0001446687-14-000070.txt : 20141114 0001446687-14-000070.hdr.sgml : 20141114 20141114155408 ACCESSION NUMBER: 0001446687-14-000070 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20141114 FILED AS OF DATE: 20141114 DATE AS OF CHANGE: 20141114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Hartman Short Term Income Properties XX, Inc. CENTRAL INDEX KEY: 0001446687 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 263455189 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53912 FILM NUMBER: 141223742 BUSINESS ADDRESS: STREET 1: 2909 HILLCROFT, SUITE 420 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 713-467-2222 MAIL ADDRESS: STREET 1: 2909 HILLCROFT, SUITE 420 CITY: HOUSTON STATE: TX ZIP: 77057 10-Q 1 f2014form10q31114.htm Converted by EDGARwiz



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________

FORM 10-Q

____________


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


For the quarterly period ended September 30, 2014


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


Commission File Number 000-53912

__________


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.
(Exact name of registrant as specified in its charter)


 

 

Maryland

26-3455189

(State of Organization)

(I.R.S. Employer Identification Number)


2909 Hillcroft, Suite 420 Houston, Texas


77057

(Address of principal executive offices)

(Zip Code)

_______________


(713) 467-2222
(Registrant’s telephone number, including area code)



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

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

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

Large accelerated filer ¨     Accelerated filer ¨          Non-accelerated filer (Do not check if a smaller reporting company) ¨                         Smaller reporting company x


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


As of November 10, 2014 there were 7,607,196 shares of the Registrant’s common shares issued and outstanding, 19,000 of which were held by an affiliate of the Registrant.








Hartman Short Term Income Properties XX, Inc. and Subsidiaries

Table of Contents



 

 

 

 

 

PART I   FINANCIAL INFORMATION

 

Item 1.

Financial Statements

  2

Item 2.     

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.   

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.   

Controls and Procedures

31

 

 

 

PART II  OTHER INFORMATION

 

Item 1.    

Legal Proceedings

33

Item 1A.   

Risk Factors

33

Item 2.    

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.     

Defaults Upon Senior Securities

35

Item 4.     

Mine Safety Disclosures

35

Item 5.     

Other Information

35

Item 6.

Exhibits

35

 

SIGNATURES

36






























1






PART I

FINANCIAL INFORMATION

Item 1. Financial Statements




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

September 30, 2014

 

December 31, 2013

ASSETS

 

 (Unaudited)

 

 

 

 

 

 

 

Real estate assets, at cost

 

 $                           91,991,529

 

 $                           56,992,904

Accumulated depreciation and amortization

 

                             (10,909,141)

 

                               (6,278,801)

Real estate assets, net

 

                              81,082,388

 

                              50,714,103

 

 

 

 

 

Cash and cash equivalents

 

                              12,062,366

 

                                   143,038

Restricted cash

 

                                7,100,000

 

                                             -   

Accrued rent and accounts receivable, net

 

                                1,206,124

 

                                   518,877

Deferred loan and leasing commission costs, net

 

                                2,493,088

 

                                   995,528

Goodwill

 

                                   249,686

 

                                   249,686

Prepaid expenses and other assets

 

                                1,009,530

 

                                   379,804

Due from related parties

 

                                     93,218

 

                                             -   

Total assets

 

 $                         105,296,400

 

 $                           53,001,036

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

Notes payable

 

 $                           49,569,624

 

 $                             2,300,000

Accounts payable and accrued expenses

 

                                3,937,806

 

                                2,545,833

Due to related parties

 

                                             -   

 

                                     67,651

Tenants' security deposits

 

                                   564,279

 

                                   319,258

Total liabilities

 

                              54,071,709

 

                                5,232,742

 

 

 

 

 

 Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively

 

                                              1

 

                                              1

Common stock, $0.001 par value, 750,000,000 authorized, 7,373,416 shares and 6,311,691 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively

 

                                       7,374

 

                                       6,312

Additional paid-in capital

 

                              68,722,697

 

                              58,844,825

Accumulated distributions and net loss

 

                             (17,505,381)

 

                             (11,082,844)

Total stockholders' equity

 

                              51,224,691

 

                              47,768,294

Total liabilities and total stockholders' equity

 

 $                         105,296,400

 

 $                           53,001,036

 

 

 

 

 

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




2












HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 (Unaudited)

 

 

 

 

 

 

 

 

 

 Three Months Ended September 30,

 

 Nine Months Ended September 30,

 

2014

 

2013

 

2014

 

2013

Revenues

 

 

 

 

 

 

 

Rental revenues

 $        2,844,926

 

 $        1,552,676

 

 $        7,025,809

 

 $        4,408,093

Tenant reimbursements and other revenues

              824,223

 

              563,508

 

           1,491,640

 

              979,716

Total revenues

           3,669,149

 

           2,116,184

 

           8,517,449

 

           5,387,809

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Property operating expenses

              947,204

 

              537,110

 

           2,100,777

 

           1,382,579

Asset management and acquisition fees

              158,231

 

                96,122

 

           1,217,853

 

              430,408

Organization and offering costs

              148,163

 

              210,705

 

              365,032

 

              445,871

Real estate taxes and insurance

              593,691

 

              286,867

 

           1,439,048

 

              949,760

Depreciation and amortization

           2,033,854

 

           1,057,832

 

           4,630,340

 

           2,837,947

General and administrative

              214,420

 

              130,550

 

              514,525

 

              493,692

Interest expense

              598,260

 

              192,787

 

           1,093,585

 

              661,741

Total expenses

           4,693,823

 

           2,511,973

 

         11,361,160

 

           7,201,998

Loss from continuing operations

          (1,024,674)

 

            (395,789)

 

          (2,843,711)

 

         (1,814,189)

Income from discontinued operations

                        -   

 

                       -   

 

                        -   

 

              189,036

Net loss

 $       (1,024,674)

 

 $         (395,789)

 

 $       (2,843,711)

 

 $      (1,625,153)

Basic and diluted loss per common share:

 

 

 

 

 

 

 

Loss from continuing operations attributable to common stockholders

 $                (0.14)

 

 $               (0.07)

 

 $                (0.41)

 

 $               (0.40)

Income from discontinued operations

                        -   

 

                       -   

 

                        -   

 

                    0.04

Net loss attributable to common stockholders

 $                (0.14)

 

 $               (0.07)

 

 $                (0.41)

 

 $               (0.36)

Weighted average number of common shares outstanding, basic and diluted

     7,124,242

 

     5,342,710

 

     6,868,701

 

     4,549,526

 

 

 

 

 

 

 

 

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




3











HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

Preferred Stock

Common Stock

 

Accumulated

 

 

 

 

 

 

Additional Paid-In

Distributions

 

 

Shares

Amount

Shares

Amount

Capital

and Net Loss

 Total

Balance, December 31, 2013

               1,000

$1

              6,311,691

$6,312

$58,844,825

($11,082,844)

$47,768,294

Issuance of common shares (cash investment), net of redemptions

                       -

                      -

                 872,881

                          873

                8,596,971

                                 -

                   8,597,844

Issuance of common shares (non-cash)

                       -

                      -

                 188,844

                          189

                1,797,548

                                 -

                   1,797,737

Selling commissions

                       -

                      -

                             -

                               -

                  (516,647)

                                 -

                    (516,647)

Dividends and distributions (cash)

                       -

                      -

                             -

                               -

                               -

                 (1,835,384)

                 (1,835,384)

Dividends and distributions (stock)

                       -

                      -

                             -

                               -

                               -

                 (1,743,442)

                 (1,743,442)

Net loss

                       -

                      -

                             -

                               -

                               -

                 (2,843,711)

                 (2,843,711)

Balance, September 30, 2014

               1,000

$1

              7,373,416

$7,374

$68,722,697

($17,505,381)

$51,224,691

 

 

 

 

 

 

 

 

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




4









HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Nine Months Ended September 30,

 

2014

 

2013

Cash flows from operating activities:

 

 

 

Net loss

 $      (2,843,711)

 

 $      (1,625,153)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Stock based compensation

              65,000

 

              72,500

Depreciation and amortization

          4,630,340

 

          2,837,947

Deferred loan and leasing commission costs amortization

            338,296

 

            111,870

Bad debt (recovery) provision

             (44,130)

 

              97,374

Changes in operating assets and liabilities:

 

 

 

Accrued rent and accounts receivable

           (643,117)

 

           (321,830)

Deferred leasing commissions

           (859,265)

 

           (177,080)

Prepaid expenses and other assets

           (129,726)

 

           (345,798)

Accounts payable and accrued expenses

          1,063,720

 

            152,578

Due to related parties

           (160,869)

 

           (542,741)

Tenants' security deposits

            245,021

 

              24,648

Net cash provided by operating activities

          1,661,559

 

            284,315

Cash flows from investing activities:

 

 

 

Acquisition deposits

           (500,000)

 

            350,000

Increase in restricted cash

        (7,100,000)

 

                    -   

Additions to real estate

       (34,734,917)

 

       (14,185,804)

Disposition of Haute Harwin property

                    -   

 

          3,253,671

Net cash used in investing activities

       (42,334,917)

 

       (10,582,133)

Cash flows from financing activities:

 

 

 

Distributions to common stockholders

(1,814,583)

 

(1,131,249)

Payment of selling commissions

(516,647)

 

(576,783)

Borrowings net of repayment under insurance premium finance note

33,039

 

22,397

Payment of deferred loan costs

(976,591)

 

(48,152)

Borrowings under term loan notes

49,725,000

 

-

Repayments under term loan notes

(155,376)

 

-

Borrowings under revolving credit facility

22,644,050

 

7,487,821

Repayment of revolving credit advances

(24,944,050)

 

(15,387,821)

Proceeds from issuance of common stock, net of redemptions

8,597,844

 

20,667,469

Net cash provided by financing activities

52,592,686

 

11,033,682

Net change in cash and cash equivalents

11,919,328

 

735,864

Cash and cash equivalents at the beginning of period

143,038

 

61,894

Cash and cash equivalents at the end of period

$     12,062,366

 

$          797,758

 

 

 

 

Supplemental cash flow information:

 

 

 

Cash paid for interest

            931,089

 

            586,571

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

Increase in stock distribution payable

              25,705

 

              42,688

Distributions made to common stockholders through common stock issuances pursuant to the distribution reinvestment plan

          1,717,737

 

          1,111,176

 

 

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




5




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



        As used herein, the terms “we,” “our,” “us,” and “the Company” refers to Hartman Short Term Income Properties XX, Inc. and our consolidated subsidiaries, except where the context requires otherwise.


Note 1 — Organization and Business


Hartman Short Term Income Properties XX, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009.  The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2011.  Effective July 16, 2013, the Company is offering $200,000,000 of its common shares to the public in its follow-on offering (exclusive of $19,000,000 of its common shares available pursuant to the Company’s distribution reinvestment plan) at a price of $10.00 per share. The offering price for shares offered in the follow-on offering was determined by the Company’s board of directors.  The Company’s board of directors may change the price at which the Company offers shares to the public from time to time during the follow-on offering, but not more frequently than quarterly, to reflect changes in the Company’s estimated per-share net asset value and other factors the Company’s board of directors deems relevant.


The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc.  Hartman XX Holdings, Inc. is a Texas corporation wholly owned by Allen R. Hartman.  The Company sold 19,000 shares to Hartman XX Holdings, Inc. at a price of $10.00 per share.  The Company has also issued 1,000 shares of convertible preferred shares to its advisor, Hartman Advisors LLC at a price of $10.00 per share.  Hartman Advisors LLC (the “Advisor”) is the Company’s advisor. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc. (the “Property Manager”). The Property Manager is a wholly owned subsidiary of Hartman Income REIT, Inc. of which approximately 20% is beneficially owned by Allen R. Hartman, the Company’s Chief Executive Officer and Chairman of the Board of Directors.


On April 11, 2014 we formed Hartman XX Limited Partnership, a Texas limited partnership (the “Operating Partnership”).  On March 7, 2014 we formed Hartman XX REIT GP LLC, a Texas limited liability company, to serve as the sole general partner of the Operating Partnership.  We are the sole limited partner of the Operating Partnership.  Our single member interests in our limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries.


As of September 30, 2014, we had issued and outstanding 7,373,416 shares of our common stock in our initial and follow-on offerings, including 465,487 shares of our common stock pursuant to our distribution reinvestment plan, resulting in gross offering proceeds of $66,998,299.  Total shares issued and outstanding as of September 30, 2014 include 30,875 shares of our common stock issued as non-employee compensation to members of our board of directors and certain executives of our Property Manager.


The management of the Company is through the Advisor.  Management of the Company’s properties is through the Property Manager. D.H. Hill Securities LLLP (the “Dealer Manager”) serves as the dealer manager of the Company’s public offering. These parties receive compensation and fees for services related to the offering and for the investment and management of the Company’s assets. These parties will receive fees during the offering, acquisition, operational and liquidation stages.


       As of September 30, 2014 we owned 6 commercial properties comprising approximately 1,103,647 square feet plus 3 pad sites.  We own 4 properties located in Richardson, Arlington, and Dallas, Texas and 2 properties in Houston, Texas.  As of September 30, 2013 we owned 4 commercial properties comprising approximately 605,244 square feet plus 3 pad sites, located in Richardson, Arlington and Dallas, Texas.





6




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 2 — Summary of Significant Accounting Policies


Basis of Presentation


The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2013 are derived from our audited consolidated financial statements as of that date.  The unaudited consolidated financial statements as of September 30, 2014 have been prepared by us 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, 2014, and the results of consolidated operations for the three and nine months ended September 30, 2014 and 2013, the consolidated statements of stockholders’ equity for the nine months ended September 30, 2014 and the consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013.  The results of the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.


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, 2013.


        These unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Hartman Richardson Heights Properties, LLC; Hartman Cooper Street Plaza, LLC; and Hartman Bent Tree Green, LLC for the nine months ended September 30, 2014 and 2013, respectively; Hartman Parkway LLC for the nine months ended September 30, 2014 and for the period from March 15, 2013, the date this subsidiary acquired the Parkway Property, to September 30, 2013; Hartman Gulf Plaza LLC for the period from March 11, 2014, the date this subsidiary acquired the Gulf Plaza Property, to September 30, 2014; Hartman Mitchelldale Business Park, LLC for the period from June 13, 2014, the date this subsidiary acquired the Mitchelldale Property, to September 30, 2014; and Hartman Haute Harwin, LLC for the period from January 1, 2013 to March 28, 2013, the date this subsidiary’s property was sold to an affiliate.  All significant intercompany balances and transactions have been eliminated.


Use of Estimates in the Preparation of Financial Statements

 

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.


Reclassifications


We have reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net loss, total assets, total liabilities or stockholders’ equity.


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 at September 30, 2014 and December 31, 2013 consisted of demand deposits at commercial banks.





7




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Restricted Cash


Restricted cash represents cash for which the use of funds is restricted by certain loan documents.  As of September 30, 2014 and December 31, 2013, the Company had a restricted cash balance of $7,100,000 and $0, respectively, which represent amounts set aside as impounds to be disbursed to the Company (i) upon its achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property, and (ii) the completion of certain agreed upon capital repairs at the Cooper Street Property and the Mitchelldale Property.  Restricted cash includes $6,500,000 of loan proceeds and $600,000 in cash, which have been deposited in an escrow account with a loan servicer.


Financial Instruments


       The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, accounts payable and accrued expenses and due from (to) related parties.  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.  Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value.


Revenue Recognition


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


Real Estate


Allocation of Purchase Price of Acquired Assets


       Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings).


The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases.





8




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases.


The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Company’s reported net loss.


Depreciation and amortization


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


Impairment


       We review our 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.  We determine 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 our real estate assets as of September 30, 2014.


Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income.


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.

 

Deferred Loan and Leasing Commission Costs


       Loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method.  Leasing commissions are amortized using the straight-line method over the term of the related lease agreements.  




9




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)




Goodwill


       GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired.  The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount.  If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test.  In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements.


Organization and Offering Costs


The Company has incurred certain expenses in connection with organizing the Company. These costs principally relate to professional and filing fees. For the three months ended September 30, 2014 and 2013, such costs totaled $148,163 and $210,705, respectively.  For the nine months ended September 30, 2014 and 2013, such costs totaled $365,032 and $445,871, respectively.


Organization and offering costs will be reimbursed by the Advisor to the extent that organization and offering costs ultimately exceed 1.5% of gross offering proceeds.  As of September 30, 2014, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds is cumulatively $525,694 for the Company’s initial and follow-on offerings.  No demand has been made of the Advisor for reimbursement as of September 30, 2014 and no receivable has been recorded with respect to the excess costs as of that date.  The Company expects the excess cost to diminish as additional offering proceeds are received. Selling commissions in connection with the offering are recorded and charged to additional paid-in capital.

 

Stock-Based Compensation


The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) 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 fair value of the equity or liability instruments issued.


       Stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations.


Advertising


       The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations.  Advertising costs totaled $9,215 and $275 for the three months ended September 30, 2014 and 2013, and $23,320 and $3,891 for the nine months ended September 30, 2014 and 2013, respectively.


Income Taxes


We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our 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




10




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions.  Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders.  However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT. 


For the three months ended September 30, 2014 and 2013, the Company incurred a net loss of $1,024,674 and $395,789, respectively.  For the nine months ended September 30, 2014 and 2013, the Company incurred a net loss of $2,843,711 and $1,625,153.  The Company does not currently 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 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.

 

Loss Per Share

 

The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities.  The Company’s potentially dilutive securities include preferred shares that are convertible into the Company’s common stock.  As of September 30, 2014 and 2013, 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, 2014 and 2013 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.


Concentration of Risk


       Substantially all of our revenues are derived from four properties located in the Dallas, Texas metropolitan area and two properties located in Houston, Texas.  We maintain cash accounts in two U.S. financial institutions.  The terms of these deposits are on demand to minimize risk.  The balances of these accounts may exceed the federally insured limits.  No losses have been incurred in connection with these deposits nor are any expected.





11




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 3 — Real Estate


   Real estate assets consisted of the following:

 

 

 

 

 

 

 

September 30, 2014

December 31, 2013

Land

$             21,097,500

$               12,816,250

Buildings and improvements

51,115,435

33,420,171

In-place lease value intangible

19,778,594

10,756,483

 

91,991,529

56,992,904

Less accumulated depreciation and amortization

(10,909,141)

(6,278,801)

Total real estate assets

$             81,082,388

$              50,714,103


       Depreciation expense for the three months ended September 30, 2014 and 2013 was $728,453 and $383,916, respectively. Depreciation expense for the nine months ended September 30, 2014 and 2013 was $1,593,376 and $947,831, respectively.  Amortization expense of in-place lease value intangible was $1,305,401 and $673,916 for the three months ended September 30, 2014 and 2013, respectively.  Amortization expense of in-place lease value intangible was $3,036,964 and $1,890,116 for the nine months ended September 30, 2014 and 2013, respectively.

       

       Acquisition fees paid to Advisor were $0 and $0 for the three months ended September 30, 2014 and 2013, respectively.  Acquisition fees paid to Advisor were $828,125 and $156,870 for the nine months ended September 30, 2014 and 2013, respectively.  Asset management fees paid to Advisor were $158,231 and $96,122 for the three months ended September 30, 2014 and 2013, respectively.  Asset management fees paid to Advisor were $389,728 and $273,538 for the nine months ended September 30, 2014 and 2013, respectively.  Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013, respectively.


On March 11, 2014, the Company acquired an office building comprising approximately 120,651 square feet located in Houston, Texas, commonly known as Gulf Plaza (the “Gulf Plaza Property”) through Hartman Gulf Plaza LLC (“Gulf Plaza LLC”), a wholly owned subsidiary of the Operating Partnership.  The Gulf Plaza Property was acquired for $13,950,000, exclusive of closing costs, from fourteen tenant-in-common investors, including Hartman Gulf Plaza Acquisitions, LP (“Acquisitions”) which owned 1% of the Gulf Plaza Property.  Acquisitions is an affiliate of our Property Manager, which indirectly owns approximately 15% of Acquisitions.  The Gulf Plaza Property was 100% occupied at the acquisition date.  An acquisition fee of $348,750 was earned by the Advisor in connection with the purchase of the Gulf Plaza Property.


On June 13, 2014, the Operating Partnership acquired an office/industrial business park comprising approximately 377,752 square feet located in Houston, Texas, commonly known as Mitchelldale Business Park (the “Mitchelldale Property”) through Hartman Mitchelldale Business Park, LLC (“Mitchelldale LLC”), a wholly owned indirect subsidiary of the Operating Partnership.  The Mitchelldale Property was acquired for $19,175,000, exclusive of closing costs, from an unrelated party.  The Mitchelldale Property was approximately 89% occupied at the acquisition date.  An acquisition fee of $479,375 was earned by the Advisor in connection with the purchase of the Mitchelldale Property.





12




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



The following table summarizes the fair values of the Gulf Plaza Property and the Mitchelldale Property assets acquired and liabilities assumed based upon our initial purchase price allocations as of the respective acquisition dates:

 

 

 

 

Gulf Plaza

Mitchelldale

Assets acquired:

 

 

Real estate assets

$              13,950,000

$               19,175,000

Other assets

112,316

102,268

  Total assets acquired

14,062,316

19,277,268

 

 

 

Liabilities assumed:

 

 

Accounts payable and accrued expenses

292,347

219,548

Security deposits

-

196,850

  Total liabilities assumed

292,347

416,398

 

 

 

Fair value of net assets acquired

$              13,769,969

$               18,860,870


We identify and record 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:


 

 

 

 

September 30, 2014

December 31, 2013

In-place lease value intangible

$                19,778,594

$                 10,756,483

In-place leases – accumulated amortization

(7,290,197)

(4,253,233)

 Acquired lease intangible assets, net

$                12,488,397

$                   6,503,250


The Company’s wholly owned subsidiary, Hartman Richardson Heights Properties, LLC (“HRHP LLC”), and the City of Richardson, Texas are parties to an economic development incentive agreement.  Under the terms of the agreement, the City of Richardson will pay annual grants to HRHP LLC in equal installments over a five year period of up to $1.5 million and sales tax grants to be paid annually over the first 10 years of the tenant lease.  The Company has received installments of $300,000 in each of the three months ended September 30, 2014 and 2013, respectively, which are included in tenant reimbursements and other revenues on the consolidated statements of operations.


Payments received by the Company in the form of annual grants and annual sales tax grants are subject to refund or adjustment during the term of the economic development incentive agreement.  In general the incentive agreement provides that the Company must continue to be in good standing with respect to the terms and conditions of the agreement and that the Alamo Draft House lessee must continue as a tenant of the Richardson Heights Property during the term of its lease agreement.  As of September 30, 2014, no uncured breach or default exists under the terms of the incentive agreement and the Company has no liability or other obligation to repay any grants received under the agreement.





13




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 4 — Accrued Rent and Accounts Receivable, net


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


 

 

 

 

September 30, 2014

December 31, 2013

Tenant receivables

$                     455,119

$                      312,218

Accrued rent

967,760

467,544

Allowance for uncollectible accounts

(216,755)

(260,885)

 Accrued rents and accounts receivable, net

$                  1,206,124

$                      518,877


As of September 30, 2014 and December 31, 2013, we had an allowance for uncollectible accounts of $216,755 and $260,885, respectively.  For the three months ended September 30, 2014 and 2013, we recorded bad debt expense in the amount of $9,592 and $34,013, respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenant’s credit-worthiness.  For the nine months ended September 30, 2014 and 2013, we recorded bad debt (recovery) expense of ($44,130) and $97,374, respectively.  Bad debt expenses and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.


Note 5 — Deferred Loan and Leasing Commission Costs, net


Costs which have been deferred consist of the following:

 

 

 

 

September 30, 2014

December 31, 2013

Deferred loan and leasing commission costs

$                  3,220,413

$                   1,384,557

Less: accumulated amortization

(727,325)

(389,029)

 Total cost, net of accumulated amortization

$                  2,493,088

$                      995,528


Note 6 — Notes Payable


The Company is a party to a $30.0 million revolving credit agreement (the “Credit Facility”) with a bank.  The borrowing base of the Credit Facility may be adjusted from time to time subject to the lenders underwriting with respect to real property collateral.    The Credit Facility was secured by the Richardson Heights Property; the Cooper Street Property; the Bent Tree Green Property and the Parkway Property.  On June 13, 2014, the Company entered into a modification agreement pursuant to which the Richardson Heights Property, the Cooper Street Property, and the Bent Tree Green Property were released as collateral for the Credit Facility.  On July 2, 2014, the Company entered into a further modification agreement of the Credit Facility to add the Gulf Plaza Property as collateral and the borrowing base of the Credit Facility, as further modified, was increased to $7.0 million.  The Credit Facility note bears interest at greater of 4.5% per annum or the bank’s prime rate plus 1% per annum.  The interest rate was 4.5% per annum as of September 30, 2014.  The loan matures on May 9, 2015.


The outstanding balance under the Credit Facility was $0 and $2.3 million as of September 30, 2014 and December 31, 2013, respectively.  As of September 30, 2014 the amount available to be borrowed is $7.0 million.  As of September 30, 2014, we were in compliance with all loan covenants.


On June 13, 2014, the Company, through the Operating Partnership, entered into four term loan agreements with an insurance company, each loan being secured by a collateral property.  The following is a summary of the mortgage notes payable as of September 30, 2014:




14




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)




 

 

 

 

 

Property Name

Payment Type

Maturity Date

Interest Rate

Principal Balance

Richardson Heights Property

Principal and interest

July 1, 2041

4.61%

$            20,136,882

Cooper Street Property

Principal and interest

July 1, 2041

4.61%

8,373,752

Bent Tree Green Property

Principal and interest

July 1, 2041

4.61%

8,373,752

Mitchelldale Property

Principal and interest

July 1, 2041

4.61%

12,685,238

 

 

 

 

$            49,569,624


Monthly payments of principal and interest are due and payable on the first day of each month beginning August 1, 2014 until July 1, 2041 based on a 27 year loan amortization.  Each promissory note contains a call option wherein the holder of the promissory note may declare the outstanding balance due and payable on either July 1, 2024; July 1, 2029; July 1, 2034; or July 1, 2039.  Each of the loan agreements are subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements.  As of September 30, 2014, we were in compliance with all loan covenants.  Each of the loan agreements are secured by a deed of trust; assignment of licenses, permits and contracts; assignment and subordination of the management agreements; and assignment of rents.  The terms of the security instruments provide for the cross collateralization/cross default of the each of the loans.


In connection with the loans secured by the Richardson Heights Property and the Bent Tree Green Property, the Company has entered into a reserve agreement with the lender which requires that loan proceeds of $5,525,000 and $975,000, respectively, be deposited with the loan servicer.  The escrowed loan proceeds will be released to the Company upon satisfactory showing of increased annualized rental income from new lease agreements as set forth in the reserve agreement.  In connection with the loans secured by the Cooper Street Property and the Mitchelldale Property, the Company entered into a post-closing agreement with the lender requiring the short term escrow of $600,000 for certain capital repairs to be completed during 2014 together with the delivery of certain other documents as set forth in the post-closing agreement.  Loan proceeds and other reserve funds held pursuant to the reserve agreement and the post-closing agreement are recorded as restricted cash on the accompanying consolidated balance sheets.


       Under the terms of the reserve agreement, the Company may draw upon the escrow reserve funds until December 31, 2016.  Thereafter, the lender shall have the right to draw any remaining escrow reserve funds and apply such funds to one or more of the loans as the lender may determine in its sole discretion.


Note 7 — Loss Per Share

 

       Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding.  Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share.

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30,

Nine months ended September 30,

 

2014

2013

2014

2013

Numerator:

 

 

 

 

 Net loss attributable to common stockholders

$   (1,024,674)

 $      (395,789)

$       (2,843,711)

$          (1,625,153)

Denominator:

 

 

 

 

 Basic and diluted weighted average common shares outstanding

7,124,242

5,342,710

6,868,701

4,549,526

 

 

 

 

 

 Basic and diluted loss per common share:

 

 

 

 

 Net loss attributable to common stockholders

$            (0.14)

$            (0.07)

$                (0.41)

$                   (0.36)

 




15




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 8 — Income Taxes


       Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.


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 rental revenue.

 

Note 9 — Related Party Transactions


Hartman Advisors LLC is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager.  The Advisor is a variable interest entity which consolidates for financial reporting purposes with Hartman Income REIT, Inc. and Subsidiaries, of which approximately 20% is beneficially owned by Allen R. Hartman, our Chief Executive Officer and Chairman of the Board of Directors.


For the three months ended September 30, 2014 and 2013 we paid the Advisor $158,231 and $96,122 respectively for asset management fees.  For the nine months ended September 30, 2014 and 2013 we paid the Advisor $389,728 and $273,538, respectively for asset management fees.  Acquisition fees paid to Advisor were $0 and $0 for the three months ended September 30, 2014 and 2013, respectively and $828,125 and $156,870 for the nine months ended September 30, 2014 and 2013, respectively.  In connection with the disposition of the Harwin property to Hartman XIX in March 2013, Advisor refunded the acquisition fee of $80,380 previously paid in connection with that acquisition.


Property operating expenses include property management fees paid to our Property Manager of $158,429 and $68,883 for the three months ended September 30, 2014 and 2013, respectively, and $352,871 and $197,236 for the nine months ended September 30, 2014 and 2013, respectively.  For the three months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $225,784 and $26,483 for leasing commissions and $40,390 and $23,306 for construction management fees.  For the nine months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $859,265 and $177,080 for leasing commissions and $127,447 and $130,786 for construction management fees.  Lease commissions and construction management fees are included in deferred loan and lease commission costs and real estate assets, respectively, in the consolidated balance sheets.


       As of September 30, 2014 and December 31, 2013, respectively, the Company had a net balance due from the Property Manager and the Advisor of $61,963 and $90,417.


The Company had a net balance due from (to) an affiliate, Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), of $31,255 and ($158,068) as of September 30, 2014 and December 31, 2013, respectively.  The balance due to Hartman XIX represents undistributed funds from operations due to Hartman XIX with respect to its former ownership interest in the Richardson Heights Property joint venture and a retail shopping center commonly known as Haute Harwin (the “Harwin Property”) which was sold to Hartman XIX.


Effective March 28, 2013 the Company disposed of the Harwin Property for $3.4 million.


On March 11, 2014, we acquired a fee simple interest in an office building located in the Energy Corridor of Houston, Texas, commonly known as Gulf Plaza.  The property was acquired from fourteen tenant-in-common investors, including Hartman Gulf Plaza Acquisitions, LP which owned 1% of Gulf Plaza.  Acquisitions is an




16




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



affiliate of Hartman Income REIT Management, Inc., our Property Manager, which indirectly owns approximately 15% of Acquisitions.  Approximately 10% of Acquisitions is owned by Allen Hartman, our President and CEO, or his affiliates.  Advisor earned an acquisition fee of $348,750 in connection with the Gulf Plaza Property acquisition.


On June 13, 2014, we acquired the Mitchelldale Property.  Advisor earned an acquisition fee of $479,375 in connection with the Mitchelldale Property acquisition.


Note 10 – Stockholders’ Equity


Common Stock


       Shares of common stock entitle the holders to one vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law.  The common stock has no preferences or preemptive, conversion or exchange rights.


       Under our articles of incorporation, we have authority to issue 750,000,000 common shares, $0.001 par value per share, and 200,000,000 preferred shares, $0.001 par value per share.

       

       As of September 30, 2014, the Company has accepted investors’ subscriptions for and issued 6,858,054 shares of the Company’s common stock in its initial and follow-on public offerings, resulting in gross proceeds to the Company of $66,998,299.  As of the termination of our initial public offering, we had accepted investors’ subscriptions for, and issued 4,455,678 shares of our common stock in the initial public offering, including 162,561 shares of our common stock pursuant to our DRIP, resulting in offering proceeds of $43,943,731.


Preferred Stock


       Under our articles of incorporation the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors shall have the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares.  As of September 30, 2014 and December 31, 2013, respectively, we have issued 1,000 shares of convertible preferred shares to Hartman Advisors LLC at a price of $10.00 per share.


Common Stock Issuable Upon Conversion of Convertible Preferred Stock.  The convertible preferred stock will convert to shares of common stock if (1) the Company has made total distributions on then outstanding shares of the Company’s common stock equal to the issue price of those shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares, (2) the Company lists its common stock for trading on a national securities exchange if the sum of prior distributions on then outstanding shares of our common stock plus the aggregate market value of our common  stock  (based on the  30-day  average  closing   price) meets  the  same  6%  performance  threshold,  or  (3)  the Company’s advisory agreement with Hartman Advisors, LLC expires without renewal or is terminated (other than because of a material breach by Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.





17




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Stock-Based Compensation


       We award 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, 2014 and 2013, respectively, the Company granted 1,500 and 1,500 shares and 4,500 and 5,250 shares of restricted common stock to independent directors as compensation for services.  We recognized $15,000 and $15,000; and $45,000 and $52,500 as stock-based compensation expense for the three and nine months ended September 30, 2014 and 2013, respectively, based upon the estimated fair value per share.  The Compensation Committee of the Board of Directors approved awards of 1,000 shares of restricted common stock issued to each of two executives of the Property Manager. We recognized stock-based compensation expense of $20,000 and $20,000 with respect to these awards based on the amount offering price of $10 per share for the nine months ended September 30, 2014 and 2013, respectively.  Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations.


Distributions


The following table reflects the total distributions we have paid, including the total amount paid and amount paid per common share, in each indicated quarter:

 

 

 


Quarter paid

Distributions per

Common Share


Total Amounts Paid

2014

 

 

 3rd Quarter

$                         0.175

$                 1,237,568

 2nd Quarter

                        0.175

                1,191,153

 1st Quarter

0.175

1,103,599

  Total

$                         0.525

$                 3,532,320

 

 

 

2013

 

 

 4th Quarter

$                         0.175

 $                 1,033,066

 3rd Quarter

0.175

854,120

 2nd Quarter

0.175

760,551

 1st Quarter

0.175

627,754

  Total

$                           0.700

$                 3,275,491


Note 11 – Discontinued Operations


Effective March 28, 2013, the Company sold the Harwin Property to Hartman XIX pursuant to the terms agreed upon and approved by both the board of directors of the Company and of Hartman XIX.  The Company sold the Harwin property for $3,400,000 cash.


       Income from discontinued operations is comprised as follows:


 

 

 

 

 

 

Three months ended September 30,

Nine months ended September 30,

 

2014

2013

2014

2013

Income from discontinued operations

$                      -

$                      -

$                      -

$            66,460

 

 

 

 

 

Gain on sale of property

-

-

-

122,576

 

 

 

 

 

Income from discontinued operations

$                     -

$                      -

$                     -

$          189,036




18




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 12 – Commitments and Contingencies


Economic Dependency


       The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common stock and preferred stock available for issue; the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the Company’s real estate portfolio, and other general and administrative responsibilities.  In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other providers.


Litigation


The Company is subject to various claims and legal actions that arise in the ordinary course of business.  Management of the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position of the Company.


Rescission Rights of Certain Stockholders


In connection with the Company’s initial public offering, the Company may have a contingent liability to certain stockholders who purchased shares of the Company’s common stock during the period in which the Company’s registration statement was not effective and during which time the Company may have been in violation of one or more securities laws.  The Company considered the possibility of affording the remedy of rescission to stockholders who purchased common shares during the period that the Company was required to file post-effective amendments to its registration statement.  Any such rescission would obligate the Company to reacquire the stockholders common shares at a price equal to the price originally paid for such shares with market interest, less the amount of any income received with respect to such shares.  If affected stockholders were successful in seeking rescission and/or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies.  If stockholders seek rescission and/or damages or we conduct a rescission offer, we may or may not have the resources to fund the repurchase of all of the securities tendered.  We determined not to offer rescission because the Advisor and the Company do not believe that any material number of affected investors would choose to rescind their common share purchases.  On July 16, 2013, the SEC declared the Company’s follow-on offering registration statement effective and the Company has recommenced offering of its common shares as of that date. The Company believes that the right of affected stockholders to request rescission has expired under the one-year federal statute of limitations.  The statute of limitations in several of the various states is longer than the federal statute of limitations.  Accordingly, affected shareholders of any such state may continue to possess a rescission right.  


We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.  Pursuant to Section 10(a)(3) of the Securities Act, we are required to annually update our prospectus so that the financial statements and other information contained or incorporated by reference in the prospectus is not more than sixteen months old. In order to comply with Section 10(a)(3) of the Securities Act, we are required to file a post-effective amendment to our registration statement containing an updated prospectus prior to April 30th of each year. If the SEC has not declared such post-effective amendment effective by April 30th of each year, we are required to halt our public offering until such time as the SEC declares the post-effective amendment effective. We failed to file the post-effective amendment required to be filed by April 30, 2014 and continued to offer and sell our shares in our public offering during the period from May 1, 2014 to May 30, 2014, the date we suspended our public offering. During the period from May 1, 2014 to the suspension of our public offering on May 30, 2014, we sold 85,569 shares of our common stock, including 19,638 shares issued pursuant to our distribution reinvestment program. On June 5, 2014, we filed a post-effective amendment to our registration statement updating our prospectus pursuant to Section 10(a)(3) of the Securities Act, which registration statement was declared effective by the SEC on July 7, 2014.




19




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)




As a result of our failure to timely update our registration statement as required by Section 10(a)(3) of the Securities Act, from May 1, 2014 to May 30, 2014, the offer and sale of securities in our continuous public offering may have failed to comply fully with Section 5 of the Securities Act, which may trigger a right of rescission under the Securities Act for investors that purchased shares of our common stock during this period.  Such stockholders may have the right to rescind their purchase of shares of our common stock and require us to reacquire their shares at a price equal to the price originally paid for such shares, plus interest, less the amount of any income (i.e., dividends) received by the investor on such shares. An investor who acquired shares of our common stock during such period who no longer owns the shares they acquired may have the right to collect damages from us in lieu of the rescission rights described above.  We determined not to offer rescission because the Advisor and the Company do not believe that any material number of affected investors would choose to rescind their common share purchases.  If stockholders were successful in seeking rescission and/or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies.  If stockholders seek rescission and/or damages or we elect to conduct a rescission offer, we may or may not have the resources to fund the repurchase of the securities.


No rescission requests have been received by the Company as of September 30, 2014.  


Escrow Contingency Under Term Loan Reserve Agreement


The reserve agreement among Richardson Heights Properties, LLC and the term loan lender referred to in Note 6, requires that three specific new tenants must occupy their leased premises and be paying full base rent on or before December 15, 2014.   The Taco Joint, one of the specified new tenants, is currently occupying their leased premises and paying full base rent under their lease agreement effective October 1, 2014.  Skechers USA, one of the specified new tenants, has taken possession of their lease space and their lease agreement commenced on October 24, 2014.  The tenant will pay prorated rent for the month of October 2014 and will begin paying full base rent effective February 1, 2015.  Under the terms of the reserve agreement, Richardson Heights Properties, LLC may be required to add $1,008,377 to the escrow reserve until such time as Richardson Heights Properties, LLC has met the requirements for disbursement of proceeds as set forth in the reserve agreement.  The lease agreement of Dulce Restaurants LLC (dba Krispy Kreme), the third of the three specific new tenants, commenced on August 5, 2014 and the tenant has begun paying full base rent under their lease agreement beginning in November 2014.  This tenant is currently occupying their leased premises.  No addition to the escrow reserve is required with respect to this specified tenant.  Funds held in the escrow reserve may be recovered on a quarterly basis subject to the terms and conditions set forth in the reserve agreement.


Property Acquisition


On July 1, 2014, the Company, through the Operating Partnership, entered into a purchase agreement with BRI 1841 Energy Plaza, LLC, to acquire a two office building complex containing approximately 180,119 square foot of office space located in San Antonio, Texas, for an aggregate purchase price, as amended, of $17,610,000.  The property is commonly referred to as Energy Plaza I & II (the “Energy Plaza Property”).


The acquisition of the Energy Plaza Property is subject to substantial conditions to closing, including (i) the assumption of existing indebtedness secured by the Energy Plaza Property of approximately $10.5 million; and (ii) the absence of a material adverse change to the Energy Plaza Property prior to the acquisition date.  The acquisition is scheduled to close on December 17, 2014, however, there is no assurance that the Company will close the acquisition of the Energy Plaza Property on the terms described above or at all.


Note 13 – Subsequent Events


In accordance with Financial Accounting Standards Board ASC Topic 855, Subsequent Events, the Company has evaluated subsequent events through November 14, 2014, which is the date these consolidated financial




20




HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



statements were issued. All subsequent events requiring recognition as of November 14, 2014, have been incorporated into these notes to consolidated financial statements.





21






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


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

 

Forward-Looking Statements

 

         This Form 10-Q contains forward-looking statements, including discussion and analysis of our financial condition, anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to our stockholders in the future and other matters, which are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or the negative of such terms and variations of these words and similar expressions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

 

          Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned to not place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that could cause actual results to differ materially from any forward-looking statements made in this Form 10-Q include:

 

 

 

  

  

  

  

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

  

  

  

  

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

  

  

  

  

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

  

  

  

  

construction costs that may exceed estimates or construction delays;

  

  

  

  

increases in interest rates;

  

  

  

  

availability of credit or significant disruption in the credit markets;

  

  

  

  

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

 

 

 

  

litigation risks;

  

  

  

  

lease-up risks;

  

  

  

  

inability to obtain new tenants upon the expiration of existing leases;




22









  

  

  

  

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

  

  

  

  

changes to generally accepted accounting principles, or GAAP;

 

 

 

  

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

 

          The forward-looking statements should be read in light of these factors and the factors identified in the “Risk Factors” sections of the December 31, 2013 Form 10-K filed with the SEC on March 31, 2014.


Overview


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


We commenced our initial public offering of shares of our common stock on February 9, 2010, which we refer to as our initial offering.  In our initial offering, we offered up to 25,000,000 shares of our common stock to the public at $10.00 per share in the primary offering and up to 2,500,000 shares of our common stock pursuant to our distribution reinvestment plan (“DRIP”) at $9.50 per share.  Our initial public offering ended on April 25, 2013.  As of the termination of our initial public offering, we had accepted investors’ subscriptions for, and issued 4,455,678 shares of our common stock in the initial public offering, including 162,561 shares of our common stock pursuant to our DRIP, resulting in offering proceeds of $43,943,731.


On December 7, 2012, the Company filed a registration statement on Form S-11 with the SEC to register a follow-on public offering of up to $219,000,000 in shares of the Company’s common stock.  In the follow-on offering, the Company is offering up to $200,000,000 in shares of the Company’s common stock to the public and up to $19,000,000 in shares of the Company’s common stock pursuant to the distribution reinvestment plan.  The offering price for shares to be offered to the public in the follow-on offering will be determined by the Company’s board of directors.  The Company’s board of directors may change the price at which the Company offers shares to the public in the follow-on offering from time to time during the follow-on offering, but not more frequently than quarterly, to reflect changes in the Company’s estimated per-share net asset value and other factors the Company’s board of directors deems relevant.  On July 16, 2013, the SEC declared the Company’s follow-on offering registration statement effective and the Company recommenced offering of its common shares as of that date.  As a result of our failure to timely update our registration statement by April 30, 2014 as required by Section 10(a)(3) of the Securities Act, on May 30, 2014 we suspended our public offering. On June 5, 2014, we filed a post-effective amendment to our registration statement updating our prospectus pursuant to Section 10(a)(3) of the Securities Act, which registration statement was declared effective by the SEC on July 7, 2014. On July 7, 2014 we recommenced our public offering.


We intend to use substantially all of the net proceeds of our follow-on offering to purchase additional properties and other real estate-related investments. As of the date of this Form 10-Q, we have acquired 7 commercial real estate properties and disposed of 1 property.  The number of assets we acquire will depend upon the number of shares sold in our follow-on offering and the resulting amount of the net proceeds available for investment in properties. 




23






 

We elected to be taxed as a REIT, beginning with the taxable year ending December 31, 2011. Once qualified as a REIT for federal income tax purposes, we will not generally be subject to federal income tax. If we later fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income. However, we believe that we are organized and will operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes and we intend to continue to operate so as to remain, thereafter qualified as a REIT for federal income tax purposes.


For the three months ended September 30, 2014 and 2013, the Company incurred a net loss of $1,024,674 and $395,789, respectively. For the nine months ended September 30, 2014 and 2014, the Company incurred a net loss of $2,843,711 and $1,625,153, respectively.  The Company does not currently 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 financial statements.


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

 

Critical Accounting Policies and Estimates


Our results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related notes, require us to make estimates and assumptions that are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions and other factors related to the ongoing viability of our customers.  With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements.  A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2013, under "Management's Discussion and Analysis of Financial Condition and Results of Operations."  There have been no significant changes to these policies during the nine months ended September 30, 2014.  See also Note 2 to our consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of our significant accounting policies.


RESULTS OF OPERATIONS

 

      As of September 30, 2014 we owned 6 commercial properties located in Richardson, Arlington, Dallas and Houston, Texas comprising approximately 1,103,647 square feet plus 3 pad sites.  As of September 30, 2013 we owned 4 commercial properties located in Richardson, Arlington and Dallas, Texas comprising approximately 605,244 square feet plus 3 pad sites.


Revenues – The primary source of our revenue is rental revenues and tenant reimbursements.  For the three months ended September 30, 2014 and 2013, we had total rental revenues and tenant reimbursements and other revenues of $3,669,149 and $2,116,184, respectively. For the nine months ended September 30, 2014 and 2013, we had total rental revenues and tenant reimbursements and other revenues of $8,517,449 and $5,387,809, respectively.  The increase in revenues of approximately $3,130,000 is attributable to (i) approximately $853,000 of the revenue increase for Richardson Heights, Cooper Street, Bent Tree Green and Parkway; (ii) approximately $1,351,000 of the revenue increase is due to our 203 days of ownership of the Gulf Plaza Property which was acquired in the first quarter of 2014; and (iii) approximately $926,000 of the revenue increase is due to increase due to our 109 days of ownership of Mitchelldale Business Park which was acquired in the second quarter of 2014.


Property operating expenses – Property operating expenses consists of contract services, repairs and maintenance, utilities and property management fees.  For the three months ended September 30, 2014 and 2013, we




24






had total property operating expenses of $947,204 and $537,110, respectively.  For the nine months ended September 30, 2014 and 2013, we had total property operating expenses of $2,100,777 and $1,382,579, respectively.  Property operating expenses include property management fees paid to our Property Manager of $352,871 and $197,236 for the nine months ended September 30, 2014 and 2013, respectively.  The increase in property operating expenses is attributable to the fact that we owned and operated 6 properties for all of the third quarter of 2014 versus 4 properties owned and operated for all of the third quarter of 2013.  Our fourth property was acquired in March 2013.  Our fifth and sixth property acquisitions occurred in March and June 2014, respectively.


Asset management and acquisition fees – Asset management and acquisition fees are fees payable to our Advisor in connection with the management of the Company and the acquisition of our properties.  For the three months ended September 30, 2014 and 2013 we paid the Advisor $158,231 and $96,122 respectively for asset management fees.  For the nine months ended September 30, 2014 and 2013 we paid the Advisor $389,728 and $273,538, respectively for asset management fees.  The increase in asset management fees is a result of the increase in the value of assets under management as a result of property acquisitions.  Acquisition fees paid the Advisor were $0 and $0 for the three months ended September 30, 2014 and 2013, respectively and $828,125 and $156,870 for the nine months ended September 30, 2014 and 2013, respectively.  In connection with the disposition of the Harwin property to Hartman XIX in March 2013, Advisor refunded the acquisition fee of $80,380 previously paid in connection with that acquisition.  


Organizational and offering costs - The Company incurs certain expenses in connection with its organization and registration to sell common shares.  These costs principally relate to professional and filing fees. For the three months ended September 30, 2014 and 2013 organization and offering costs were $148,163 and $210,705, respectively.  For the nine months ended September 30, 2014 and 2013 organization and offering costs were $365,032 and $445,871, respectively.


General and administrative expense - General and administrative expenses were $214,420 and $130,550 for the three months ended September 30, 2014 and 2013, respectively, and $514,525 and $493,692 for the nine months ended September 30, 2014 and 2013, respectively. General and administrative expenses consist primarily of audit fees, transfer agent fees, other professional fees, independent director compensation and other share based compensation.  We expect general and administrative expenses to increase only modestly in future periods as we acquire additional real estate and real estate related assets.  We expect general and administrative expenses to decrease substantially as a percentage of total revenue.


Fees to affiliatesIn addition to asset management and acquisition fees paid to Advisor and property management fees paid to the Property Manager, we pay leasing commissions and construction management fees to the Property Manager.  For the three months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $225,784 and $26,483 for leasing commissions and $40,390 and $23,306 for construction management fees.  For the nine months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $859,265 and $177,080 for leasing commissions and $127,447 and $130,786 for construction management fees.  Lease commissions and construction management fees are included in deferred loan and lease commission costs and real estate assets, respectively, in the consolidated balance sheets.


Funds From Operations and Modified Funds From Operations


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


The Company defines FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper").  The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from




25






sales of property and asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO.  The Company’s FFO calculation complies with NAREIT’s policy described above.


The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed.  The Company believes that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative.  Additionally, the Company believes it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time.  An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset.  Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred.  While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of the Company’s operations, it could be difficult to recover any impairment charges.


Historical accounting for real estate involves the use of GAAP.  Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP.  Nevertheless, the Company believes that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, provides a more complete understanding of the Company’s performance to investors and to management, and when compared year over year, reflects the impact on the Company’s operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.  However, FFO and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating the operating performance of the Company.  The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.


Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses.  Management believes these fees and expenses do not affect the Company’s overall long-term operating performance.  Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation.  While other start up entities may also experience significant acquisition activity during their initial years, the Company believes that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases.  As disclosed in the prospectus for the Company’s offering (the “Prospectus”), the Company will use the proceeds raised in the offering to acquire properties, and intends to begin the process of achieving a liquidity event (i.e., listing of its common stock on a national exchange, a merger or sale of the Company or another similar transaction) within five to ten years of the completion of the offering.  The Investment Program Association (“IPA”), an industry trade group, has standardized a measure known as Modified Funds From Operations (“MFFO”), which




26






the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which the Company believes to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT having the characteristics described above.  MFFO is not equivalent to the Company’s net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if the Company does not continue to operate with a limited life and targeted exit strategy, as currently intended.  The Company believes that, because MFFO excludes costs that the Company considers more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect the Company’s operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of the Company’s operating performance after the period in which the Company is acquiring its properties and once the Company’s portfolio is in place.  By providing MFFO, the Company believes it is presenting useful information that assists investors and analysts to better assess the sustainability of the Company’s operating performance after the Company’s offering has been completed and the Company’s properties have been acquired.  The Company also believes that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry.  Further, the Company believes MFFO is useful in comparing the sustainability of the Company’s operating performance after the Company’s offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of the Company’s operating performance after the Company’s offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on the Company’s operating performance during the periods in which properties are acquired.


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


The Company’s MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, the Company excludes acquisition related expenses.  The Company does not currently exclude amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests.  Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income.  These expenses are paid in cash by the Company, and therefore such funds will not be available to distribute to investors.  All paid and accrued acquisition fees and expenses negatively impact the Company’s operating performance during the period in which properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by the Company, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property.  Accordingly, MFFO may not be an accurate indicator of the Company’s operating performance, especially during periods in which properties are being acquired.  MFFO that excludes such costs and expenses would only be comparable to non-listed REITs that have completed their acquisition activities




27






and have similar operating characteristics as the Company.  Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities.  In addition, the Company views fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.  As disclosed elsewhere in the Prospectus, the purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of the Company’s business plan to generate operational income and cash flows in order to make distributions to investors. Acquisition fees and expenses will not be reimbursed by the advisor if there are no further proceeds from the sale of shares in this offering, and therefore such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.


The Company’s management uses MFFO and the adjustments used to calculate it in order to evaluate the Company’s performance against other non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter.  As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if the Company does not continue to operate in this manner.  The Company believes that its use of MFFO and the adjustments used to calculate it allow the Company to present its performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors.  For example, acquisitions costs are funded from the proceeds of the Company’s offering and other financing sources and not from operations.  By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties.  Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to the Company’s current operating performance.  By excluding such changes that may reflect anticipated and unrealized gains or losses, the Company believes MFFO provides useful supplemental information.


Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of the Company’s performance, as an alternative to cash flows from operations as an indication of its liquidity, or indicative of funds available to fund its cash needs including its ability to make distributions to its stockholders.  FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of the Company’s performance.  MFFO has limitations as a performance measure in an offering such as the Company’s where the price of a share of common stock is a stated value and there is no net asset value determination during the offering stage and for a period thereafter.  MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed.  FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO or MFFO.


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










28







 

Three months ended September 30,

Nine months ended September 30,

 

2014

2013

2014

2013

Net loss

$(1,024,674)

$(395,789)

$(2,843,711)

$(1,625,153)

 Depreciation and amortization of real estate assets

2,033,854

1,057,832

4,630,340

2,837,947

 Income from discontinued operations

-

-

-

(189,036)

Funds from operations (FFO)

1,009,180

662,043

1,786,629

1,023,758

  Acquisition related expenses

-

-

828,125

156,870

Modified funds from operations (MFFO)

$1,009,180

$662,043

$2,614,754

$1,180,628


Distributions


The following table summarizes the quarterly distributions we paid in cash and pursuant to our distribution reinvestment plan (DRIP) for the period from January 2013 through September 2014:

 

 

 

 

 



Period



Cash (1)



DRIP (1) (2)



Total

Net Cash Provided by

(used in) Operating

Activities

First  Quarter 2013

$                 316,478

$              311,276

$              627,754

$             (204,928)

Second Quarter 2013

372,901

387,650

760,551

592,968

Third Quarter 2013

441,870

412,250

854,120

(103,725)

Fourth Quarter 2013

550,371

482,695

1,033,066

916,336

Total

$              1,681,620

$           1,593,871

$          3,275,491

$            1,200,651

 

 

 

 

 

First Quarter 2014

$                 568,290

$              535,309

$          1,103,599

$               435,759

Second Quarter 2014

614,018

577,135

1,191,153

588,753

Third Quarter 2014

632,275

605,293

1,237,568

637,047

Total

$              1,814,583

 $           1,717,737

$          3,532,320

$            1,661,559

 

(1)

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


(2)

Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan.


For the three and nine months ended September 30, 2014, we paid aggregate distributions of $1,237,568 and $3,532,320, respectively.  During the same periods, cash provided by operating activities was $637,047 and $1,661,559, respectively.  Of the $1,237,568 and $3,532,320 we paid to our stockholders for the three and nine months ended September 30, 2014, 52% and 47%, respectively, was attributable to cash provided by operating activities.


Liquidity and Capital Resources

  

As of September 30, 2014, the Company had issued 6,858,054 shares of the Company’s common stock in its ongoing public offering, resulting in gross proceeds to the Company of $66,998,299.


Our principal demands for funds will be for real estate and real estate-related acquisitions, for the payment of operating expenses and distributions, and for the payment of interest on our outstanding indebtedness. Generally, we expect to meet cash needs for items other than acquisitions from our cash flow from operations, and we expect to meet cash needs for acquisitions from the net proceeds of this offering and from financings. 


There may be a delay between the sale of our shares and the purchase of properties or other investments, which could result in a delay in our ability to make distributions to our stockholders. Some or all of our distributions will




29






be paid from other sources, such as from the proceeds of this offering, cash advances to us by our advisor, cash resulting from a waiver of asset management fees and borrowings secured by our assets in anticipation of future operating cash flow until such time as we have sufficient cash flow from operations to fund fully the payment of distributions. We expect to have limited cash flow from operations available for distribution until we make substantial investments. In addition, to the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted, especially during our early periods of operation.

 

We intend to borrow money to acquire properties and make other investments. There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment. We do not expect that the maximum amount of our indebtedness will exceed 300% of our “net assets” (as defined by the NASAA REIT Guidelines) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors and if disclosed to the stockholders in the next quarterly report along with the explanation for such excess borrowings. Our board of directors has adopted a policy to generally limit our aggregate borrowings to approximately 50% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests.  Our policy limitation, however, does not apply to individual real estate assets and only will apply once we have ceased raising capital under this or any subsequent offering and invested substantially all of our capital.  As a result, we expect to borrow more than 50% of the contract purchase price of each real estate asset we acquire to the extent our board of directors determines that borrowing these amounts is prudent.  Our policy of limiting the aggregate debt to equity ratio to 50% relates primarily to mortgage loans and other debt that will be secured by our properties.  The NASAA guideline limitation of 300% of our net assets includes secured and unsecured indebtedness that we may issue.  We do not anticipate issuing significant amounts of unsecured indebtedness and therefore we intend to limit the balance of our borrowings to 50% of the purchase prices, in the aggregate, of our property portfolio. 

 

Our advisor may, but is not required to, establish capital reserves from gross offering proceeds, out of cash flow generated by operating properties and other investments or out of non-liquidating net sale proceeds from the sale of our properties and other investments. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures. Alternatively, a lender may require its own formula for escrow of capital reserves.

 

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


Cash Flows from Operating Activities


As of September 30, 2014 we owned 6 commercial real estate properties.  During the nine months ended September 30, 2014, net cash provided by operating activities was $1,661,559 versus $284,315 provided by operating activities for the nine months ended September 30, 2013.  The increase in cash flow from operating activities is attributable to the fact that we owned and operated 4 commercial real estate properties during the nine months ended September 30, 2014 and acquired our fifth and sixth properties on March 11, 2014 and June 13, 2014, respectively.  For the nine months ended September 30, 2013, we owned and operated 3 commercial real estate properties and acquired our fourth property on March 15, 2013.  We expect cash flows from operating activities to increase in future periods as a result of anticipated future acquisitions of real estate and real estate related investments.


Cash Flows from Investing Activities


During the nine months ended September 30, 2014, net cash used in investing activities was $42,334,917 versus $10,582,133 for the nine months ended September 30, 2013 and consisted primarily of $13,950,000 and $19,175,000 net cash used to acquire the Gulf Plaza and Mitchelldale properties on March 11, 2014 and June 13, 2014, respectively; $500,000 cash was used in acquisition deposits, and $1,609,917 cash used to fund building and




30






tenant improvements; and $7,100,000 of loan proceeds and cash used to fund escrow accounts required under term loan agreements.


Cash Flows from Financing Activities


Cash flows from financing activities consisted primarily of net proceeds from our term loan financing and proceeds from our ongoing public offering.  Net cash provided by financing activities for the nine months ended September 30, 2014 and 2013, respectively, were and $52,592,686 versus $11,033,682 and consisted primarily of the following:

·

$9,186,370 and $20,385,186, respectively of cash provided by offering proceeds related to our public offering, net of payments of commissions on sales of common stock fees of $516,647 and $567,783, respectively;

·

$1,105,173 and $294,500, respectively of cash used to redeem common stock pursuant to our share redemption plan;

·

$1,814,583 and $1,131,249, respectively of net cash distributions;

·

$48,626,072 cash provided and $25,755 cash used, respectively of net term loan proceeds and insurance premium financing; and

·

$2,300,000 cash versus $7,900,000 net cash used in our Revolving Credit Facility.

 

Contractual Obligations

 

Our board of directors has approved our entering into the Advisory Agreement, the Property Management Agreement and the Dealer Management Agreement.


Off-Balance Sheet Arrangements


       As of September 30, 2014, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.


Recent Accounting Pronouncements


Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements  (See Note 2 to consolidated financial statements disclosed in Item 1 to this quarterly report).

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

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


Item 4. Controls and Procedures


Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this Form 10-Q, as of September 30, 2014, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures




31






(as defined in Rule 13a-15(e) and 13d-15(e) under the Exchange Act). In performing this evaluation, management reviewed the selection, application and monitoring of our historical accounting policies. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2014, these disclosure controls and procedures were effective and designed to ensure that the information required to be disclosed in our reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported as and when required.


Changes in Internal Control over Financial Reporting


There have been no changes during the quarter ended September 30, 2014, in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financing reporting.






32






PART II

OTHER INFORMATION


Item 1.  Legal Proceedings


None.


Item 1A. Risk Factors


Except as set forth below, there have been no material changes to the Risk Factors described in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 as filed with the Securities and Exchange Commission.


We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.  


Pursuant to Section 10(a)(3) of the Securities Act, we are required to annually update our prospectus so that the financial statements and other information contained or incorporated by reference in the prospectus is not more than sixteen months old. In order to comply with Section 10(a)(3) of the Securities Act, we are required to file a post-effective amendment to our registration statement containing an updated prospectus prior to April 30th of each year. If the SEC has not declared such post-effective amendment effective by April 30th of each year, we are required to halt our public offering until such time as the SEC declares the post-effective amendment effective. We failed to file the post-effective amendment required to be filed by April 30, 2014 and continued to offer and sell our shares in our public offering during the period from May 1, 2014 to May 30, 2014, the date we suspended our public offering. During the period from May 1, 2014 to the suspension of our public offering on May 30, 2014, we sold 85,569 shares of our common stock, including 19,638 shares issued pursuant to our distribution reinvestment program. On June 5, 2014, we filed a post-effective amendment to our registration statement updating our prospectus pursuant to Section 10(a)(3) of the Securities Act, which registration statement was declared effective by the SEC on July 7, 2014.


As a result of our failure to timely update our registration statement as required by Section 10(a)(3) of the Securities Act, from May 1, 2014 to May 30, 2014, the offer and sale of securities in our continuous public offering may have failed to comply fully with Section 5 of the Securities Act, which may trigger a right of rescission under the Securities Act for investors that purchased shares of our common stock during this period.  Such stockholders may have the right to rescind their purchase of shares of our common stock and require us to reacquire their shares at a price equal to the price originally paid for such shares, plus interest, less the amount of any income (i.e., dividends) received by the investor on such shares. An investor who acquired shares of our common stock during such period who no longer owns the shares they acquired may have the right to collect damages from us in lieu of the rescission rights described above.  If stockholders were successful in seeking rescission and/or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies.  If stockholders seek rescission and/or damages or we elect to conduct a rescission offer, we may or may not have the resources to fund the repurchase of the securities.


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


During the three months ended September 30, 2014, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.


During the three months ended September 30, 2014, we fulfilled redemption requests and redeemed shares of our common stock pursuant to our share redemption program as follows:






33









 

 

 

 

 

 



Total Number of

Shares Requested to

be Redeemed (1)




Total Number of

Shares Redeemed




Average Price

Paid per Share (2)

Approximately Dollar

Value of Shares

Available That May

Yet Be Redeemed

Under the Program

July 2014

260

-

-

(3)

August 2014

-

260

$9.25

(3)

September 2014

4,737

6,281

$9.31

(3)

 

4,997

6,541

 

 


(1) We generally redeem shares in the month following the end of the fiscal quarter in which requests were received.


(2) Pursuant to the share redemption program, we currently redeem shares at prices determined as follows:


a.

In the first year, the lesser of 90.0% of the price paid to acquire the shares or 90.0% of the offering price of shares in our most recent offering;

b.

In the second year, the lesser of 92.5% of the price paid to acquire the shares or 92.5% of the offering price of shares in our most recent offering;

c.

In the third year, the lesser of 95.0% of the price paid to acquire the shares or 95.0% of the offering price of shares in our most recent offering;

d.

In the fourth year, the lesser of 97.5% of the price paid to acquire the shares or 97.5% of the offering price of shares in our most recent offering;

e.

Thereafter, the lesser of 100.0% of the price paid to acquire the shares or 90.0% of the net asset value per share, as determined by the board of directors.


Notwithstanding the foregoing, the redemption price for redemptions sought upon a stockholder’s death or disability or upon confinement to a long-term care facility, is available only for stockholders who purchased their shares directly from us or the persons specifically set forth in the share redemption program.


(3) The number of shares that may be redeemed pursuant to our share redemption program will not exceed (i) 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the effective date of the redemption and (ii) those share redemptions that can be funded with proceeds from our distribution reinvestment plan plus, if we had positive net operating cash flow for the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.


On February 9, 2010, our Registration Statement on Form S-11 (File No. 333-154750), registering a public offering of up to $273,750,000 in shares of our common stock, was declared effective by the SEC and we commenced our initial public offering.  In our initial public offering we offered up to 25,000,000 shares of our common stock to the public at $10.00 per share with discounts available to certain categories of purchasers and up to 2,500,000 shares of our common stock pursuant to our distribution reinvestment plan at a price of $9.50 per share.  We issued a total of 4,455,678 shares of our common stock in our initial public offering, including 162,561 shares of our common stock pursuant to our distribution reinvestment plan, resulting in gross offering proceeds of $43,943,731.  On July 16, 2013, our Registration Statement on Form S-11 (File No. 333-185336), registering our follow-on public offering of up to $219,000,000 in shares of our common stock, was declared effective by the SEC.  In our follow-on offering, we are offering up to 20,000,000 shares of our common stock to the public at $10.00 per share and up to 2,000,000 common shares pursuant to our distribution reinvestment plan at $9.50 per share.


As of September 30, 2014, we had accepted subscriptions for and issued 6,858,054 shares of our common stock in our initial and follow-on offerings, including 465,487 shares of our common stock pursuant to our




34






distribution reinvestment plan, resulting in gross offering proceeds of $66,998,299.  As of the termination of our initial public offering, we had accepted investors’ subscriptions for, and issued 4,455,678 shares of our common stock in the initial public offering, including 162,561 shares of our common stock pursuant to our DRIP, resulting in offering proceeds of $43,943,731.  Total shares issued and outstanding as of September 30, 2014 include 30,875 shares of our common stock issued as non-employee compensation to members of our board of directors and certain executives of our Property Manager.


As of September 30, 2014, we incurred selling commissions and other organization and offering costs in our initial and follow-on offerings in the amounts set forth in the table below.  The dealer manager reallowed all of the selling commissions and a portion of the dealer manager fees to participating broker dealers.


 

 

 

Type of Expense

Amount

Estimated/Actual

Selling commissions and dealer manager fees

$           4,177,623

Actual

Other organization and offering expenses

1,530,668

Actual

Total expenses

$           5,708,291

 


As of September 30, 2014, we had used all of the net offering proceeds of our initial and follow-on offerings to acquire the Richardson Heights, Cooper Street, Bent Tree Green, Parkway Plaza, Gulf Plaza and Mitchelldale properties.


Item 3. Defaults Upon Senior Securities


None.


Item 4.  Mine Safety Disclosures


Not applicable.


Item 5. Other Information


None.


Item 6.  Exhibits


 

 

 

Exhibit

 

Description

10.1

 

Purchase Agreement, dated as of July 1, 2014, by and between BRI 1841 Energy Plaza, LLC and Hartman XX Limited Partnership (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 7, 2014.)

10.2

 

Loan Modification Agreement, dated as of July 2, 2014 by and among Hartman Parkway LLC, Hartman Short Term Income Properties XX, Inc. and Hartman Gulf Plaza LLC and Texas Capital Bank, NA (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 7, 2014.)

10.3

 

Amended and Restated Promissory Note, dated July 2, 2014 by and among Hartman Parkway LLC, Hartman Short Term Income Properties XX, Inc. and Hartman Gulf Plaza LLC and Texas Capital Bank, NA (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on July 7, 2014.)

10.4

 

Assignment of Rents, dated July 2, 2014 by and among Hartman Gulf Plaza LLC and Texas Capital Bank, NA (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on July 7, 2014.)




35









10.5

 

Assignment and Subordination of Management Agreement, July 2, 2014 by and among Hartman Gulf Plaza LLC and Texas Capital Bank, NA and Hartman Income REIT Management, Inc. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on July 7, 2014.)

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

32.1

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

32.2

 

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)


101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 



SIGNATURES


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

 

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.

 

Date: November 14, 2014                                                          

              By: /s/ Allen R. Hartman

Allen R. Hartman,

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)


Date: November 14, 2014                                                          

              By: /s/ Louis T. Fox, III

Louis T. Fox, III,

Chief Financial Officer,

(Principal Financial and Principal Accounting Officer)










36



EX-31.1 2 f311.htm Hartman XX

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Allen R. Hartman, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Hartman Short Term Income Properties XX, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this  report;
 
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 

 

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
       
Date:  November 14, 2014
 
/s/ Allen R. Hartman
 
   
Allen R. Hartman
 
   
Chairman and Chief Executive Officer
 
EX-31.2 3 f312.htm Hartman XX
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Louis T. Fox, III, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Hartman Short Term Income Properties XX, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this  report;
 
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
       
Date:  November 14, 2014
 
/s/ Louis T. Fox, III
 
   
Louis T. Fox, III
 
   
Chief Financial Officer
EX-32.1 4 f321.htm Hartman XX
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Allen R. Hartman, Chairman and Chief Executive Officer of Hartman Short Term Income Properties XX, Inc. (the “Company”), certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
            1. The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2014 (“the Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

            2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

       
Date:  November 14, 2014
 
/s/ Allen R. Hartman
 
   
Allen R. Hartman
 
   
Chairman and Chief Executive Officer
EX-32.2 5 f322.htm Hartman XX
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Louis T. Fox, III, Chief Financial Officer of Hartman Short Term Income Properties XX, Inc. (the “Company”), certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
           1. The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2014 (“the Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

           2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
       
Date:  November 14, 2014
 
/s/ Louis T. Fox, III
 
   
Louis T. Fox, III
 
   
Chief Financial Officer
EX-101.INS 6 hartman-20140930.xml 2844926 1552676 7025809 4408093 824223 563508 1491640 979716 3669149 2116184 8517449 5387809 947204 537110 2100777 1382579 158231 96122 1217853 430408 148163 210705 365032 445871 593691 286867 1439048 949760 2033854 1057832 4630340 2837947 214420 130550 514525 493692 598260 192787 1093585 661741 4693823 2511973 11361160 7201998 -1024674 -395789 -2843711 -1814189 189036 -1024674 -395789 -0.14 -0.07 -0.41 -0.40 7124242 5342710 6868701 4549526 1 6312 58844825 -11082844 1000 1000 6311691 6311691 0 1062 10394519 0 10395581 1061725 1061725 0 0 -516647 0 -516647 0 0 0 -3578826 -3578826 0 0 0 -2843711 1 7374 68722697 -17505381 1000 1000 7373416 7373416 91991529 56992904 -10909141 -6278801 81082388 50714103 7100000 1206124 518877 2493088 995528 249686 249686 1009530 379804 93218 105296400 53001036 49569624 2300000 3937806 2545833 67651 564279 319258 54071709 5232742 1 1 7374 6312 68722697 58844825 17505381 11082844 51224691 47768294 105296400 53001036 <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Note 1&nbsp;&#151;&nbsp;Organization and Business</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Hartman Short Term Income Properties XX, Inc. (the &#147;Company&#148;), is a Maryland corporation formed on February 5, 2009. &nbsp;The Company elected to be treated as a real estate investment trust (&#147;REIT&#148;) beginning with the taxable year ending December 31, 2011.&nbsp;&nbsp;Effective July 16, 2013, the Company is offering $200,000,000 of its common shares to the public in its follow-on offering (exclusive of $19,000,000 of its common shares available pursuant to the Company&#146;s distribution reinvestment plan) at a price of $10.00 per share. The offering price for shares offered in the follow-on offering was determined by the Company&#146;s board of directors. &nbsp;The Company&#146;s board of directors may change the price at which the Company offers shares to the public from time to time during the follow-on offering, but not more frequently than quarterly, to reflect changes in the Company&#146;s estimated per-share net asset value and other factors the Company&#146;s board of directors deems relevant.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc.&nbsp;&nbsp;Hartman XX Holdings, Inc. is a Texas corporation wholly owned by Allen R. Hartman.&nbsp;&nbsp;The Company sold 19,000 shares to Hartman XX Holdings, Inc. at a price of $10.00 per share.&nbsp;&nbsp;The Company has also issued 1,000 shares of convertible preferred shares to its advisor, Hartman Advisors LLC at a price of $10.00 per share.&nbsp;&nbsp;Hartman Advisors LLC (the &#147;Advisor&#148;) is the Company&#146;s advisor. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc. (the &#147;Property Manager&#148;). The Property Manager is a wholly owned subsidiary of Hartman Income REIT, Inc. of which approximately 20% is beneficially owned by Allen R. Hartman, &#160;the Company&#146;s Chief Executive Officer and Chairman of the Board of Directors.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>On April 11, 2014 we formed Hartman XX Limited Partnership, a Texas limited partnership (the &#147;Operating Partnership&#148;). &nbsp;On March 7, 2014 we formed Hartman XX REIT GP LLC, a Texas limited liability company, to serve as the sole general partner of the Operating Partnership. &nbsp;We are the sole limited partner of the Operating Partnership. &nbsp;Our single member interests in our limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>As of September 30, 2014, we had issued and outstanding 7,373,416 shares of our common stock in our initial and follow-on offerings, including 465,487 shares of our common stock pursuant to our distribution reinvestment plan, resulting in gross offering proceeds of $66,998,299. &nbsp;Total shares issued and outstanding as of September 30, 2014 include 30,875 shares of our common stock issued as non-employee compensation to members of our board of directors and certain executives of our Property Manager.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The management of the Company is through the Advisor.&nbsp;&nbsp;Management of the Company&#146;s properties is through the Property Manager. D.H. Hill Securities LLLP (the &#147;Dealer Manager&#148;) serves as the dealer manager of the Company&#146;s public offering. These parties receive compensation and fees for services related to the offering and for the investment and management of the Company&#146;s assets. These parties will receive fees during the offering, acquisition, operational and liquidation stages.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September 30, 2014 we owned 6 commercial properties comprising approximately 1,103,647 square feet plus 3 pad sites. We owned 4 properties located in Richardson, Arlington, and Dallas, Texas and 2 properties in Houston, Texas. &nbsp;As of September 30, 2013 we owned 4 commercial properties comprising approximately 605,244 square feet plus 3 pad sites, located in Richardson, Arlington and Dallas, Texas.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 2&nbsp;&#151;&nbsp;Summary of Significant Accounting Policies</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Basis of Presentation</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'><font style='background:white'>The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2013 are derived from our audited consolidated financial statements as of that date. &nbsp;The unaudited consolidated financial statements as of&nbsp;September 30, 2014 have been prepared by us in accordance with accounting principles generally accepted in the United States (&#147;GAAP&#148;) 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, 2014, and the results of consolidated operations for the three and nine months ended September 30, 2014 and 2013, the consolidated statements of stockholders&#146; equity for the nine months ended September 30, 2014 and the consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013. &nbsp;The results of the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.</font></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'><font style='background:white'>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&#146;s Annual Report on Form 10-K for the year ended December 31, 2013.</font></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Hartman Richardson Heights Properties, LLC; Hartman Cooper Street Plaza, LLC; and Hartman Bent Tree Green, LLC for the nine months ended September 30, 2014 and 2013, respectively; Hartman Parkway LLC for the nine months ended September 30, 2014 and for the period from March 15, 2013, the date this subsidiary acquired the Parkway Property, to September 30, 2013; Hartman Gulf Plaza LLC for the period from March 11, 2014, the date this subsidiary acquired the Gulf Plaza Property, to September 30, 2014; Hartman Mitchelldale Business Park, LLC for the period from June 13, 2014, the date this subsidiary acquired the Mitchelldale Property, to September 30, 2014; and Hartman Haute Harwin, LLC for the period from January 1, 2013 to March 28, 2013, the date this subsidiary&#146;s property was sold to an affiliate. &nbsp;All significant intercompany balances and transactions have been eliminated.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Use of Estimates in the Preparation of Financial Statements</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>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.&nbsp;&nbsp;Actual results could differ from those estimates.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Reclassifications</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>We have reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net loss, total assets, total liabilities or stockholders&#146; equity.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Cash and Cash Equivalents</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. &nbsp;Cash and cash equivalents at September 30, 2014 and December 31, 2013 consisted of demand deposits at commercial banks.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Restricted Cash</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Restricted cash represents cash for which the use of funds is restricted by certain loan documents. &nbsp;As of September 30, 2014 and December 31, 2013, the Company had a restricted cash balance of $7,100,000 and $0, respectively, which represent amounts set aside as impounds to be disbursed to the Company (i) upon its achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property, and (ii) the completion of certain agreed upon capital repairs at the Cooper Street Property and the Mitchelldale Property. &nbsp;Restricted cash includes $6,500,000 of loan proceeds and $600,000 in cash, which have been deposited in an escrow account with a loan servicer.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Financial Instruments</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, accounts payable and accrued expenses and due from (to) related parties. &nbsp;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. &nbsp;Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Revenue Recognition</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Our leases are accounted for as operating leases. &nbsp;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. &nbsp;Revenue is recognized on a straight-line basis over the terms of the individual leases. &nbsp;Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. &nbsp;When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Accrued rents are included in accrued rent and accounts receivable, net. &nbsp;In accordance with Accounting Standards Codification (&#147;ASC&#148;) 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.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Real Estate</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Allocation of Purchase Price of Acquired Assets</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the acquisition of real properties, it is the Company&#146;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).</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>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&#146;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.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>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&#146;s reported net loss.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Depreciation and amortization</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. &nbsp;Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years calculated on terms of all of the leases in-place when acquired. </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Impairment</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We review our 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.&nbsp;&nbsp;We determine 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.&nbsp;&nbsp;If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value.&nbsp;&nbsp;Management has determined that there has been no impairment in the carrying value of our real estate assets as of September 30, 2014. </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property&#146;s 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.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&#160;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Accrued Rent and Accounts Receivable</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Deferred Loan and Leasing Commission Costs</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. &nbsp;Leasing commissions are amortized using the straight-line method over the term of the related lease agreements. &nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Goodwill</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.&nbsp; The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount.&nbsp; If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. &nbsp;In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements. </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Organization and Offering Costs</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company has incurred certain expenses in connection with organizing the Company. These costs principally relate to professional and filing fees. For the three months ended September 30, 2014 and 2013, such costs totaled $148,163 and $210,705, respectively. &nbsp;For the nine months ended September 30, 2014 and 2013, such costs totaled $365,032 and $445,871, respectively.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Organization and offering costs will be reimbursed by the Advisor to the extent that organization and offering costs ultimately exceed 1.5% of gross offering proceeds.&nbsp;&nbsp;As of September 30, 2014,&nbsp;the amount of offering and organizational expenses incurred&nbsp;in excess of&nbsp;1.5% of gross offering proceeds&nbsp;is cumulatively $525,694.&nbsp;for the Company&#146;s initial and follow-on offerings. &nbsp;No demand has been made of the Advisor for reimbursement as of September 30, 2014 and no receivable has been recorded with respect to the excess costs as of that date. &nbsp;The Company expects the excess cost to diminish as additional offering proceeds are received. Selling commissions in connection with the offering are recorded and charged to additional paid-in capital.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Stock-Based Compensation</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) with regard to issuance of stock in payment of services. &nbsp;ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. &nbsp;The compensation cost is measured based on the fair value of the equity or liability instruments issued.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Advertising</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. &nbsp;Advertising costs totaled $9,215 and $275 for the three months ended September 30, 2014 and 2013, and $23,320 and $3,891 for the nine months ended September 30, 2014 and 2013, respectively.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Income Taxes</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our 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&#146;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).&nbsp;&nbsp;As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.&nbsp;&nbsp;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.&nbsp;&nbsp;Such an event could materially and adversely affect the Company&#146;s net income and net cash available for distribution to stockholders.&nbsp;&nbsp;However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT.&nbsp; </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>For the three months ended September 30, 2014 and 2013, the Company incurred a net loss of $1,024,674 and $395,789, respectively.&nbsp; For the nine months ended September 30, 2014 and 2013, the Company incurred a net loss of $2,843,711 and $1,625,153. &nbsp;The Company does not currently anticipate forming any taxable REIT subsidiaries or otherwise generating future taxable income which may be offset by the net loss carry forward.&nbsp;&nbsp;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.&nbsp;&nbsp;Accordingly no deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>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. &nbsp;Management has reviewed the Company&#146;s tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. &nbsp;Accordingly, the Company has not recognized a liability related to uncertain tax positions.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Loss Per Share</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities.&nbsp;&nbsp;The Company&#146;s potentially dilutive securities include preferred shares that are convertible into the Company&#146;s common stock.&nbsp;&nbsp;As of September 30, 2014 and 2013, there were no shares issuable in connection with these potentially dilutive securities.&nbsp;&nbsp;These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and nine months ended September 30, 2014 and 2013 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Concentration of Risk</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantially all of our revenues are derived from four properties located in the Dallas, Texas metropolitan area and two properties located in Houston, Texas. &nbsp;We maintain cash accounts in two U.S. financial institutions. &nbsp;The terms of these deposits are on demand to minimize risk. &nbsp;The balances of these accounts may exceed the federally insured limits. &nbsp;No losses have been incurred in connection with these deposits nor are any expected.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <!--egx--> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 4&nbsp;&#151;&nbsp;Accrued Rent and Accounts Receivable, net</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Accrued rent and accounts receivable, net, consisted of the following:</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="427" style='width:320.25pt;padding:0'></td> <td width="144" style='width:1.5in;padding:0'></td> <td width="145" style='width:108.75pt;padding:0'></td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>September 30, 2014</b></p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>December 31, 2013</b></p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Tenant receivables</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;455,119</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;312,218</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Accrued rent</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>967,760</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>467,544</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Allowance for uncollectible accounts</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(216,755)</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid black 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(260,885)</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;Accrued rents and accounts receivable, net</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,206,124</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:double black 2.25pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;518,877</p> </td> </tr> </table> </div> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>As of September 30, 2014 and December 31, 2013, we had an allowance for uncollectible accounts of $216,755 and $260,885, respectively. &nbsp;For the three months ended September 30, 2014 and 2013, we recorded bad debt expense in the amount of $9,592 and $34,013, respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenant&#146;s credit-worthiness.&nbsp;&nbsp;For the nine months ended September 30, 2014 and 2013, we recorded bad debt (recovery) expense of ($44,130) and $97,374, respectively. &nbsp;Bad debt expenses and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <b> </b> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 5&nbsp;&#151;&nbsp;Deferred Loan and Leasing Commission Costs, net</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Costs which have been deferred consist of the following:</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="427" style='width:320.25pt;padding:0'></td> <td width="144" style='width:1.5in;padding:0'></td> <td width="145" style='width:108.75pt;padding:0'></td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>September 30, 2014</b></p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>December 31, 2013</b></p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Deferred loan and leasing commission costs</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,220,413</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,384,557</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Less: accumulated amortization</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(727,325)</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(389,029)</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;Total cost, net of accumulated amortization</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,493,088</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;995,528</p> </td> </tr> </table> </div> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 6&nbsp;&#151;&nbsp;Notes Payable</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company is a party to a $30.0 million revolving credit agreement (the &#147;Credit Facility&#148;) with a bank. &nbsp;The borrowing base of the Credit Facility may be adjusted from time to time subject to the lenders underwriting with respect to real property collateral. &nbsp;&nbsp;&nbsp;The Credit Facility was secured by the Richardson Heights Property; the Cooper Street Property; the Bent Tree Green Property and the Parkway Property. &nbsp;On June 13, 2014, the Company entered into a modification agreement pursuant to which the Richardson Heights Property, the Cooper Street Property, and the Bent Tree Green Property were released as collateral for the Credit Facility. &nbsp;On July 2, 2014, the Company entered into a further modification agreement of the Credit Facility to add the Gulf Plaza Property as collateral and the borrowing base of the Credit Facility, as further modified, was increased to $7.0 million. &nbsp;The Credit Facility note bears interest at greater of 4.5% per annum or the bank&#146;s prime rate plus 1% per annum. &nbsp;The interest rate was 4.5% per annum as of September 30, 2014. &nbsp;The loan matures on May 9, 2015.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The outstanding balance under the Credit Facility was $0 and $2.3 million as of September 30, 2014 and December 31, 2013, respectively. &nbsp;As of September 30, 2014 the amount available to be borrowed is $7.0 million. &nbsp;As of September 30, 2014, we were in compliance with all loan covenants.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>On June 13, 2014, the Company, through the Operating Partnership, entered into four term loan agreements with an insurance company, each loan being secured by a collateral property. &nbsp;The following is a summary of the mortgage notes payable as of September 30, 2014:</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>&nbsp;</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="174" style='width:130.5pt;padding:0'></td> <td width="128" style='width:96.3pt;padding:0'></td> <td width="109" style='width:81.55pt;padding:0'></td> <td width="90" style='width:67.6pt;padding:0'></td> <td width="123" style='width:92.05pt;padding:0'></td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Property Name</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Payment Type</b></p> </td> <td width="109" valign="top" style='width:81.55pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Maturity Date</b></p> </td> <td width="90" valign="top" style='width:67.6pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Interest Rate</b></p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Principal Balance</b></p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Richardson Heights Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,136,882</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Cooper Street Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>8,373,752</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Bent Tree Green Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>8,373,752</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Mitchelldale Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>12,685,238</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;49,569,624</p> </td> </tr> </table> </div> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Monthly payments of principal and interest are due and payable on the first day of each month beginning August 1, 2014 until July 1, 2041 based on a 27 year loan amortization. &nbsp;Each promissory note contains a call option wherein the holder of the promissory note may declare the outstanding balance due and payable on either July 1, 2024; July 1, 2029; July 1, 2034; or July 1, 2039. &nbsp;Each of the loan agreements are subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements. &nbsp;As of September 30, 2014, we were in compliance with all loan covenants.&#160; Each of the loan agreements are secured by a deed of trust; assignment of licenses, permits and contracts; assignment and subordination of the management agreements; and assignment of rents. &nbsp;The terms of the security instruments provide for the cross collateralization/cross default of the each of the loans.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>In connection with the loans secured by the Richardson Heights Property and the Bent Tree Green Property, the Company has entered into a reserve agreement with the lender which requires that loan proceeds of $5,525,000 and $975,000, respectively, be deposited with the loan servicer. &nbsp;The escrowed loan proceeds will be released to the Company upon satisfactory showing of increased annualized rental income from new lease agreements as set forth in the reserve agreement. &nbsp;In connection with the loans secured by the Cooper Street Property and the Mitchelldale Property, the Company entered into a post-closing agreement with the lender requiring the short term escrow of $600,000 for certain capital repairs to be completed during 2014 together with the delivery of certain other documents as set forth in the post-closing agreement. &nbsp;Loan proceeds and other reserve funds held pursuant to the reserve agreement and the post-closing agreement are recorded as restricted cash on the accompanying consolidated balance sheets.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&#160;&#160;&#160;&#160;&#160;&#160; Under the terms of the reserve agreement, the Company may draw upon the escrow reserve funds until December 31, 2016.&#160; Thereafter, the lender shall have the right to draw any remaining escrow reserve funds and apply such funds to one or more of the loans as the lender may determine in its sole discretion.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 7&nbsp;&#151;&nbsp;Loss Per Share</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding. &nbsp;Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share. </p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="236" style='width:176.7pt;padding:0'></td> <td width="91" style='width:68.5pt;padding:0'></td> <td width="99" style='width:74.3pt;padding:0'></td> <td width="92" style='width:69.05pt;padding:0'></td> <td width="106" style='width:79.45pt;padding:0'></td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="91" valign="top" style='width:68.5pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="190" colspan="2" valign="bottom" style='width:142.8pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>Three months ended September 30,</b></p> </td> <td width="198" colspan="2" valign="bottom" style='width:148.5pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>Nine months ended September 30,</b></p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="91" valign="bottom" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2014</b></p> </td> <td width="99" valign="bottom" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2013</b></p> </td> <td width="92" valign="bottom" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2014</b></p> </td> <td width="106" valign="bottom" style='width:79.45pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2013</b></p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Numerator:</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Net loss attributable to common stockholders</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;(1,024,674)</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(395,789)</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,843,711)</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,625,153)</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Denominator:</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Basic and diluted weighted average common shares outstanding</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>7,124,242</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>5,342,710</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>6,868,701</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4,549,526</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Basic and diluted loss per common share:</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Net loss attributable to common stockholders</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.14)</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.07)</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.41)</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.36)</p> </td> </tr> </table> </div> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 8&nbsp;&#151;&nbsp;Income Taxes</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>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 rental revenue.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 9&nbsp;&#151;&nbsp;Related Party Transactions</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Hartman Advisors LLC, is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager.&nbsp;&nbsp;The Advisor is a variable interest entity which consolidates for financial reporting purposes with Hartman Income REIT, Inc. and Subsidiaries, of which approximately 20% is beneficially owned by Allen R. Hartman, our Chief Executive Officer and Chairman of the Board of Directors.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>For the three months ended September 30, 2014 and 2013 we paid the Advisor $158,231 and $96,122 respectively for asset management fees. &nbsp;For the nine months ended September 30, 2014 and 2013 we paid the Advisor $389,728 and $273,538, respectively for asset management fees. &#160;Acquisition fees paid to Advisor were $0 and $0 for the three months ended September 30, 2014 and 2013, respectively and $828,125 and $156,870 for the nine months ended September 30, 2014 and 2013, respectively. &nbsp;In connection with the disposition of the Harwin property to Hartman XIX in March 2013, Advisor refunded the acquisition fee of $80,380 previously paid in connection with that acquisition.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'><font style='background:white'>Property operating expenses include property management fees paid to our Property Manager of $158,429 and $68,883 for the three months ended September 30, 2014 and 2013, respectively, and $352,871 and $197,236 for the nine months ended September 30, 2014 and 2013, respectively.&#160; </font>For the three months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $225,784 and $26,483 for leasing commissions and $40,390 and $23,306 for construction management fees. &nbsp;For the nine months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $859,265 and $177,080 for leasing commissions and $127,447 and $130,786 for construction management fees. &nbsp;Lease commissions and construction management fees are included in deferred loan and lease commission costs and real estate assets, respectively, in the consolidated balance sheets.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September 30, 2014 and December 31, 2013, respectively, the Company had a net balance due from the Property Manager and the Advisor of $61,963 and $90,417.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company had a net balance due from (to) an affiliate, Hartman Short Term Income Properties XIX, Inc. (&#147;Hartman XIX&#148;), of $31,255 and ($158,068) as of September 30, 2014 and December 31, 2013, respectively. &nbsp;The balance due to Hartman XIX represents undistributed funds from operations due to Hartman XIX with respect to its former ownership interest in the Richardson Heights Property joint venture and a retail shopping center commonly known as Haute Harwin (the &#147;Harwin Property&#148;) which was sold to Hartman XIX. </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Effective March 28, 2013 the Company disposed of the Harwin Property for $3.4 million.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>On March 11, 2014, we acquired a fee simple interest in an office building located in the Energy Corridor of Houston, Texas, commonly known as Gulf Plaza. &nbsp;The property was acquired from fourteen tenant-in-common investors, including Hartman Gulf Plaza Acquisitions, LP (&#147;Acquisitions&#148;) which owned 1% of Gulf Plaza. &nbsp;Acquisitions is an affiliate of Hartman Income REIT Management, Inc., our Property Manager, which indirectly owns approximately 15% of Acquisitions. &nbsp;Approximately 10% of Acquisitions is owned by Allen Hartman, our President and CEO, or his affiliates. &nbsp;Advisor earned an acquisition fee of $348,750 in connection with the Gulf Plaza Property acquisition.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>On June 13, 2014, we acquired the Mitchelldale Property. &nbsp;Advisor earned an acquisition fee of $479,375 in connection with the Mitchelldale Property acquisition.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 10 &#150; Stockholders&#146; Equity</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><i><u>Common Stock</u></i></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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&#146;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. &nbsp;The common stock has no preferences or preemptive, conversion or exchange rights.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our articles of incorporation, we have authority to issue 750,000,000 common shares, $0.001 par value per share, and 200,000,000 preferred, $0.001 par value per share.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September 30, 2014, the Company has accepted investors&#146; subscriptions for and issued 6,858,054 shares of the Company&#146;s common stock in its initial and follow-on public offerings, resulting in gross proceeds to the Company of $66,998,299. &#160;As of the termination of our initial public offering, we had accepted investors&#146; subscriptions for, and issued 4,455,678 shares of our common stock in the initial public offering, including 162,561 shares of our common stock pursuant to our DRIP, resulting in offering proceeds of $43,943,731.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><i><u>Preferred Stock</u></i></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our articles of incorporation the Company&#146;s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors shall have the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares. &nbsp;As of September 30, 2014 and December 31, 2013, respectively, we have issued 1,000 shares of convertible preferred shares to Hartman Advisors LLC at a price of $10.00 per share.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><i>Common Stock Issuable Upon Conversion of Convertible Preferred Stock</i> - The convertible preferred stock will convert to shares of common stock if (1) the Company has made total distributions on then outstanding shares of the Company&#146;s common stock equal to the issue price of those shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares, (2) the Company lists its common stock for trading on a national securities exchange if the sum of prior distributions on then outstanding shares of our common stock plus the aggregate market value of our common&nbsp;&nbsp;stock&nbsp;&nbsp;(based on the&nbsp;&nbsp;30-day&nbsp;&nbsp;average&nbsp;&nbsp;closing&nbsp;&nbsp;&nbsp;price) meets&nbsp;&nbsp;the&nbsp;&nbsp;same&nbsp;&nbsp;6%&nbsp;&nbsp;performance&nbsp;&nbsp;threshold,&nbsp;&nbsp;or&nbsp;&nbsp;(3)&nbsp;&nbsp;the Company&#146;s advisory agreement with Hartman Advisors, LLC expires without renewal or is terminated (other than because of a material breach by Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company&#146;s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company&#146;s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><i><u>Stock-Based Compensation</u></i></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We award 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. &nbsp;These shares are fully vested when granted. &nbsp;These shares may not be sold while an independent director is serving on the board of directors. &nbsp;For the three and nine months ended September 30, 2014 and 2013, respectively, the Company granted 1,500 and 1,500 shares and 4,500 and 5,250 shares of restricted common stock to independent directors as compensation for services. &nbsp;We recognized $15,000 and $15,000; and $45,000 and $52,500 as stock-based compensation expense for the three and nine months ended September 30, 2014 and 2013, respectively, based upon the estimated fair value per share. &nbsp;The Compensation Committee of the Board of Directors approved awards of 1,000 shares of restricted common stock issued to each of two executives of the Property Manager. We recognized stock-based compensation expense of $20,000 and $20,000 with respect to these awards based on the amount offering price of $10 per share for the nine months ended September 30, 2014 and 2013, respectively. &nbsp;Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><i><u>Distributions</u></i></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>The following table reflects the total distributions we have paid, including the total amount paid and amount paid per common share, in each indicated quarter:</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="335" style='width:251.35pt;padding:0'></td> <td width="146" style='width:109.25pt;padding:0'></td> <td width="143" style='width:107.4pt;padding:0'></td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Quarter paid</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Distributions per</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Common Share</b></p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Total Amounts Paid</b></p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>2014</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b> 3<sup>rd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; 0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; 1,237,568</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;2<sup>nd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,191,153</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;1<sup>st</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid black 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>1,103,599</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;&nbsp;Total</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.525</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:double black 2.25pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,532,320</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>2013</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;4<sup>th</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,033,066</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;3<sup>rd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>854,120</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;2<sup>nd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>760,551</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;1<sup>st</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>627,754</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;&nbsp;Total</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.700</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,275,491</p> </td> </tr> </table> </div> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 11 &#150; Discontinued Operations</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Effective March 28, 2013, the Company sold the Harwin Property to Hartman XIX pursuant to the terms agreed upon and approved by both the board of directors of the Company and of Hartman XIX. &nbsp;The Company sold the Harwin property for $3,400,000 cash.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&#160;&#160;&#160;&#160;&#160;&#160; Income from discontinued operations is comprised as follows:</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <table border="1" cellspacing="0" cellpadding="0" style='border-collapse:collapse;border:none'> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.25pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.45pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.25pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="190" colspan="2" valign="top" style='width:142.7pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>Three months ended September 30,</b></p> </td> <td width="190" colspan="2" valign="top" style='width:142.45pt;border:none;border-bottom:solid windowtext 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Nine months ended September 30,</b></p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2014</b></p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2013</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2014</b></p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2013</b></p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Income from discontinued operations</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#160;&#160;&#160;&#160;&#160; -</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;66,460</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Gain on sale of property</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>-</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>-</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>-</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>122,576</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Net Income from discontinued operations</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:double windowtext 1.5pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:double windowtext 1.5pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:double windowtext 1.5pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:double windowtext 1.5pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;189,036</p> </td> </tr> </table> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 12 &#150; Commitments and Contingencies</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Economic Dependency</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company&#146;s shares of common stock and preferred stock available for issue; the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the Company&#146;s real estate portfolio, and other general and administrative responsibilities.&nbsp;&nbsp;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.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Litigation</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company is subject to various claims and legal actions that arise in the ordinary course of business. &nbsp;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.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Rescission Rights of Certain Stockholders</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>In connection with the Company&#146;s initial public offering, the Company may have a contingent liability to certain stockholders who purchased shares of the Company&#146;s common stock during the period in which the Company&#146;s registration statement was not effective and during which time the Company may have been in violation of one or more securities laws. &nbsp;The Company considered the possibility of affording the remedy of rescission to stockholders who purchased common shares during the period that the Company was required to file post-effective amendments to its registration statement. &nbsp;Any such rescission would obligate the Company to reacquire the stockholders common shares at a price equal to the price originally paid for such shares with market interest, less the amount of any income received with respect to such shares.&nbsp;&nbsp;If affected stockholders were successful in seeking rescission and/or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies.&nbsp;&nbsp;If stockholders seek rescission and/or damages or we conduct a rescission offer, we may or may not have the resources to fund the repurchase of all of the securities tendered. &nbsp;We determined not to offer rescission because the Advisor and the Company do not believe that any material number of affected investors would choose to rescind their common share purchases. &nbsp;On July 16, 2013, the SEC declared the Company&#146;s follow-on offering registration statement effective and the Company has recommenced offering of its common shares as of that date. The Company believes that the right of affected stockholders to request rescission has expired under the one-year federal statute of limitations. &nbsp;The statute of limitations in several of the various states is longer than the federal statute of limitations. &nbsp;Accordingly, affected shareholders of any such state may continue to possess a rescission right. &nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights. &nbsp;Pursuant to Section 10(a)(3) of the Securities Act, we are required to annually update our prospectus so that the financial statements and other information contained or incorporated by reference in the prospectus is not more than sixteen months old. In order to comply with Section 10(a)(3) of the Securities Act, we are required to file a post-effective amendment to our registration statement containing an updated prospectus prior to April 30th of each year. If the SEC has not declared such post-effective amendment effective by April 30th of each year, we are required to halt our public offering until such time as the SEC declares the post-effective amendment effective. We failed to file the post-effective amendment required to be filed by April 30, 2014 and continued to offer and sell our shares in our public offering during the period from May 1, 2014 to May 30, 2014, the date we suspended our public offering. During the period from May 1, 2014 to the suspension of our public offering on May 30, 2014, we sold 85,569 shares of our common stock, including 19,638 shares issued pursuant to our distribution reinvestment program. On June 5, 2014, we filed a post-effective amendment to our registration statement updating our prospectus pursuant to Section 10(a)(3) of the Securities Act, which registration statement was declared effective by the SEC on July 7, 2014.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>As a result of our failure to timely update our registration statement as required by Section 10(a)(3) of the Securities Act, from May 1, 2014 to May 30, 2014, the offer and sale of securities in our continuous public offering may have failed to comply fully with Section 5 of the Securities Act, which may trigger a right of rescission under the Securities Act for investors that purchased shares of our common stock during this period. &nbsp;Such stockholders may have the right to rescind their purchase of shares of our common stock and require us to reacquire their shares at a price equal to the price originally paid for such shares, plus interest, less the amount of any income (i.e., dividends) received by the investor on such shares. An investor who acquired shares of our common stock during such period who no longer owns the shares they acquired may have the right to collect damages from us in lieu of the rescission rights described above. &nbsp;We determined not to offer rescission because the Advisor and the Company do not believe that any material number of affected investors would choose to rescind their common share purchases. &nbsp;If stockholders were successful in seeking rescission and/or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies. &nbsp;If stockholders seek rescission and/or damages or we elect to conduct a rescission offer, we may or may not have the resources to fund the repurchase of the securities.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>No rescission requests have been received by the Company as of September 30, 2014. &nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Escrow Contingency Under Term Loan Reserve Agreement</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The reserve agreement among Richardson Heights Properties, LLC and the term loan lender referred to in Note 6, requires that three specific new tenants must occupy their leased premises and be paying full base rent on or before December 15, 2014. &nbsp; The Taco Joint, one of the specified new tenants, is currently occupying their leased premises and paying full base rent under their lease agreement effective October 1, 2014. &nbsp;Skechers USA, one of the specified new tenants, has taken possession of their lease space and their lease agreement commenced on October 24, 2014.&#160; The tenant will pay prorated rent for the month of October 2014 and will begin paying full base rent effective February 1, 2015.&#160; Under the terms of the reserve agreement, Richardson Heights Properties, LLC may be required to add $1,008,377 to the escrow reserve until such time as Richardson Heights Properties, LLC has met the requirements for disbursement of proceeds as set forth in the reserve agreement.&#160; The lease agreement of Dulce Restaurants LLC (dba Krispy Kreme), the third of the three specific new tenants, commenced on August 5, 2014 and the tenant has begun paying full base rent under their lease agreement beginning in November 2014. &nbsp;This tenant is currently occupying their leased premises.&#160; No addition to the escrow reserve is required with respect to this specified tenant. &#160;Funds held in the escrow reserve may be recovered on a quarterly basis subject to the terms and conditions set forth in the reserve agreement.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Property Acquisition</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>On July 1, 2014, the Company, through the Operating Partnership, entered into a purchase agreement with BRI 1841 Energy Plaza, LLC, to acquire a two office building complex containing approximately 180,119 square foot of office space located in San Antonio, Texas, for an aggregate purchase price of $17,610,000. &nbsp;The property is commonly referred to as Energy Plaza I &amp; II (the &#147;Energy Plaza Property&#148;).</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The acquisition of the Energy Plaza Property is subject to substantial conditions to closing, including (i) the assumption of existing indebtedness secured by the Energy Plaza Property of approximately $10.5 million; and (ii) the absence of a material adverse change to the Energy Plaza Property prior to the acquisition date. &nbsp;The acquisition is scheduled to close on December 17, 2014, however, there is no assurance that the Company will close the acquisition of the Energy Plaza Property on the terms described above or at all.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Note 13 &#150; Subsequent Events</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>In accordance with Financial Accounting Standards Board ASC Topic 855, Subsequent Events, the Company has evaluated subsequent events through November 14, 2014, which is the date these consolidated financial statements were issued. All subsequent events requiring recognition as of November 14, 2014, have been incorporated into these notes to consolidated financial statements.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <b> </b> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Basis of Presentation</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'><font style='background:white'>The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2013 are derived from our audited consolidated financial statements as of that date. &nbsp;The unaudited consolidated financial statements as of&nbsp;September 30, 2014 have been prepared by us in accordance with accounting principles generally accepted in the United States (&#147;GAAP&#148;) 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, 2014, and the results of consolidated operations for the three and nine months ended September 30, 2014 and 2013, the consolidated statements of stockholders&#146; equity for the nine months ended September 30, 2014 and the consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013. &nbsp;The results of the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.</font></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'><font style='background:white'>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&#146;s Annual Report on Form 10-K for the year ended December 31, 2013.</font></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Hartman Richardson Heights Properties, LLC; Hartman Cooper Street Plaza, LLC; and Hartman Bent Tree Green, LLC for the nine months ended September 30, 2014 and 2013, respectively; Hartman Parkway LLC for the nine months ended September 30, 2014 and for the period from March 15, 2013, the date this subsidiary acquired the Parkway Property, to September 30, 2013; Hartman Gulf Plaza LLC for the period from March 11, 2014, the date this subsidiary acquired the Gulf Plaza Property, to September 30, 2014; Hartman Mitchelldale Business Park, LLC for the period from June 13, 2014, the date this subsidiary acquired the Mitchelldale Property, to September 30, 2014; and Hartman Haute Harwin, LLC for the period from January 1, 2013 to March 28, 2013, the date this subsidiary&#146;s property was sold to an affiliate. &nbsp;All significant intercompany balances and transactions have been eliminated.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Use of Estimates in the Preparation of Financial Statements</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>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.&nbsp;&nbsp;Actual results could differ from those estimates.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Reclassifications</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>We have reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net loss, total assets, total liabilities or stockholders&#146; equity.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Cash and Cash Equivalents</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. &nbsp;Cash and cash equivalents at September 30, 2014 and December 31, 2013 consisted of demand deposits at commercial banks.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Restricted Cash</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Restricted cash represents cash for which the use of funds is restricted by certain loan documents. &nbsp;As of September 30, 2014 and December 31, 2013, the Company had a restricted cash balance of $7,100,000 and $0, respectively, which represent amounts set aside as impounds to be disbursed to the Company (i) upon its achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property, and (ii) the completion of certain agreed upon capital repairs at the Cooper Street Property and the Mitchelldale Property. &nbsp;Restricted cash includes $6,500,000 of loan proceeds and $600,000 in cash, which have been deposited in an escrow account with a loan servicer.</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b><i>Financial Instruments</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, accounts payable and accrued expenses and due from (to) related parties. &nbsp;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. &nbsp;Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Accrued Rent and Accounts Receivable</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Deferred Loan and Leasing Commission Costs</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. &nbsp;Leasing commissions are amortized using the straight-line method over the term of the related lease agreements. &nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Goodwill</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.&nbsp; The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount.&nbsp; If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test. &nbsp;In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements. </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Organization and Offering Costs</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company has incurred certain expenses in connection with organizing the Company. These costs principally relate to professional and filing fees. For the three months ended September 30, 2014 and 2013, such costs totaled $148,163 and $210,705, respectively. &nbsp;For the nine months ended September 30, 2014 and 2013, such costs totaled $365,032 and $445,871, respectively.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>Organization and offering costs will be reimbursed by the Advisor to the extent that organization and offering costs ultimately exceed 1.5% of gross offering proceeds.&nbsp;&nbsp;As of September 30, 2014,&nbsp;the amount of offering and organizational expenses incurred&nbsp;in excess of&nbsp;1.5% of gross offering proceeds&nbsp;is cumulatively $525,694.&nbsp;for the Company&#146;s initial and follow-on offerings. &nbsp;No demand has been made of the Advisor for reimbursement as of September 30, 2014 and no receivable has been recorded with respect to the excess costs as of that date. &nbsp;The Company expects the excess cost to diminish as additional offering proceeds are received. Selling commissions in connection with the offering are recorded and charged to additional paid-in capital.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Stock-Based Compensation</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) with regard to issuance of stock in payment of services. &nbsp;ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. &nbsp;The compensation cost is measured based on the fair value of the equity or liability instruments issued.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Advertising</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. &nbsp;Advertising costs totaled $9,215 and $275 for the three months ended September 30, 2014 and 2013, and $23,320 and $3,891 for the nine months ended September 30, 2014 and 2013, respectively.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Income Taxes</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our 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&#146;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).&nbsp;&nbsp;As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.&nbsp;&nbsp;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.&nbsp;&nbsp;Such an event could materially and adversely affect the Company&#146;s net income and net cash available for distribution to stockholders.&nbsp;&nbsp;However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT.&nbsp; </p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>For the three months ended September 30, 2014 and 2013, the Company incurred a net loss of $1,024,674 and $395,789, respectively.&nbsp; For the nine months ended September 30, 2014 and 2013, the Company incurred a net loss of $2,843,711 and $1,625,153. &nbsp;The Company does not currently anticipate forming any taxable REIT subsidiaries or otherwise generating future taxable income which may be offset by the net loss carry forward.&nbsp;&nbsp;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.&nbsp;&nbsp;Accordingly no deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>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. &nbsp;Management has reviewed the Company&#146;s tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. &nbsp;Accordingly, the Company has not recognized a liability related to uncertain tax positions.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Loss Per Share</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities.&nbsp;&nbsp;The Company&#146;s potentially dilutive securities include preferred shares that are convertible into the Company&#146;s common stock.&nbsp;&nbsp;As of September 30, 2014 and 2013, there were no shares issuable in connection with these potentially dilutive securities.&nbsp;&nbsp;These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and nine months ended September 30, 2014 and 2013 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b><i>Concentration of Risk</i></b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantially all of our revenues are derived from four properties located in the Dallas, Texas metropolitan area and two properties located in Houston, Texas. &nbsp;We maintain cash accounts in two U.S. financial institutions. &nbsp;The terms of these deposits are on demand to minimize risk. &nbsp;The balances of these accounts may exceed the federally insured limits. &nbsp;No losses have been incurred in connection with these deposits nor are any expected.</p> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="427" style='width:320.25pt;padding:0'></td> <td width="144" style='width:1.5in;padding:0'></td> <td width="145" style='width:108.75pt;padding:0'></td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>September 30, 2014</b></p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>December 31, 2013</b></p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>In-place lease value intangible</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,778,594</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,756,483</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>In-place leases &#150; accumulated amortization</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(7,290,197)</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(4,253,233)</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;Acquired lease intangible assets, net</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,488,397</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,503,250</p> </td> </tr> </table> </div> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="427" style='width:320.25pt;padding:0'></td> <td width="144" style='width:1.5in;padding:0'></td> <td width="145" style='width:108.75pt;padding:0'></td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>September 30, 2014</b></p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>December 31, 2013</b></p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Tenant receivables</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;455,119</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;312,218</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Accrued rent</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>967,760</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>467,544</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Allowance for uncollectible accounts</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(216,755)</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid black 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(260,885)</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;Accrued rents and accounts receivable, net</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,206,124</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:double black 2.25pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;518,877</p> </td> </tr> </table> </div> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Costs which have been deferred consist of the following:</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="427" style='width:320.25pt;padding:0'></td> <td width="144" style='width:1.5in;padding:0'></td> <td width="145" style='width:108.75pt;padding:0'></td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>September 30, 2014</b></p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>December 31, 2013</b></p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Deferred loan and leasing commission costs</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,220,413</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,384,557</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Less: accumulated amortization</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(727,325)</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>(389,029)</p> </td> </tr> <tr align="left"> <td width="427" valign="top" style='width:320.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;Total cost, net of accumulated amortization</p> </td> <td width="144" valign="top" style='width:1.5in;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,493,088</p> </td> <td width="145" valign="top" style='width:108.75pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;995,528</p> </td> </tr> </table> </div> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;text-indent:.25in;line-height:normal'>&nbsp;</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="174" style='width:130.5pt;padding:0'></td> <td width="128" style='width:96.3pt;padding:0'></td> <td width="109" style='width:81.55pt;padding:0'></td> <td width="90" style='width:67.6pt;padding:0'></td> <td width="123" style='width:92.05pt;padding:0'></td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Property Name</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Payment Type</b></p> </td> <td width="109" valign="top" style='width:81.55pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Maturity Date</b></p> </td> <td width="90" valign="top" style='width:67.6pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Interest Rate</b></p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Principal Balance</b></p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;line-height:normal'><b>Richardson Heights Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,136,882</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Cooper Street Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>8,373,752</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Bent Tree Green Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>8,373,752</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Mitchelldale Property</b></p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>Principal and interest</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>July 1, 2041</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4.61%</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>12,685,238</p> </td> </tr> <tr align="left"> <td width="174" valign="top" style='width:130.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="128" valign="top" style='width:96.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="109" valign="top" style='width:81.55pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="90" valign="top" style='width:67.6pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="123" valign="top" style='width:92.05pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;49,569,624</p> </td> </tr> </table> </div> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding. &nbsp;Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share. </p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="236" style='width:176.7pt;padding:0'></td> <td width="91" style='width:68.5pt;padding:0'></td> <td width="99" style='width:74.3pt;padding:0'></td> <td width="92" style='width:69.05pt;padding:0'></td> <td width="106" style='width:79.45pt;padding:0'></td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="91" valign="top" style='width:68.5pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="190" colspan="2" valign="bottom" style='width:142.8pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>Three months ended September 30,</b></p> </td> <td width="198" colspan="2" valign="bottom" style='width:148.5pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>Nine months ended September 30,</b></p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="91" valign="bottom" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2014</b></p> </td> <td width="99" valign="bottom" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2013</b></p> </td> <td width="92" valign="bottom" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2014</b></p> </td> <td width="106" valign="bottom" style='width:79.45pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'><b>2013</b></p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Numerator:</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Net loss attributable to common stockholders</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;(1,024,674)</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(395,789)</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,843,711)</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,625,153)</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Denominator:</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Basic and diluted weighted average common shares outstanding</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>7,124,242</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>5,342,710</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>6,868,701</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>4,549,526</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Basic and diluted loss per common share:</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="236" valign="top" style='width:176.7pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;Net loss attributable to common stockholders</b></p> </td> <td width="91" valign="top" style='width:68.5pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.14)</p> </td> <td width="99" valign="top" style='width:74.3pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.07)</p> </td> <td width="92" valign="top" style='width:69.05pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.41)</p> </td> <td width="106" valign="top" style='width:79.45pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.36)</p> </td> </tr> </table> </div> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>The following table reflects the total distributions we have paid, including the total amount paid and amount paid per common share, in each indicated quarter:</p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0"> <tr align="left"> <td width="335" style='width:251.35pt;padding:0'></td> <td width="146" style='width:109.25pt;padding:0'></td> <td width="143" style='width:107.4pt;padding:0'></td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Quarter paid</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Distributions per</b></p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Common Share</b></p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.5pt;background:white;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Total Amounts Paid</b></p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>2014</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b> 3<sup>rd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; 0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; 1,237,568</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;2<sup>nd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,191,153</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;1<sup>st</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid black 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>1,103,599</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;&nbsp;Total</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.525</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:double black 2.25pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,532,320</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>2013</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;4<sup>th</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,033,066</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;3<sup>rd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>854,120</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;2<sup>nd</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>760,551</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;1<sup>st</sup> Quarter</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:solid black 1.0pt;border-right:solid aqua 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>0.175</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>627,754</p> </td> </tr> <tr align="left"> <td width="335" valign="top" style='width:251.35pt;border-top:none;border-left:none;border-bottom:solid aqua 1.0pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;&nbsp;Total</b></p> </td> <td width="146" valign="top" style='width:109.25pt;border-top:none;border-left:none;border-bottom:double black 2.25pt;border-right:solid aqua 1.0pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.700</p> </td> <td width="143" valign="top" style='width:107.4pt;border:none;border-bottom:double black 2.25pt;background:#DEEAF6;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,275,491</p> </td> </tr> </table> </div> <!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'>&nbsp;</p> <table border="1" cellspacing="0" cellpadding="0" style='border-collapse:collapse;border:none'> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.25pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.45pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.25pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.5pt;background:white;padding:0in 5.4pt 0in 5.4pt'></td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="190" colspan="2" valign="top" style='width:142.7pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>Three months ended September 30,</b></p> </td> <td width="190" colspan="2" valign="top" style='width:142.45pt;border:none;border-bottom:solid windowtext 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Nine months ended September 30,</b></p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2014</b></p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2013</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2014</b></p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:center;line-height:normal'><b>2013</b></p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Income from discontinued operations</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#160;&#160;&#160;&#160;&#160; -</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;66,460</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Gain on sale of property</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>-</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>-</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>-</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>122,576</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>&nbsp;</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid #9CC2E5 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>&nbsp;</p> </td> </tr> <tr align="left"> <td width="244" valign="top" style='width:182.85pt;border-top:none;border-left:none;border-bottom:solid #9CC2E5 1.0pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:justify;text-justify:inter-ideograph;line-height:normal'><b>Net Income from discontinued operations</b></p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:double windowtext 1.5pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.45pt;border-top:none;border-left:none;border-bottom:double windowtext 1.5pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.25pt;border-top:none;border-left:none;border-bottom:double windowtext 1.5pt;border-right:solid #9CC2E5 1.0pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</p> </td> <td width="95" valign="top" style='width:71.2pt;border:none;border-bottom:double windowtext 1.5pt;background:#DEEAF6;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:8.0pt;margin-left:0in;line-height:107%;margin-bottom:0in;margin-bottom:.0001pt;text-align:right;line-height:normal'>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;189,036</p> </td> </tr> </table> 0.700 0.175 3275491 3532320 -2843711 -1625153 65000 72500 4630340 2837947 338296 111870 -44130 97374 -500000 350000 -7100000 -34734917 -14185804 3253671 -42334917 -10582133 -1814583 -1131249 -516647 -576783 -976591 -48152 49725000 -155376 22644050 7487821 -24944050 -15387821 8597844 20667469 52592686 11033682 11919328 735864 143038 61894 12062366 797758 10-Q 2014-09-30 false HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. 0001446687 --12-31 7374416 63126910 Smaller Reporting Company Yes No No 2014 Q3 10.00 1000 7373416 465487 66998299 30875 605244 7100000 0 525694 9215 275 23320 3891 455119 312218 967760 467544 -216755 -260885 1206124 518877 9592 34013 -44130 97374 3220413 1384557 -727325 -389029 2493088 995528 0.0461 49569624 61963 90417 31255 -158068 1500 1500 4500 5250 15000 15000 45000 52500 20000 20000 0.175 1191153 0.175 1103599 0.525 3532320 0.175 1033066 0.175 854120 0.175 760551 0.175 627754 0.700 3275491 66460 122576 189036 0001446687 2014-01-01 2014-09-30 0001446687 2014-09-30 0001446687 2014-06-30 0001446687 2013-12-31 0001446687 2014-07-01 2014-09-30 0001446687 2013-07-01 2013-09-30 0001446687 2013-01-01 2013-09-30 0001446687 us-gaap:PreferredStockMember 2014-01-01 2014-09-30 0001446687 us-gaap:CommonStockMember 2014-01-01 2014-09-30 0001446687 us-gaap:AdditionalPaidInCapitalMember 2014-01-01 2014-09-30 0001446687 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2014-01-01 2014-09-30 0001446687 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Discontinued Operations: Discontinued Operations (Tables)
9 Months Ended
Sep. 30, 2013
Tables/Schedules  
Discontinued Operations

 

 

Three months ended September 30,

Nine months ended September 30,

 

2014

2013

2014

2013

Income from discontinued operations

$                      -

$                      -

$                      -

$            66,460

 

 

 

 

 

Gain on sale of property

-

-

-

122,576

 

 

 

 

 

Net Income from discontinued operations

$                     -

$                      -

$                     -

$          189,036

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Related Party Transactions (Details) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Details    
Due from the Property Manager and the Advisor $ 61,963 $ 90,417
Net balance due from (to) Hartman XIX $ 31,255 $ (158,068)
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Accrued Rent and Accounts Receivable, Net (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Details        
Bad debt (recovery) expense $ 9,592 $ 34,013 $ (44,130) $ 97,374
XML 16 R33.htm IDEA: XBRL DOCUMENT v2.4.0.8
In-place lease intangible asset and the respective accumulated amortization (Tables)
9 Months Ended
Sep. 30, 2013
Tables/Schedules  
In-place lease intangible asset and the respective accumulated amortization

 

 

September 30, 2014

December 31, 2013

In-place lease value intangible

$                19,778,594

$                 10,756,483

In-place leases – accumulated amortization

(7,290,197)

(4,253,233)

 Acquired lease intangible assets, net

$                12,488,397

$                   6,503,250

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Summary of Significant Accounting Policies: Deferred Loan and Leasing Commission Costs (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Deferred Loan and Leasing Commission Costs

Deferred Loan and Leasing Commission Costs

 

       Loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method.  Leasing commissions are amortized using the straight-line method over the term of the related lease agreements.  

 

XML 20 R50.htm IDEA: XBRL DOCUMENT v2.4.0.8
Stockholders' Equity: Distributions (Details) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Details                    
Distributions per Common Share $ 0.175 $ 0.175 $ 0.175 $ 0.175 $ 0.175 $ 0.175 $ 0.175 $ 0.525 $ 0.700 $ 0.700
Total Distribution Amounts Paid $ 3,532,320 $ 1,191,153 $ 1,103,599 $ 1,033,066 $ 854,120 $ 760,551 $ 627,754 $ 3,532,320 $ 3,275,491 $ 3,275,491
XML 21 R42.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Organization and Offering Costs (Details) (USD $)
Sep. 30, 2014
Details  
Expense incurred in excess of 1.5% of gross offering proceeds $ 525,694
XML 22 R37.htm IDEA: XBRL DOCUMENT v2.4.0.8
Loss Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)
9 Months Ended
Sep. 30, 2013
Tables/Schedules  
Schedule of Earnings Per Share, Basic and Diluted

       Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding.  Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share.

 

 

 

 

 

 

Three months ended September 30,

Nine months ended September 30,

 

2014

2013

2014

2013

Numerator:

 

 

 

 

 Net loss attributable to common stockholders

$   (1,024,674)

 $      (395,789)

$       (2,843,711)

$          (1,625,153)

Denominator:

 

 

 

 

 Basic and diluted weighted average common shares outstanding

7,124,242

5,342,710

6,868,701

4,549,526

 

 

 

 

 

 Basic and diluted loss per common share:

 

 

 

 

 Net loss attributable to common stockholders

$            (0.14)

$            (0.07)

$                (0.41)

$                   (0.36)

XML 23 R47.htm IDEA: XBRL DOCUMENT v2.4.0.8
Notes Payable: Term loan agreements schedule (Details) (USD $)
Sep. 30, 2014
Details  
Accounts Payable, Interest-bearing, Interest Rate 4.61%
Notes Principal Balance on properties $ 49,569,624
XML 24 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Deferred Loan and Leasing Commission Costs, Net
9 Months Ended
Sep. 30, 2013
Notes  
Deferred Loan and Leasing Commission Costs, Net

Note 5 — Deferred Loan and Leasing Commission Costs, net

 

Costs which have been deferred consist of the following:

 

September 30, 2014

December 31, 2013

Deferred loan and leasing commission costs

$                  3,220,413

$                   1,384,557

Less: accumulated amortization

(727,325)

(389,029)

 Total cost, net of accumulated amortization

$                  2,493,088

$                      995,528

 

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M/3-$)W1E>'0O:'1M;#L@8VAA65E(&-O;7!E;G-A=&EO;B!T;R!M96UB97)S(&]F M(&]U7!E.B!T M97AT+VAT;6P[(&-H87)S970](G5S+6%S8VEI(@T*#0H\:'1M;#X-"B`@/&AE M860^#0H@("`@/$U%5$$@:'1T<"UE<75I=CTS1$-O;G1E;G0M5'EP92!C;VYT M96YT/3-$)W1E>'0O:'1M;#L@8VAA'0^)SQS<&%N/CPO7!E.B!T97AT+VAT;6P[(&-H87)S970](G5S+6%S8VEI(@T*#0H\ M:'1M;#X-"B`@/&AE860^#0H@("`@/$U%5$$@:'1T<"UE<75I=CTS1$-O;G1E M;G0M5'EP92!C;VYT96YT/3-$)W1E>'0O:'1M;#L@8VAA'!E;G-E(&EN8W5R'0O:F%V87-C3X-"B`@("`\=&%B;&4@8VQA'0^)SQS<&%N/CPO'!E;G-E/"]T9#X-"B`@("`@ M("`@/'1D(&-L87-S/3-$;G5M<#XD(#DL,C$U/'-P86X^/"]S<&%N/CPO=&0^ M#0H@("`@("`@(#QT9"!C;&%S'0O:F%V87-C3X-"B`@("`\=&%B;&4@8VQA'0^)SQS<&%N/CPO7!E.B!T M97AT+VAT;6P[(&-H87)S970](G5S+6%S8VEI(@T*#0H\:'1M;#X-"B`@/&AE M860^#0H@("`@/$U%5$$@:'1T<"UE<75I=CTS1$-O;G1E;G0M5'EP92!C;VYT M96YT/3-$)W1E>'0O:'1M;#L@8VAA'0^)SQS<&%N/CPO'0O:F%V87-C3X-"B`@("`\=&%B;&4@8VQA'0^)SQS<&%N/CPO'0^)SQS<&%N/CPO'!E M;G-E/"]T9#X-"B`@("`@("`@/'1D(&-L87-S/3-$;G5M<#XD(#DL-3DR/'-P M86X^/"]S<&%N/CPO=&0^#0H@("`@("`@(#QT9"!C;&%S7!E.B!T97AT+VAT;6P[(&-H87)S970] M(G5S+6%S8VEI(@T*#0H\:'1M;#X-"B`@/&AE860^#0H@("`@/$U%5$$@:'1T M<"UE<75I=CTS1$-O;G1E;G0M5'EP92!C;VYT96YT/3-$)W1E>'0O:'1M;#L@ M8VAA6%B;&4L($EN=&5R97-T+6)E87)I;F'0O:F%V87-C M3X-"B`@("`\=&%B;&4@ M8VQA'0^)SQS<&%N/CPO2!-86YA9V5R(&%N9"!T:&4@061V:7-O3X-"CPO M:'1M;#X-"@T*+2TM+2TM/5].97AT4&%R=%]D.#9A8SDR.%\Q86$W7S1B,&1? M8C`Q,%\X-F0R968Y93`Q,#@-"D-O;G1E;G0M3&]C871I;VXZ(&9I;&4Z+R\O M0SHO9#@V86,Y,CA?,6%A-U\T8C!D7V(P,3!?.#9D,F5F.64P,3`X+U=O'0O:'1M;#L@ M8VAA'0^)SQS<&%N/CPO&5C=71I=F5S M(&]F('1H92!02!-86YA9V5R/"]T9#X-"B`@("`@("`@/'1D(&-L M87-S/3-$=&5X=#XG/'-P86X^/"]S<&%N/CPO=&0^#0H@("`@("`@(#QT9"!C M;&%S'0^)SQS<&%N/CPO'0O:F%V M87-C3X-"B`@("`\=&%B M;&4@8VQA3H@1&ES=')I8G5T:6]N M'0^)SQS<&%N/CPO'0^)SQS<&%N/CPO'0^)SQS<&%N/CPO'0^)SQS<&%N/CPO3X-"CPO:'1M;#X-"@T*+2TM+2TM M/5].97AT4&%R=%]D.#9A8SDR.%\Q86$W7S1B,&1?8C`Q,%\X-F0R968Y93`Q M,#@-"D-O;G1E;G0M3&]C871I;VXZ(&9I;&4Z+R\O0SHO9#@V86,Y,CA?,6%A M-U\T8C!D7V(P,3!?.#9D,F5F.64P,3`X+U=O'0O:'1M;#L@8VAA7!E(&-O;G1E;G0],T0G=&5X="]H=&UL.R!C:&%R7!E.B!T97AT M+VAT;6P[(&-H87)S970](G5S+6%S8VEI(@T*#0H\>&UL('AM;&YS.F\],T0B M=7)N.G-C:&5M87,M;6EC&UL/@T*+2TM+2TM/5].97AT4&%R=%]D G.#9A8SDR.%\Q86$W7S1B,&1?8C`Q,%\X-F0R968Y93`Q,#@M+0T* ` end XML 26 R43.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Advertising (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Details        
Advertising expense $ 9,215 $ 275 $ 23,320 $ 3,891
XML 27 R29.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Advertising (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Advertising

Advertising

 

       The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations.  Advertising costs totaled $9,215 and $275 for the three months ended September 30, 2014 and 2013, and $23,320 and $3,891 for the nine months ended September 30, 2014 and 2013, respectively.

 

XML 28 R28.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Stock-based Compensation (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Stock-based Compensation

Stock-Based Compensation

 

The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) 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 fair value of the equity or liability instruments issued.

 

       Stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations.

 

XML 29 R44.htm IDEA: XBRL DOCUMENT v2.4.0.8
Accrued Rent and Accounts Receivable, Net: Accrued Rent and Accounts Receivable Schedule (Details) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Details    
Tenant receivables $ 455,119 $ 312,218
Accrued Rent, Current 967,760 467,544
Allowance for Doubtful Accounts Receivable, Current (216,755) (260,885)
Accrued rents and accounts receivable, net $ 1,206,124 $ 518,877
XML 30 R30.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Income Taxes (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Income Taxes

Income Taxes

 

We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP).  As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions.  Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders.  However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT. 

 

For the three months ended September 30, 2014 and 2013, the Company incurred a net loss of $1,024,674 and $395,789, respectively.  For the nine months ended September 30, 2014 and 2013, the Company incurred a net loss of $2,843,711 and $1,625,153.  The Company does not currently 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 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.

 

XML 31 R31.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Loss Per Share (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Loss Per Share

Loss Per Share

 

The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities.  The Company’s potentially dilutive securities include preferred shares that are convertible into the Company’s common stock.  As of September 30, 2014 and 2013, 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, 2014 and 2013 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.

 

XML 32 R8.htm IDEA: XBRL DOCUMENT v2.4.0.8
Accrued Rent and Accounts Receivable, Net
9 Months Ended
Sep. 30, 2013
Notes  
Accrued Rent and Accounts Receivable, Net

Note 4 — Accrued Rent and Accounts Receivable, net

 

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

 

 

September 30, 2014

December 31, 2013

Tenant receivables

$                     455,119

$                      312,218

Accrued rent

967,760

467,544

Allowance for uncollectible accounts

(216,755)

(260,885)

 Accrued rents and accounts receivable, net

$                  1,206,124

$                      518,877

 

As of September 30, 2014 and December 31, 2013, we had an allowance for uncollectible accounts of $216,755 and $260,885, respectively.  For the three months ended September 30, 2014 and 2013, we recorded bad debt expense in the amount of $9,592 and $34,013, respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenant’s credit-worthiness.  For the nine months ended September 30, 2014 and 2013, we recorded bad debt (recovery) expense of ($44,130) and $97,374, respectively.  Bad debt expenses and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

 

XML 33 R32.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Concentration of Risk (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Concentration of Risk

Concentration of Risk

 

       Substantially all of our revenues are derived from four properties located in the Dallas, Texas metropolitan area and two properties located in Houston, Texas.  We maintain cash accounts in two U.S. financial institutions.  The terms of these deposits are on demand to minimize risk.  The balances of these accounts may exceed the federally insured limits.  No losses have been incurred in connection with these deposits nor are any expected.

XML 34 R40.htm IDEA: XBRL DOCUMENT v2.4.0.8
Organization and Business (Details) (USD $)
Sep. 30, 2014
Details  
Share Price $ 10.00
Preferred Stock, Shares Issued 1,000
Common Stock, Shares, Issued 7,373,416
Distribution reinvestment shares 465,487
Gross offering proceeds $ 66,998,299
Non-employee compensation to members of our board of directors shares 30,875
Commercial properties 605,244
XML 35 R2.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED BALANCE SHEETS (USD $)
Sep. 30, 2014
Dec. 31, 2013
ASSETS    
Real estateInvestment property at cost $ 91,991,529 $ 56,992,904
Real estate investment property accumulated depreciation (10,909,141) (6,278,801)
Real estate investment property at cost, net 81,082,388 50,714,103
Cash and cash equivalents 12,062,366 143,038
Restricted cash 7,100,000  
Accrued rent and accounts receivable, net 1,206,124 518,877
Deferred lease commissions and loan costs, net 2,493,088 995,528
Goodwill 249,686 249,686
Prepaid expenses and other assets 1,009,530 379,804
Due from related parties 93,218  
Total assets 105,296,400 53,001,036
LIABILITIES    
Note payable 49,569,624 2,300,000
Accounts payable and accrued expenses 3,937,806 2,545,833
Due to related parties   67,651
Tenants' security deposits 564,279 319,258
Total liabilities 54,071,709 5,232,742
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, 2014 and December 31, 2013, respectively 1 1
Common stock, $0.001 par value, 750,000,000 authorized, 7,373,416 shares and 6,311,691 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively 7,374 6,312
Additional paid in capital 68,722,697 58,844,825
Accumulated distributions and net loss (17,505,381) (11,082,844)
Total stockholders' equity 51,224,691 47,768,294
Total liabilities and total stockholders' equity $ 105,296,400 $ 53,001,036
XML 36 R45.htm IDEA: XBRL DOCUMENT v2.4.0.8
Deferred Loan and Leasing Commission Costs, Net: Costs Which Have Been Deferred Consist of The Following (Details) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Details    
Deferred loan and leasing commission costs $ 3,220,413 $ 1,384,557
Less: accumulated loan and commission amortization (727,325) (389,029)
Net of accumulated amortization $ 2,493,088 $ 995,528
XML 37 R6.htm IDEA: XBRL DOCUMENT v2.4.0.8
Organization and Business
9 Months Ended
Sep. 30, 2014
Notes  
Organization and Business

Note 1 — Organization and Business

 

Hartman Short Term Income Properties XX, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009.  The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2011.  Effective July 16, 2013, the Company is offering $200,000,000 of its common shares to the public in its follow-on offering (exclusive of $19,000,000 of its common shares available pursuant to the Company’s distribution reinvestment plan) at a price of $10.00 per share. The offering price for shares offered in the follow-on offering was determined by the Company’s board of directors.  The Company’s board of directors may change the price at which the Company offers shares to the public from time to time during the follow-on offering, but not more frequently than quarterly, to reflect changes in the Company’s estimated per-share net asset value and other factors the Company’s board of directors deems relevant.

 

The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc.  Hartman XX Holdings, Inc. is a Texas corporation wholly owned by Allen R. Hartman.  The Company sold 19,000 shares to Hartman XX Holdings, Inc. at a price of $10.00 per share.  The Company has also issued 1,000 shares of convertible preferred shares to its advisor, Hartman Advisors LLC at a price of $10.00 per share.  Hartman Advisors LLC (the “Advisor”) is the Company’s advisor. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc. (the “Property Manager”). The Property Manager is a wholly owned subsidiary of Hartman Income REIT, Inc. of which approximately 20% is beneficially owned by Allen R. Hartman,  the Company’s Chief Executive Officer and Chairman of the Board of Directors.

 

On April 11, 2014 we formed Hartman XX Limited Partnership, a Texas limited partnership (the “Operating Partnership”).  On March 7, 2014 we formed Hartman XX REIT GP LLC, a Texas limited liability company, to serve as the sole general partner of the Operating Partnership.  We are the sole limited partner of the Operating Partnership.  Our single member interests in our limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries.

 

As of September 30, 2014, we had issued and outstanding 7,373,416 shares of our common stock in our initial and follow-on offerings, including 465,487 shares of our common stock pursuant to our distribution reinvestment plan, resulting in gross offering proceeds of $66,998,299.  Total shares issued and outstanding as of September 30, 2014 include 30,875 shares of our common stock issued as non-employee compensation to members of our board of directors and certain executives of our Property Manager.

 

The management of the Company is through the Advisor.  Management of the Company’s properties is through the Property Manager. D.H. Hill Securities LLLP (the “Dealer Manager”) serves as the dealer manager of the Company’s public offering. These parties receive compensation and fees for services related to the offering and for the investment and management of the Company’s assets. These parties will receive fees during the offering, acquisition, operational and liquidation stages.

 

       As of September 30, 2014 we owned 6 commercial properties comprising approximately 1,103,647 square feet plus 3 pad sites. We owned 4 properties located in Richardson, Arlington, and Dallas, Texas and 2 properties in Houston, Texas.  As of September 30, 2013 we owned 4 commercial properties comprising approximately 605,244 square feet plus 3 pad sites, located in Richardson, Arlington and Dallas, Texas.

 

XML 38 R35.htm IDEA: XBRL DOCUMENT v2.4.0.8
Deferred Loan and Leasing Commission Costs, Net: Costs Which Have Been Deferred Consist of The Following (Tables)
9 Months Ended
Sep. 30, 2013
Tables/Schedules  
Costs Which Have Been Deferred Consist of The Following:

Costs which have been deferred consist of the following:

 

September 30, 2014

December 31, 2013

Deferred loan and leasing commission costs

$                  3,220,413

$                   1,384,557

Less: accumulated amortization

(727,325)

(389,029)

 Total cost, net of accumulated amortization

$                  2,493,088

$                      995,528

XML 39 R22.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Restricted Cash (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Restricted Cash

Restricted Cash

 

Restricted cash represents cash for which the use of funds is restricted by certain loan documents.  As of September 30, 2014 and December 31, 2013, the Company had a restricted cash balance of $7,100,000 and $0, respectively, which represent amounts set aside as impounds to be disbursed to the Company (i) upon its achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property, and (ii) the completion of certain agreed upon capital repairs at the Cooper Street Property and the Mitchelldale Property.  Restricted cash includes $6,500,000 of loan proceeds and $600,000 in cash, which have been deposited in an escrow account with a loan servicer.

XML 40 R36.htm IDEA: XBRL DOCUMENT v2.4.0.8
Notes Payable: Term loan agreements schedule (Tables)
9 Months Ended
Sep. 30, 2013
Tables/Schedules  
Term loan agreements schedule

 

Property Name

Payment Type

Maturity Date

Interest Rate

Principal Balance

Richardson Heights Property

Principal and interest

July 1, 2041

4.61%

$            20,136,882

Cooper Street Property

Principal and interest

July 1, 2041

4.61%

8,373,752

Bent Tree Green Property

Principal and interest

July 1, 2041

4.61%

8,373,752

Mitchelldale Property

Principal and interest

July 1, 2041

4.61%

12,685,238

 

 

 

 

$            49,569,624

XML 41 R24.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Accrued Rent and Accounts Receivable (Policies)
9 Months Ended
Sep. 30, 2014
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.

 

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Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2014
Notes  
Summary of Significant Accounting Policies

Note 2 — Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2013 are derived from our audited consolidated financial statements as of that date.  The unaudited consolidated financial statements as of September 30, 2014 have been prepared by us 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, 2014, and the results of consolidated operations for the three and nine months ended September 30, 2014 and 2013, the consolidated statements of stockholders’ equity for the nine months ended September 30, 2014 and the consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013.  The results of the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.

 

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, 2013.

 

        These unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Hartman Richardson Heights Properties, LLC; Hartman Cooper Street Plaza, LLC; and Hartman Bent Tree Green, LLC for the nine months ended September 30, 2014 and 2013, respectively; Hartman Parkway LLC for the nine months ended September 30, 2014 and for the period from March 15, 2013, the date this subsidiary acquired the Parkway Property, to September 30, 2013; Hartman Gulf Plaza LLC for the period from March 11, 2014, the date this subsidiary acquired the Gulf Plaza Property, to September 30, 2014; Hartman Mitchelldale Business Park, LLC for the period from June 13, 2014, the date this subsidiary acquired the Mitchelldale Property, to September 30, 2014; and Hartman Haute Harwin, LLC for the period from January 1, 2013 to March 28, 2013, the date this subsidiary’s property was sold to an affiliate.  All significant intercompany balances and transactions have been eliminated.

 

Use of Estimates in the Preparation of Financial Statements

 

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.

 

Reclassifications

 

We have reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net loss, total assets, total liabilities or stockholders’ equity.

 

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 at September 30, 2014 and December 31, 2013 consisted of demand deposits at commercial banks.

 

Restricted Cash

 

Restricted cash represents cash for which the use of funds is restricted by certain loan documents.  As of September 30, 2014 and December 31, 2013, the Company had a restricted cash balance of $7,100,000 and $0, respectively, which represent amounts set aside as impounds to be disbursed to the Company (i) upon its achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property, and (ii) the completion of certain agreed upon capital repairs at the Cooper Street Property and the Mitchelldale Property.  Restricted cash includes $6,500,000 of loan proceeds and $600,000 in cash, which have been deposited in an escrow account with a loan servicer.

 

Financial Instruments

 

       The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, accounts payable and accrued expenses and due from (to) related parties.  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.  Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value.

 

Revenue Recognition

 

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

 

Real Estate

 

Allocation of Purchase Price of Acquired Assets

 

       Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings).

 

The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases.

 

The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases.

 

The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Company’s reported net loss.

 

Depreciation and amortization

 

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

 

Impairment

 

       We review our 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.  We determine 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 our real estate assets as of September 30, 2014.

 

Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income.

 

 

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.

 

Deferred Loan and Leasing Commission Costs

 

       Loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method.  Leasing commissions are amortized using the straight-line method over the term of the related lease agreements.  

 

Goodwill

 

       GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired.  The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount.  If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test.  In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements.

 

Organization and Offering Costs

 

The Company has incurred certain expenses in connection with organizing the Company. These costs principally relate to professional and filing fees. For the three months ended September 30, 2014 and 2013, such costs totaled $148,163 and $210,705, respectively.  For the nine months ended September 30, 2014 and 2013, such costs totaled $365,032 and $445,871, respectively.

 

Organization and offering costs will be reimbursed by the Advisor to the extent that organization and offering costs ultimately exceed 1.5% of gross offering proceeds.  As of September 30, 2014, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds is cumulatively $525,694. for the Company’s initial and follow-on offerings.  No demand has been made of the Advisor for reimbursement as of September 30, 2014 and no receivable has been recorded with respect to the excess costs as of that date.  The Company expects the excess cost to diminish as additional offering proceeds are received. Selling commissions in connection with the offering are recorded and charged to additional paid-in capital.

 

Stock-Based Compensation

 

The Company follows ASC 718, Compensation-Stock Compensation (ASC 718) 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 fair value of the equity or liability instruments issued.

 

       Stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations.

 

Advertising

 

       The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations.  Advertising costs totaled $9,215 and $275 for the three months ended September 30, 2014 and 2013, and $23,320 and $3,891 for the nine months ended September 30, 2014 and 2013, respectively.

 

Income Taxes

 

We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP).  As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions.  Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders.  However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT. 

 

For the three months ended September 30, 2014 and 2013, the Company incurred a net loss of $1,024,674 and $395,789, respectively.  For the nine months ended September 30, 2014 and 2013, the Company incurred a net loss of $2,843,711 and $1,625,153.  The Company does not currently 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 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.

 

Loss Per Share

 

The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities.  The Company’s potentially dilutive securities include preferred shares that are convertible into the Company’s common stock.  As of September 30, 2014 and 2013, 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, 2014 and 2013 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.

 

Concentration of Risk

 

       Substantially all of our revenues are derived from four properties located in the Dallas, Texas metropolitan area and two properties located in Houston, Texas.  We maintain cash accounts in two U.S. financial institutions.  The terms of these deposits are on demand to minimize risk.  The balances of these accounts may exceed the federally insured limits.  No losses have been incurred in connection with these deposits nor are any expected.

 

XML 44 R3.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Revenues        
Rental revenues $ 2,844,926 $ 1,552,676 $ 7,025,809 $ 4,408,093
Tenant reimbursements and other revenues 824,223 563,508 1,491,640 979,716
Total revenues 3,669,149 2,116,184 8,517,449 5,387,809
Expenses        
Property operating expenses 947,204 537,110 2,100,777 1,382,579
Asset management and acquisition fees 158,231 96,122 1,217,853 430,408
Organization and offering costs 148,163 210,705 365,032 445,871
Real estate taxes and insurance 593,691 286,867 1,439,048 949,760
Depreciation and amortization 2,033,854 1,057,832 4,630,340 2,837,947
General and administrative 214,420 130,550 514,525 493,692
Interest expense 598,260 192,787 1,093,585 661,741
Total expenses 4,693,823 2,511,973 11,361,160 7,201,998
Loss from continuing operations (1,024,674) (395,789) (2,843,711) (1,814,189)
Income from discontinued operations       189,036
Net loss $ (1,024,674) $ (395,789) $ (2,843,711) $ (1,625,153)
Basic and diluted loss per common share        
Loss attributable to common stockholders $ (0.14) $ (0.07) $ (0.41) $ (0.40)
Weighted average number of common shares outstanding, basic and diluted 7,124,242 5,342,710 6,868,701 4,549,526
XML 45 R17.htm IDEA: XBRL DOCUMENT v2.4.0.8
Subsequent Events
9 Months Ended
Sep. 30, 2013
Notes  
Subsequent Events

Note 13 – Subsequent Events

 

In accordance with Financial Accounting Standards Board ASC Topic 855, Subsequent Events, the Company has evaluated subsequent events through November 14, 2014, which is the date these consolidated financial statements were issued. All subsequent events requiring recognition as of November 14, 2014, have been incorporated into these notes to consolidated financial statements.

 

XML 46 R1.htm IDEA: XBRL DOCUMENT v2.4.0.8
Document and Entity Information (USD $)
9 Months Ended
Sep. 30, 2014
Jun. 30, 2014
Document and Entity Information:    
Entity Registrant Name HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.  
Document Type 10-Q  
Document Period End Date Sep. 30, 2014  
Amendment Flag false  
Entity Central Index Key 0001446687  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding 7,374,416  
Entity Public Float   $ 63,126,910
Entity Filer Category Smaller Reporting Company  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Document Fiscal Year Focus 2014  
Document Fiscal Period Focus Q3  
XML 47 R18.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Basis of Presentation (Policies)
9 Months Ended
Sep. 30, 2014
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, 2013 are derived from our audited consolidated financial statements as of that date.  The unaudited consolidated financial statements as of September 30, 2014 have been prepared by us 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, 2014, and the results of consolidated operations for the three and nine months ended September 30, 2014 and 2013, the consolidated statements of stockholders’ equity for the nine months ended September 30, 2014 and the consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013.  The results of the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.

 

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, 2013.

 

        These unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Hartman Richardson Heights Properties, LLC; Hartman Cooper Street Plaza, LLC; and Hartman Bent Tree Green, LLC for the nine months ended September 30, 2014 and 2013, respectively; Hartman Parkway LLC for the nine months ended September 30, 2014 and for the period from March 15, 2013, the date this subsidiary acquired the Parkway Property, to September 30, 2013; Hartman Gulf Plaza LLC for the period from March 11, 2014, the date this subsidiary acquired the Gulf Plaza Property, to September 30, 2014; Hartman Mitchelldale Business Park, LLC for the period from June 13, 2014, the date this subsidiary acquired the Mitchelldale Property, to September 30, 2014; and Hartman Haute Harwin, LLC for the period from January 1, 2013 to March 28, 2013, the date this subsidiary’s property was sold to an affiliate.  All significant intercompany balances and transactions have been eliminated.

 

XML 48 R4.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
Preferred Stock
Common Stock
Additional Paid-In Capital
Accumulated Distributions In Excess Of Net Income
Total
Stockholders' equity, starting balance (value) at Dec. 31, 2013 $ 1 $ 6,312 $ 58,844,825 $ (11,082,844) $ 47,768,294
Beginning balance - common Stock (shares) at Dec. 31 2013 at Dec. 31, 2013   6,311,691     6,311,691
Beginning balance - preferred Stock (shares) at Dec. 31 2013 at Dec. 31, 2013 1,000       1,000
Issuance of common shares, net of redemption (value) 0 1,062 10,394,519 0 10,395,581
Issuance of common shares, net of redemption (shares)   1,061,725     1,061,725
Selling commissions 0 0 (516,647) 0 (516,647)
Dividends and distributions 0 0 0 (3,578,826) (3,578,826)
Net loss 0 0 0 (2,843,711) (2,843,711)
Stockholders' equity, ending balance at Sep. 30, 2014 $ 1 $ 7,374 $ 68,722,697 $ (17,505,381) $ 51,224,691
Ending balance - common Stock (in shares) at Sep. 30, 2014 at Sep. 30, 2014   7,373,416     7,373,416
Ending balance - preferred Stock (in shares) at Sep. 30, 2014 at Sep. 30, 2014 1,000       1,000
XML 49 R12.htm IDEA: XBRL DOCUMENT v2.4.0.8
Income Taxes
9 Months Ended
Sep. 30, 2013
Notes  
Income Taxes

Note 8 — Income Taxes

 

       Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.

 

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 rental revenue.

 

XML 50 R11.htm IDEA: XBRL DOCUMENT v2.4.0.8
Loss Per Share
9 Months Ended
Sep. 30, 2013
Notes  
Loss Per Share

Note 7 — Loss Per Share

 

       Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding.  Diluted earnings per share reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share.

 

 

 

 

 

 

Three months ended September 30,

Nine months ended September 30,

 

2014

2013

2014

2013

Numerator:

 

 

 

 

 Net loss attributable to common stockholders

$   (1,024,674)

 $      (395,789)

$       (2,843,711)

$          (1,625,153)

Denominator:

 

 

 

 

 Basic and diluted weighted average common shares outstanding

7,124,242

5,342,710

6,868,701

4,549,526

 

 

 

 

 

 Basic and diluted loss per common share:

 

 

 

 

 Net loss attributable to common stockholders

$            (0.14)

$            (0.07)

$                (0.41)

$                   (0.36)

 

XML 51 R23.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Financial Instruments (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
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, accounts payable and accrued expenses and due from (to) related parties.  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.  Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value.

 

XML 52 R19.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Use of Estimates in The Preparation of Financial Statements (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Use of Estimates in The Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements

 

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.

 

XML 53 R15.htm IDEA: XBRL DOCUMENT v2.4.0.8
Discontinued Operations
9 Months Ended
Sep. 30, 2013
Notes  
Discontinued Operations

Note 11 – Discontinued Operations

 

Effective March 28, 2013, the Company sold the Harwin Property to Hartman XIX pursuant to the terms agreed upon and approved by both the board of directors of the Company and of Hartman XIX.  The Company sold the Harwin property for $3,400,000 cash.

 

       Income from discontinued operations is comprised as follows:

 

 

Three months ended September 30,

Nine months ended September 30,

 

2014

2013

2014

2013

Income from discontinued operations

$                      -

$                      -

$                      -

$            66,460

 

 

 

 

 

Gain on sale of property

-

-

-

122,576

 

 

 

 

 

Net Income from discontinued operations

$                     -

$                      -

$                     -

$          189,036

 

XML 54 R13.htm IDEA: XBRL DOCUMENT v2.4.0.8
Related Party Transactions
9 Months Ended
Sep. 30, 2013
Notes  
Related Party Transactions

Note 9 — Related Party Transactions

 

Hartman Advisors LLC, is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager.  The Advisor is a variable interest entity which consolidates for financial reporting purposes with Hartman Income REIT, Inc. and Subsidiaries, of which approximately 20% is beneficially owned by Allen R. Hartman, our Chief Executive Officer and Chairman of the Board of Directors.

For the three months ended September 30, 2014 and 2013 we paid the Advisor $158,231 and $96,122 respectively for asset management fees.  For the nine months ended September 30, 2014 and 2013 we paid the Advisor $389,728 and $273,538, respectively for asset management fees.  Acquisition fees paid to Advisor were $0 and $0 for the three months ended September 30, 2014 and 2013, respectively and $828,125 and $156,870 for the nine months ended September 30, 2014 and 2013, respectively.  In connection with the disposition of the Harwin property to Hartman XIX in March 2013, Advisor refunded the acquisition fee of $80,380 previously paid in connection with that acquisition.

 

Property operating expenses include property management fees paid to our Property Manager of $158,429 and $68,883 for the three months ended September 30, 2014 and 2013, respectively, and $352,871 and $197,236 for the nine months ended September 30, 2014 and 2013, respectively.  For the three months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $225,784 and $26,483 for leasing commissions and $40,390 and $23,306 for construction management fees.  For the nine months ended September 30, 2014 and 2013, respectively, we paid our Property Manager $859,265 and $177,080 for leasing commissions and $127,447 and $130,786 for construction management fees.  Lease commissions and construction management fees are included in deferred loan and lease commission costs and real estate assets, respectively, in the consolidated balance sheets.

 

       As of September 30, 2014 and December 31, 2013, respectively, the Company had a net balance due from the Property Manager and the Advisor of $61,963 and $90,417.

 

The Company had a net balance due from (to) an affiliate, Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), of $31,255 and ($158,068) as of September 30, 2014 and December 31, 2013, respectively.  The balance due to Hartman XIX represents undistributed funds from operations due to Hartman XIX with respect to its former ownership interest in the Richardson Heights Property joint venture and a retail shopping center commonly known as Haute Harwin (the “Harwin Property”) which was sold to Hartman XIX.

 

Effective March 28, 2013 the Company disposed of the Harwin Property for $3.4 million.

 

On March 11, 2014, we acquired a fee simple interest in an office building located in the Energy Corridor of Houston, Texas, commonly known as Gulf Plaza.  The property was acquired from fourteen tenant-in-common investors, including Hartman Gulf Plaza Acquisitions, LP (“Acquisitions”) which owned 1% of Gulf Plaza.  Acquisitions is an affiliate of Hartman Income REIT Management, Inc., our Property Manager, which indirectly owns approximately 15% of Acquisitions.  Approximately 10% of Acquisitions is owned by Allen Hartman, our President and CEO, or his affiliates.  Advisor earned an acquisition fee of $348,750 in connection with the Gulf Plaza Property acquisition.

 

On June 13, 2014, we acquired the Mitchelldale Property.  Advisor earned an acquisition fee of $479,375 in connection with the Mitchelldale Property acquisition.

 

XML 55 R14.htm IDEA: XBRL DOCUMENT v2.4.0.8
Stockholders' Equity
9 Months Ended
Sep. 30, 2013
Notes  
Stockholders' Equity

Note 10 – Stockholders’ Equity

 

Common Stock

 

       Shares of common stock entitle the holders to one vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law.  The common stock has no preferences or preemptive, conversion or exchange rights.

 

       Under our articles of incorporation, we have authority to issue 750,000,000 common shares, $0.001 par value per share, and 200,000,000 preferred, $0.001 par value per share.

       

       As of September 30, 2014, the Company has accepted investors’ subscriptions for and issued 6,858,054 shares of the Company’s common stock in its initial and follow-on public offerings, resulting in gross proceeds to the Company of $66,998,299.  As of the termination of our initial public offering, we had accepted investors’ subscriptions for, and issued 4,455,678 shares of our common stock in the initial public offering, including 162,561 shares of our common stock pursuant to our DRIP, resulting in offering proceeds of $43,943,731.

 

Preferred Stock

 

       Under our articles of incorporation the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors shall have the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares.  As of September 30, 2014 and December 31, 2013, respectively, we have issued 1,000 shares of convertible preferred shares to Hartman Advisors LLC at a price of $10.00 per share.

 

Common Stock Issuable Upon Conversion of Convertible Preferred Stock - The convertible preferred stock will convert to shares of common stock if (1) the Company has made total distributions on then outstanding shares of the Company’s common stock equal to the issue price of those shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares, (2) the Company lists its common stock for trading on a national securities exchange if the sum of prior distributions on then outstanding shares of our common stock plus the aggregate market value of our common  stock  (based on the  30-day  average  closing   price) meets  the  same  6%  performance  threshold,  or  (3)  the Company’s advisory agreement with Hartman Advisors, LLC expires without renewal or is terminated (other than because of a material breach by Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.

 

Stock-Based Compensation

 

       We award 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, 2014 and 2013, respectively, the Company granted 1,500 and 1,500 shares and 4,500 and 5,250 shares of restricted common stock to independent directors as compensation for services.  We recognized $15,000 and $15,000; and $45,000 and $52,500 as stock-based compensation expense for the three and nine months ended September 30, 2014 and 2013, respectively, based upon the estimated fair value per share.  The Compensation Committee of the Board of Directors approved awards of 1,000 shares of restricted common stock issued to each of two executives of the Property Manager. We recognized stock-based compensation expense of $20,000 and $20,000 with respect to these awards based on the amount offering price of $10 per share for the nine months ended September 30, 2014 and 2013, respectively.  Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations.

 

Distributions

 

The following table reflects the total distributions we have paid, including the total amount paid and amount paid per common share, in each indicated quarter:

 

Quarter paid

Distributions per

Common Share

 

Total Amounts Paid

2014

 

 

3rd Quarter

$                         0.175

$                 1,237,568

 2nd Quarter

                        0.175

                1,191,153

 1st Quarter

0.175

1,103,599

  Total

$                         0.525

$                 3,532,320

 

 

 

2013

 

 

 4th Quarter

$                         0.175

 $                 1,033,066

 3rd Quarter

0.175

854,120

 2nd Quarter

0.175

760,551

 1st Quarter

0.175

627,754

  Total

$                           0.700

$                 3,275,491

 

 

 

 

 

 

 

 

XML 56 R16.htm IDEA: XBRL DOCUMENT v2.4.0.8
Commitments and Contingencies
9 Months Ended
Sep. 30, 2013
Notes  
Commitments and Contingencies

Note 12 – Commitments and Contingencies

 

Economic Dependency

 

       The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common stock and preferred stock available for issue; the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the Company’s real estate portfolio, and other general and administrative responsibilities.  In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other providers.

 

Litigation

 

The Company is subject to various claims and legal actions that arise in the ordinary course of business.  Management of the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position of the Company.

 

Rescission Rights of Certain Stockholders

 

In connection with the Company’s initial public offering, the Company may have a contingent liability to certain stockholders who purchased shares of the Company’s common stock during the period in which the Company’s registration statement was not effective and during which time the Company may have been in violation of one or more securities laws.  The Company considered the possibility of affording the remedy of rescission to stockholders who purchased common shares during the period that the Company was required to file post-effective amendments to its registration statement.  Any such rescission would obligate the Company to reacquire the stockholders common shares at a price equal to the price originally paid for such shares with market interest, less the amount of any income received with respect to such shares.  If affected stockholders were successful in seeking rescission and/or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies.  If stockholders seek rescission and/or damages or we conduct a rescission offer, we may or may not have the resources to fund the repurchase of all of the securities tendered.  We determined not to offer rescission because the Advisor and the Company do not believe that any material number of affected investors would choose to rescind their common share purchases.  On July 16, 2013, the SEC declared the Company’s follow-on offering registration statement effective and the Company has recommenced offering of its common shares as of that date. The Company believes that the right of affected stockholders to request rescission has expired under the one-year federal statute of limitations.  The statute of limitations in several of the various states is longer than the federal statute of limitations.  Accordingly, affected shareholders of any such state may continue to possess a rescission right.  

 

We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.  Pursuant to Section 10(a)(3) of the Securities Act, we are required to annually update our prospectus so that the financial statements and other information contained or incorporated by reference in the prospectus is not more than sixteen months old. In order to comply with Section 10(a)(3) of the Securities Act, we are required to file a post-effective amendment to our registration statement containing an updated prospectus prior to April 30th of each year. If the SEC has not declared such post-effective amendment effective by April 30th of each year, we are required to halt our public offering until such time as the SEC declares the post-effective amendment effective. We failed to file the post-effective amendment required to be filed by April 30, 2014 and continued to offer and sell our shares in our public offering during the period from May 1, 2014 to May 30, 2014, the date we suspended our public offering. During the period from May 1, 2014 to the suspension of our public offering on May 30, 2014, we sold 85,569 shares of our common stock, including 19,638 shares issued pursuant to our distribution reinvestment program. On June 5, 2014, we filed a post-effective amendment to our registration statement updating our prospectus pursuant to Section 10(a)(3) of the Securities Act, which registration statement was declared effective by the SEC on July 7, 2014.

 

As a result of our failure to timely update our registration statement as required by Section 10(a)(3) of the Securities Act, from May 1, 2014 to May 30, 2014, the offer and sale of securities in our continuous public offering may have failed to comply fully with Section 5 of the Securities Act, which may trigger a right of rescission under the Securities Act for investors that purchased shares of our common stock during this period.  Such stockholders may have the right to rescind their purchase of shares of our common stock and require us to reacquire their shares at a price equal to the price originally paid for such shares, plus interest, less the amount of any income (i.e., dividends) received by the investor on such shares. An investor who acquired shares of our common stock during such period who no longer owns the shares they acquired may have the right to collect damages from us in lieu of the rescission rights described above.  We determined not to offer rescission because the Advisor and the Company do not believe that any material number of affected investors would choose to rescind their common share purchases.  If stockholders were successful in seeking rescission and/or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies.  If stockholders seek rescission and/or damages or we elect to conduct a rescission offer, we may or may not have the resources to fund the repurchase of the securities.

 

No rescission requests have been received by the Company as of September 30, 2014.  

 

Escrow Contingency Under Term Loan Reserve Agreement

 

The reserve agreement among Richardson Heights Properties, LLC and the term loan lender referred to in Note 6, requires that three specific new tenants must occupy their leased premises and be paying full base rent on or before December 15, 2014.   The Taco Joint, one of the specified new tenants, is currently occupying their leased premises and paying full base rent under their lease agreement effective October 1, 2014.  Skechers USA, one of the specified new tenants, has taken possession of their lease space and their lease agreement commenced on October 24, 2014.  The tenant will pay prorated rent for the month of October 2014 and will begin paying full base rent effective February 1, 2015.  Under the terms of the reserve agreement, Richardson Heights Properties, LLC may be required to add $1,008,377 to the escrow reserve until such time as Richardson Heights Properties, LLC has met the requirements for disbursement of proceeds as set forth in the reserve agreement.  The lease agreement of Dulce Restaurants LLC (dba Krispy Kreme), the third of the three specific new tenants, commenced on August 5, 2014 and the tenant has begun paying full base rent under their lease agreement beginning in November 2014.  This tenant is currently occupying their leased premises.  No addition to the escrow reserve is required with respect to this specified tenant.  Funds held in the escrow reserve may be recovered on a quarterly basis subject to the terms and conditions set forth in the reserve agreement.

 

 

 

 

Property Acquisition

 

On July 1, 2014, the Company, through the Operating Partnership, entered into a purchase agreement with BRI 1841 Energy Plaza, LLC, to acquire a two office building complex containing approximately 180,119 square foot of office space located in San Antonio, Texas, for an aggregate purchase price of $17,610,000.  The property is commonly referred to as Energy Plaza I & II (the “Energy Plaza Property”).

 

The acquisition of the Energy Plaza Property is subject to substantial conditions to closing, including (i) the assumption of existing indebtedness secured by the Energy Plaza Property of approximately $10.5 million; and (ii) the absence of a material adverse change to the Energy Plaza Property prior to the acquisition date.  The acquisition is scheduled to close on December 17, 2014, however, there is no assurance that the Company will close the acquisition of the Energy Plaza Property on the terms described above or at all.

 

XML 57 R34.htm IDEA: XBRL DOCUMENT v2.4.0.8
Accrued Rent and Accounts Receivable, Net: Accrued Rent and Accounts Receivable Schedule (Tables)
9 Months Ended
Sep. 30, 2013
Tables/Schedules  
Accrued Rent and Accounts Receivable Schedule

 

 

September 30, 2014

December 31, 2013

Tenant receivables

$                     455,119

$                      312,218

Accrued rent

967,760

467,544

Allowance for uncollectible accounts

(216,755)

(260,885)

 Accrued rents and accounts receivable, net

$                  1,206,124

$                      518,877

XML 58 R51.htm IDEA: XBRL DOCUMENT v2.4.0.8
Discontinued Operations: Discontinued Operations (Details) (USD $)
9 Months Ended
Sep. 30, 2013
Details  
Income from discontinued operations before gain $ 66,460
Gain (Loss) on Disposition 122,576
Income from Discontinued Operations, Net $ 189,036
XML 59 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies)
9 Months Ended
Sep. 30, 2014
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 at September 30, 2014 and December 31, 2013 consisted of demand deposits at commercial banks.

 

XML 60 R26.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Goodwill (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
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.  The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying amount.  If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a two-step impairment test.  In the first step, management compares its net book value of the Company to the carrying amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge. No goodwill impairment has been recognized in the accompanying consolidated financial statements.

 

XML 61 R49.htm IDEA: XBRL DOCUMENT v2.4.0.8
Stockholders' Equity (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Details        
Stock-Based Compensation to directors 1,500 1,500 4,500 5,250
Stock-Based Compensation to directors in amount $ 15,000 $ 15,000 $ 45,000 $ 52,500
Stock Compensation to Executives of the Property Manager     $ 20,000 $ 20,000
XML 62 R41.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Restricted Cash (Details) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Details    
Restricted cash balance $ 7,100,000 $ 0
XML 63 R5.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Cash flows from operating activities:    
Net loss $ (2,843,711) $ (1,625,153)
Stock based compensation 65,000 72,500
Depreciation and amortization expense 4,630,340 2,837,947
Deferred loan and leasing commission costs amortization 338,296 111,870
Bad debt provision (44,130) 97,374
Cash flows from investing activities:    
Acquisition deposit (500,000) 350,000
Increase in restricted cash (7,100,000)  
Additions to real estate (34,734,917) (14,185,804)
Property disposition   3,253,671
Net cash used in investing activities (42,334,917) (10,582,133)
Cash flows from financing activities:    
Dividend distributions paid in cash (1,814,583) (1,131,249)
Payment of selling commissions (516,647) (576,783)
Payment of deferred loan costs (976,591) (48,152)
Borrowings under term loan notes 49,725,000  
Repayments under term loan notes (155,376)  
Borrowings under revolving credit facility 22,644,050 7,487,821
Repayment of revolving credit advances (24,944,050) (15,387,821)
Proceeds from issuance of common stock, net of redemption 8,597,844 20,667,469
Net cash provided by financing activities 52,592,686 11,033,682
Net change in cash 11,919,328 735,864
Cash and cash equivalents, beginning of period 143,038 61,894
Cash and cash equivalents, end of period $ 12,062,366 $ 797,758
XML 64 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Notes Payable
9 Months Ended
Sep. 30, 2013
Notes  
Notes Payable

Note 6 — Notes Payable

 

The Company is a party to a $30.0 million revolving credit agreement (the “Credit Facility”) with a bank.  The borrowing base of the Credit Facility may be adjusted from time to time subject to the lenders underwriting with respect to real property collateral.    The Credit Facility was secured by the Richardson Heights Property; the Cooper Street Property; the Bent Tree Green Property and the Parkway Property.  On June 13, 2014, the Company entered into a modification agreement pursuant to which the Richardson Heights Property, the Cooper Street Property, and the Bent Tree Green Property were released as collateral for the Credit Facility.  On July 2, 2014, the Company entered into a further modification agreement of the Credit Facility to add the Gulf Plaza Property as collateral and the borrowing base of the Credit Facility, as further modified, was increased to $7.0 million.  The Credit Facility note bears interest at greater of 4.5% per annum or the bank’s prime rate plus 1% per annum.  The interest rate was 4.5% per annum as of September 30, 2014.  The loan matures on May 9, 2015.

 

The outstanding balance under the Credit Facility was $0 and $2.3 million as of September 30, 2014 and December 31, 2013, respectively.  As of September 30, 2014 the amount available to be borrowed is $7.0 million.  As of September 30, 2014, we were in compliance with all loan covenants.

 

On June 13, 2014, the Company, through the Operating Partnership, entered into four term loan agreements with an insurance company, each loan being secured by a collateral property.  The following is a summary of the mortgage notes payable as of September 30, 2014:

 

Property Name

Payment Type

Maturity Date

Interest Rate

Principal Balance

Richardson Heights Property

Principal and interest

July 1, 2041

4.61%

$            20,136,882

Cooper Street Property

Principal and interest

July 1, 2041

4.61%

8,373,752

Bent Tree Green Property

Principal and interest

July 1, 2041

4.61%

8,373,752

Mitchelldale Property

Principal and interest

July 1, 2041

4.61%

12,685,238

 

 

 

 

$            49,569,624

 

Monthly payments of principal and interest are due and payable on the first day of each month beginning August 1, 2014 until July 1, 2041 based on a 27 year loan amortization.  Each promissory note contains a call option wherein the holder of the promissory note may declare the outstanding balance due and payable on either July 1, 2024; July 1, 2029; July 1, 2034; or July 1, 2039.  Each of the loan agreements are subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements.  As of September 30, 2014, we were in compliance with all loan covenants.  Each of the loan agreements are secured by a deed of trust; assignment of licenses, permits and contracts; assignment and subordination of the management agreements; and assignment of rents.  The terms of the security instruments provide for the cross collateralization/cross default of the each of the loans.

 

In connection with the loans secured by the Richardson Heights Property and the Bent Tree Green Property, the Company has entered into a reserve agreement with the lender which requires that loan proceeds of $5,525,000 and $975,000, respectively, be deposited with the loan servicer.  The escrowed loan proceeds will be released to the Company upon satisfactory showing of increased annualized rental income from new lease agreements as set forth in the reserve agreement.  In connection with the loans secured by the Cooper Street Property and the Mitchelldale Property, the Company entered into a post-closing agreement with the lender requiring the short term escrow of $600,000 for certain capital repairs to be completed during 2014 together with the delivery of certain other documents as set forth in the post-closing agreement.  Loan proceeds and other reserve funds held pursuant to the reserve agreement and the post-closing agreement are recorded as restricted cash on the accompanying consolidated balance sheets.

 

       Under the terms of the reserve agreement, the Company may draw upon the escrow reserve funds until December 31, 2016.  Thereafter, the lender shall have the right to draw any remaining escrow reserve funds and apply such funds to one or more of the loans as the lender may determine in its sole discretion.

 

XML 65 R27.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies: Organization and Offering Costs (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Organization and Offering Costs

Organization and Offering Costs

 

The Company has incurred certain expenses in connection with organizing the Company. These costs principally relate to professional and filing fees. For the three months ended September 30, 2014 and 2013, such costs totaled $148,163 and $210,705, respectively.  For the nine months ended September 30, 2014 and 2013, such costs totaled $365,032 and $445,871, respectively.

 

Organization and offering costs will be reimbursed by the Advisor to the extent that organization and offering costs ultimately exceed 1.5% of gross offering proceeds.  As of September 30, 2014, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds is cumulatively $525,694. for the Company’s initial and follow-on offerings.  No demand has been made of the Advisor for reimbursement as of September 30, 2014 and no receivable has been recorded with respect to the excess costs as of that date.  The Company expects the excess cost to diminish as additional offering proceeds are received. Selling commissions in connection with the offering are recorded and charged to additional paid-in capital.

 

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Stockholders' Equity: Distributions (Tables)
9 Months Ended
Sep. 30, 2013
Tables/Schedules  
Distributions:

The following table reflects the total distributions we have paid, including the total amount paid and amount paid per common share, in each indicated quarter:

 

Quarter paid

Distributions per

Common Share

 

Total Amounts Paid

2014

 

 

3rd Quarter

$                         0.175

$                 1,237,568

 2nd Quarter

                        0.175

                1,191,153

 1st Quarter

0.175

1,103,599

  Total

$                         0.525

$                 3,532,320

 

 

 

2013

 

 

 4th Quarter

$                         0.175

 $                 1,033,066

 3rd Quarter

0.175

854,120

 2nd Quarter

0.175

760,551

 1st Quarter

0.175

627,754

  Total

$                           0.700

$                 3,275,491

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Summary of Significant Accounting Policies: Reclassifications (Policies)
9 Months Ended
Sep. 30, 2014
Policies  
Reclassifications

Reclassifications

 

We have reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net loss, total assets, total liabilities or stockholders’ equity.