Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Jun. 30, 2016 | |
Document and Entity Information: | ||
Entity Registrant Name | Hartman vREIT XXI, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Trading Symbol | hart | |
Amendment Flag | true | |
Entity Central Index Key | 1,654,948 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 1,505,454 | |
Entity Public Float | $ 12,810,985 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | No | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Description | republish financial statements |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
ASSETS | ||
Real estateInvestment property at cost | $ 7,257,174 | |
Real estate investment property accumulated depreciation | (112,685) | |
Real estate investment property at cost, net | 7,144,489 | |
Cash and cash equivalents | 2,152,430 | $ 97,810 |
Deferred lease commissions and loan costs, net | 282,050 | 320,775 |
Lease commissions (net) | 20,730 | |
Accrued rent and accounts receivable, net | 27,904 | |
Prepaid expenses and other assets | 50,285 | |
Due from related parties | 440,768 | |
Total assets | 16,682,007 | 1,795,024 |
LIABILITIES | ||
Note payable | 3,474,707 | |
Accounts payable and accrued expenses | 329,511 | 57,240 |
Due to related parties | 19,107 | |
Subscriptions for common stock | 282,045 | 320,000 |
Tenants' security deposits | 52,208 | |
Total liabilities | 4,138,471 | 396,347 |
Special Limited Partnership Interests | 1,000 | 1,000 |
Common Stock A | 15,055 | 1,608 |
Common StockB | 653 | |
Additional paid-in capital | 13,986,596 | 1,452,653 |
Accumulated distributions and net income | (1,459,768) | (56,584) |
Total stockholders' equity | 12,542,536 | 1,397,677 |
Total liabilities and total stockholders' equity | $ 16,682,007 | $ 1,795,024 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 4 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Revenues | ||
Rental revenues | $ 183,067 | $ 472,308 |
Tenant reimbursements and other revenues | 64,917 | 194,805 |
Total revenues | 247,984 | 667,112 |
Expenses | ||
Property operating expenses | 40,965 | 119,533 |
Asset management and acquisition fees | 13,219 | 37,012 |
Organization and offering costs | 23,462 | 872,440 |
Real estate taxes and insurance | 38,593 | 108,457 |
Depreciation and amortization | 46,271 | 112,685 |
General and administrative | 35,301 | 113,089 |
Interest expense | 39,625 | 106,464 |
Total expenses | 237,435 | 1,469,680 |
Loss from operations | 10,549 | (802,568) |
Loss on remeasurement | (2,194) | |
Equity in earnings of unconsolidated joint venture | (63,047) | (128,250) |
Less net income attributable to non-controlling interest | (5,400) | |
Net loss | $ (52,498) | $ (938,412) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (938,412) | |
Adjustments to reconcile net loss to cash provided by (used in) operating activities: | ||
Depreciation and amortization expense | 112,685 | |
Deferred loan and leasing commission costs amortization | 16,074 | |
Equity in earnings of unconsolidated joint venture | 128,250 | |
loss on remeasurement | 2,194 | |
Bad debt provision | 13,605 | |
(Increase) decrease accrued rent and accounts receivable | (31,048) | |
Deferred leasing commmission costs | (21,903) | |
(Increase) decrease prepaid expenses and other assets | (45,401) | |
Increase (decrease) accounts payable and accrued expenses | 140,840 | |
Increase (decrease) on due to related parties | (547,633) | |
Net cash provided by (used in) operating activities | (1,151,999) | |
Cash flows from investing activities: | ||
Additions to real estate | (27,423) | |
Net cash provide from (used in) investing activities | (8,941,903) | |
Cash flows from financing activities: | ||
Dividend distributions paid in cash | (194,058) | |
Payment of selling commissions | (1,202,355) | |
Escrowed investor proceeds | 38,725 | $ (11,000) |
Change in subscriptions for common stock | (37,955) | 11,000 |
Proceeds from insurance premium finance note | 13,544,165 | |
Net cash provided by (used in) financing activities | 12,148,522 | |
Net change in cash | 2,054,620 | |
Cash and cash equivalents, beginning of period | 97,810 | 201,005 |
Cash and cash equivalents, end of period | $ 2,152,430 | $ 201,005 |
Organization and Business
Organization and Business | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Organization and Business | Organization and Business Hartman vREIT XXI, Inc. (the Company) was formed on September 3, 2015 as a Maryland corporation and intends to qualify as a real estate investment trust (REIT). The Company expects to use the proceeds from its initial public offering to invest in a portfolio of commercial real estate properties that offer a blend of current and potential income based on in place occupancy plus relatively significant potential for growth in income and value from re-tenanting, repositioning or redevelopment. As discussed in Note 9, the Company was initially capitalized by the sale of 22,100 shares of common stock, at an issue price of $9.05 per share, to Hartman Advisors, LLC, an affiliate of the Companys Sponsor (as defined below) on September 30, 2015. The Companys fiscal year end is December 31. Effective June 24, 2016, the Company commenced its initial public offering of up to a maximum of $250,000,000 in shares of its common stock to the public in its primary offering at $10.00 per share, with discounts available to certain purchasers, and up to $19,000,000 in shares of its common stock to its stockholders pursuant to its distribution reinvestment plan at $9.50 per share. On February 6, 2017, the Company amended its registration statement on Form S-11, providing for its public offering of up to $269,000,000 in shares of Class A common stock and Class T common stock, was declared effective by the SEC and the Company commenced offering shares of its Class A and Class T common stock. In its initial public offering, the Company is offering to the public up to $250,000,000 in any combination of shares of Class A and Class T common stock and up to $19,000,000 in shares of Class A and Class T common stock to stockholders pursuant to its distribution reinvestment plan. Class A common stock is being offered to the public at an initial price of $10.00 per share and to stockholders at an initial price of $9.50 per share for Class A common stock purchased pursuant to the distribution reinvestment plan. Class T common stock is being offered to the public at an initial price of $9.60 per share and to stockholders at an initial price of $9.12 per share for Class T common stock purchased pursuant to the distribution reinvestment plan. The Companys board of directors may, in its sole discretion and from time to time, change the price at which the Company offers shares to the public in the primary offering or pursuant to its distribution reinvestment plan to reflect changes in estimated value per share and other factors that the board of directors deems relevant. Pursuant to the terms of the Companys initial public offering (the Offering), subscription proceeds were held in an escrow account until the Company raised the minimum offering amount of $1,000,000. On December 1, 2016, the Company raised the minimum offering amount and the subscription proceeds held in escrow as of that date were released to the Company. The Companys advisor is Hartman XXI Advisors, LLC (the Advisor), a Texas limited liability company and wholly owned subsidiary of Hartman Advisors, LLC. Hartman Income REIT Management, Inc., an affiliate of the Advisor, is the Companys sponsor and property manager (Sponsor or Property Manager). Subject to certain restrictions and limitations, the Advisor is responsible for managing the Companys affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company. Substantially all the Companys business will be conducted through Hartman vREIT XXI Operating Partnership, L.P., a Texas limited partnership (the OP). The Company is the sole general partner of the OP. The initial limited partners of the OP are Hartman vREIT XXI Holdings LLC, a wholly owned subsidiary of the Company (XXI Holdings), and Hartman vREIT XXI SLP LLC (SLP LLC), a wholly owned subsidiary of Hartman Advisors, LLC. SLP LLC has invested $1,000 in the OP in exchange for a separate class of limited partnership interests (the Special Limited Partnership Interests). As the Company accepts subscriptions for shares, it will transfer substantially all the net proceeds of the Offering to the OP as a capital contribution. The partnership agreement provides that the OP will be operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the OP will not be classified as a publicly traded partnership for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), which classification could result in the OP being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the OP in acquiring and operating real properties, the OP will pay all the Companys administrative costs and expenses and such expenses will be treated as expenses of the OP. As of September 30, 2017, we had accepted subscriptions for, and issued 1,505,454 shares of our Class A common stock, including 16,420 shares issued pursuant to our distribution reinvestment plan, and 65,348 shares of our Class T common stock in our initial public offering, including 542 shares issued pursuant to our distribution reinvestment plan resulting in gross offering proceeds of $15,004,383. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2016 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of have been prepared by the Company in accordance with accounting principles generally accepted in the United States (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of September 30, 2017, and the results of its consolidated operations for the three and nine months ended September 30, 2017 and 2016, the consolidated statement of stockholders equity for the nine months ended September 30, 2017 and the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016. The results of the nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2016. The Companys consolidated financial statements include the Companys accounts and the accounts of the OP, Hartman Village Pointe, LLC and XXI Holdings, the subsidiaries over which the Company has control. All intercompany balances and transactions are eliminated in consolidation. 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of September 30, 2017 Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, accrued rent and accounts receivable, accounts payable and accrued expenses, note payable, net and due from (to) related parties. The Company considers the carrying value, other than note payable, net, to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its note payable approximates fair value. Revenue Recognition The Companys leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purpose of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (ASC) 605-10-S99, "Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursement and other revenues in the period the related costs are incurred. Investment in Unconsolidated Joint Venture The Companys investment in unconsolidated joint venture in Hartman Village Pointe was accounted for under the equity method at December 31, 2016. Effective February 8, 2017, the Company owns all of Hartman Village Pointe. On April 11, 2017, the Company entered into a membership interest purchase agreement with Hartman XX Operating Partnership (XX OP), the operating partnership of Hartman Short Term Income Properties XX, Inc., a related party, pursuant to which the Company may acquire up to $10,000,000 of XX OPs equity ownership in Hartman Three Forest Plaza LLC. As of September 30, 2017, the Company has acquired an approximate 37.6% equity interest in Hartman Three Forest Plaza LLC for $6,700,000. On October 19, 2017, the Company acquired an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%. The Companys investment in Hartman Three Forest Plaza LLC is accounted for under the equity method. Real Estate Allocation of Purchase Price of Acquired Assets Upon acquisition, the purchase price of properties is allocated to the tangible assets acquired, consisting of land, buildings and improvements, any assumed debt and asset retirement obligations, if any, based on their fair values. Acquisition costs, including acquisition fees paid to our advisor, are capitalized as part of the purchase price. Initial valuations are subject to change during the measurement period, but the measurement period ends as soon as the information is available. The measurement period shall not exceed one year from the acquisition date. Land and building and improvement fair values are derived based upon the Companys estimate of fair value after giving effect to estimated replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow analyses or similar methods. Any difference between the fair value of the property acquired and the purchase price of the property is recorded as goodwill or gain (loss) on acquisition of the property. The Company determines the fair value of any assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense. In allocating the purchase price of each of the Companys properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. The Company uses Level 3 inputs to value acquired properties. Many of these estimates are obtained from independent third party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates require judgment and are subject to being imprecise; accordingly, if different estimates and assumptions were derived, the valuation of the various categories of the Companys properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Companys consolidated financial statements. These variances could be material to the Companys results of operations and financial condition. The Company has early adopted ASU No. 2017-01, Clarifying the Definition of a Business. In accordance with the guidance provided by this accounting pronouncement, provided that the acquisition of real estate is determined to be the acquisition of an asset versus the acquisition of a business, the allocation of purchase price will not include an allocation to intangible assets, in particular in-place lease value. Further, the Company will capitalize acquisition fees and expenses associated with real estate asset acquisitions versus recording such fees as an expense in the period incurred in connection with the acquisition of a business. The effect of adoption in the accompanying consolidated financial statements, is that the acquisition fee payable to advisor in the amount of $33,750 for the year ended December 31, 2016 and $142,500 for the nine months ended September 30, 2017, which would have been expensed if the acquisition of the Company joint venture investment and subsequent purchase of the equity interest of our former joint venture partner were considered an acquisition of a business, have been capitalized and added to the unconsolidated joint venture investment and real estate assets at cost as of December 31, 2016 and September 30, 2017, respectively. 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. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of the Companys real estate assets as of September 30, 2017. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market Approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost Approach: Amount required to replace the service capacity of an asset (replacement cost). Income Approach: Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Companys estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Accrued Rent and Accounts Receivable Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Organization and Offering Costs Prior to achieving the minimum offering amount of $1,000,000, organization and offering costs of the Company were incurred by Advisor on behalf of the Company. Such costs include legal, accounting, printing and other offering expenses, including marketing, salaries and direct expenses of the Advisors employees and employees of the Advisors affiliates and others. Under the terms of the advisory agreement between the Company and the Advisor, upon the satisfaction of the minimum offering amount and the release to the Company of all subscription proceeds held in escrow, the Company would be obligated to reimburse the Advisor for organization and offering costs incurred by Advisor in connection with the Offering. Effective December 31, 2016, the advisory agreement between the Company and the Advisor was amended to provide that the liability of the Company to the Advisor for reimbursement of offering and organization costs of the Company incurred by the Advisor prior to completion of the minimum offering, shall not be reimbursable to the Advisor until the Companys receipt of gross offering proceeds in its initial public offering is at least $10,000,000. As of September 30, 2017, the Company has received $15,004,383 in gross offering proceeds. As of September 30, 2017, total organization and offering costs incurred for the offering amounted to $928,357 of which the Advisor has incurred organization and offering costs of $877,443 on behalf of the Company. The Advisor has been reimbursed $824,514 for organization and offering costs which is limited to the total organizational and offering costs incurred by the Company (including selling commissions, dealer manager fees and all other underwriting compensation) not exceeding 15% of the aggregate gross proceeds from the sale of the shares of common stock sold in the Offering. Organization costs, when recorded by the Company, are expensed as incurred, and offering costs, which include selling commissions, dealer manager fees and all other underwriting compensation, are deferred and charged to stockholders equity as such amounts are reimbursed or paid by the Advisor, the dealer manager or their affiliates from gross offering proceeds. For the three and nine months ended September 30, 2017 and 2016, such costs totaled $23,462 and $0 and $872,440 and $0, respectively. Advertising The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. Advertising costs totaled $793 and $0 for the three months ended September 30, 2017 and 2016, respectively. Advertising costs totaled $5,527 and $0 for the nine months ended September 30, 2017 and 2016, respectively. Income Taxes The Company intends to make an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing in the taxable year ending December 31, 2017. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90 percent of its REIT taxable income (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.) REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. Prior to qualifying to be taxed as a REIT, the Company is subject to normal federal and state corporation income taxes. The Company accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company records a valuation allowance for net deferred tax assets that are not expected to be realized. For the three months ended September 30, 2017 and 2016, the Company had net income of $(52,498) and $0, respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred a net loss of $938,412 and $0, respectively. The Company does not anticipate forming any taxable REIT subsidiaries or otherwise generating future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance in that no future taxable income is expected. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements. Only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the Companys tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions as of September 30, 2017 and December 31, 2016, respectively. Earnings Per Share The computations of basic and diluted earnings per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Companys potentially dilutive securities include special limited partnership interests see Note 11. For the three and nine months ended September 30, 2017 and 2016, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and nine months ended September 30, 2017 and 2016 because no shares are issuable. Concentration of Risk The Company maintains cash accounts in one U.S. financial institution. The terms of these deposits are on demand to minimize risk. The balances of these accounts may exceed the federally insured limits. No losses have been incurred in connection with these deposits. Major tenants are defined as those tenants which individually comprise more than 10% of the Companys total rental revenues. The following four individual tenants of the Village Pointe property each represent more than 10% of total rental revenues for the nine months ended September 30, 2017: Tenant Name Annualized Rental Revenue Percentage of Total Annualized Rental Revenue Initial Lease Date Lease Expiration Year Mattress Firm $119,915 17.6% 10/2013 2018 SA Bike World 98,518 14.5% 11/2016 2026 Top Brass, Inc. 96,034 14.1% 11/2015 2021 ABDEP, LP 81,072 11.9% 1/2015 2020 Total $395,539 58.1% Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to January 1, 2018 with early adoption beginning January 1, 2017. We have begun to evaluate each of our revenue streams under the new model. Based on preliminary assessments, we do not expect the adoption of ASU No. 2014-09 to have a material effect on our consolidated financial position or our consolidated results of operations. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities, which enhances the reporting requirements surrounding the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. ASU No. 2016-01 is effective for our fiscal year commencing on January 1, 2018. Based on preliminary assessments, we do not expect the adoption of ASU No. 2016-01 to have a material effect on our consolidated financial position or our consolidated results of operations. In February 2016, the FASB issued ASU No. 2016-02, Leases, which changes lessee accounting to reflect the financial liability and right-of-use asset that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for our fiscal year commencing on January 1, 2019, but early adoption is permitted. Based on preliminary assessments, we do not expect the adoption of ASU No. 2016-02 to have a material effect on our consolidated financial position or our consolidated results of operations. In October 2016, the FASB issued ASU No. 2016-17, Interest Held Through Related Parties That Are Under Common Control, which amends the accounting guidance when determining the treatment of certain VIEs to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. We have adopted this guidance for all periods presented. In November 2016, the FASB issued ASU No. 2016-18, Classification of Restricted Cash, which addresses the Statement of Cash Flow classification and presentation of restricted cash transactions. ASU No. 2016-18 is effective for our fiscal year commencing on January 1, 2018. The effect of this amendment is to be applied retrospectively and early adoption is permitted. We expect to adopt ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. Based on preliminary assessments, we do not expect the adoption of ASU No. 2016-18 to have a material effect on our consolidated financial position or our consolidated results of operations. |
Real Estate
Real Estate | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Real Estate | Real Estate The Companys real estate assets as of September 30, 2017 and December 31, 2016 consisted of the following: September 30, 2017 December 31, 2016 Land $1,762,500 $ - Buildings and improvements 5,494,674 - 7,257,174 - Less accumulated depreciation and amortization (112,685) - Total real estate assets $7,144,489 $- Depreciation expense for the three months ended September 30, 2017 and 2016 was $46,271 and $0, respectively. Depreciation expense for the nine months ended September 30, 2017 and 2016 was $112,685 and $0, respectively. Acquisition fees incurred were $142,500 and $0 for the nine months ended September 30, 2017 and 2016, respectively. The acquisition fee has been capitalized and added to the real estate assets, at cost, in the accompanying consolidated balance sheets. Asset management fees incurred were $13,219 and $0 for the three months ended September 30, 2017 and 2016, respectively and $37,013 and $0 for the nine months ended September 30, 2017 and 2016, respectively. Asset management fees are captioned as such in the accompanying consolidated statements of operations. On November 14, 2016, the Company contributed $100,000 to Hartman Village Pointe, LLC (Hartman Village Pointe) in exchange for an initial 2.65% membership interest in Hartman Village Pointe, a joint venture between the Company and Hartman XX Operating Partnership (Hartman XX LP), the operating partnership of Hartman XX. Pursuant to the terms of a membership purchase agreement between the Company and Hartman XX LP, the Company may from time to time acquire up to all of Hartman XX LPs remaining membership interest in Hartman Village Pointe at a price equal to Hartman XX LPs investment cost. As of December 31, 2016, the Companys total equity investment in Hartman Village Pointe was $1,350,000, representing an approximate 35.8% membership interest. As of January 19, 2017, the Company owned more than 50% of Hartman Village Pointe and as of that date, and from that point forward Hartman Village Pointe is included in these consolidated financial statements. As of February 8, 2017, the Company owned 100% of Hartman Village Pointe. The Company re-measured its interest, with a carrying value of $3,764,024 as of February 8, 2017. The acquisition date fair value of the previous equity interest in the joint venture was $3,761,830. The Company recognized a loss of $2,194 as a result of revaluing its prior equity interest held before the acquisition. The loss is reflected as loss on re-measurement in the consolidated statements of operations. The following table summarizes the fair value of the assets acquired and the liabilities assumed based upon the Companys purchase price allocations of the Companys 2017 property acquisition as of the respective acquisition date: Assets acquired: Real estate assets $7,050,000 Accounts receivable and other assets 273,352 Total assets 7,323,352 Liabilities assumed: Note payable (3,459,805) Accounts payable and accrued expenses (49,509) Security deposits (52,208) Total liabilities assumed (3,561,522) Fair value of net assets acquired $3,761,830 |
Investment in Unconsolidated Jo
Investment in Unconsolidated Joint Venture | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Investment in Unconsolidated Joint Venture | Investment in unconsolidated joint venture On April 11, 2017, the Company entered into a membership interest purchase agreement with Hartman XX Limited Partnership (Hartman XX LP), the operating partnership of Hartman Short Term Income Properties XX, Inc., an affiliate of the Company. Pursuant to the terms of a membership interest purchase agreement between the Company and Hartman XX LP, the Company may acquire up to $10,000,000 of the equity membership interest of Hartman XX LP in Hartman Three Forest Plaza, LLC (Three Forest Plaza LLC). As of September 30, 2017, the Company has acquired an approximately 37.6% equity interest in Three Forest Plaza LLC for $6,700,000. On October 19, 2017, the Company acquired an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%. Equity in earnings of the unconsolidated joint venture were $88,378 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $(128,250) and $0 for the nine months ended September 30, 2017 and 2016, respectively. Equity in earnings of unconsolidated joint venture is captioned as such in the accompanying consolidated statements of operations. |
Accrued Rent and Accounts Recei
Accrued Rent and Accounts Receivable, Net | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Accrued Rent and Accounts Receivable, Net | Accrued Rent and Accounts Receivable, net Accrued rent and accounts receivable, net, consisted of the following: September 30, 2017 December 31, 2016 Tenant receivables $13,912 $ - Accrued rent 27,597 - Allowance for uncollectible accounts (13,605) - Accrued rents and accounts receivable, net $27,904 $- As of September 30, 2017 and December 31, 2016, the Company had an allowance for uncollectible accounts of $13,605 and $0, respectively. For the three months ended September 30, 2017 and 2016, the Company recorded bad debt expense in the amount of $13,605 and $0, respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenants credit-worthiness. For the nine months ended September 30, 2017 and 2016, the Company did not record any bad debt write-off. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations. |
Note Payable, Net
Note Payable, Net | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Note Payable, Net | Note Payable, net The Companys wholly owned subsidiary, Hartman Village Pointe, LLC, is a party to a $3,525,000, three-year mortgage loan agreement with a bank. The mortgage loan is secured by the Village Pointe property. Unamortized deferred loan costs at the time of the acquisition, on February 8, 2017, of Hartman Village Pointe, LLC were $65,195. The interest rate is one-month LIBOR plus 2.75%. The loan is payable in monthly installments of interest only until the initial maturity date which is December 14, 2019. Thereafter, if the loan is extended pursuant to the terms of the loan agreement, the loan will be payable in monthly installments of principal and interest. The interest rate as at September 30, 2017 was 3.9783%. Interest expense for the three months ended September 30, 2017 and 2016 was $39,625 and $0, respectively, including $5,588 and $0 of deferred loan cost amortization. Interest expense for the nine months ended September 30, 2017 and 2016 was $106,464 and $0, respectively, including $16,074 and $0 of deferred loan cost amortization. Unamortized deferred loan costs were $50,294 and $0 as of September 30, 2017 and December 31, 2016, respectively. Interest expense of $6,233 and $0 was payable as of September 30, 2017 and December 31, 2016, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. |
Related Party Arrangements
Related Party Arrangements | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Related Party Arrangements | Related Party Arrangements The Advisor is a wholly owned subsidiary of Hartman Advisors LLC, a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. and Subsidiaries, of which approximately 16% of the voting stock is owned by Allen R. Hartman who is the Chief Executive Officer and Chairman of the Board of Directors. The Advisor and certain affiliates of the Advisor will receive fees and compensation in connection with the Offering, and the acquisition, management and sale of the Companys real estate investments. In addition, in exchange for $1,000, the OP has issued the Advisor a separate, special limited partnership interest, in the form of Special Limited Partnership Interests. See Note 11 (Special Limited Partnership Interest) below. The Advisor will receive reimbursement for organizational and offering expenses incurred on the Companys behalf, but only to the extent that such reimbursements do not exceed actual expenses incurred by the Advisor and would not cause the cumulative selling commission, the dealer manager fee and other organization and offering expenses borne by the Company to exceed 15.0% of gross offering proceeds from the sale of shares in the Offering. The Advisor, or its affiliates, will receive an acquisition fee equal to 2.5% of the cost of each investment the Company acquires, which includes the amount actually paid or allocated to fund the purchase, development, construction or improvement of each investment, including acquisition expenses and any debt attributable to each investment. Acquisition fees of $176,250 were earned by the Advisor as a result of the interests acquired in Hartman Village Pointe. The Advisor, or its affiliates, will receive a debt financing fee equal to 1.0% of the amount available under any loan or line of credit originated or assumed, directly or indirectly, in connection with the acquisition, development, construction, improvement of properties or other permitted investments, which will be in addition to the acquisition fee paid to the Advisor. No debt financing fees were earned by Advisor for the three and nine months ended September 30, 2017 and 2016. The Company pays Hartman Income REIT Management, Inc. (HIRM), an affiliate of the Advisor, property management fees equal to (i) 5% of the effective gross revenues of the managed properties for the management of retail centers, warehouse, industrial and flex properties and (ii) 3% or 4% of the effective gross revenues for office buildings, as applicable based upon the square footage and gross property revenues of the office buildings. The Company pays HIRM leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services in the same geographic location of the applicable property, provided that such fees will only be paid if a majority of the Companys board of directors, including a majority of its independent directors, determines that such fees are fair and reasonable in relation to the services being performed. HIRM may subcontract the performance of its property management and leasing duties to third parties and HIRM will pay a portion of its property management fee to the third parties with whom it subcontracts for these services. The Company reimburses the costs and expenses incurred by HIRM on the Companys behalf, including the wages and salaries and other employee-related expenses of all employees of HIRM or its subcontractors who are engaged in the operation, management, maintenance or access control of our properties, including taxes, insurance and benefits relating to such employees, and travel and other out-of-pocket expenses that are directly related to the management of specific properties. Other charges, including fees and expenses of third-party professionals and consultants, are reimbursed, subject to the limitations on fees and reimbursements contained in the Charter. If HIRM provides construction management services related to the improvement or finishing of tenant space in the Companys real estate properties, the Company pays HIRM a construction management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project; provided, however, that the Company will only pay a construction management fee if a majority of the Companys board of directors, including a majority of its independent directors, determines that such construction management fee is fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties. The Company pays the Advisor a monthly asset management fee equal to one-twelfth of 0.75% of the higher of (i) the cost or (ii) the value of all real estate investments the Company acquires. If Advisor or affiliate provides a substantial amount of services, as determined by the Companys independent directors, in connection with the sale of one or more assets, the Company will pay the Advisor a disposition fee equal to (1) in the case of the sale of real property, the lesser of: (A) one-half of the aggregate brokerage commission paid (including the disposition fee) or, if none is paid, the amount that customarily would be paid, or (B) 3% of the sales price of each property sold, and (2) in the case of the sale of any asset other than real property, 3% of the sales price of such asset. The Company will reimburse the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that, commencing four fiscal quarters after the Companys acquisition of its first asset, the Company will not reimburse the Advisor for any amount by which its operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of: (1) 2% of the Companys average invested assets (as defined in the Charter), or (2) 25% of the Companys net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Companys assets for that period. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of this limitation if a majority of the Companys independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the three months ended September 30, 2017 and 2016, the Company incurred property management fees and reimbursable costs of $7,128 and $0 payable to the Property Manager and asset management fees of $13,219 and $0 payable to the Advisor. For the nine months ended September 30, 2017 and 2016, the Company incurred property management fees and reimbursable costs of $14,747 and $0 payable to the Property Manager and asset management fees of $37,013 and $0 payable to the Advisor. As of September 30, 2017, the Company had $165,938 due from the Advisor and $274,830 due from Hartman Short Term Income Properties XX, Inc. and $5,123 due from other Hartman affiliates. As of December 31, 2016, the Company had $19,107 due to the Advisor. Mr. Jack Cardwell, an independent director, and his affiliates, have invested $2,265,000 for the purchase of 250,119 Class A common shares in the Company. As of September 30, 2017, Mr. Cardwell and his affiliates owned approximately 16% of the Companys outstanding stock. |
Earnings (loss) Per Share
Earnings (loss) Per Share | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Earnings (loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per share is computed using net income (loss) attributable to common stockholders and the weighted average number of common shares outstanding. Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Numerator: Net income (loss) attributable to common stockholders $(52,498) $ $(938,412) $ Denominator: Weighted average common shares outstanding 976,949 854,265 Basic and diluted loss per common share: $0.10 $ $(0.78) $ |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Stockholders' Equity | Stockholders Equity Under the Companys Articles of Amendment and Restatement (as amended and restated, the Charter), the Company has the authority to issue 900,000,000 shares of common stock, $0.01 per share par value, classified and designated as 850,000,000 shares of Class A common stock, 50,000,000 shares of Class T common stock, and 50,000,000 shares of preferred stock with a par value of $0.01 per share. On September 30, 2015, the Company sold 22,100 shares of common stock to Hartman Advisors, LLC at a purchase price of $9.05 per share for an aggregate purchase price of $200,005, which was paid in cash. The Companys board of directors is authorized to amend the Charter, without the approval of the Companys stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. Common Stock Shares of Class A and Class T common stock entitle the holders to one vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Companys board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. Neither Class A or Class T common stock have any preferences or preemptive conversion or exchange rights. Preferred Stock The board of directors, with the approval of a majority of the entire board of directors and without any action by the stockholders, may amend the charter from time to time to increase or decrease the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series. If the Company were to create and issue preferred stock or convertible stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock or convertible stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities and the removal of incumbent management. Stock-Based Compensation The Company awards vested restricted common shares to non-employee directors as compensation in part for their service as members of the board of directors of the Company. These shares are fully vested when granted. These shares may not be sold while an independent director is serving on the board of directors. For the three and nine months ended September 30, 2017 and 2016, the Company granted 0 shares of restricted common stock to independent directors as compensation for services. The Company recognized $0 stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016. Distributions The following table reflects the total distributions the Company has paid, including the total amount paid and amount paid per common share, in each indicated quarter: Quarter Paid Distribution per Common Share Total Distributions Paid 2017 3 rd $0.1875 $151,132 2 nd 0.1875 75,406 1 st 0.1875 45,961 Total $0.5625 $272,499 2016 4 th $0.1875 $- 3 rd 0.00 - 2 nd 0.00 - 1 st 0.00 - Total $0.1875 $- |
Incentive Plans
Incentive Plans | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Incentive Plans | Incentive Plans The Company has adopted a long-term incentive plan (the Incentive Award Plan) that provides for the grant of equity awards to employees, directors and consultants and those of the Companys affiliates. The Incentive Award Plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Companys affiliates selected by the board of directors for participation in the Incentive Award Plan. Stock options and shares of restricted common stock granted under the Incentive Award Plan will not, in the aggregate, exceed an amount equal to 5.0% of the outstanding shares of the Companys common stock on the date of grant or award of any such stock options or shares of restricted stock. Stock options may not have an exercise price that is less than the fair market value of a share of the Companys common stock on the date of grant. Shares of common stock will be authorized and reserved for issuance under the Incentive Award Plan. The Company has adopted an independent directors compensation plan (the Independent Directors Compensation Plan) pursuant to which each of the Companys independent directors will be entitled, subject to the plans conditions and restrictions, to receive an initial grant of 3,000 shares of restricted stock when the Company raises the minimum offering amount of $1,000,000 in the Offering. Each new independent director that subsequently joins the Companys board of directors will receive a grant of 3,000 shares of restricted stock upon his or her election to the Companys board of directors. The shares of restricted common stock granted to independent directors fully vest upon the completion of the annual term for which the director was elected. Subject to certain conditions, the non-vested shares of restricted stock granted pursuant to the Independent Directors Compensation Plan will become fully vested on the earlier to occur of (1) the termination of the independent directors service as a director due to his or her death or disability, or (2) a change in control of the Company. The Company recognized stock based compensation expenses of $0 with respect to the independent director compensation for the three and nine months ended September 30, 2017 and 2016. |
Special Limited Partnership Int
Special Limited Partnership Interest | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Special Limited Partnership Interest | Special Limited Partnership Interest Pursuant to the limited partnership agreement for the OP, SLP LLC, the holder of the Special Limited Partnership Interest, will be entitled to receive distributions equal to 15.0% of the OPs net sales proceeds from the disposition of assets, but only after the Companys stockholders have received, in the aggregate, cumulative distributions equal to their total invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such aggregated invested capital. In addition, the holder of the Special Limited Partnership Interest is entitled to receive a payment upon the redemption of the Special Limited Partnership Interests. Pursuant to the limited partnership agreement for the OP, the Special Limited Partnership Interests will be redeemed upon: (1) the listing of the Companys common stock on a national securities exchange; (2) the occurrence of certain events that result in the termination or non-renewal of the Companys advisory agreement with the Advisor (Advisory Agreement) other than by the Company for cause (as defined in the Advisory Agreement); or (3) the termination of the Advisory Agreement by the Company for cause. In the event of the listing of the Companys shares of common stock or a termination of the Advisory Agreement other than by the Company for cause, the Special Limited Partnership Interests will be redeemed for an aggregate amount equal to the amount that the holder of the Special Limited Partnership Interests would have been entitled to receive, as described above, if the OP had disposed of all of its assets at their fair market value and all liabilities of the OP had been satisfied in full according to their terms as of the date of the event triggering the redemption. Payment of the redemption price to the holder of the Special Limited Partnership Interests will be paid, at the holders discretion, in the form of (i) limited partnership interests in the OP, (ii) shares of the Companys common stock, or (iii) a non-interest bearing promissory note. If the event triggering the redemption is a listing of the Companys shares on a national securities exchange only, the fair market value of the assets of the OP will be calculated taking into account the average share price of the Companys shares for a specified period. If the event triggering the redemption is an underwritten public offering of the Companys shares, the fair market value will take into account the valuation of the shares as determined by the initial public offering price in such offering. If the triggering event of the redemption is the termination or non-renewal of the Advisory Agreement other than by the Company for cause for any other reason, the fair market value of the assets of the OP will be calculated based on an appraisal or valuation of the Companys assets. In the event of the termination or non-renewal of the Advisory Agreement by the Company for cause, all of the Special Limited Partnership Interests will be redeemed by the OP for the aggregate price of $1. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Notes | |
Commitments and Contingencies | Commitments and Contingencies Economic Dependency The Company is dependent on the Sponsor and the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the Companys real estate portfolio, and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other providers. Litigation The Company is subject to various claims and legal actions that arise in the ordinary course of business. Management of the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position of the Company. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
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, 2016 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of have been prepared by the Company in accordance with accounting principles generally accepted in the United States (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of September 30, 2017, and the results of its consolidated operations for the three and nine months ended September 30, 2017 and 2016, the consolidated statement of stockholders equity for the nine months ended September 30, 2017 and the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016. The results of the nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2016. The Companys consolidated financial statements include the Companys accounts and the accounts of the OP, Hartman Village Pointe, LLC and XXI Holdings, the subsidiaries over which the Company has control. All intercompany balances and transactions are eliminated in consolidation. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies: Use of Estimates (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Cash and Cash Equivalents | Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of September 30, 2017 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies: Financial Instruments (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Financial Instruments | Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, accrued rent and accounts receivable, accounts payable and accrued expenses, note payable, net and due from (to) related parties. The Company considers the carrying value, other than note payable, net, to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its note payable approximates fair value. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Revenue Recognition | Revenue Recognition The Companys leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purpose of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. In accordance with Accounting Standards Codification (ASC) 605-10-S99, "Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursement and other revenues in the period the related costs are incurred. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies: Investment in Unconsolidated Joint Venture (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Investment in Unconsolidated Joint Venture | Investment in Unconsolidated Joint Venture The Companys investment in unconsolidated joint venture in Hartman Village Pointe was accounted for under the equity method at December 31, 2016. Effective February 8, 2017, the Company owns all of Hartman Village Pointe. On April 11, 2017, the Company entered into a membership interest purchase agreement with Hartman XX Operating Partnership (XX OP), the operating partnership of Hartman Short Term Income Properties XX, Inc., a related party, pursuant to which the Company may acquire up to $10,000,000 of XX OPs equity ownership in Hartman Three Forest Plaza LLC. As of September 30, 2017, the Company has acquired an approximate 37.6% equity interest in Hartman Three Forest Plaza LLC for $6,700,000. On October 19, 2017, the Company acquired an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%. The Companys investment in Hartman Three Forest Plaza LLC is accounted for under the equity method. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies: Real Estate (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Real Estate | Real Estate Allocation of Purchase Price of Acquired Assets Upon acquisition, the purchase price of properties is allocated to the tangible assets acquired, consisting of land, buildings and improvements, any assumed debt and asset retirement obligations, if any, based on their fair values. Acquisition costs, including acquisition fees paid to our advisor, are capitalized as part of the purchase price. Initial valuations are subject to change during the measurement period, but the measurement period ends as soon as the information is available. The measurement period shall not exceed one year from the acquisition date. Land and building and improvement fair values are derived based upon the Companys estimate of fair value after giving effect to estimated replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow analyses or similar methods. Any difference between the fair value of the property acquired and the purchase price of the property is recorded as goodwill or gain (loss) on acquisition of the property. The Company determines the fair value of any assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense. In allocating the purchase price of each of the Companys properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. The Company uses Level 3 inputs to value acquired properties. Many of these estimates are obtained from independent third party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates require judgment and are subject to being imprecise; accordingly, if different estimates and assumptions were derived, the valuation of the various categories of the Companys properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Companys consolidated financial statements. These variances could be material to the Companys results of operations and financial condition. The Company has early adopted ASU No. 2017-01, Clarifying the Definition of a Business. In accordance with the guidance provided by this accounting pronouncement, provided that the acquisition of real estate is determined to be the acquisition of an asset versus the acquisition of a business, the allocation of purchase price will not include an allocation to intangible assets, in particular in-place lease value. Further, the Company will capitalize acquisition fees and expenses associated with real estate asset acquisitions versus recording such fees as an expense in the period incurred in connection with the acquisition of a business. The effect of adoption in the accompanying consolidated financial statements, is that the acquisition fee payable to advisor in the amount of $33,750 for the year ended December 31, 2016 and $142,500 for the nine months ended September 30, 2017, which would have been expensed if the acquisition of the Company joint venture investment and subsequent purchase of the equity interest of our former joint venture partner were considered an acquisition of a business, have been capitalized and added to the unconsolidated joint venture investment and real estate assets at cost as of December 31, 2016 and September 30, 2017, respectively. 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. Impairment The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of the Companys real estate assets as of September 30, 2017. Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies: Fair Value Measurement (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
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 Companys estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies: Accrued Rent and Accounts Receivable (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Accrued Rent and Accounts Receivable | Accrued Rent and Accounts Receivable Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies: Income Taxes (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Income Taxes | Income Taxes The Company intends to make an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing in the taxable year ending December 31, 2017. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90 percent of its REIT taxable income (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.) REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. Prior to qualifying to be taxed as a REIT, the Company is subject to normal federal and state corporation income taxes. The Company accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company records a valuation allowance for net deferred tax assets that are not expected to be realized. For the three months ended September 30, 2017 and 2016, the Company had net income of $(52,498) and $0, respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred a net loss of $938,412 and $0, respectively. The Company does not anticipate forming any taxable REIT subsidiaries or otherwise generating future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance in that no future taxable income is expected. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements. Only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the Companys tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions as of September 30, 2017 and December 31, 2016, respectively. |
Summary of Significant Accoun27
Summary of Significant Accounting Policies: Earnings Per Share (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Policies | |
Earnings Per Share | Earnings Per Share The computations of basic and diluted earnings per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Companys potentially dilutive securities include special limited partnership interests see Note 11. For the three and nine months ended September 30, 2017 and 2016, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and nine months ended September 30, 2017 and 2016 because no shares are issuable. |
Summary of Significant Accoun28
Summary of Significant Accounting Policies: Major Customers, Policy (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Major Customers, Policy | Tenant Name Annualized Rental Revenue Percentage of Total Annualized Rental Revenue Initial Lease Date Lease Expiration Year Mattress Firm $119,915 17.6% 10/2013 2018 SA Bike World 98,518 14.5% 11/2016 2026 Top Brass, Inc. 96,034 14.1% 11/2015 2021 ABDEP, LP 81,072 11.9% 1/2015 2020 Total $395,539 58.1% |
Real Estate_ Real Estate Proper
Real Estate: Real Estate Properties (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Real Estate Properties | September 30, 2017 December 31, 2016 Land $1,762,500 $ - Buildings and improvements 5,494,674 - 7,257,174 - Less accumulated depreciation and amortization (112,685) - Total real estate assets $7,144,489 $- |
Real Estate_ Assets acquired (T
Real Estate: Assets acquired (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Assets acquired | Assets acquired: Real estate assets $7,050,000 Accounts receivable and other assets 273,352 Total assets 7,323,352 Liabilities assumed: Note payable (3,459,805) Accounts payable and accrued expenses (49,509) Security deposits (52,208) Total liabilities assumed (3,561,522) Fair value of net assets acquired $3,761,830 |
Accrued Rent and Accounts Rec31
Accrued Rent and Accounts Receivable, Net: Accrued Rent and Accounts Receivable, net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Accrued Rent and Accounts Receivable, net | September 30, 2017 December 31, 2016 Tenant receivables $13,912 $ - Accrued rent 27,597 - Allowance for uncollectible accounts (13,605) - Accrued rents and accounts receivable, net $27,904 $- |
Earnings (loss) Per Share_ Sche
Earnings (loss) Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Earnings Per Share, Basic and Diluted | Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Numerator: Net income (loss) attributable to common stockholders $(52,498) $ $(938,412) $ Denominator: Weighted average common shares outstanding 976,949 854,265 Basic and diluted loss per common share: $0.10 $ $(0.78) $ |
Stockholders' Equity_ Distribut
Stockholders' Equity: Distributions (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Distributions | Quarter Paid Distribution per Common Share Total Distributions Paid 2017 3 rd $0.1875 $151,132 2 nd 0.1875 75,406 1 st 0.1875 45,961 Total $0.5625 $272,499 2016 4 th $0.1875 $- 3 rd 0.00 - 2 nd 0.00 - 1 st 0.00 - Total $0.1875 $- |
Organization and Business (Deta
Organization and Business (Details) | 9 Months Ended |
Sep. 30, 2017USD ($)$ / sharesshares | |
Details | |
Sale of Stock, Price Per Share | $ / shares | $ 10 |
DRP Per share | $ / shares | $ 9.50 |
Public offering share proceeds | $ | $ 250,000,000 |
Distribution reinvestment plan offering | $ | $ 19,000,000 |
Class T common stock price | $ / shares | $ 9.60 |
Class A common stock issued | shares | 1,505,454 |
Class T common stock issued | shares | 65,348 |
Proceeds from Issuance Initial Public Offering | $ | $ 15,004,383 |
Real Estate_ Real Estate Prop35
Real Estate: Real Estate Properties (Details) | Sep. 30, 2017USD ($) |
Details | |
Land | $ 1,762,500 |
Buildings and Improvements, Gross | 5,494,674 |
Accumulated Depreciation | $ (112,685) |
Real Estate (Details)
Real Estate (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Details | |||||
Depreciation expense | $ 46,271 | $ 0 | $ 112,685 | $ 0 | |
Business Combination, Acquisition Related Costs | 142,500 | 0 | |||
Asset Management Fees | 13,219 | $ 37,013 | |||
Equity investment | $ 6,700,000 | $ 6,700,000 | $ 1,350,000 |
Investment in Unconsolidated 37
Investment in Unconsolidated Joint Venture (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Details | ||
Equity investment | $ 6,700,000 | $ 1,350,000 |
Accrued Rent and Accounts Rec38
Accrued Rent and Accounts Receivable, Net: Accrued Rent and Accounts Receivable, net (Details) | Sep. 30, 2017USD ($) |
Details | |
Tenant receivables | $ 13,912 |
Accrued Rent, Current | 27,597 |
Allowance for uncollectible accounts | $ (13,605) |
Accrued Rent and Accounts Rec39
Accrued Rent and Accounts Receivable, Net (Details) | 3 Months Ended |
Sep. 30, 2017USD ($) | |
Details | |
Bad debt expense | $ 13,605 |
Note Payable, Net (Details)
Note Payable, Net (Details) - HartmanVillagePointedLlcMember | Sep. 30, 2017USD ($) |
Owned subsidiary | $ 3,525,000 |
loan cost gross | $ 65,195 |
The interest rate | 3.98% |
Related Party Arrangements (Det
Related Party Arrangements (Details) | Sep. 30, 2017USD ($) |
HartmanVillagePointedLlcMember | |
Acquisition fees | $ 176,250 |
Earnings (loss) Per Share_ Sc42
Earnings (loss) Per Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Details | ||
Net income (loss) attributable to common stockholders | $ (52,498) | $ (938,412) |
Weighted average comon shares outstanding | 976,949 | 854,265 |
Stockholders' Equity_ Distrib43
Stockholders' Equity: Distributions (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Details | ||
Dividend distribution $ | $ 0.1875 | $ 0.5625 |
Dividend distribution paid | $ 151,132 | $ 272,499 |