budgeted operating expenses for the month of the payment date occurs, (iv) capital expenditure reserve, and (v) tenant improvement and lease commission reserve. All remaining amounts are disbursed to an excess cash flow reserve account, also maintained by the loan servicer. The SASB cash management account held $3,262,000 and $3,817,000 as of June 30, 2023 and December 31, 2022, respectively. The excess cash flow reserve account held $5,137,000 and $223,000 as of June 30, 2023 and December 31, 2022, respectively. Both the cash management and excess cash flow reserve accounts are recorded in restricted cash on the consolidated balance sheets. On February 10, 2022, the Company executed a $2,645,000 promissory note with East West Bank, resulting in net proceeds of $2,528,000. The promissory note was secured by the Company's 17 acre development site located in Fort Worth, Texas and had a maturity date of February 25, 2023. The remaining principal balance was paid out of proceeds from the sale of the development site on January 31, 2023. The following is a summary of the Company’s notes payable, in thousands: Property/Facility Payment Maturity Date Rate June 30, 2023 December 31, 2022 Richardson Heights P&I July 1, 2041 4.61 % $ — $ 15,556 Cooper Street P&I July 1, 2041 4.61 % — 6,764 Bent Tree Green P&I July 1, 2041 4.61 % — 6,764 Mitchelldale P&I July 1, 2041 4.61 % — 10,240 Hartman SPE LLC (1) IO October 9, 2023 5.55 % 250,386 259,000 Hartman XXI IO October 31, 2022 10.00 % 15,336 17,168 Fort Worth - EWB P&I February 25, 2023 8.50 % — 480 Southern Star IO December 31, 2023 10.00 % 200 — 265,922 315,972 Less: unamortized deferred loan costs (220) (1,112) $ 265,702 $ 314,860 (1) On October 9, 2022, the Company executed the third and final one-year maturity date extension to October 9, 2023. 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: June 30, 2023 December 31, 2022 Deferred loan costs $ 5,030 $ 5,471 Less: deferred loan cost accumulated amortization (4,810) (4,359) Total cost, net of accumulated amortization $ 220 $ 1,112 Interest expense incurred for the three months ended June 30, 2023 and 2022 was $4,733,000 and $2,655,000, respectively, which includes amortization expense of deferred loan costs. Interest expense incurred for the six months ended June 30, 2023 and 2022 was $10,803,000 and $4,738,000, respectively, which included amortization expense of deferred loan costs. Interest expense also includes $541,000 of write off of deferred loan costs for the six months ended June 30, 2023 due to the pay off of the insurance company loan mentioned above. Interest expense of $1,857,000 and $1,117,000 was payable as of June 30, 2023 and December 31, 2022, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. On March 29, 2021, Hartman Income REIT Property Holdings, LLC ("HIRPH"), a wholly owned subsidiary of the Operating Partnership, was added, by means of a joinder agreement, to a master credit facility agreement where Hartman vREIT XXI, Inc. is the guarantor. The Company’s Atrium II office property was added to the collateral security for the master credit facility agreement where the borrowing base of the facility increased by $1,625,000. The master credit facility has a maturity date of March 9, 2023. As of May 30, 2023, the Atrium II property is unencumbered and HIRPH is no longer a borrower nor is it jointly or severally liable with the other loan parties to the vREIT XXI loan. 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 $263,545,000 and $308,286,000 as compared to book value of $265,922,000 and $315,972,000 as of June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022. |
Income Per Share
Income Per Share | 6 Months Ended |
Jun. 30, 2023 | |
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 unvested restricted shares of common stock. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share. The following table sets forth the computation of our basic and diluted earnings per share of common stock for three and six months ended June 30, 2023 and 2022, in thousands except per share amounts. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income attributable to common stockholders $ 1,722 $ (4,666) $ 24,376 $ (4,651) Denominator: Weighted average number of common shares outstanding, basic 34,895 34,976 34,895 35,020 Dilutive effect of restricted common shares 302 — 302 — Weighted average number of common shares outstanding, dilutive 35,197 34,976 35,197 35,020 Basic and diluted income per common share: Net income attributable to common stockholders per share, basic $ 0.05 $ (0.13) $ 0.70 $ (0.13) Net income attributable to common stockholders per share, dilutive $ 0.05 $ (0.13) $ 0.70 $ (0.13) |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes A REIT may elect to retain rather than distribute all or a portion of net capital gains and pay tax on the gains. Through the implementation and execution of the New Direction Plans, the Company has sold properties and incurred net capital gains which it does not anticipate distributing to stockholders. The Company has incurred an estimated $6,185,000 of current tax expense due on undistributed net capital gains from property sales through the six months ended June 30, 2023. With the exception of current tax expense on undistributed net capital gains mentioned above, 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, 2019, 2020, and 2021 have not been examined by the Internal Revenue Service. The Company’s federal income tax return for the year ended December 31, 2019 may be examined on or before September 15, 2023. 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. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party TransactionsHartman Advisors LLC ("Advisor"), is a Texas limited liability company. Advisor is the sole member of Hartman vREIT XXI Advisor, LLC ("XXI Advisor"), which was the advisor for Hartman vREIT XXI, Inc. ("vREIT XXI") through April 17, 2023. vREIT XXI paid acquisition fees and asset management fees to the Advisor in connection with the acquisition of properties and management of the Company. Through April 17, 2023, vREIT XXI paid property management and leasing commissions to the Property Manager in connection with the management and leasing of vREIT XXI's properties. Effective April 17, 2023, the Company is no longer providing management and advisory services to vREIT XXI and its affiliates. 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 with an interest rate of 10%. In addition to the balance due under this note, the Company received advances from vREIT XXI totaling $7,168,000 which were outstanding as of December 31, 2022 and which were not covered by the unsecured promissory note. The Company made principal payments of $1,832,000 during the six months ended June 30, 2023. This note payable had an outstanding balance of $15,336,000 and $17,168,000 as of June 30, 2023 and December 31, 2022, 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 $382,000 and $225,000 for the three months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, the Company recognized interest expense on the affiliate balance in the amount of $790,000 and $356,000, respectively 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 or upon property sale. The maturity date of the promissory note, as amended, is June 30, 2024. This note receivable had an outstanding balance of $1,726,000 as of both June 30, 2023 and December 31, 2022, respectively, which is included in notes receivable – related party in the accompanying consolidated balance sheets. For the period ended December 31, 2022, the Company wrote off $1,022,000 of interest receivable and will cease to recognize interest income in future periods. For the three months ended June 30, 2023 and 2022, the Company recognized interest income on this affiliate note in the amounts of $0 and $43,000, respectively. On April 6, 2023, the Company agreed to purchase all of the equity interests in Southern Star for approximately $3,000,000 in cash and 301,659 restricted stock units of the Company's Common Stock. Mark T. Torok, who previously served as CEO of the Company at the time of the acquisition, and Louis T. Fox III, CFO of the Company, were equity holders of Southern Star. On May 5, 2023, the Company completed the acquisition of Southern Star, which will operate as a subsidiary of the Operating Partnership alongside the Company’s current operations, utilizing its expertise in developing self storage assets within Delaware statutory trusts. Refer to Note 3 (Southern Star Acquisition). As noted in Note 3 (Southern Star Acquisition), the Company acquired $7,050,000 of notes payable pertaining to self-storage property that was transferred to a Delaware statutory trust sponsored by Southern Star in May 2023, where neither Southern Star or the Company are the primary beneficiary. $2,115,000 of the notes payable balance was due to Haddock Investments, LLC, an affiliate of Gerald Haddock, who serves as an Independent Director of the Company. The amount was repaid in June 2023 by the Delaware statutory trust. In accordance with the Company's governance policies, the transaction between Southern Star and Haddock Investments, LLC was approved by the Executive Committee. The transaction and its due diligence provided valuable self-storage insight, knowledge, and expertise to Mr. Haddock as the Company shifts its strategic focus and repositions its assets into self-storage. If required by the Executive Committee, Mr. Haddock will make no further investments of this nature with Southern Star. As of June 30, 2023, Southern Star sponsors four Delaware statutory trusts (i) Southern Star Storage-Airports, DST ("Airports DST") (ii) Southern Star Storage-Montrose II, DST ("Montrose II DST") (iii) Southern Star Storage III-Carolinas, DST ("Carolinas III DST) and (iv) Southern Star Storage IV-Rockport DST ("Rockport IV DST"). 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 deemed to not have a variable interest in Hartman Retail I DST, Hartman Retail III DST, Ashford Bayou, Airports DST, Montrose II DST, Carolinas III DST, and Rockport IV DST. The Company has determined, as a result of its analysis, it is not deemed to be the primary beneficiary of Hartman Retail II DST. Accordingly, the assets and liabilities and revenues and expenses of Hartman Retail II DST 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 $45,322,000 and $24,276,000 as of June 30, 2023 and December 31, 2022, respectively. Pursuant to these guaranty agreements, the Company has guaranteed any losses or liabilities that the lenders may incur as a result of the occurrence of certain enumerated bad acts as defined in the agreements. The Company has also guaranteed the repayment of obligations and indebtedness due to the lenders upon the occurrence of certain enumerated events as defined in the agreements. The Company's expected liability, if any, under these arrangements is immaterial and the potential for the Company to be required to make payments under the guarantees is remote. On March 29, 2021, Hartman Income REIT Property Holdings, LLC, a wholly owned subsidiary of Hartman XX Limited Partnership, was added, by means of a joinder agreement, to a master credit facility agreement where vREIT XXI is the guarantor. The Company’s Atrium II office property was added to the collateral security for the master credit facility agreement where the borrowing base of the facility increased by $1,625,000. On May 30, 2023, vREIT XXI completed the refinance of the master credit facility where HIRPH was a borrower via the joinder agreement. The Atrium II property is no longer included in the master credit facility and is unencumbered as of the closing of the refinance. HIRPH is no longer a borrower nor is it jointly and severally liable with the other loan parties for repayment of the loan. vREIT XXI owns 1,198,228 shares of the Company's common stock, 60,178 Operating Partnership units, and a 2.47% ownership interest in Hartman SPE, LLC. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2023 | |
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 June 30, 2023 and December 31, 2022, respectively, the Company has 1,000 shares of convertible preferred stock issued and outstanding, 300 shares of which are owned by a wholly-owned subsidiary. 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 or (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. 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. 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 2023 1st Quarter $ — $ — 2nd Quarter — — Total 2023 $ — $ — 2022 4th Quarter $ — $ — 3rd Quarter — — 2nd Quarter 0.128 4,500 1st Quarter 0.112 3,958 Total 2022 $ 0.240 $ 8,458 |
Stock-based Compensation
Stock-based Compensation | 6 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-based Compensation | Stock-based Compensation The Company previously adopted an incentive plan called the Omnibus Stock Incentive Plan, (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 Incentive Plan has expired pursuant to its terms and requires stockholder approval for modification or reinstatement. The Board approved the payment of accrued director's fees in cash, as stock compensation was not available. On April 6, 2023, the Company adopted an incentive plan called the Silver Star Properties REIT, Inc. and Hartman XX Limited Partnership 2023 Incentive Award Plan (the "2023 Incentive Plan") that provides for the grant of incentive and non-qualified stock options and Appreciation-Only Long Term Incentive Plan Performance Units ("Performance Units"). Under the 2023 Incentive Plan, awards may be granted up to 4,422,748 shares of common stock. Performance Units Performance Units are a class of interests in the Operating Partnership that are intended to qualify as “profits interests” for federal income tax purposes and generally only allow the recipient to realize value to the extent the value of a common share of the Company exceeds the threshold level set at the time the Performance Units are granted, subject to any vesting conditions applicable to the award. The value of vested Performance Units is realized through conversion of the Performance Units into Operating Partnership units. Performance Units have a term of 10 years from the grant date. Each holder will generally receive special income allocations in respect of a Performance Unit equal to 10% (or such other percentage specified in the applicable award agreement) of the income allocated in respect of an Operating Partnership unit. The Performance Units issued under the 2023 Incentive Plan vest 1/3 of the grant per year. A participant may redeem the Performance Units after 3 years from the grant date and payable in cash within 90 days of the notice of redemption. Below is a summary of Performance Unit activity for the six months ended June 30, 2023. Units Granted 4,422,748 Cancelled or expired (1,263,642) Outstanding at June 30, 2023 3,159,106 Performance Units outstanding and granted during the six months ended June 30, 2023 had a fair value of $928,000. The fair value of each Performance Unit granted is estimated on the date of grant using a combination of income and market approaches. We recorded $55,000 for the three months ended June 30, 2023 of stock-based compensation expense as a component of "general and administrative" expenses on consolidated statement of operations. Hartman 401(k) Profit Sharing Plan The Company sponsors a defined contribution pension plan, the Hartman 401(k) Profit Sharing Plan, covering substantially all of its full-time employees who are at least 21 years of age. Participants may annually contribute up to 100% of pretax annual compensation and any applicable catch-up contributions, as defined in the plan and subject to deferral limitations as set forth in Section 401(k) of the Internal Revenue Code. Participants may also contribute amounts representing distributions from other qualified benefit or defined contribution plans. The Company may make discretionary matching contributions. For the three months ended June 30, 2023 and 2022, the Company matched $99,000 and $99,000, respectively. The Company had a stock match liability to the plan of $2,006,000 and $1,808,000 as of June 30, 2023 and December 31, 2022, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation Winter Storm Uri During February 2021, the state of Texas experienced a severe winter storm, unofficially referred to as Winter Storm Uri, which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, the Company experienced a substantial increase in electricity billings for a number of our properties during the month of and after the storm. On May 26, 2021, Summer Energy LLC (“Summer”) filed a lawsuit against Hartman Income REIT Management, Inc. (the “Property Manager”), a wholly owned subsidiary of the Company that manages our properties, in state court in Harris County, Texas. In this lawsuit, Summer seeks to collect approximately $8.4 million from the Property Manager that Summer claims that the Property Manager owes Summer under one or more electricity sales agreements (“Agreements”) related to Winter Storm Uri. Of the approximately $8.4 million claimed in the lawsuit, approximately $7.6 million relates to wholly owned properties of the Company. Under the Agreements, Summer provided electricity to buildings managed by the Property Manager at indexed prices. On March 24, 2022, the court entered a judgment in favor of Summer against the Property Manager in the amount of $7,871,000 plus customary pre- and post-judgment interest and attorney's fees.The Company had recognized the share of the judgment amount applicable to wholly owned properties of the Company, approximately $6,731,000, within the Company's consolidated statements of operations for fiscal year 2021. The Company has also recognized $370,000 of pre-judgment interest and attorney fees in 2021 and $304,000 of post-judgment interest in 2022. Many of the Company’s leases contain provisions that require tenants to pay their allocable share of operating expenses, including utilities. The Company has completed its assessment of tenants' applicable share and has collected and recognized $2,155,000 of tenant's share to date, $1,490,000 was recognized during the six months ended June 30, 2023. On April 25, 2022, the Property Manager filed its supersedeas surety bond totaling $2,197,000 in order to suspend enforcement the judgment for the duration of the Property Manager's appeal. The share of the supersedeas surety bond applicable to wholly owned properties of the Company totaled $2,001,000 and is recorded in prepaid expenses and other assets on the Company's consolidated balance sheets. The Property Manager continues to dispute the amount of litigation to Summer and had appeal the judgment, filing its Notice of Appeal on June 21, 2022. The outcome of the appeal is subject to significant uncertainty and we cannot provide any assurance that the Property Manager will ultimately prevail. Even if the Property Manager is ultimately successful in its appeal, it may take considerable time to resolve the matter. Allen Hartman and Hartman vREIT XXI, Inc. The Company's director and former Chief Executive Officer, Allen Hartman, along with another company that he leads as Executive Chairman and Chief Executive Officer, Hartman vREIT XXI, Inc., (the "Hartman Plaintiff's") has filed a lawsuit against the Company and several of its subsidiaries, alleging various causes of action. The lawsuit has not been served on the Company, although the Hartman Plaintiffs have filed "lis pendens" to encumber two of the Company's properties. The Company and its subsidiaries dispute each of the causes of action alleged by the Hartman Plaintiffs, as well as the Hartman Plaintiffs' account of facts, and intends to vigorously defend against same and to recover damages from the Hartman Plaintiffs related to their filing of the lawsuit, the "lis pendens," and false claims. Further, the Company intends to pursue numerous counterclaims against the Hartman Plaintiffs, including causes of action for breaches of fiduciary duty, fraud, tortious interference, and slander of title. The outcome of the lawsuit is subject to uncertainty and may take considerable time to resolve. Management does not believe that any of these causes of actions will impair the Company’s ability to reposition its assets or obtain its goal of listing on an established national exchange. Charter provision regarding liquidity or liquidation The Company does not anticipate that there will be any market for its shares of common stock unless they are listed on a national securities exchange. In the event that Company shares of common stock are not listed or traded on an established securities exchange prior to the tenth anniversary of the completion or termination of the Company's initial public offering, which terminated on April 25, 2013, the Company's charter requires that the board of directors must seek the approval of the stockholders of a plan to liquidate assets, unless the board of directors has obtained the approval of the stockholders (1) to defer the liquidation of our assets or (2) of an alternate strategy. If the stockholders do not approve the proposal presented by the board of directors prior to the end of ten years after the termination of the Company’s initial public offering, the board of directors shall begin the process of liquidating the Company’s assets or listing the Company’s shares. The Executive Committee has adopted resolutions directing management to begin the process of listing the Company’s shares on an established securities exchange, and it is taking steps to accomplish the listing, including without limitation engaging the services of an investment bank to assist with the listing. On October 14, 2022, the Company’s board of directors formed the Executive Committee, composed of independent directors, to continue the review of strategic alternatives with the objective of maximizing shareholder value and to streamline the communicating, reporting, and decision-making between the board and the Chief Executive Officer. To accomplish this objective and to communicate and manage the day-to-day communications and interactions with the Chief Executive Officer, the Executive Committee has all the authority of decision making of the whole board of directors. The Executive Committee performed a strategic review process to identify, examine, and consider a range of strategic alternatives available to the Company. On April 6, 2023, the Executive Committee of the board of directors approved the previously-announced New Direction Plans to reposition the Company's assets into the self-storage asset class and away from office, retail, and light industrial assets. The Executive Committee is in the process of carrying out the New Direction Plans with the objective of maximizing shareholder value. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On July 17, 2023, the Company completed the sale of its Harwin property for a sales price of $5,100,000. Proceeds from the sale were applied to the outstanding balance of the SASB Loan. On July 19, 2023, the Company completed the sale of its Spring Valley property for a sales price of $5,625,000. Proceeds from the sale were applied to the outstanding balance of the SASB Loan. On August 2, 2023, the Company sold its 10-acre land development located in Grand Prairie, Texas for a sales price of $1,800,000. On August 3, 2023, the Company appointed Steven Treadwell as the Company’s Chief Executive Officer, effective as of August 21, 2023. In connection with Mr. Treadwell’s election as Chief Executive Officer, he executed a three-year employment agreement (the “Employment Agreement”) with the Company to serve as the Company’s Chief Executive Officer included as Exhibit 10.1 to the Company's Form 8-K filed August 8, 2023. Under the Employment Agreement, Mr. Treadwell will receive a base salary for the first annual period equal to $550,000 and thereafter any increase will be determined by the Executive Committee with input from the Company’s compensation consultant. He will also receive 250,000 Performance Units. Mr. Treadwell is eligible to receive additional grants of 300,000 Performance Units and 450,000 Performance Units on each of the first and second anniversaries of the effective date of the Employment Agreement. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2023 | |
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, 2022 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of June 30, 2023 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 June 30, 2023, and the results of consolidated operations for the three and six months ended June 30, 2023 and 2022, consolidated statements of equity for the three and six months ended June 30, 2023 and 2022, and consolidated statements of cash flows for the six months ended June 30, 2023 and 2022. The results of the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023. 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, 2022. These unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, the Operating Partnership and its subsidiaries, Hartman SPE, LLC, and Southern Star. 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 |
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 reserves, as required by certain of our mortgage debt agreements. As of June 30, 2023 and December 31, 2022, the Company had a restricted cash balance of $40,591,000 and $24,088,000, respectively. Restricted cash as of June 30, 2023 includes $14,000,000 of proceeds from the sale of the Cooper Street property which are held in a qualified intermediary account pending the potential replacement property which may be acquired in a 1031 like-kind exchange. The following provides a reconciliation of cash, cash equivalents, and restricted cash as of June 30, 2023 and December 31, 2022 to the corresponding consolidated statement of cash flows, in thousands: June 30, 2023 December 31, 2022 Cash and cash equivalents $ 3,077 $ 334 Restricted cash 40,591 24,088 Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows $ 43,668 $ 24,422 |
Financial Instruments | Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, notes payable, accounts payable and accrued expenses and balances due to/due from related parties, related party notes receivable, and derivatives. With the exception of derivative financial instruments and notes payable, the Company considers the carrying value to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Disclosure about the fair value of financial instruments is based on relevant information available as of June 30, 2023 and December 31, 2022. |
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 terms of existing leases are considered to commence as of the acquisition date for the purposes of this calculation. The Company's accrued rents are included in accrued rent and accounts receivable, net. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. |
Real Estate | Real Estate Allocation of Purchase Price of Acquired Assets Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings). The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment 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 |
Impairment | 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. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to re-lease the property and the number of years the property is held for investment. The use of inaccurate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of the Company’s real estate and related intangible assets and net income. |
Fair Value Measurement | Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost approach: Amount required to replace the service capacity of an asset (replacement cost). Income approach: Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Recurring fair value measurements: The carrying values of cash and cash equivalents, restricted cash, accrued rent and accounts receivable, other assets and accounts payable and accrued expenses are reasonable estimates of fair values because of the short maturities of these instruments. For our disclosure of debt instrument fair value in Note 10, we use a discounted cash flow analysis based on borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments (categorized within Level 2 of the fair value hierarchy). For our disclosure of interest rate cap derivative fair value, refer to Note 7. Fair value determination of the interest rate cap derivative is based on Level 2 inputs. For our disclosure of fair value of certain equity based awards (categorized within Level 3 of the fair value hierarchy), refer to Noe 15. Nonrecurring fair value measurements: Property Impairments 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. Our estimated fair values are determined by utilizing cash flow models, market capitalization rates and market discount rates, obtaining third-party broker valuation estimates, or appraisals (categorized within Level 3 of the fair value hierarchy). |
Accrued Rent and Accounts Receivable, net | Accrued Rent and Accounts Receivable, net 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 | 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. Goodwill evaluation is completed using either a qualitative or quantitative approach. Under a qualitative approach, the impairment review for goodwill consists of an assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value, including goodwill. If a qualitative approach indicates it is more likely-than-not that the estimated carrying value of a reporting unit (including goodwill) exceeds its fair value, or if we choose to bypass the qualitative approach for any reporting unit, we perform the quantitative approach. |
Noncontrolling Interests | 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 |
Stock-Based Compensation | Stock-Based Compensation The Company follows ASC 718 - Compensation - Stock Compensation, with regard to issuance of stock in payment of services. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the 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 is 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. A REIT may elect to retain rather than distribute all or a portion of net capital gains and pay tax on the gains. Through the implementation and execution of the previously-announced plan to reposition the Company’s assets into the self-storage asset class (the “New Direction Plans"), the Company has sold properties and incurred net capital gains which it used to reduce debt and does not anticipate distributing to stockholders. The Company has incurred an estimated $6,185,000 of current tax expense due on undistributed net capital gains from property sales through the six months ended June 30, 2023. For the three months ended June 30, 2023 and 2022, the Company incurred net income (loss) of $2,258,000 and $(4,778,000), respectively. For the six months ended June 30, 2023 and 2022, the Company incurred net income (loss) of $26,856,000 and $(4,561,000), 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 |
Concentration of Risk | Concentration of RiskThe 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. The product type concentration in office space, which accounts for approximately 76% of our base rental revenue for the three months ended June 30, 2023, is susceptible to any negative trends in the future demand for office space. |
Going Concern Evaluation | Going Concern Evaluation Pursuant to ASC 205-40, “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, 2022, SPE LLC executed the third and final maturity date option to extend the maturity to October 9, 2023. |
Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted | Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The Company adopted ASU 2016-13 effective January 1, 2023. The amendments in this update replaced the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASC 2018-19, Financial Instruments — Credit Losses (Topic 326): Codification Improvements , clarified that receivables arising from operating leases are not within the scope of ASC Topic 326. Instead, impairment of receivables arising from operating leases will be accounted for in accordance with ASC 842. The adoption of this standard did not have a material impact on our consolidated financial statements as the majority of our financial instruments result from operating lease transactions, which are not within the scope of this standard. Recent Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . ASU 2020-04 provides optional expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective for all entities as of March 12, 2020 through December 31, 2022. An entity can elect to apply the amendments as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to that date that the consolidated financial statements are available to be issued. In October 2022, the FASB approved a two-year extension of the temporary accounting relief provided under ASU 2020-04 to December 31, 2024. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU 2020-04) through December 31, 2022, the Company did not have any contract modifications impacting current reference rates. The Company's SASB Loan and derivative instrument use LIBOR as the current reference rate. The optional expedients for hedging relationships described in ASU 2020-04 are not expected to have an impact to the Company as the Company has elected to not designate its derivative instrument as a hedge. |
Reclassification | Reclassification Certain items on the comparative consolidated balance sheet have been reclassified to conform to the presentation adopted in the current period. Related party balances have been reclassified to present on a gross basis due from or due to individual counterparties. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Cash and Cash Equivalents | The following provides a reconciliation of cash, cash equivalents, and restricted cash as of June 30, 2023 and December 31, 2022 to the corresponding consolidated statement of cash flows, in thousands: June 30, 2023 December 31, 2022 Cash and cash equivalents $ 3,077 $ 334 Restricted cash 40,591 24,088 Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows $ 43,668 $ 24,422 |
Restrictions on Cash and Cash Equivalents | The following provides a reconciliation of cash, cash equivalents, and restricted cash as of June 30, 2023 and December 31, 2022 to the corresponding consolidated statement of cash flows, in thousands: June 30, 2023 December 31, 2022 Cash and cash equivalents $ 3,077 $ 334 Restricted cash 40,591 24,088 Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows $ 43,668 $ 24,422 |
Southern Star Acquisition (Tabl
Southern Star Acquisition (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table illustrates the fair value of assets and liabilities of Southern Star acquired, in thousands: Assets Real estate assets $ 7,061 Cash and cash equivalents 319 Prepaid expenses and other assets 109 Other intangible assets 1,065 Goodwill 4,516 Total Assets $ 13,070 Liabilities Account payable and accrued expenses $ 25 Due to related parties 1,302 Notes payable 7,250 Total Liabilities $ 8,577 Net identifiable assets acquired 4,493 Total consideration transferred 4,493 |
Real Estate (Tables)
Real Estate (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Real Estate [Abstract] | |
Schedule of Real Estate Assets | The Company’s real estate assets consisted of the following, in thousands: June 30, 2023 December 31, 2022 Land $ 124,430 $ 132,533 Buildings and improvements 342,159 352,060 In-place lease value intangible 92,472 96,009 559,061 580,602 Less: accumulated depreciation and amortization (192,632) (189,509) Total real estate assets $ 366,429 $ 391,093 |
Schedule of Total In-place Lease Intangible Assets and Accumulated Amortization | The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands: June 30, 2023 December 31, 2022 In-place lease value intangible $ 92,472 $ 96,009 In-place leases – accumulated amortization (88,994) (89,926) Acquired lease intangible assets, net $ 3,478 $ 6,083 |
Accrued Rent and Accounts Rec_2
Accrued Rent and Accounts Receivable, net (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Receivables [Abstract] | |
Schedule of Accrued Rent and Accounts Receivable | Accrued rent and accounts receivable, net, consisted of the following, in thousands: June 30, 2023 December 31, 2022 Tenant receivables $ 9,397 $ 11,617 Accrued rent 10,108 11,118 Allowance for uncollectible accounts (7,054) (6,228) Accrued rents and accounts receivable, net $ 12,451 $ 16,507 |
Deferred Leasing Commission C_2
Deferred Leasing Commission Costs, net (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Deferred Leasing Commission Costs | Costs which have been deferred consist of the following, in thousands: June 30, 2023 December 31, 2022 Deferred leasing commissions costs $ 18,427 $ 21,244 Less: accumulated amortization (10,712) (11,418) Deferred leasing commission costs, net $ 7,715 $ 9,826 |
Future Minimum Rents (Tables)
Future Minimum Rents (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Leases [Abstract] | |
Schedule of Minimum Future Lease Rentals To Be Received | A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable leases in existence at June 30, 2023 is as follows, in thousands: June 30, Minimum Future Rents 2023 $ 54,096 2024 40,897 2025 28,643 2026 21,510 2027 12,534 Thereafter 19,067 Total $ 176,747 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | Other intangible assets consisted of the following, in thousands. June 30, 2023 December 31, 2022 Intangible Assets Accumulated Amortization Intangible Assets, Net Intangible Assets Accumulated Amortization Intangible Assets, Net Non-compete agreements $ 1,065 $ (59) $ 1,006 $ — $ — $ — Total intangible assets subject to amortization $ 1,065 $ (59) $ 1,006 $ — $ — $ — |
Notes Payable (Tables)
Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Debt Disclosure [Abstract] | |
Mortgage Notes Payable | The following is a summary of the Company’s notes payable, in thousands: Property/Facility Payment Maturity Date Rate June 30, 2023 December 31, 2022 Richardson Heights P&I July 1, 2041 4.61 % $ — $ 15,556 Cooper Street P&I July 1, 2041 4.61 % — 6,764 Bent Tree Green P&I July 1, 2041 4.61 % — 6,764 Mitchelldale P&I July 1, 2041 4.61 % — 10,240 Hartman SPE LLC (1) IO October 9, 2023 5.55 % 250,386 259,000 Hartman XXI IO October 31, 2022 10.00 % 15,336 17,168 Fort Worth - EWB P&I February 25, 2023 8.50 % — 480 Southern Star IO December 31, 2023 10.00 % 200 — 265,922 315,972 Less: unamortized deferred loan costs (220) (1,112) $ 265,702 $ 314,860 (1) On October 9, 2022, the Company executed the third and final one-year maturity date extension to October 9, 2023. 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: June 30, 2023 December 31, 2022 Deferred loan costs $ 5,030 $ 5,471 Less: deferred loan cost accumulated amortization (4,810) (4,359) Total cost, net of accumulated amortization $ 220 $ 1,112 |
Income Per Share (Tables)
Income Per Share (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share | The following table sets forth the computation of our basic and diluted earnings per share of common stock for three and six months ended June 30, 2023 and 2022, in thousands except per share amounts. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income attributable to common stockholders $ 1,722 $ (4,666) $ 24,376 $ (4,651) Denominator: Weighted average number of common shares outstanding, basic 34,895 34,976 34,895 35,020 Dilutive effect of restricted common shares 302 — 302 — Weighted average number of common shares outstanding, dilutive 35,197 34,976 35,197 35,020 Basic and diluted income per common share: Net income attributable to common stockholders per share, basic $ 0.05 $ (0.13) $ 0.70 $ (0.13) Net income attributable to common stockholders per share, dilutive $ 0.05 $ (0.13) $ 0.70 $ (0.13) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
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 2023 1st Quarter $ — $ — 2nd Quarter — — Total 2023 $ — $ — 2022 4th Quarter $ — $ — 3rd Quarter — — 2nd Quarter 0.128 4,500 1st Quarter 0.112 3,958 Total 2022 $ 0.240 $ 8,458 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Summary of AO LTIP Activity | Below is a summary of Performance Unit activity for the six months ended June 30, 2023. Units Granted 4,422,748 Cancelled or expired (1,263,642) Outstanding at June 30, 2023 3,159,106 |
Organization and Business (Deta
Organization and Business (Details) ft² in Millions | Jun. 30, 2023 property | Jun. 30, 2023 ft² | Jun. 30, 2023 padSite | Jun. 30, 2023 land_development | Dec. 31, 2022 property | Jun. 30, 2022 property | Jun. 30, 2022 ft² | Jun. 30, 2022 padSite | Jun. 30, 2022 land_development |
Texas | |||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||
Number of real estate properties | 1 | 1 | 1 | 2 | |||||
Number of commercial properties | 41 | 44 | |||||||
Area of real estate property (in square feet) | ft² | 5.5 | 6.8 | |||||||
Houston, Texas | |||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||
Number of real estate properties | 24 | 26 | |||||||
San Antonio, Texas | |||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||
Number of real estate properties | 3 | 3 | |||||||
Richardson, Arlington, Plano And Dallas, Texas | |||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||
Number of real estate properties | 14 | 15 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Cash and Cash Equivalents Information (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 3,077 | $ 334 | ||
Restricted cash | 40,591 | 24,088 | ||
Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows | $ 43,668 | $ 24,422 | $ 14,882 | $ 19,257 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2023 USD ($) property | Jun. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
Property, Plant and Equipment [Line Items] | |||||
Restricted cash | $ 40,591,000 | $ 40,591,000 | $ 24,088,000 | ||
Loss on impairment | 0 | $ 0 | |||
Provision for income taxes | 6,185,000 | $ 0 | 6,185,000 | 0 | |
Net income (loss) | 2,258,000 | $ (4,778,000) | 26,856,000 | $ (4,561,000) | |
Cooper Street | |||||
Property, Plant and Equipment [Line Items] | |||||
Restricted cash | $ 14,000,000 | $ 14,000,000 | |||
Product | Revenue Benchmark | Revenue from Rights Concentration Risk | |||||
Property, Plant and Equipment [Line Items] | |||||
Concentration risk (as a percent) | 76% | ||||
Hartman SPE LLC Loan Agreement | |||||
Property, Plant and Equipment [Line Items] | |||||
Number of extensions | property | 3 | ||||
Extension term | 1 year | ||||
Building and Building Improvements | Minimum | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful life | 5 years | 5 years | |||
Building and Building Improvements | Maximum | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful life | 39 years | 39 years |
Southern Star Acquisition - Nar
Southern Star Acquisition - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
May 05, 2023 | Apr. 06, 2023 | Jun. 30, 2023 | Jun. 30, 2023 | Dec. 31, 2022 | |
Business Acquisition [Line Items] | |||||
Goodwill | $ 4,766 | $ 4,766 | $ 250 | ||
Related Party | |||||
Business Acquisition [Line Items] | |||||
Notes payable, net | 15,336 | 15,336 | $ 17,168 | ||
Southern Star | |||||
Business Acquisition [Line Items] | |||||
Cash paid in acquisition | $ 3,000 | $ 3,000 | |||
Shares acquired (in shares) | 301,659 | ||||
Common stock in acquisition, value per share (in dollars per share) | $ 4.95 | ||||
Vesting period (in years) | 3 years | ||||
Total consideration transferred | $ 4,493 | ||||
Acquisition costs | 66 | ||||
Actual revenue included in statements | 262 | 262 | |||
Goodwill | 4,516 | $ 4,516 | $ 4,516 | ||
Southern Star | Related Party | |||||
Business Acquisition [Line Items] | |||||
Notes payable, net | $ 7,050 |
Southern Star Acquisition - Fai
Southern Star Acquisition - Fair Value of Assets in Acquisition (Details) - USD ($) $ in Thousands | May 05, 2023 | Jun. 30, 2023 | Dec. 31, 2022 |
Assets | |||
Goodwill | $ 4,766 | $ 250 | |
Southern Star | |||
Assets | |||
Real estate assets | $ 7,061 | ||
Cash and cash equivalents | 319 | ||
Prepaid expenses and other assets | 109 | ||
Other intangible assets | 1,065 | ||
Goodwill | 4,516 | $ 4,516 | |
Total Assets | 13,070 | ||
Liabilities | |||
Account payable and accrued expenses | 25 | ||
Due to related parties | 1,302 | ||
Notes payable | 7,250 | ||
Total Liabilities | 8,577 | ||
Net identifiable assets acquired | 4,493 | ||
Total consideration transferred | $ 4,493 |
Real Estate - Assets (Details)
Real Estate - Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Real Estate [Abstract] | ||
Land | $ 124,430 | $ 132,533 |
Buildings and improvements | 342,159 | 352,060 |
In-place lease value intangible | 92,472 | 96,009 |
Total gross real estate assets | 559,061 | 580,602 |
Less: accumulated depreciation and amortization | (192,632) | (189,509) |
Real estate assets, net | $ 366,429 | $ 391,093 |
Real Estate - Additional Inform
Real Estate - Additional Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||||||
Aug. 02, 2023 USD ($) a | Jun. 29, 2023 USD ($) | Apr. 06, 2023 USD ($) | Mar. 10, 2023 USD ($) | Jan. 31, 2023 USD ($) a | Jun. 30, 2023 USD ($) padSite | Jun. 30, 2022 USD ($) | Jun. 30, 2023 USD ($) padSite | Jun. 30, 2022 USD ($) | Feb. 10, 2022 a | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Depreciation expense | $ 4,673 | $ 4,742 | $ 9,156 | $ 9,455 | ||||||
Amortization expense | 1,297 | 1,793 | 2,534 | 3,597 | ||||||
Impairment of real estates assets | 468 | 0 | 468 | 0 | ||||||
Gain on sale of property | 13,616 | $ 0 | 39,793 | $ 0 | ||||||
Fort Worth, Texas | ||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Area of real estate property (in square feet) | a | 17 | 17 | ||||||||
Proceeds from sale of real estate | $ 4,317 | |||||||||
Mitchelldale | ||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Proceeds from sale of real estate | $ 40,510 | |||||||||
Gain on sale of property | 26,177 | 26,177 | ||||||||
Quitman | ||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Proceeds from sale of real estate | $ 9,065 | |||||||||
Gain on sale of property | 2,802 | 2,802 | ||||||||
Cooper Street | ||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Proceeds from sale of real estate | $ 18,198 | |||||||||
Gain on sale of property | 10,814 | 10,814 | ||||||||
Grand Prairie, Texas | ||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Impairment of real estates assets | $ 468 | $ 468 | ||||||||
Grand Prairie, Texas | Subsequent Event | ||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Area of real estate property (in square feet) | a | 10 | |||||||||
Proceeds from sale of real estate | $ 1,800 | |||||||||
HIREIT Acquisition | ||||||||||
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | ||||||||||
Number of real estate properties | padSite | 1 | 1 |
Real Estate - In-place Intangib
Real Estate - In-place Intangible Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Real Estate [Abstract] | ||
In-place lease value intangible | $ 92,472 | $ 96,009 |
In-place leases – accumulated amortization | (88,994) | (89,926) |
Acquired lease intangible assets, net | $ 3,478 | $ 6,083 |
Accrued Rent and Accounts Rec_3
Accrued Rent and Accounts Receivable, net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Receivables [Abstract] | |||||
Tenant receivables | $ 9,397 | $ 9,397 | $ 11,617 | ||
Accrued rent | 10,108 | 10,108 | 11,118 | ||
Allowance for uncollectible accounts | (7,054) | (7,054) | (6,228) | ||
Accrued rents and accounts receivable, net | 12,451 | 12,451 | $ 16,507 | ||
Bad debt expense | $ 873 | $ 1,064 | $ 873 | $ 762 |
Deferred Leasing Commission C_3
Deferred Leasing Commission Costs, net (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred leasing commissions costs | $ 18,427 | $ 21,244 |
Less: accumulated amortization | (10,712) | (11,418) |
Deferred leasing commission costs, net | $ 7,715 | $ 9,826 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Oct. 05, 2022 | Oct. 01, 2018 | Jun. 30, 2023 | |
Interest Rate Cap | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Gain on derivative | $ 1,125 | ||
Interest Rate Cap | Not Designated as Hedging Instrument | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Derivative asset, notional amount | 2,254 | ||
Derivative, fair value | 1,227 | ||
Notes Payable to Banks | Hartman SPE, LLC | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Interest income | $ 1,227 | ||
Notes Payable to Banks | Hartman SPE, LLC | SASB Loan | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Debt instrument, face amount | $ 259,000 | ||
Notes Payable to Banks | Hartman SPE, LLC | London Interbank Offered Rate (LIBOR) 1 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Basis spread | 1.80% | ||
Notes Payable to Banks | Hartman SPE, LLC | London Interbank Offered Rate (LIBOR) 1 | SASB Loan | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Basis spread | 3.75% |
Future Minimum Rents (Details)
Future Minimum Rents (Details) $ in Thousands | Jun. 30, 2023 USD ($) |
Leases [Abstract] | |
2023 | $ 54,096 |
2024 | 40,897 |
2025 | 28,643 |
2026 | 21,510 |
2027 | 12,534 |
Thereafter | 19,067 |
Total | $ 176,747 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | May 05, 2023 | Dec. 31, 2022 | |
Goodwill [Line Items] | ||||||
Goodwill | $ 4,766,000 | $ 4,766,000 | $ 250,000 | |||
Loss on impairment | 0 | $ 0 | ||||
Amortization expense | 1,297,000 | $ 1,793,000 | 2,534,000 | $ 3,597,000 | ||
Southern Star | ||||||
Goodwill [Line Items] | ||||||
Goodwill | 4,516,000 | 4,516,000 | $ 4,516,000 | |||
Amortization expense | $ 59,000 | $ 0 | ||||
Southern Star | Noncompete Agreements | ||||||
Goodwill [Line Items] | ||||||
Useful like (in years) | 3 years | 3 years |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Other intangible assets | $ 1,006 | $ 0 |
Southern Star | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Intangible Assets | 1,065 | 0 |
Accumulated Amortization | (59) | 0 |
Other intangible assets | 1,006 | 0 |
Southern Star | Noncompete Agreements | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Intangible Assets | 1,065 | 0 |
Accumulated Amortization | (59) | 0 |
Other intangible assets | $ 1,006 | $ 0 |
Notes Payable - Additional Info
Notes Payable - Additional Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||
Mar. 10, 2023 USD ($) | Jan. 31, 2023 USD ($) a | Feb. 10, 2022 USD ($) a | Oct. 01, 2018 | Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2023 USD ($) loan | Jun. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) loan | Mar. 29, 2021 USD ($) | |
Short-term Debt [Line Items] | ||||||||||
Outstanding balance | $ 265,922 | $ 265,922 | $ 315,972 | |||||||
Cash management account | 3,262 | 3,817 | ||||||||
Excess cash flow reserve | 5,137 | 223 | ||||||||
Interest expense incurred | 4,733 | $ 2,655 | 10,803 | $ 4,738 | ||||||
Deferred loan cost write-off | 541 | $ 0 | ||||||||
Interest expense payable | 1,857 | 1,857 | 1,117 | |||||||
Fort Worth, Texas | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Proceeds from sale of real estate | $ 4,317 | |||||||||
Area of real estate property (in square feet) | a | 17 | 17 | ||||||||
Mitchelldale | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Proceeds from sale of real estate | $ 40,510 | |||||||||
Estimate of Fair Value Measurement | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Debt instrument, fair value disclosure | 263,545 | 263,545 | 308,286 | |||||||
Hartman SPE, LLC | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Outstanding balance | $ 250,386 | $ 250,386 | $ 259,000 | |||||||
East West Bank Master Credit Facility Agreement II | Revolving Credit Facility | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Increase in credit facility, modification | $ 1,625 | |||||||||
Secured debt | Richardson Heights, Cooper Street, Bent Tree Green And Mitchelldale Property Loans | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Number of term loans outstanding | loan | 4 | 4 | ||||||||
Amortization term | 27 years | |||||||||
Fixed interest rate | 4.61% | 4.61% | ||||||||
Outstanding balance | $ 0 | $ 0 | $ 39,324 | |||||||
Notes Payable to Banks | Hartman SPE, LLC | London Interbank Offered Rate (LIBOR) 1 | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Basis spread | 1.80% | |||||||||
Notes Payable to Banks | Maximum | Hartman SPE, LLC | London Interbank Offered Rate (LIBOR) 1 | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Basis spread | 3.75% | |||||||||
Secured Promissory Notes | East West Bank | ||||||||||
Short-term Debt [Line Items] | ||||||||||
Outstanding balance | $ 2,645 | |||||||||
Proceeds from loans | $ 2,528 |
Notes Payable - Summary of Mort
Notes Payable - Summary of Mortgage Notes Payable (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 265,922 | $ 315,972 |
Less: unamortized deferred loan costs | (220) | (1,112) |
Long-term debt | $ 265,702 | 314,860 |
Richardson Heights | ||
Debt Instrument [Line Items] | ||
Rate | 4.61% | |
Long-term debt, gross | $ 0 | 15,556 |
Cooper Street | ||
Debt Instrument [Line Items] | ||
Rate | 4.61% | |
Long-term debt, gross | $ 0 | 6,764 |
Bent Tree Green | ||
Debt Instrument [Line Items] | ||
Rate | 4.61% | |
Long-term debt, gross | $ 0 | 6,764 |
Mitchelldale | ||
Debt Instrument [Line Items] | ||
Rate | 4.61% | |
Long-term debt, gross | $ 0 | 10,240 |
Hartman SPE, LLC | ||
Debt Instrument [Line Items] | ||
Rate | 5.55% | |
Long-term debt, gross | $ 250,386 | 259,000 |
Hartman XXI | ||
Debt Instrument [Line Items] | ||
Rate | 10% | |
Long-term debt, gross | $ 15,336 | 17,168 |
Fort Worth - EWB | ||
Debt Instrument [Line Items] | ||
Rate | 8.50% | |
Long-term debt, gross | $ 0 | 480 |
Southern Star | ||
Debt Instrument [Line Items] | ||
Rate | 10% | |
Long-term debt, gross | $ 200 | $ 0 |
Notes Payable - Amortization of
Notes Payable - Amortization of Loan Costs (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Debt Disclosure [Abstract] | ||
Deferred loan costs | $ 5,030 | $ 5,471 |
Less: deferred loan cost accumulated amortization | (4,810) | (4,359) |
Total cost, net of accumulated amortization | $ 220 | $ 1,112 |
Income Per Share (Details)
Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Numerator: | ||||
Net income (loss) attributable to common stockholders, basic | $ 1,722 | $ (4,666) | $ 24,376 | $ (4,651) |
Net income (loss) attributable to common stockholders, diluted | $ 1,722 | $ (4,666) | $ 24,376 | $ (4,651) |
Denominator: | ||||
Weighted average number of common shares outstanding, basic (in shares) | 34,895 | 34,976 | 34,895 | 35,020 |
Dilutive effect of restricted common shares (in shares) | 302 | 0 | 302 | 0 |
Weighted average number of common shares outstanding, diluted (in shares) | 35,197 | 34,976 | 35,197 | 35,020 |
Basic and diluted income per common share: | ||||
Net income (loss) attributable to common stockholders per share, basic (in dollars per share) | $ 0.05 | $ (0.13) | $ 0.70 | $ (0.13) |
Net income (loss) attributable to common stockholders per share, diluted (in dollars per share) | $ 0.05 | $ (0.13) | $ 0.70 | $ (0.13) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |||||
Provision for income taxes | $ 6,185,000 | $ 0 | $ 6,185,000 | $ 0 | |
Deferred tax benefit | 0 | $ 0 | |||
Deferred tax asset | $ 0 | $ 0 | $ 0 |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
May 05, 2023 | Apr. 06, 2023 | May 31, 2016 | Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | Mar. 29, 2021 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | ||||||||||
Repayments to affiliates | $ 1,832,000 | $ 1,870,000 | ||||||||
Long-term debt, gross | $ 265,922,000 | 265,922,000 | $ 315,972,000 | |||||||
Note receivable - related party | 1,726,000 | 1,726,000 | 1,726,000 | |||||||
Variable interest entity, reporting entity involvement, maximum loss exposure, amount | $ 45,322,000 | $ 45,322,000 | 24,276,000 | |||||||
Southern Star | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Shares acquired (in shares) | 301,659 | |||||||||
Southern Star | Restricted Stock Units (RSUs) | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Shares acquired (in shares) | 301,659 | |||||||||
Revolving Credit Facility | East West Bank Master Credit Facility Agreement II | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Increase in credit facility, modification | $ 1,625,000 | |||||||||
Revolving Credit Facility | East West Bank Master Credit Facility Agreement II | Hartman vREIT XXI | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Increase in credit facility, modification | $ 1,625,000 | |||||||||
Hartman SPE, LLC | Common Stock | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Ownership interest | 2.47% | |||||||||
Affiliated Entity | Hartman vREIT XXI | Silver Star Properties REIT, Inc. | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Investment owned (in shares) | 1,198,228 | 1,198,228 | ||||||||
Affiliated Entity | Hartman vREIT XXI | Operating Partnership | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Investment owned (in shares) | 60,178 | 60,178 | ||||||||
Related Party | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Notes payable, net | $ 15,336,000 | $ 15,336,000 | 17,168,000 | |||||||
Related Party | Southern Star | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Notes payable, net | $ 7,050,000 | |||||||||
Hartman vREIT XXI | Affiliated Entity | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Long-term debt, gross | $ 15,336,000 | $ 15,336,000 | 17,168,000 | |||||||
Hartman vREIT XXI | Affiliated Entity | Loan From Related Party To Company | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Debt instrument, face amount | $ 10,000,000 | |||||||||
Stated interest rate | 10% | 10% | ||||||||
Intercompany advances | 7,168,000 | |||||||||
Repayments to affiliates | $ 1,832,000 | |||||||||
Interest expense | $ 382,000 | $ 225,000 | 790,000 | $ 356,000 | ||||||
Hartman vREIT XXI | Affiliated Entity | Loan From Related Party To Company | Unsecured Promissory Note To Hartman Short Term Income Properties XX Inc | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Stated interest rate | 10% | |||||||||
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 | |||||||||
Loans receivable, face amount | $ 8,820,000 | |||||||||
Note receivable - related party | 1,726,000 | 1,726,000 | 1,726,000 | |||||||
Hartman TRS, Inc. | Affiliated Entity | Loan from Company to related party | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Origination fees, percentage | 2% | |||||||||
Loans receivable, interest rate | 10% | |||||||||
Hartman TRS, Inc. | Affiliated Entity | Loan from Company to Related Party | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Writeoff of interest receivable | $ 1,022,000 | |||||||||
Interest income | 0 | $ 43,000 | ||||||||
Haddock Investments, LLC | Related Party | Southern Star | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Notes payable, net | $ 2,115,000 | $ 2,115,000 |
Stockholders' Equity - Narrativ
Stockholders' Equity - Narrative (Details) | 6 Months Ended | |
Jun. 30, 2023 vote $ / shares shares | Dec. 31, 2022 $ / shares shares | |
Class of Stock [Line Items] | ||
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 |
Number or votes per share | vote | 1 | |
Preferred stock, shares issued (in shares) | 1,000 | 1,000 |
Preferred stock, shares outstanding (in shares) | 1,000 | 1,000 |
Convertible Preferred Stock | ||
Class of Stock [Line Items] | ||
Preferred stock, shares issued (in shares) | 1,000 | 300 |
Preferred stock, shares outstanding (in shares) | 1,000 | |
Conversion terms, cumulative annual return on issue price, percentage | 6% | |
Conversion terms, performance threshold | 6% | |
Conversion terms, percentage of excess enterprise value | 15% | |
Convertible Preferred Stock | Wholly-Owned Subsidiary | ||
Class of Stock [Line Items] | ||
Preferred stock, shares outstanding (in shares) | 300 |
Stockholders' Equity - Distribu
Stockholders' Equity - Distributions (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jun. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2023 | Dec. 31, 2022 | |
Equity [Abstract] | ||||||||
Distributions per Common Share (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 | $ 0.128 | $ 0.112 | $ 0 | $ 0.240 |
Total Distributions | $ 0 | $ 0 | $ 0 | $ 0 | $ 4,500 | $ 3,958 | $ 0 | $ 8,458 |
Stock-based Compensation - Narr
Stock-based Compensation - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Apr. 06, 2023 | Jun. 30, 2023 | Jun. 30, 2023 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Shares authorized (in shares) | 4,422,748 | ||
Performance Shares | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Vesting period (in years) | 10 years | ||
Term to redeem grants (in years) | 3 years | ||
Maximum term to pay for grants | 90 days | ||
Percentage of income allocation received (as a percent) | 10% | ||
Vesting percentage | 33.33% | ||
Stock-based compensation expense | $ 55 | ||
Fair value of grants | $ 928 |
Stock-based Compensation - Perf
Stock-based Compensation - Performance Unit Activity (Details) - Performance Shares | 6 Months Ended |
Jun. 30, 2023 shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Grants in period (shares) | 4,422,748 |
Cancelled or expired (in shares) | (1,263,642) |
Outstanding (in shares) | 3,159,106 |
Stock-based Compensation - Prof
Stock-based Compensation - Profit Sharing Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | ||||
Maximum annual contributions per employee (as a percent) | 100% | |||
Discretionary contribution amount | $ 99 | $ 99 | ||
Stock matching contribution, liability | $ 2,006 | $ 2,006 | $ 1,808 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | 15 Months Ended | |||||
Apr. 25, 2022 | Mar. 24, 2022 | May 26, 2021 | Jun. 30, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2023 | Apr. 25, 2013 | |
Loss Contingencies [Line Items] | ||||||||
Litigation amount sought related to wholly owned properties of the Company | $ 6,731 | |||||||
Loss contingency, damages awarded in settlement | $ 7,871 | |||||||
Interest and attorney fees | $ 304 | $ 370 | ||||||
Tenant's share value | $ 1,490 | $ 2,155 | ||||||
Period after termination of initial public offering | 10 years | |||||||
Surety Bond | ||||||||
Loss Contingencies [Line Items] | ||||||||
Amount sought by plaintiff in litigation | $ 2,197 | |||||||
Loss contingency, damages awarded in settlement | $ 2,001 | |||||||
Pending Litigation | ||||||||
Loss Contingencies [Line Items] | ||||||||
Amount sought by plaintiff in litigation | $ 8,400 | |||||||
Litigation amount sought related to wholly owned properties of the Company | $ 7,600 |
Subsequent Events - Narrative (
Subsequent Events - Narrative (Details) - Subsequent Event $ in Thousands | Aug. 21, 2023 USD ($) shares | Aug. 02, 2023 USD ($) a | Jul. 19, 2023 USD ($) | Jul. 17, 2023 USD ($) | Aug. 21, 2025 shares | Aug. 21, 2024 shares |
Chief Executive Officer | ||||||
Subsequent Event [Line Items] | ||||||
Contractual term (in years) | 3 years | |||||
Annual base salary | $ 550 | |||||
Chief Executive Officer | Performance Shares | ||||||
Subsequent Event [Line Items] | ||||||
Shares authorized for issuance (in shares) | shares | 250,000 | |||||
Chief Executive Officer | Forecast | Performance Shares | ||||||
Subsequent Event [Line Items] | ||||||
Additional shares authorized (in shares) | shares | 450,000 | 300,000 | ||||
Harwin | ||||||
Subsequent Event [Line Items] | ||||||
Proceeds from sale of real estate | $ 5,100 | |||||
Spring Valley | ||||||
Subsequent Event [Line Items] | ||||||
Proceeds from sale of real estate | $ 5,625 | |||||
Grand Prairie, Texas | ||||||
Subsequent Event [Line Items] | ||||||
Proceeds from sale of real estate | $ 1,800 | |||||
Area of real estate property (in square feet) | a | 10 |