10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________

FORM 10-K 

____________

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

For the fiscal year ended December 31, 2019 

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

For the transition period from ___ to ___

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)

Securities registered pursuant to Section 12 (b) of the Act:  None

Securities registered pursuant to Section 12 (g) of the Act:  Common stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨   No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes ¨   No ý

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 ý   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 ý   No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes ¨    No ý

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,” “smaller reporting company” and emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

There is no established market for the registrant's shares of common stock.  There were 17,698,385 shares of common stock held by non-affiliates as of June 30, 2019; the last business day of the registrant’s most recently completed second fiscal quarter.

As of March 31, 2020, there were 18,417,687 shares of the registrant’s common shares issued and outstanding.

Table of Contents

Reliance on Securities and Exchange Commission Order		1
Cautionary Note Regarding Forward-Looking Statements		1
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	39
Item 2.	Properties	40
Item 3.	Legal Proceedings	47
Item 4.	Mine Safety Disclosures	47
PART II
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	45
Item 6.	Selected Financial Data	51
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 7A.	Quantitative and Qualitative Disclosures about Market Risks	61
Item 8.	Financial Statements and Supplementary Data	62
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	62
Item 9A.	Controls and Procedures	62
Item 9B.	Other Information	64
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	64
Item 11.	Executive Compensation	67
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69
Item 13.	Certain Relationships and Related Transactions and Director Independence	69
Item 14.	Principal Accounting Fees and Services	74
PART IV
Item 15.	Exhibits and Financial Statement Schedules	76
Item 16.	Form 10-K Summary	76
	Index to Consolidated Financial Statements

Reliance on Securities and Exchange Commission Order

Hartman Short Term Income Properties XX, Inc. (the “Company”) is filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Report”) pursuant to the Securities and Exchange Commission (the “SEC”) Order dated March 4, 2020 (Release No. 34-88318) under Section 36 of the Exchange Act Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder, as superseded by SEC Order Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465) (together, the “Order”) to delay the filing of the Report due to circumstances related to the coronavirus pandemic (“COVID-19”). On March 30, 2020, the Company filed a Current Report on Form 8-K stating that it is relying on the Order to delay the filing of the Report by up to 45 days. As result of the global outbreak of the COVID-19 virus and out of an abundance of caution, members of the Company’s advisor, property manager and certain other employees, including financial reporting staff, began working remotely on or about March 17, 2020. The Company has been following the recommendations of local government and health authorities to minimize exposure risk for its employees, including the temporary closures of some of its offices and having employees work remotely. The Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic that has spread throughout the United States and the world. The Company’s business was abruptly and dramatically impacted by the COVID-19 pandemic as the Company’s commercial real estate properties, headquarters, property management operations and other services offices located in Texas counties, which were under stay-at-home orders resulting in staffing and work-from-home challenges which caused significant disruptions in communications and delayed completion of the audit. These disruptions to the process of preparing the Company’s financial statements as a result of the COVID-19 virus, are causing the Company’s Form 10-K for the 2019 fiscal year which was due on March 30, 2020 to be delayed. Consequently, the Company was unable to timely file the Report without the extension provided for by the Order.

Cautionary Note Regarding Forward-Looking Statements

As used herein, the terms “we,” “us” or “our” are to Hartman Short Term Income Properties XX, Inc. and, as required by context, Hartman XX Limited Partnership, which we refer to as our “operating partnership,” and their respective subsidiaries.

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

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

1

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

● the risk that the pending Mergers (as defined below) will not be consummated within the expected time period or at all;

● the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreements (as defined below);

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

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

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

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

● construction costs that may exceed estimates or construction delays;

● increases in interest rates;

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

● litigation risks;

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

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

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

● the impact of the global pandemic of the novel coronavirus that causes the disease known as coronavirus disease 2019 (“COVID-19”), and the measures taken in response to the pandemic, on the global economy and our real estate tenants;

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

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

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

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

● changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon any forward-looking statements included herein. All forward-looking statements are made as of the date of this Annual Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made after the date of this Annual Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Annual Report, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Annual Report will be achieved.  

2

PART I

Item 1.   Business

General

Hartman Short Term Income Properties XX, Inc. is a Maryland corporation formed on February 5, 2009, to acquire and invest in income-producing commercial real estate properties, including office buildings, retail shopping centers and flex and industrial properties. We have made and expect to continue to make investments in real estate assets located in the United States, with a strategic focus on real estate properties located in Texas, based on our view of existing market conditions.  We own, and in the future intend to own, substantially all of our assets and conduct our operations through our Hartman XX Limited Partnership, a Texas limited partnership, which we refer to as our “operating partnership.” Our wholly-owned subsidiary, Hartman XX REIT GP LLC, is the sole general partner of our operating partnership, and we are the sole limited partner of our operating partnership.  We elected to be treated as a real estate investment trust, or REIT, for federal income tax purposes beginning with the taxable year ended December 31, 2011. References in this Annual Report to “shares” and “our common stock” refer to the shares of our common stock.   

As of December 31, 2019, we owned 43 commercial properties comprising approximately 6,700,000 square feet plus three pad sites, all located in Texas. As of December 31, 2019, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.  For more information on our real estate portfolio, see “Investment Portfolio” below. 

On February 9, 2010, we commenced our initial public offering of up to $250,000,000 in shares of our common stock to the public at a price of $10.00 per share and up to $23,750,000 in shares of common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. On April 25, 2013, we terminated our initial public offering.

On July 16, 2013, we commenced our follow-on public offering, or our “follow-on offering,” of up to $200,000,000 in shares of our common stock to the public at a price of $10.00 per share and up to $19,000,000 in shares of our common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. Effective March 31, 2016, we terminated the offer and sale of our common shares to the public in our follow-on offering. Effective July 16, 2016, we terminated the sale of additional shares of our common stock to our stockholders pursuant to our distribution reinvestment plan. As of December 31, 2016, we had accepted subscriptions for, and issued an aggregate of 18,574,461 shares of our common stock in our initial public offering and follow-on offering, including 1,216,240 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross proceeds to us of $181,336,480.

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders.  We are externally managed by Hartman Advisors, LLC, which we refer to as our “advisor,” pursuant to an advisory agreement by and among us and our advisor, which we refer to as the “Advisory Agreement.”  Subject to certain restrictions and limitations, our advisor manages our day-to-day operations and our portfolio of properties and real estate related assets. Our advisor sources and presents investment opportunities to our board of directors.  Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.  The key personnel of our advisor are involved in the selection, acquisition, financing and disposition of our properties.  The key personnel of our advisor have extensive experience in selecting and operating commercial real estate and in operating investment entities that acquire commercial real estate. Our affiliated property manager is Hartman Income REIT Management, Inc., which we refer to herein as “HIR Management” or the “property manager,” which is responsible for operating, leasing and maintaining our properties.

3

We issued 1,000 shares of convertible preferred stock to our Advisor on February 5, 2009 for $10.00 per share.  We issued 19,000 shares of our common stock to Hartman XX Holdings, Inc. on February 5, 2009 for $10.00 per share.

Our principal executive offices are located at 2909 Hillcroft, Suite 420, Houston, Texas 77057. Our telephone number is 713-467-2222. Information regarding our company is available via the internet at www.hartmaninvestment.com and www.hartmanreits.com. We are not incorporating our web-sites or any information from our web-sites into this Annual Report.

2020 Key Objectives

We intend to grow in a conservative manner consistent with our fundamental strategy of owning and operating value add properties in Texas. As we move into 2020, our business strategy for the upcoming year includes the following three objectives: (1) increase occupancy in the Houston, Dallas and San Antonio markets and extend our portfolio’s weighted average in-place lease term to drive cash flow growth; (2) subject to receiving the requisite shareholder approvals and the satisfaction of all other closing conditions, complete the Mergers (as defined below); and (3) reduce leverage and extend our weighted average debt maturity.  There can be no assurance regarding our achievement of any of our objectives.

Increase occupancy in Houston, Dallas and San Antonio markets and extend the portfolio’s weighted average in-place lease term

The occupancy of our properties as of December 31, 2019 was 81%. We intend to increase occupancy at our properties by the end of 2020 to 85% with an average occupancy of 83%.We expect to accomplish occupancy increase with a combination of aggressive lease incentive offerings for prospective new tenants and enhanced customer service initiatives to improve tenant retention.  We intend to increase weighted average in-place lease term remaining from approximately 40 months as of December 31, 2019 to 48 months by the end of 2020. We also intend to increase net operating income for same store properties by 5%.

Complete mergers with Hartman Income REIT and Hartman Short Term Income Properties XIX

Subject to our receipt of the requisite approvals of our shareholders and the shareholders of Hartman Income REIT, Inc. and Hartman Short Term Income Properties XIX, Inc. and the satisfaction of all other closing conditions set forth in the Merger Agreements (as defined below), we intend to complete the Mergers and integrate the portfolios of Hartman Income REIT, Inc. and Hartman Short Term Income Properties XIX, Inc. with our existing portfolio.

Our negotiation and joint proxy statement was declared effective by SEC on February 14, 2020. Shareholder meetings are scheduled for May 14, 2020.

Pending Mergers

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

4

Our registration statement and joint proxy statement was declared effective by the Securities and Exchange Commission on February 14, 2020. Shareholder meetings are scheduled for May 14, 2020.

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

Subject to the terms and conditions of the XIX Merger Agreement, (i) each share of common stock of Hartman XIX (the “XIX Common Stock”) issued and outstanding immediately prior to the Effective Time (as defined in the XIX Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 9,171.98 shares of our common stock, (ii) each share of 8% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of our common stock, and (iii) each share of 9% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of our common stock.

Subject to the terms and conditions of the HIREIT Merger Agreement, (a) in connection with the HIREIT Merger, (i) each share of common stock of HIREIT (the “HIREIT Common Stock”) issued and outstanding immediately prior to the REIT Merger Effective Time (as defined in the HIREIT Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of our common stock, and (ii) each share of subordinate common stock of HIREIT will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of our common stock, and (b) in connection with the Partnership Merger, each unit of limited partnership interest in HIREIT Operating Partnership (“HIREIT OP Units”) issued and outstanding immediately prior to the Partnership Merger Effective Time (as defined in the HIREIT Merger Agreement) (other than any HIREIT OP Units held by HIREIT) will be automatically cancelled and retired and converted into the right to receive 0.752222 validly issued, fully paid and non-assessable units of limited partnership interests in our operating partnership.

Investment Objectives and Strategy: Hartman Advantage

Our primary investment objectives are to:

•realize growth in the value of our investments;

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

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

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

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

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

5

Effective March 31, 2016, we terminated our follow-on offering. Our board of directors continues to evaluate potential liquidity events to maximize the total potential return to our stockholders, including, but not limited to, merging our company with its affiliates followed by a listing of our shares of common stock on a national securities exchange.  However, our board of directors has not decided to pursue any specific liquidity event at any specific date, and there can be no assurance that we will complete any liquidity event on the terms described above, or at all.

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

Investment Portfolio

As of December 31, 2019, we owned 43 commercial properties comprising approximately 6,700,000 square feet plus three pad sites, all located in Texas. As of December 31, 2019, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas. For additional information regarding our property portfolio, see Part I, Item 2, “Properties” of this Annual Report. 

Competition

The United States commercial real estate market is highly competitive. All our properties are located in areas that include competing properties. We face competition from various entities for investment opportunities in our targeted assets, including other REITs, pension funds, insurance companies, investment funds, real estate companies and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the geographic location of investments or the creditworthiness of tenants. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell real estate assets. The amount of competition in a particular market could also impact our ability to lease space and impact the amount of rent we are able to charge.  

Employees

Although we have executive officers who manage our operations, we do not have any paid employees.  The employees of our advisor and its affiliates provide management, acquisition, advisory and certain administrative services for us.

Regulations

All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations. Our investments are subject to various federal, state, and local laws, ordinances, and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts.

6

Under various federal and state environmental laws and regulations, as an owner or operator of real estate, we may be required to investigate and clean up certain hazardous or toxic substances, asbestos-containing materials, or petroleum product releases at our properties.  We may also be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by those parties in connection with the contamination.  In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination.  The presence of contamination or the failure to remediate contamination at any of our properties may adversely affect our ability to sell or lease the properties or to borrow using the properties as collateral.

We do not believe that compliance with existing environmental laws will have a material adverse effect on our financial condition or results of operations.  However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly in the future.

Tax Status

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, and have operated as such beginning with the taxable year ended December 31, 2011.  To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income (which is computed without regard to the dividends paid deduction and excluding net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to stockholders.  As a REIT, we generally will not be subject to federal income tax so long as we maintain our REIT status. If we fail to qualify as a REIT in any taxable year after the taxable year in which we initially elected to be taxed as a REIT, we will be subject to federal income tax on our 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 us relief under certain statutory provisions.  Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. We believe we are organized and operate in such a manner as to qualify for taxation as a REIT under the Internal Revenue Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REIT.

Financial Information About Segments

Our current business consists of acquiring, developing, investing-in, owning, managing, leasing, operating, and disposing of real estate assets.We internally evaluate all of our real estate assets as one industry segment and, accordingly, do not report segment information.

Economic Dependency

We are dependent on our advisor for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments, management of the daily operations of our real estate portfolio, and other general and administrative responsibilities. In the event that our advisor is unable to provide these services to us, we will be required to obtain such services from other sources, and our failure to identify such other sources could have an adverse impact on our financial condition and results of operations. Prior to the termination of the offer and sale of our shares to the public in our follow-on offering, we were dependent upon our dealer manager for the sale of our shares in our follow-on offering.

7

Available Information

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, accordingly, we file annual reports, quarterly reports and other information with the SEC. Access to copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC, including amendments to such filings, may be obtained free of charge from our website, http://www.hartmanreits.com/sec-filings/. These filings are available promptly after we file them with, or furnish them to, the SEC. We are not incorporating our website or any information from the website into this annual report. The SEC also maintains a website, http://www.sec.gov, were our filings with the SEC are available free of charge. We will provide without charge a copy of this Annual Report, including financial statements and schedules, upon written request delivered to our principal executive office at the address listed on the cover page of this Annual Report.

Item 1A.     Risk Factors

 The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. Our stockholders or potential investors may be referred to as “you” or “your” in this Item 1A.

Risks Related to Our Business and Operations

Health concerns arising from the outbreak of a health epidemic or pandemic, including the COVID-19 coronavirus, may have an adverse effect on our business.

Our business could be materially and adversely affected by the outbreak of a health epidemic or pandemic, including the coronavirus, particularly to the extent and degree to which the outbreak affects the U.S., state and local economies. Our revenues consist primarily of rental income and other tenant reimbursements derived from tenants of our commercial real estate properties. The effects of the COVID-19 coronavirus and other adverse public health developments could materially affect the financial viability of our tenants and their ability to pay rent. While it is premature to accurately predict the ultimate impact of these developments, our results for the quarter ending March 31, 2020 have not been significantly impacted, however, we do expect to be impacted with potentially continuing and possibly adverse impacts beyond March 31, 2020.

Our operations could be disrupted if any of our employees, employees of our vendors and business partners or employees of our tenants were to contract or be suspected of having any strain of flu or a coronavirus, since this could require us or vendors and business partners and tenants to quarantine some or all of any effected employees and or disinfect affected workspaces. We could be adversely affected if government authorities impose mandatory closures, seek voluntary closures or impose restrictions on the operations of our business and the operations of our tenants’ businesses. Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk of infection or public health risk may adversely affect the business and operating results of our tenants and by extension affect our business and operating and results.

8

We have experienced annual net losses from inception through December 31, 2019 and may experience similar losses in the future.

From inception through December 31, 2019, we incurred a net loss of $47,650,000. We cannot assure that we will be profitable in the future or that we will realize growth in the value of our assets.

Our cash distributions are not guaranteed, may fluctuate and may constitute a return of capital or taxable gain from the sale or exchange of property.

We began paying a distribution in January 2011. The actual amount and timing of distributions are determined by our board of directors and typically will depend upon the amount of funds available for distribution, which will depend on items such as current and projected cash requirements and tax considerations. As a result, our distribution rate and payment frequency may vary from time to time. To the extent we do not have sufficient funds, or sources, of funds to pay distributions, we may be forced to reduce the rate at which we pay distributions or stop paying distributions entirely. Distributions payable to our stockholders may also include a return of capital, rather than a return on capital.

The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.

As of December 31, 2019, we owned or held a majority interest in 43 commercial properties comprising approximately 6,700,000 square feet plus three pad sites, all located in Texas. As of December 31, 2019, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas. Our geographic focus on the State of Texas is consistent with our investment strategy. However, our focus on investments in the State of Texas results in a geographic concentration in our portfolio which increases the likelihood that a downturn in economic or market conditions that selectively or disproportionately impact the State of Texas will have a significant impact on our results of operations and financial condition and our ability to pay distributions to our stockholders. Any adverse economic or real estate developments in the Texas market, such as business layoffs or downsizing, industry slowdowns, relocation of businesses, changing demographics and other factors, or any decrease in demand for commercial property space resulting from local business climates, could adversely affect our property revenue, and hence net operating income. An investment in our shares of common stock may entail more risk than an investment in the shares of common stock of a real estate investment trust with a more geographically diversified portfolio.

We have and may continue to pay distributions from sources other than our cash flow from operations. To the extent that we pay distributions from sources other than our cash flow from operations, we will have reduced funds available for investment and the overall return to our stockholders may be reduced.

Our organizational documents permit us to pay distributions from any source, including net proceeds from our public offerings, borrowings, advances from our sponsor or advisor and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. Since our inception, our cash flow from operations has not been sufficient to fund all of our distributions, and as a consequence we have funded a significant portion of our distributions with the net proceeds of our public offerings. Of the $12,811,000 in total distributions we paid during the year ended December 31, 2019, including shares issued pursuant to our distribution reinvestment plan and but excluding distributions we paid to non-controlling interests, 100% was funded from cash flow from operations. Of the $67,484,000 in total distributions we paid during the period from our inception through December 31, 2019, including shares issued pursuant to our distribution reinvestment plan and excluding distributions we paid to non-controlling interests, approximately 71% was funded from cash flow from operations and approximately 29% was funded from offering proceeds. In the future, our cash flow from operations may not be sufficient to fund our distributions and we may continue to fund all or a portion of our distributions from the remaining proceeds from our follow-on offering or other sources other than cash flow from operations. We have not established a limit on the

9

amount of offering proceeds, or other sources other than cash flow from operations, which we may use to fund distributions.

If we are unable to consistently fund distributions to our stockholders entirely from our cash flow from operations, the value of your shares upon a listing of our common stock, the sale of our assets or any other liquidity event may be reduced. To the extent that we fund distributions from sources other than our cash flow from operations, our funds available for investment will be reduced relative to the funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as a tax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of our common stock will be taxable as gain realized from the sale or exchange of property.

Payment of fees to our advisor and its affiliates reduces cash available for investment, which may result in stockholders not receiving a full return of their invested capital.

Because a portion of the offering price from the sale of our shares was used to pay expenses and fees, the full offering price paid by our stockholders was not invested in real estate assets. As a result, stockholders will only receive a full return of their invested capital if we either (1) sell our assets or our company for a sufficient amount in excess of the original purchase price of our assets or (2) the market value of our company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets.

If we internalize our management functions, your interest in us could be diluted and we could incur other significant costs associated with being self-managed.  See “Pending Mergers” above.

Our board of directors may decide in the future to internalize our management functions. If we do so, we may elect to negotiate to acquire our advisor’s assets and personnel.At this time, we cannot anticipate the form or amount of consideration or other terms relating to any such acquisition.Such consideration could take many forms, including cash payments, promissory notes, and shares of our common stock.The payment of such consideration could cause a dilution of your interests as a stockholder and could reduce the earnings per share and funds from operations per share attributable to your investment.

Additionally, if we internalize our management functions, while we would no longer bear the costs of the various fees and expenses we pay to our advisor under the advisory agreement, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance, SEC reporting and compliance.We would also be required to employ personnel and would be subject to potential liabilities commonly faced by employers such as worker’s compensation and disability claims. We would also incur the costs of compensation and benefits of our officers, employees and consultants that is currently paid by our advisor or its affiliates.We may issue equity awards to officers, employees and consultants which would decrease net income and funds from operations and which may further dilute your investment. We cannot reasonably estimate the amount of fees to our advisor that we would save versus the costs we would incur if we became self-managed.  If the costs assumed as a result of internalization exceed the costs we avoid paying to our advisor, our earnings per share and funds from operations per share would be lower, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares.

If we internalize management functions, we could have difficulty integrating these functions as a stand-alone entity.  Currently, our advisor and its affiliates perform asset management and general and administrative functions, including accounting and financial reporting, for multiple entities. These personnel have a great deal of know-how and experience which provides us with economies of scale. We may fail to properly identify the appropriate mix of

10

personnel and capital needed to operate on a stand-alone basis.The inability to manage an internalization transaction effectively could result in our incurring excess costs and suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting.Such deficiencies could cause us to incur additional administrative costs and our management’s attention could be diverted from efficiently managing our real estate assets.

If we were to internalize our management or if another investment program, whether sponsored by our sponsor or otherwise, hires the employees of our advisor in connection with its own internalization, our ability to conduct our business may be adversely affected.  See “Pending Mergers” above.

We rely on persons employed by our advisor and its affiliates to manage our day-to-day operations.If we were to effect an internalization of our advisor, we may not be able to retain all of the employees of our advisor and its affiliates or to maintain a relationship with our sponsor.Additionally, some of the employees of our advisor and its affiliates may provide services to one or more other investment programs.These programs or third parties may decide to retain some or all of our advisor’s key employees.If this were to occur, these programs could hire persons currently employed by our advisor and its affiliates who are most familiar with our business and operations, which potentially may adversely impact our business.

There is currently no public trading market for your shares; therefore, it will be difficult for you to sell your shares. If you are able to sell your shares, you may have to sell them at a substantial discount from the public offering price.

There is currently no public market for the shares and we have no obligation to list our shares on any public securities market. It will therefore be difficult for you to sell your shares of our common stock promptly or at all. Even if you are able to sell your shares of our common stock, the absence of a public market may cause the price received for any shares of our common stock sold to be less than what you paid or less than your proportionate value of the assets we own. We have adopted a share redemption program but it is limited in terms of the amount of shares that stockholder may sell back to us each quarter. Our board of directors may reject any request for redemption of shares or amend, suspend or terminate our share redemption program for any reason upon 30 days’ written notice to participants. Existing shareholders must be prepared to hold their shares for an indefinite length of time.

If we lose or are unable to obtain key personnel, our ability to implement our investment strategies could be delayed or hindered.

Our success depends to a significant degree upon the continued contributions of certain executive officers and other key personnel, of us, our advisor and its affiliates, including Allen R. Hartman, each of whom would be difficult to replace.  In particular, we have not obtained and do not intend to obtain “key man” life insurance on Mr. Hartman. We do not have employment agreements with our executive officers, and we cannot guarantee that they will remain affiliated with us. If any of our key personnel were to cease their affiliation with us, our advisor or its affiliates, our operating results could suffer. We believe that our future success depends, in large part, upon our advisor’s and its affiliates’ ability to hire and retain highly skilled managerial, operational and marketing personnel.  Competition for persons with these skills is intense, and we cannot assure our stockholders that our advisor will be successful in attracting and retaining such skilled personnel. Further, we have established, and intend in the future to establish, strategic relationships with firms that have special expertise in certain services or as to assets both nationally and in certain geographic regions. Maintaining these relationships will be important for us to effectively compete for assets. We cannot assure our stockholders that we will be successful in attracting and retaining such strategic relationships. If we lose or are unable to obtain the services of key personnel or do not establish or maintain appropriate strategic relationships, our ability to implement our investment strategies could be delayed or hindered.

11

Because we rely on our advisor and its affiliates for the provision of advisory and property management services, if our advisor were unable to meet its obligations we may be required to find alternative providers of these services, which could result in a disruption of our business and may increase our costs.

In the event that our advisor was unable to meet its obligations as they become due, we might be required to find alternative service providers, which could result in disruption of our business.

Our board of directors determined an estimated net asset value per share of $12.61 for our shares of common stock as of December 31, 2018. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock.

On July 30, 2019, our board of directors determined an estimated net asset value per share of our common stock of $12.61 as of December 31, 2018. Our board of directors’ objective in determining the estimated net asset value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with our advisor. However, the market for commercial real estate can fluctuate quickly and substantially and the value of our assets is expected to change in the future and may decrease. Also, our board of directors did not consider certain other factors, such as a liquidity discount to reflect the fact that our shares are not currently traded on a national securities exchange and the limitations on the ability to redeem shares pursuant to our share repurchase plan.

As with any valuation method, the methods used to determine the estimated net asset value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. Our assets have been valued based upon appraisal standards and the values of our assets using these methods are not required to be a reflection of market value under those standards and will not necessarily result in a reflection of fair value under GAAP. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated net asset value per share, which could be significantly different from the estimated net asset value per share determined by our board of directors. The estimated net asset value per share is not a representation or indication that, among other things: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company; shares of our common stock would trade at the estimated net asset value per share on a national securities exchange; a third party would offer the estimated net asset value per share in an arms-length transaction to purchase all or substantially all of our shares of common stock; or the methodologies used to estimate the net asset value per share would be acceptable to FINRA or ERISA with respect to their respective requirements.  Further, the estimated net asset value per share was calculated as of a moment in time and the value of our shares will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets, developments related to individual assets and changes in the real estate and capital markets. For additional information on the calculation of our estimated net asset value per share as of December 31, 2018, see Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Estimated Net Asset Value Per Share.”

We disclose funds from operations and modified funds from operations, each a non-GAAP financial measure, in communications with investors, including documents filed with the SEC; however, funds from operations and modified funds from operation are not equivalent to our net income or loss of cash flow from operations as determined under GAAP, and stockholders should consider GAAP measures to be more relevant to our operating performance

We use and we disclose to investors funds from operations, or “FFO,” which is a non-GAAP financial measures, as defined herein (see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations.”) FFO is not equivalent to our net income or loss or cash flow from operations as determined in accordance with GAAP, and investors should consider GAAP measures to be more

12

relevant to evaluating our operating performance and ability to pay distributions. FFO and GAAP net income differ because FFO excludes gains or losses from sales of property and asset impairment write-downs, and add back depreciation and amortization and adjustments for unconsolidated partnerships and joint ventures.

Because of these differences, FFO may not be accurate indicators of our operating performance, especially during periods in which we are acquiring properties. In addition, FFO is not indicative of cash flow available to fund cash needs and investors should not consider FFO as an alternative to cash flows from operations or an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to pay distributions to our stockholders. Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO. Also, because not all companies calculate FFO the same way, comparisons with other companies may not be meaningful.

You are limited in your ability to sell your shares of common stock pursuant to our share redemption program if and when our share redemption program reopens. You may not be able to sell any of your shares of our common stock back to us, and if you do sell your shares, you may not receive the price you paid.

Our share redemption program is currently suspended, pending the mergers. If and when it may be reopened, it may provide you with a limited opportunity to have your shares of our common stock redeemed by us after you have held them for at least one year, subject to the significant conditions and limitations. Subject to the Board of Directors discretion, if the share redemption program is reopened under the same or similar terms as previously constituted, shares will generally be redeemed under the share redemption program at a price equal to or at a discount from the lesser of (1) the average gross price per share the original purchaser or purchasers of the shares being redeemed paid to us, which we refer to as the “issue price,” and (2) the current offering price per share for the shares being redeemed. However, our share redemption program will likely contain certain restrictions and limitations, including those relating to the number of shares of our common stock that we can redeem at any given time and limiting the redemption price. Specifically, the plan will likely limit the number of shares to be redeemed during any calendar year to no more than (1) 5.0% of the weighted average of the shares of our common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under our distribution reinvestment plan in the prior calendar year plus, if we had positive operating cash flow from the previous fiscal year, 1.0% of all operating cash flow from the previous fiscal year. In addition, our board of directors reserves the right to reject any redemption request for any reason or no reason or to amend, suspend or terminate the share redemption program at any time.Therefore, you may not have the opportunity to make a redemption request prior to a termination of the share redemption program and you may not be able to sell any of your shares of common stock back to us pursuant to our share redemption program. Moreover, if you do sell your shares of common stock back to us pursuant to the share redemption program, you may not receive the same price you paid for any shares of our common stock being redeemed.

Our advisor relies on information technology networks and systems in providing services to us, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.

Risks associated with security breaches, whether through cyber-attacks or cyber-intrusions over the Internet, malware, computer viruses, attachments to e-mails, or otherwise, against persons inside our organization, persons with access to systems inside our organization, the U.S. government, financial markets or institutions, or major businesses, including tenants, could disrupt or disable networks and related systems, other critical infrastructures, and the normal operation of business. The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, including by computer hackers, foreign governments, and cyber-terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. Even though we may not be specifically targeted, cyber-attacks on the U.S. government, financial markets, financial institutions, or other major businesses, including tenants, could disrupt our normal business operations and networks, which may in turn have a material adverse impact on our financial condition and results of operations.

13

IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations. They also may be critical to the operations of certain of our tenants. Although we believe we will be able to maintain the security and integrity of these types of networks and related systems, or implement various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. While, to date, we are not aware that we have experienced any significant cyber-attacks or cyber-intrusions, we may not be able to anticipate or implement adequate security barriers or other preventive measures. A security breach or other significant disruption involving our IT networks and related systems could:

•disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants;

•result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines;

•result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

•result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of proprietary, confidential, sensitive, or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;

•result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

•require significant management attention and resources to remedy any damages that result;

•subject us to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements; or

•damage our reputation among our tenants and stockholders generally.

We may change our investment and operational policies without stockholder consent.

Except for changes to the investment restrictions contained in our charter, which require stockholder consent to amend, we may change our investment and operational policies, including our policies with respect to investments, operations, indebtedness, capitalization and distributions, at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier or more highly leveraged than, the types of investments contemplated by our current investment policies. A change in our investment strategy may, among other things, increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could materially affect our ability to achieve our investment objectives.

The recent events in the credit markets has increased the cost of borrowing and has made financing more difficult to obtain, each of which may have a material adverse effect on our results of operations and business.

Recent events in the financial markets have had an adverse impact on the credit markets and, as a result, the availability of credit has become more expensive and more difficult to obtain. Some lenders are imposing more stringent restrictions on the terms of credit and there may be a general reduction in the amount of credit available in the markets in which we conduct business. The negative impact of the tightening of the credit markets may have a material adverse effect on us resulting from, but not limited to, an inability to finance the acquisition of real estate assets on favorable terms, if at all, increased financing costs or financing with increasingly restrictive covenants.

14

We are uncertain of our sources for funding our future capital needs. If we cannot obtain debt or equity financing on acceptable terms, our ability to acquire real estate assets and to expand our operations will be adversely affected.

In the event that we develop a need for additional capital in the future for investments, the improvement of our real properties or for any other reason, sources of funding may not be available to us. If we cannot establish reserves out of cash flow generated by our real estate assets or out of net sale proceeds in non-liquidating sale transactions, or obtain debt or equity financing on acceptable terms, our ability to acquire real estate assets and to expand our operations will be adversely affected. As a result, we would be less likely to achieve portfolio diversification and our investment objectives, which may negatively impact our results of operations and reduce our ability to make distributions to our stockholders.

Non-traded REITs have been the subject of increased scrutiny by regulators and media outlets resulting from inquiries and investigations initiated by FINRA and the SEC. We could also become the subject of scrutiny and may face difficulties in raising capital should negative perceptions develop regarding non-traded REITs.

Our securities, like other non-traded REITs, were sold through the independent broker-dealer channel (i.e., U.S. broker-dealers that are not affiliated with money center banks or similar financial institutions). Governmental and self-regulatory organizations like the SEC and FINRA impose and enforce regulations on broker-dealers, investment banking firms, investment advisers and similar financial services companies. Self-regulatory organizations such as FINRA adopt rules, subject to approval by the SEC, that govern aspects of the financial services industry and conduct periodic examinations of the operations of registered investment dealers and broker-dealers.

Recently, FINRA has initiated investigations of broker-dealers with respect to the sales practices related to the sale of shares of non-traded REITS. These proceedings have resulted in increased regulatory scrutiny from the SEC regarding non-traded REITs. As a result of this increased scrutiny and accompanying negative publicity and coverage by media outlets, FINRA may impose additional restrictions on sales practices in the independent broker-dealer channel for non-traded REITs, and accordingly we may face increased difficulties in raising capital in the future. This could result in a reduction in the returns achieved on those investments as a result of a smaller capital base limiting our investments. If we become the subject of scrutiny, even if we have complied with all applicable laws and regulations, responding to such scrutiny could be expensive and distracting our management.

FINRA has also adopted changes to rules relating to information required to be included on customer account statements by registered broker dealers. In order to assist broker dealers in complying with the new rules, we were required to obtain independent valuations of our assets to determine an estimated per share value of our common stock more frequently than under prior regulations. Compliance with these new rules and future rule changes by FINRA could increase our operating expenses which could have an adverse effect on our results of operations.

The pendency of the Mergers could adversely affect our business and operations.

Between the date that the Merger Agreements were signed and the date that the Mergers are consummated, the attention of our management may be diverted from day-to-day operations, regardless of whether or not the Mergers are ultimately consummated. The pendency of the Mergers could have an adverse impact on our relationships with other parties, which parties may delay or decline entering into agreements with us as a result of the announcement of our entry into the Merger Agreements. In addition, due to operating covenants to which we are subject pursuant to the Merger Agreements, we may be unable during the pendency of the Mergers to pursue certain transactions, incur certain financing and otherwise pursue other actions that are not in the ordinary course of business, even if such actions could prove beneficial.

15

There can be no certainty that the Mergers will be consummated, and failure to consummate the Mergers could negatively affect our future business and financial results.

Consummation of the Mergers remains subject to the satisfaction or waiver of a number of significant conditions, some of which are beyond our control, including receipt of the approval of our stockholders and the stockholders of each of Hartman XIX and HIREIT, delivery of certain documents, consents and legal opinions, and the truth and correctness of the representations and warranties of the parties, subject to the materiality standards contained in the Merger Agreements. There can be no certainty that all such conditions will be met or waived, or that the Mergers will be consummated. If the Mergers are not consummated, our ongoing business could be adversely affected and we may be subject to a number of material risks, including that fact that we will have incurred substantial costs and expenses related to the Mergers, such as legal, accounting and advisory fees, which will be payable by us even if the Mergers are not consummated. If the Mergers are not consummated, these risks could materially affect our business and financial results.

There may be unexpected delays in the consummation of the pending Mergers.

Each Merger Agreement provides that either we or Hartman XIX or HIREIT, as applicable, may terminate the Merger Agreement if the applicable Merger has not occurred by June 30, 2020. Certain events may delay the consummation of the Mergers. Some of the events that could delay the consummation of the Mergers include difficulties in obtaining the approval of our stockholders and the stockholders of each of Hartman XIX and HIREIT or satisfying the other closing conditions to which the Mergers are subject.

Our stockholders will be diluted by the pending Mergers.

The Mergers will dilute the ownership position of our current stockholders and result in our stockholders (excluding stockholders affiliated with our advisor or sponsor) having an ownership stake in us that is smaller than their current stake in our company.

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

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

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

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

16

Risks Related to Conflicts of Interest

Because other Hartman real estate programs use investment strategies that are similar to ours, our advisor, their advisor and our executive officers will face conflicts of interest relating to the purchase and leasing of properties and other investments, and such conflicts may not be resolved in our favor.

Although our sponsor generally seeks to avoid simultaneous public or private offerings of funds that have a substantially similar mix of fund characteristics, including targeted investment types, investment objectives and criteria, and anticipated fund terms, there may be periods during which one or more Hartman-sponsored programs are seeking to invest in similar properties and other real estate-related investments. As a result, we may be buying properties and other real estate-related investments at the same time as one or more of the other Hartman-sponsored programs managed by officers and employees of our advisor and/or its affiliates, and these other Hartman-sponsored programs may use investment strategies that are similar to ours. Our executive officers and the executive officers of our advisor are also the executive officers of other Hartman-sponsored REITs and their advisors, the general partners of Hartman-sponsored partnerships and/or the advisors or fiduciaries of other Hartman-sponsored programs, and these entities are and will be under common control. There is a risk that our advisor will choose a property that provides lower returns to us than a property purchased by another Hartman-sponsored program. In the event these conflicts arise, we cannot assure stockholders that our best interests will be met when officers and employees acting on behalf of our advisor and on behalf of advisors and managers of other Hartman-sponsored programs decide whether to allocate any particular property to us or to another Hartman-sponsored program or affiliate of our advisor, which may have an investment strategy that is similar to ours. In addition, we may acquire properties in geographic areas where other Hartman-sponsored programs own properties. If one of the other Hartman-sponsored programs attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant. Stockholders will not have the opportunity to evaluate the manner in which these conflicts of interest are resolved before or after making an investment.

Our advisor and its affiliates, including all of our executive officers and some of our directors, will face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.

Our advisor and its affiliates, including our property manager, are entitled to substantial fees from us under the terms of the advisory agreement and the property management agreements with our property manager. These fees could influence our advisor’s advice to us as well as the judgment of affiliates of our advisor performing services for us. Among other matters, these compensation arrangements could affect their judgment with respect to:

•the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement and the property management agreement;

•property sales, which entitle our advisor or its affiliates to real estate commissions and the possible issuance to our advisor of shares of our common stock through the conversion of our convertible preferred stock;

•property acquisitions from other Hartman-sponsored programs, which might entitle affiliates of our advisor to real estate commissions and possible success-based sale fees in connection with its services for the seller;

•development of real properties, which entitle our advisor or its affiliates to development acquisition fees and asset management fees;

•acquisition of properties from third parties, which entitle our advisor or its affiliates to acquisition fees and asset management fees;

17

•borrowings to acquire properties, which borrowings will increase the acquisition and asset management fees payable to our advisor;

•whether and when we seek to list our common stock on a national securities exchange, which listing could entitle our advisor to the issuance of shares of our common stock through the conversion of our convertible preferred stock; and

•whether and when we seek to sell the company or its assets, which sale could entitle our property manager to real estate commissions and our advisor to the issuance of shares of our common stock through the conversion of our convertible preferred stock.

The fees our advisor receives in connection with transactions involving the purchase and management of an asset are based on the cost of the investment, including the amount budgeted for the development, construction, and improvement of each asset, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us. Furthermore, the advisor will refund these fees to the extent they are based on budgeted amounts that prove too high once development, construction, or improvements are completed, but the fact that these fees are initially calculated in part based on budgeted amounts could influence our advisor to overstate the estimated costs of development, construction, or improvements in order to accelerate the cash flow it receives.

In addition, the terms of our convertible preferred stock provide for its conversion into shares of common stock if we terminate the advisory agreement prior to the listing of our shares for trading on a national securities exchange other than as a result of the advisor’s material breach of the advisory agreement. In addition, the conversion feature of our convertible preferred stock could cause us to make different investment or disposition decisions than we would otherwise make, in order to avoid the stock conversion. Moreover, our advisor has the right to terminate the advisory agreement for any reason upon 60 days’ notice and thereby trigger the conversion of the convertible preferred stock, which could have the effect of delaying, deferring or preventing a change of control that might otherwise be in our stockholders’ best interests.

Executive officers and key personnel of our advisor and property manager will face competing demands on their time, and this may cause our return to suffer.

We rely upon the executive officers and employees of our advisor and our property manager to conduct our day-to day operations and performance.  These persons also conduct the day-to-day operations of other Hartman-sponsored programs and may have other business interests as well.  Because these persons have competing interests on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities.  During times of intense activity in other programs and ventures, they may devote less time and resources to our business than is necessary or appropriate.  If this occurs, we may lose the opportunity to enter into or renew a lease or to purchase or sell a property and the returns on our investments may suffer.  Our advisor holds a fiduciary relationship to us and to our stockholders’ and will endeavor to avoid putting us in a situation where we would lose an economic opportunity due to the inability of our advisor or property manager to perform a necessary task.

Our officers face conflicts of interest related to the positions they hold with entities affiliated with our advisor, which could diminish the value of the services they provide to us.

Each of our executive officers, including Mr. Hartman, who serves as our Chief Executive Officer, and Chairman of our Board of Directors, is also an officer of our advisor and other entities affiliated with our advisor,

18

including the advisors and fiduciaries to other Hartman-sponsored programs. As a result, these individuals owe fiduciary duties to these other entities and their investors, which may conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Conflicts with our business and interests are most likely to arise from involvement in activities related to (1) allocation of new investments and management time and services between us and the other entities, (2) the timing and terms of the investment in or sale of an asset, (3) development of our properties by affiliates of our advisor, (4) investments with affiliates of our advisor, (5) compensation to our advisor, and (6) our relationship with our property manager. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to stockholders and to maintain or increase the value of our assets.

Existing shareholders will be diluted upon conversion of the convertible preferred stock.

Our advisor purchased 1,000 shares of our convertible preferred stock for an aggregate purchase price of $10,000. Under limited circumstances, these shares may be converted into shares of our common stock, resulting in dilution of our stockholders’ interest in us. Our convertible preferred stock will convert to shares of common stock if (1) we have made total distributions on then outstanding shares of our 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) we list our 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) our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor), and at the time of such expiration or termination we are deemed to have met the foregoing 6% performance threshold based on our 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, our convertible preferred stock will convert into shares of common stock with a value equal to 15% of the excess of our enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of our 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. As a result, following conversion, the holder of the convertible preferred stock will be entitled to a portion of amounts distributable to our stockholders, which such amounts distributable to the holder could be significant.

Our advisor and Mr. Hartman can influence whether we terminate the advisory agreement or allow it to expire without renewal, or whether our common stock is listed for trading on a national securities exchange. Accordingly, our advisor can influence both the conversion of the convertible preferred stock issued to it, and the resulting dilution of other stockholders’ interests.

Risks Related To Our Organizational Structure

Maryland law and our organizational documents limit your right to bring claims against our officers and directors.

Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, our charter provides that, subject to the applicable limitations set forth therein or under Maryland law, no director or officer will be liable to us or our stockholders for monetary damages. Our charter also provides that we will generally indemnify and advance expenses to our directors, our officers, our advisor and its affiliates for losses they may incur by reason of their service in those capacities subject to any limitations under Maryland law or in our charter. As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by these persons in some cases. However, our charter provides that we may not indemnify our directors, our advisor and its affiliates for loss or liability suffered

19

by them or hold our directors or our advisor and its affiliates harmless for loss or liability suffered by us unless they have determined that the course of conduct that caused the loss or liability was in our best interests, they were acting on our behalf or performing services for us, the liability was not the result of negligence or misconduct by our non-independent directors, our advisor and its affiliates or gross negligence or willful misconduct by our independent directors, and the indemnification or obligation to hold harmless is recoverable only out of our net assets, including the proceeds of insurance, and not from the stockholders.

The limit on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that may benefit our stockholders.

Our charter restricts the direct or indirect ownership by one person or entity to no more than 9.8% of the value of our then outstanding shares of capital stock (which includes common stock and any preferred stock we may issue) and no more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock unless exempted by our board of directors. This restriction may discourage a change of control of us and may deter individuals or entities from making tender offers for shares of our common stock on terms that might be financially attractive to stockholders or which may cause a change in our management. In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease your ability to sell your shares of our common stock.

Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

•any person who beneficially owns 10% or more of the voting power of the then outstanding voting stock of the corporation; or

•an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.

A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the expiration of the five-year period described above, any business combination between the Maryland corporation and an interested stockholder must generally be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

•80% of the votes entitled to be cast by holders of the then outstanding shares of voting stock of the corporation; and

20

•two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. Maryland law also permits various exemptions from these provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Maryland law also limits the ability of a third party to buy a large stake in us and exercise voting power in electing directors.

Maryland law provides a second anti-takeover statute, the Control Share Acquisition Act, which provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by the corporation’s disinterested stockholders by a vote of two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by interested stockholders, that is, by the acquirer, by officers or by directors who are employees of the corporation, are excluded from the vote on whether to accord voting rights to the control shares. “Control shares” are voting shares of stock that would entitle the acquirer to exercise voting power in electing directors within specified ranges of voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of control shares. The control share acquisition statute does not apply (1) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (2) to acquisitions approved or exempted by a corporation’s charter or bylaws. Our charter contains a provision exempting from the Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. We can offer no assurance that this provision will not be amended or eliminated at any time in the future. This statute could have the effect of discouraging offers from third parties to acquire us and increasing the difficulty of successfully completing this type of offer by anyone other than our affiliates or any of their affiliates.

Our charter includes an anti-takeover provision that may discourage a stockholder from launching a tender offer for our shares.

Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with most provisions of Regulation 14D of the Exchange Act. The offering stockholder must provide our company notice of such tender offer at least ten business days before initiating the tender offer. If the offering stockholder does not comply with these requirements, our company will have the right to redeem that stockholder’s shares and any shares acquired in such tender offer. In addition, the non-complying stockholder shall be responsible for all of our company’s expenses in connection with that stockholder’s noncompliance. This provision of our charter may discourage a stockholder from initiating a tender offer for our shares and prevent a stockholder from receiving a premium price for their shares in such a transaction.

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we are subject to registration under the Investment Company Act, we will not be able to continue our business.

Neither we, our operating partnership nor any of our subsidiaries intend to register as an investment company under the Investment Company Act. Our operating partnership’s and subsidiaries’ intended investments in real estate will represent the substantial majority of our total asset mix. In order for us not to be subject to regulation

21

under the Investment Company Act, we intend to engage, through our operating partnership and our wholly and majority owned subsidiaries, primarily in the business of buying real estate.

We expect that most of our assets will be held through wholly-owned or majority-owned subsidiaries of our operating partnership. We expect that most of these subsidiaries will be outside the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the “40% test.” Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We believe that we, our operating partnership and most of the subsidiaries of our operating partnership will not fall within either definition of investment company under Section 3(a)(1) of the Investment Company Act as we intend to invest primarily in real property, through our wholly or majority-owned subsidiaries, the majority of which we expect to have at least 60% of their assets in real property. As these subsidiaries would be investing either solely or primarily in real property, they would be outside of the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through our operating partnership, which in turn is a holding company conducting its business through its subsidiaries. Both we and our operating partnership intend to conduct our operations so that we comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that neither we nor our operating partnership will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nor our operating partnership will engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our operating partnerships wholly owned or majority owned subsidiaries, we and our operating partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property.

In the event that the value of investment securities held by a subsidiary of our operating partnership were to exceed 40% of the value of its total assets, we expect that subsidiary to be able to rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in “mortgage and other liens on and interests in real estate,” which we refer to as “qualifying real estate assets,” and maintain at least 80% of its assets in qualifying real estate assets or other real estate-related assets. The remaining 20% of the portfolio can consist of miscellaneous assets. What we buy and sell is therefore limited by these criteria. How we determine to classify our assets for purposes of the Investment Company Act will be based in large measure upon no-action letters issued by the SEC staff in the past and other SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a qualifying real estate asset and a real estate-related asset. These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than ten years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. No assurance can be given that the SEC or its staff will concur with our classification of our assets. Future revisions to the Investment Company Act or further guidance from the SEC staff may cause us to lose our exclusion from the definition of investment

22

company or force us to re-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

There can be no assurance that the laws and regulations governing the Investment Company Act status of REITs, including more specific or different guidance regarding these exclusions that may be published by the SEC or its staff, will not change in a manner that adversely affects our operations. In addition, the SEC or its staff could take action that results in our or our subsidiary’s failure to maintain an exception or exemption from the Investment Company Act.

In the event that we, or our operating partnership, were to acquire assets that could make either entity fall within one of the definitions of an investment company under Section 3(a)(1) of the Investment Company Act, we believe that we would still qualify for an exclusion from registration pursuant to Section 3(c)(6) of the Investment Company Act. Although the SEC staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our operating partnership may rely on Section 3(c)(6) if 55% of the assets of our operating partnership consist of, and at least 55% of the income of our operating partnership is derived from, qualifying real estate assets owned by wholly owned or majority-owned subsidiaries of our operating partnership.

To ensure that neither we, our operating partnership nor any of our subsidiaries are required to register as an investment company, each entity may be unable to sell assets that it would otherwise want to sell and may need to sell assets that it would otherwise wish to retain. In addition, we, our operating partnership or our subsidiaries may be required to acquire additional income- or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. Although we, our operating partnership and our subsidiaries intend to monitor our portfolio periodically and prior to each acquisition and disposition, any of these entities may not be able to remain outside the definition of investment company or maintain an exclusion from the definition of an investment company. If we, our operating partnership or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.

Stockholders have limited control over changes in our policies and operations.

Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Our charter sets forth the stockholder voting rights required to be set forth therein under the NASAA REIT Guidelines. Under our charter and the Maryland General Corporation Law, our stockholders currently have a right to vote only on the following matters:

•the election or removal of directors;

•any amendment of our charter, provided that our board of directors may amend our charter without stockholder approval to:

•increase or decrease the aggregate number of our shares;

•increase or decrease the number of our shares of any class or series that we have the authority to issue;

•classify or reclassify any unissued shares by setting or changing the preferences, conversion or other rights, restrictions, limitations as to distributions, qualifications or terms and conditions of redemption of such shares;

•effect reverse stock splits; and

23

•after the listing of our shares of common stock on a national securities exchange, opting into any of the provisions of Subtitle 8 of Title 3 of the Maryland General Corporation Law (see “Description of Shares — Provisions of Maryland Law and our Charter and Bylaws – Subtitle 8” below);

•our liquidation and dissolution; and

•our being a party to any merger, consolidation, sale or other disposition of substantially all of our assets (notwithstanding that Maryland law may not require stockholder approval).

All other matters are subject to the discretion of our board of directors.

We may issue preferred stock or other classes of common stock; which issuance could adversely affect the holders of our common stock issued pursuant to our public offerings.

Existing shareholders do not have preemptive rights to any shares issued by us in the future. We may issue, without stockholder approval, preferred stock or other classes of common stock with rights that could dilute the value of your shares of common stock. However, the issuance of preferred stock must be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel. The issuance of preferred stock or other classes of common stock could increase the number of stockholders entitled to distributions without simultaneously increasing the size of our asset base.

Our board of directors may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series without stockholder approval. If we ever created and issued preferred stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.

We are structured as an “UPREIT,” which stands for “umbrella partnership real estate investment trust.” We use the UPREIT structure because a contribution of property directly to us is generally a taxable transaction to the contributing property owner. In the UPREIT structure, a contributor of a property who desires to defer taxable gain on the transfer of a property may transfer the property to our operating partnership in exchange for limited partnership units and defer taxation of gain until the contributor later exchanges his or her limited partnership units, typically on a one-for-one basis, for shares of our common stock. We believe that using an UPREIT structure gives us an advantage in acquiring desired properties from persons who may not otherwise sell their properties because of unfavorable tax results.

We may issue limited partner interests of our operating partnership in connection with certain transactions. Limited partners in our operating partnership have the right to vote on certain amendments to the operating partnership agreement, as well as on certain other matters. Persons holding such voting rights may exercise them in a manner that conflicts with the interests of our stockholders. As general partner of our operating partnership, we are obligated to act in a manner that is in the best interest of all partners of our operating partnership. Circumstances may arise in the future when the interests of limited partners in our operating partnership may conflict with the interests of our stockholders. These conflicts may be resolved in a manner stockholders do not believe are in their best interest.

24

Adverse economic conditions will negatively affect our returns and profitability.

Our operating results may be affected by many factors, including a continued or exacerbated general economic slowdown experienced by the nation as a whole or by the local economies where our properties and the properties underlying our other real estate-related investments are located. These factors include:

•poor economic conditions may result in defaults by tenants of our properties;

•job transfers and layoffs may cause tenant vacancies to increase;

•increasing concessions, reduced rental rates or capital improvements may be required to maintain occupancy levels;

•increased insurance premiums may reduce funds available for distribution or, to the extent such increases are passed through to tenants, may lead to tenant defaults. Also, increased insurance premiums may make it difficult to increase rents to tenants on turnover, which may adversely affect our ability to increase our returns.

•changes in general economic or local conditions;

•changes in supply of or demand for similar or competing properties in an area;

•changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive;

•the illiquidity of real estate investments generally;

•changes in tax, real estate, environmental and zoning laws; and

•periods of high interest rates and tight money supply.

•For these and other reasons, we cannot assure stockholders that we will be profitable or that we will realize growth in the value of our real estate properties.

The length and severity of any economic downturn cannot be predicted. Our operations could be negatively affected to the extent that an economic downturn is prolonged or becomes more severe.

General Risks Related to Investments in Real Estate

Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.

Our investments in commercial properties will be subject to risks generally attributable to the ownership of real property, including:

•changes in global, national, regional or local economic, demographic or real estate market conditions;

•changes in supply of or demand for similar properties in an area;

•increased competition for real property investments targeted by our investment strategy;

•bankruptcies, financial difficulties or lease defaults by our tenants;

•changes in interest rates and availability of financing;

•changes in the terms of available financing, including more conservative loan-to-value requirements and shorter debt maturities;

•competition from other commercial properties;

•the inability or unwillingness of tenants to pay rent increases;

25

•changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws; and

•the severe curtailment of liquidity for certain real estate related assets.

All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.

We are unable to predict future changes in global, national, regional or local economic, demographic or real estate market conditions. For example, a recession or rise in interest rates could make it more difficult for us to lease or dispose of properties and could make alternative interest-bearing and other investments more attractive and therefore potentially lower the relative value of the real estate assets we acquire. These conditions, or others we cannot predict, may adversely affect our results of operations and returns to our stockholders. In addition, the value of the properties we acquire may decrease following the date we acquire such properties due to the risks described above or any other unforeseen changes in market conditions. If the value of our properties decreases, we may be forced to dispose of our properties at a price lower than the price we paid to acquire our properties, which could adversely impact the results of our operations and our ability to make distributions and return capital to our investors.

Acquisition and ownership of real estate is subject to risks associated with environmental hazards.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances on, under or in such property. The costs of removal or remediation could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution. We may be liable for environmental hazards at our properties, including those created by prior owners or occupants, existing tenants, abutters or other persons. The properties that we plan to develop or acquire could include automobile and truck repair and maintenance facilities and tanks for the storage of petroleum products and other hazardous substances, all of which create the potential for environmental damages. As a result, we may be expected to regularly incur environmental clean-up costs. We intend to include in the leases that we entered with future tenants, an agreement for such tenant to indemnify us from all environmental liabilities arising its activities at such property during the term of the lease. Despite this indemnity, various federal and state laws impose environmental liabilities upon property owners, such as us, for any environmental damages arising on properties they own or occupy, and we cannot be assured that we will not be held liable for environmental clean-up at our properties, including environmental damages at sites we own and lease. As an owner or previous owner of properties which contain environmental hazards, we also may be liable to pay damages to governmental agencies or third parties for costs and damages they incur arising from environmental hazards at the properties. Moreover, the costs and damages which may arise from environmental hazards are often difficult to project and our future tenants may not have sufficient resources to pay its environmental liabilities.

26

Properties that have significant vacancies could be difficult to sell, which could diminish the return on stockholders’ investments.

A property may incur vacancies either by the continued default of tenants under their leases or the expiration of tenant leases. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in decreased distributions to stockholders. In addition, the value of the property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.

Many of our investments will be dependent on tenants for revenue, and lease terminations could reduce our ability to make distributions to stockholders.

The success of our real property investments often will be materially dependent on the financial stability of our tenants. Lease payment defaults by tenants could cause us to reduce the amount of distributions to stockholders. A default by a significant tenant on its lease payments to us would cause us to lose the revenue associated with such lease and cause us to have to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a mortgage. In the event of a tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting our property. If significant leases are terminated, we cannot assure stockholders that we will be able to lease the property for the rent previously received or sell the property without incurring a loss.

We may be unable to secure funds for future tenant improvements, which could adversely impact our ability to make cash distributions to our stockholders.

When tenants do not renew their leases or otherwise vacate their space, in order to attract replacement tenants, we will be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital reserves on a property-by-property basis, as we deem necessary. In addition to any reserves we establish, a lender may require escrow of capital reserves in excess of our established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure stockholders that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future tenant improvements. Additional borrowing for capital purposes will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected. If we do not have enough reserves for capital to supply needed funds for capital improvements throughout the life of the investment in a property and there is insufficient cash available from our operations, we may be required to defer necessary improvements to the property, which may cause the property to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased cash flow as a result of fewer potential tenants being attracted to the property. If this happens, we may not be able to maintain projected rental rates for affected properties, and our results of operations may be negatively impacted. The need for and amount of reserves for capital improvements will be determined on a property by property basis in consultation with our property manager. Generally, we will be responsible for the costs of these capital improvements, which gives rise to the following risks:

•cost overruns and delays;

•renovations can be disruptive to operations and can displace revenue at the properties, including revenue lost while under renovation and out of service;

•the cost of funding renovations and the possibility that financing for these renovations may not be available on attractive terms; and

•the risk that the return on our investment in these capital improvements will not be what we expect.

27

If we have insufficient cash flow from operations to fund needed capital expenditures, we will need to borrow to fund future capital improvements.

We may be unable to sell a property if or when we decide to do so, which could adversely impact our ability to make cash distributions to our stockholders.

We intend to hold the various real properties in which we invest until such time as our advisor determines that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. Otherwise, our advisor, subject to approval of our board of directors, may exercise its discretion as to whether and when to sell a property and we will have no obligation to sell properties at any particular time, except upon our liquidation. If we do not begin the process of liquidating our assets or listing our shares within ten years of the termination of our initial public offering, our charter requires that we hold a stockholder meeting to vote on a proposed alternate strategy for our orderly liquidation unless a majority of our board of directors and a majority of our independent directors vote to defer such a meeting beyond the tenth anniversary of the termination of our initial public offering. The real estate market is affected, as discussed above, by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any asset for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of an asset. If we are unable to sell an asset when we determine to do so, it could have a significant adverse effect on our cash flow and results of operations.

Our co-venture partners, co-tenants or other partners in co-ownership arrangements could take actions that decrease the value of an investment to us and lower stockholder’s overall return.

We may enter into joint ventures or other co-ownership arrangements with other Hartman programs or with third parties having investment objectives similar to ours for the acquisition, development or improvement of properties as well as the acquisition of real estate-related investments. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with other forms of real estate investment, including, for example:

•the possibility that our co-venturer, co-tenant or partner in an investment might become bankrupt;

•the possibility that a co-venturer, co-tenant or partner in an investment might breach a loan agreement or other agreement or otherwise, by action or inaction, act in a way detrimental to us or the investment;

•that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals;

•the possibility that we may incur liabilities as the result of the action taken by our partner or co-investor; or

•that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to qualifying and maintaining our qualification as a REIT.

Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment.

28

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage may adversely affect stockholder returns.

Our advisor has a duty to ensure that all of our properties are adequately insured to cover casualty losses. The nature of the activities at certain properties we may acquire will expose us and our operators to potential liability for personal injuries and, in certain instances property damage claims. In addition, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments.Insurance risks associated with potential terrorist acts could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders generally insist that specific coverage against terrorism be purchased by commercial property owners as a condition for providing mortgage loans. It is uncertain whether such insurance policies will be available, or available at reasonable cost, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We cannot assure stockholders that we will have adequate coverage for such losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss. In addition, other than the capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured damaged property, and we cannot assure stockholders that any such sources of funding will be available to us for such purposes in the future. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in decreased distributions to stockholders.

Our operating results may be negatively affected by potential development and construction delays and result in increased costs and risks, which could diminish the return on stockholders’ investments.

We may invest in the acquisition, development and/or redevelopment of properties upon which we will develop and construct improvements. We could incur substantial capital obligations in connection with these types of investments. We will be subject to risks relating to uncertainties associated with rezoning for development and environmental concerns of governmental entities and/or community groups and our builder’s ability to control construction costs or to build in conformity with plans, specifications and timetables. The developer or builder’s failure to perform may necessitate legal action by us to rescind the purchase or the construction contract or to compel performance. Performance may also be affected or delayed by conditions beyond the builder’s control. Delays in completion of construction could also give tenants the right to terminate preconstruction leases for space at a newly developed project. We may incur additional risks when we make periodic progress payments or other advances to such builders prior to completion of construction. These and other such factors can result in increased costs of a project or loss of our investment. Substantial capital obligations could delay our ability to make distributions. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. Furthermore, we must rely upon projections of rental income and expenses and estimates of the fair market value of property upon completion of construction when agreeing upon a price to be paid for the property at the time of acquisition of the property. If our projections are inaccurate, we may pay too much for a property, and the return on our investment could suffer.

In addition, we may invest in unimproved real property. Returns from development of unimproved properties are also subject to risks and uncertainties associated with rezoning the land for development and environmental concerns of governmental entities and/or community groups.Although our principal intention is to acquire developed properties and to limit any investment in unimproved property, a portion of stockholders’ investment nevertheless may be subject to the risks associated with investments in unimproved real property.

29

If we contract with an affiliate of our advisor to purchase a newly developed property or to develop a parcel that we acquire, we cannot guarantee that any earnest money deposit we make to that affiliate of the advisor or its affiliates would be fully refunded if the work were not performed.

We may enter into one or more contracts, either directly or indirectly through joint ventures, tenant-in-common investments or other co-ownership arrangements with affiliates of our advisor or others, to acquire real property from affiliates of our advisor. Properties acquired from these affiliates may be existing income-producing properties, properties to be developed or properties under development. We anticipate that we will be obligated to pay a substantial earnest money deposit at the time of contracting to acquire such properties. In the case of properties to be developed by HIR Management, our property manager, or its affiliates, we anticipate that we will be required to close the purchase of the property upon completion of the development of the property by HIR Management or its affiliates. At the time of contracting and the payment of the earnest money deposit by us, HIR Management or its affiliates typically will not have acquired title to any real property. Typically, HIR Management or its affiliates will only have a contract to acquire land, a development agreement to develop a building on the land and an agreement with one or more tenants to lease all or part of the property upon its completion. However, we will not be required to close a purchase from HIR Management or its affiliates, and will be entitled to a refund of our earnest money, in the following circumstances:

•HIR Management or its affiliates fails to develop the property;

•all or a specified portion of the pre-leased tenants fail to take possession under their leases for any reason; or

•we have insufficient offering proceeds available to pay the purchase price at closing.

The obligation of HIR Management or its affiliates to refund our earnest money will be unsecured, and no assurance can be made that we would be able to obtain a refund of such earnest money deposit from it under these circumstances since HIR Management is an entity without substantial assets or operations.

Competition with third parties in acquiring properties and other assets may reduce our profitability and the return on stockholders’ investment.

We believe that the current market for properties that meet our investment objectives is highly competitive. We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities, many of which have greater resources than we will. Larger real estate programs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable properties may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties and other investments, our profitability will be reduced and stockholders may experience a lower return on investment.

A concentration of our investments in any one property class may leave our profitability vulnerable to a downturn in such sector.

At any one time, a significant portion of our investments could be in one property class. As a result, we will be subject to risks inherent in investments in a single type of property. If our investments are substantially in one property class, then the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, resulting from a downturn in the businesses conducted in those types of properties could be more pronounced than if we had more fully diversified our investments.

30

Failure to succeed in new markets or in new property classes may have adverse consequences on our performance.

We may from time to time commence development activity or make acquisitions outside of our existing market areas or the property classes of our primary focus if appropriate opportunities arise. Our historical experience in our existing markets in developing, owning and operating certain classes of property does not ensure that we will be able to operate successfully in new markets, should we choose to enter them, or that we will be successful in new property classes. We may be exposed to a variety of risks if we choose to enter new markets, including an inability to evaluate accurately local market conditions, to obtain land for development or to identify appropriate acquisition opportunities, to hire and retain key personnel, and a lack of familiarity with local governmental and permitting procedures. In addition, we may abandon opportunities to enter new markets or acquire new classes of property that we have begun to explore for any reason and may, as a result, fail to recover expenses already incurred.

Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.

From time to time, we may attempt to acquire multiple properties in a single transaction. Portfolio acquisitions are more complex and expensive than single property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions may also result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties. To acquire multiple properties in a single transaction we may be required to accumulate a large amount of cash. We would expect the returns that we earn on such cash to be less than the ultimate returns in real property and therefore, accumulating such cash could reduce the funds available for distributions. Any of the foregoing events may have an adverse effect on our operations.

Our failure to integrate acquired properties and new personnel could create inefficiencies and reduce the return of stockholders’ investment.

To grow successfully, we must be able to apply our experience in managing real estate to a larger number of properties. In addition, we must be able to integrate new management and operations personnel as our organization grows in size and complexity. Failures in either area will result in inefficiencies that could adversely affect our expected return on our investments and our overall profitability.

Properties in which we have invested may not be readily adaptable to other uses, and if these properties become unprofitable, we may not be able to recoup the value of our investment.

Properties in which we have invested may have limited alternative uses.If the operations of any of our properties in these sectors become unprofitable due to industry competition, a general deterioration of the applicable industry or otherwise, we may have great difficulty selling the property or we may have to sell the property for substantially less than the amount we paid for it. Should any of these events occur, our income and cash available for distribution could be reduced.

31

The costs of compliance with environmental laws and other governmental laws and regulations may adversely affect our income and the cash available for any distributions.

All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination associated with disposals. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or the legality of the original disposal. In addition, the presence of these substances, or the failure to properly remediate these substances, may adversely affect our ability to sell or rent such property or to use the property as collateral for future borrowing.

Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require material expenditures by us. We cannot assure stockholders that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of our properties will not be affected by the operations of the tenants, by the existing condition of the land, by operations in the vicinity of the properties, such as the presence of underground storage tanks, or by the activities of unrelated third parties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations that we may be required to comply with, and that may subject us to liability in the form of fines or damages for noncompliance. Any foreign investments we make will be subject to similar laws in the jurisdictions where they are located.

Our costs associated with complying with the Americans with Disabilities Act may affect cash available for distributions.

Our properties are generally subject to the Americans with Disabilities Act of 1990, as amended (Disabilities Act), or similar laws of foreign jurisdictions. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We attempt to acquire properties that comply with the Disabilities Act or similar laws of foreign jurisdictions or place the burden on the seller or other third party, such as a tenant, to ensure compliance with such laws. However, we cannot assure stockholders that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, our funds used for compliance with these laws may affect cash available for distributions and the amount of distributions.

Any properties we acquire must comply with Title III of the Disabilities Act, to the extent that such properties are “public accommodations” and/or “commercial facilities” as defined by the Disabilities Act. Compliance with the Disabilities Act could require removal of structural barriers to handicapped access in public areas of our properties where such removal is readily achievable.

If we sell properties by providing financing to purchasers, we will bear the risk of default by the purchaser.

If we decide to sell any of our properties, we intend to use commercially reasonable efforts to sell them for cash or in exchange for other property. However, in some instances we may sell our properties by providing financing to purchasers. If we provide financing to purchasers, we will bear the risk of default by the purchaser and will be subject to remedies provided by law, which could negatively impact distributions to our stockholders. There are no limitations or restrictions on our ability to take purchase money obligations. We may, therefore, take a purchase money obligation secured by a mortgage as partial payment for the purchase price of a property. The terms of

32

payment to us generally will be affected by custom in the area where the property being sold is located and the then-prevailing economic conditions. If we receive promissory notes or other property in lieu of cash from property sales, the distribution of the proceeds of sales to our stockholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to make distributions to our stockholders.

Risks Associated with Debt Financing

Our borrowings may increase our business risks.

We financed a portion of the acquisition cost of our real properties with mortgage indebtedness.  In addition, we have entered into revolving credit agreements with banks secured by certain real properties. We also may borrow funds if necessary to satisfy the requirement that we distribute to stockholders at least 90% of our annual REIT taxable income, or otherwise as is necessary or advisable to assure that we maintain our qualification as a REIT for federal income tax purposes.

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. 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 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 our aggregate borrowings to no more than 50% of the value of our properties’ value will have the effect of causing the aggregate debt to equal our net asset value. Such debt may be at a level that is higher than real estate investment trusts with similar investment objectives or criteria. High debt levels would cause us to incur higher interest charges, would result in higher debt service payments, and could be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of stockholders’ investment.

We do not intend to incur mortgage debt on a particular real property unless we believe the property’s projected cash flow is sufficient to service the mortgage debt. However, if there is a shortfall in cash flow, then the amount available for distributions to stockholders may be affected. In addition, incurring mortgage debt increases the risk of loss because defaults on indebtedness secured by a property may result in foreclosure actions initiated by lenders and our loss of the property securing the loan that is in default. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds from the foreclosure. We may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, there is a risk that more than one real property may be affected by a default. If any of our properties are foreclosed upon due to a default, our ability to make distributions to our stockholders will be adversely affected. In addition, because our goal is to be in a position to liquidate our assets within five years after the termination of our primary offering, which terminated in March 2016, our approach to investing in properties utilizing leverage in order to accomplish our investment objectives over this period of time may present more risks to investors than comparable real estate programs that have a longer intended duration and that do not utilize borrowing to the same degree.

33

If mortgage debt is unavailable at reasonable rates, we may not be able to refinance our properties, which could reduce the amount of cash distributions we can make.

When we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when the properties are refinanced, we may not be able to finance the properties at reasonable rates and our income could be reduced. If this occurs, it would reduce cash available for distribution to our stockholders, and it may prevent us from borrowing more money.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

In connection with obtaining financing, a lender could impose restrictions on us that affect our ability to incur additional debt and our distribution and operating policies. In general, we expect our loan agreements to restrict our ability to encumber or otherwise transfer our interest in the respective property without the prior consent of the lender. Loan documents we enter may contain other customary negative covenants that may limit our ability to further mortgage the property, discontinue insurance coverage, replace Hartman Advisors as our advisor or impose other limitations. Any such restriction or limitation may have an adverse effect on our operations and our ability to make distributions.

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.

We may finance our property acquisitions using interest-only mortgage indebtedness. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to our stockholders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans.

Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make distributions to our stockholders.

We may incur indebtedness that bears interest at a variable rate. In addition, from time to time we may pay mortgage loans or finance and refinance our properties in a rising interest rate environment. Accordingly, increases in interest rates could increase our interest costs, which could have an adverse effect on our operating cash flow and our ability to make distributions. In addition, if rising interest rates cause us to need additional capital to repay indebtedness in accordance with its terms or otherwise, we may need to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments.

34

If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions.

Some of our financing arrangements may require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to refinance the balloon payment on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. The effect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT. Any of these results would have a significant, negative impact on stockholders’ investment.

U.S. Federal Income Tax Risks

Failure to qualify as a REIT would adversely affect our operations and our ability to make distributions.

Our qualification as a REIT depends on our ongoing satisfaction of numerous requirements established under highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and involve the determination of various factual matters and circumstances not entirely within our control. The complexity of these provisions and of the applicable income tax regulations that have been promulgated under the Internal Revenue Code is greater in the case of a REIT that holds its assets through a partnership, as we do. Moreover, no assurance can be given that legislation, new regulations, administrative interpretations or court decisions will not change the tax laws with respect to qualification as a REIT or the federal income tax consequences of that qualification.

If we fail to qualify as a REIT in any taxable year for which we have elected to be taxed as a REIT and do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income, and distributions to our stockholders would not be deductible by us in determining our taxable income. In such a case, we might need to borrow money or sell assets in order to pay our taxes. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders. Furthermore, we would not be required to distribute substantially all of our net taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year for which we have elected to be taxed as a REIT, unless we are eligible for certain statutory relief provisions, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify. In addition, although we intend to operate in a manner intended to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our board of directors to recommend that we revoke our REIT election.

We believe that our operating partnership will be treated for federal income tax purposes as a partnership and not as an association or as a publicly traded partnership taxable as a corporation. If the Internal Revenue Service were successfully to determine that our operating partnership should properly be treated as a corporation, our operating partnership would be required to pay federal income tax at corporate rates on its net income. In addition, we would fail to qualify as a REIT, with the resulting consequences described above.

Legislative, regulatory or administrative changes could adversely affect us.

The tax laws are complex and are subject to change at any time as a result of legislative, judicial or administrative actions, and these changes may adversely affect the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets.

35

On December 22, 2017, the TCJA was signed into law, which makes major changes to the Code, including a number of provisions of the Code that affect the taxation of REITs and their stockholders. The individual and collective impact of these provisions and other provisions of the TCJA on REITs and their stockholders is uncertain, and may not become evident for some period of time. Prospective investors should consult their tax advisors regarding the implications of the TCJA on their investment in our shares.

To qualify as a REIT we must meet annual distribution requirements, which may result in us distributing amounts that may otherwise be used for our operations.

To qualify as a REIT, we are required each year to distribute to our stockholders at least 90% of our real estate investment trust taxable income, determined without regard to the dividends-paid deduction and excluding net capital gains. We will be subject to federal income tax on any undistributed taxable income and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets, and it is possible that we might be required to borrow funds or sell assets to fund these distributions. If we fund distributions through borrowings, then we will have to repay debt using money we could have otherwise used to acquire properties. If we sell assets or use offering proceeds to pay distributions, we also will have fewer investments. Fewer investments may impact our ability to generate future cash flows from operations and, therefore, reduce your overall return. Although we intend to make distributions sufficient to meet the annual distribution requirements and to avoid corporate income and excise taxes, it is possible that we might not always be able to do so.

In certain circumstances, we may be subject to federal and state income taxes as a REIT which would reduce our cash available to pay distributions.

Even if we maintain our status as a REIT, we may yet become subject to federal income taxes and related state taxes.

example:

•We are subject to tax on any undistributed income. We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year plus amounts retained for which federal income tax was paid are less than the sum of 85% of our ordinary income, 95% of our capital gain net income, and 100% of our undistributed income from prior years.

•State laws may change so as to begin taxing REITs.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to qualify as a REIT. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income (including net capital gain), we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to satisfy the

36

REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. There is no assurance that outside financing will be available to us. Even if available, the use of outside financing or other alternative sources of funds to pay distributions could increase our costs or dilute our stockholders’ equity interests. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To maintain our REIT status, we may be forced to forgo otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce your overall return.

To maintain our REIT status, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of your investment.

Our gains from sales of our assets are potentially subject to the prohibited transaction tax, which could reduce the return on your investment.

Our ability to dispose of property during the first few years following acquisition is restricted to a substantial extent as a result of our REIT status. We will be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) we own, directly or through any subsidiary entity, including our operating partnership, but excluding our taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business unless we qualify for a statutory safe harbor. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction or (3) structuring certain dispositions of our properties to comply with certain safe harbors available under the Internal Revenue Code for properties held at least two years. However, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our operating partnership, but excluding our taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To maintain our REIT status, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualifying real estate assets, including certain mortgage loans and mortgage-backed securities. Our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries.

If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

37

Liquidation of assets may jeopardize our REIT status.

To maintain our REIT status, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

Legislative or regulatory action could adversely affect investors.

In recent years, numerous legislative, judicial and administrative changes have been made to the federal income tax laws applicable to investments in REITs and similar entities. Additional changes to tax laws are likely to continue to occur in the future and we cannot assure you that any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an adverse effect on an investment in shares of our common stock. We urge you to consult with your own tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.

Non-U.S. investors may be subject to U.S. federal income tax on the sale of shares of our common stock if we are unable to qualify as a “domestically controlled” REIT.

A non-U.S. person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to U.S. federal income tax on the gain recognized on such disposition. A non-U.S. stockholder generally would not be subject to U.S. federal income tax, however, on gain from the disposition of stock in a REIT if the REIT is a “domestically controlled REIT.” A domestically controlled REIT is a REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by non-U.S. holders. We cannot assure you that we will qualify as a domestically controlled REIT. If we were to fail to so qualify, gain realized by a non-U.S. investor on a sale of our common stock would be subject to U.S. federal income tax unless our common stock was traded on an established securities market, which is not currently the case, and the non-U.S. investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

Retirement Plan Risks

There are special considerations for pension or profit-sharing or 401(k) plans, health or welfare plans or individual retirement accounts whose assets are being invested in our common stock due to requirements under ERISA and the Internal Revenue Code. Furthermore, a person acting on behalf of a plan not subject to ERISA may be subject to similar penalties under applicable federal, state, local, or non-U.S. law by reason of purchasing our stock.

If you are investing the assets of a pension, profit sharing or 401(k) plan, health or welfare plan, or an IRA, or other plan or arrangement subject to ERISA or Section 4975 of the Internal Revenue Code in us, you should consider:

•whether the investment is consistent with stockholders’ fiduciary obligations under ERISA and the Internal Revenue Code;

•whether the investment is made in accordance with the documents and instruments governing the plan or IRA, including plan or account’s investment policy;

•whether the investment satisfies the prudence and diversification requirements of Section 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and/or the Internal Revenue Code;

38

•whether the investment will not impair the liquidity of the plan or IRA;

•whether the investment will not produce unrelated business taxable income, referred to as UBTI, for the plan or IRA;

•whether the stockholder will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the plan or IRA; and

•whether the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

You should consider whether your investment in us will cause some or all of our assets to be considered assets of an employee benefit plan, IRA, or other arrangement. We do not believe that under ERISA and U.S. Department of Labor regulations currently in effect that our assets would be treated as “plan assets” for purposes of ERISA, although there can be no assurances. However, if our assets were considered to be plan assets, transactions involving our assets would be subject to ERISA and Section 4975 of the Internal Revenue Code and some of the transactions we have entered into with our advisor and its affiliates could be considered “prohibited transactions,” under ERISA or the Internal Revenue Code. If such transactions were considered “prohibited transactions,” our advisor and its affiliates could be subject to liabilities and excise taxes or penalties. In addition, our officers and directors, our advisor and its affiliates could be deemed to be fiduciaries under ERISA, subject to other conditions, restrictions and prohibitions under Part 4 of Title I of ERISA and those serving as fiduciaries of plans investing in us may be considered to have improperly delegated fiduciary duties to us. Additionally, other transactions with “parties-in-interest” or “disqualified persons” with respect to an investing plan might be prohibited under ERISA, the Internal Revenue Code or other governing authority in the case of a government plan.

Therefore, we would be operating under a burdensome regulatory regime that could limit or restrict investments we can make or our management of our real estate assets. Even if our assets are not considered to be plan assets, a prohibited transaction could occur if we or any of our affiliates is a fiduciary (within the meaning of ERISA) with respect to an employee benefit plan purchasing shares and, therefore, in the event any such persons are fiduciaries (within the meaning of ERISA) of your plan or IRA, you should not purchase shares unless an administrative or statutory exemption applies to your purchase.

Failure to satisfy the fiduciary standards of conduct and other requirements of ERISA, the Internal Revenue Code, or other applicable statutory or common law may result in the imposition of civil (and criminal, if the violation was willful) penalties, and can subject the fiduciary to equitable remedies and/or damages. In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary that authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. Furthermore, to the extent that the assets of a plan or arrangement not subject to the fiduciary provisions of ERISA (for example, governmental plans, non-electing church plans, and foreign plans) will be used to purchase our stock, such plans should consider the impact of applicable federal, state, local, or non-U.S. law on the decision to make such purchase.

Item 1B. Unresolved Staff Comments

      None.

39

Item 2. Properties

General

As of December 31, 2019, we owned or held a majority interest in 43 commercial properties comprising approximately 6,700,000 square feet plus three pad sites, all located in Texas. As of December 31, 2019, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.  We believe that the long-term outlook for commercial real estate values in the Houston, Dallas and San Antonio metropolitan statistical areas remains positive.

We do not directly manage our properties. Hartman Income REIT Management, Inc. manages our properties pursuant to a property management agreement which is renewable annually. Our board of directors has approved the renewal of the property management agreement which will expire on February 9, 2020. In addition to property management, our property manager is also responsible for leasing our properties.  Our tenants consist of national, regional and local businesses.

Substantially all of our revenues consist of base rents and expense recoveries under leases that generally have terms that range from less than one year to 15 years. A majority of our existing leases as of December 31, 2019 contain “rent bump” rental provisions which provide for increases in base rental amounts over the term of the lease.

Our Properties

The following table provides summary information regarding our properties as of December 31, 2019.

40

Name/Location	Rentable SF	Date Acquired	Acquisition Cost (in thousands)		Annualized Base Rent (in thousands)		% Leased
Promenade Dallas,TX	176,585	10/1/2018	$	20,000	$	1,622	78%
Prestonwood Park Dallas,TX	105,783	10/1/2018	23,000		1,948		85%
Richardson Heights Dallas,TX	201,433	12/28/2010	19,150		2,957		79%
Cooper Street Dallas,TX	127,696	5/11/2012	10,613		1,648		100%
One Mason SC Houston,TX	75,183	10/1/2018	12,860		1055		93%
Chelsea Square SC Houston,TX	70,275	10/1/2018	7,110		495		78%
Mission Center SC Houston,TX	112,971	10/1/2018	10,600		750		100%
Garden Oaks SC Houston,TX	106,858	10/1/2018	20,760		1123		71%
Harwin Houston,TX	38,813	10/1/2018	5,280		369		82%
Fondren Houston,TX	93,196	10/1/2018	9,980		795		91%
Northeast Square SC Houston,TX	40,525	10/1/2018	4,910		394		67%
Walzem Plaza SC San Antonio,TX	182,713	10/1/2018	16,400		1,585		80%
North Central Plaza Dallas,TX	198,374	10/1/2018	19,800		2,300		75%
Gateway Tower Dallas,TX	266,412	10/1/2018	29,100		2,707		66%
Bent Tree Green Dallas,TX	139,609	10/16/2012	12,013		2,060		80%
Parkway Plaza I&II Dallas,TX	136,506	3/15/2013	9,490		1,804		80%
Hillcrest Dallas,TX	203,688	5/1/2015	11,400		2,612		82%
Skymark Dallas,TX	115,700	9/2/2015	8,846		1,585		78%
Corporate Park Place Dallas,TX	113,429	8/24/2015	9,500		1,417		77%
Westway One Dallas,TX	165,982	6/1/2016	21,638		2,887		92%
Three Forest Plaza Dallas,TX	366,549	12/22/2016	35,655		5,253		74%
Spring Valley Dallas,TX	94,304	10/1/2018	5,620		835		68%
Tower Pavilion Houston,TX	87,589	10/1/2018	6,670		1,238		90%
The Preserve Houston,TX	218,689	10/1/2018	22,300		3,345		94%
Westheimer Central Houston,TX	182,506	10/1/2018	18,500		1694		79%
11811 N Freeway Houston,TX	156,362	10/1/2018	5,490		1962		79%
Atrium I Houston,TX	118,461	10/1/2018	4,750		1,279		76%
3100 Timmons Houston,TX	111,265	10/1/2018	15,300		1,295		81%
Cornerstone Houston,TX	71,008	10/1/2018	3,650		896		89%
Northchase Houston,TX	128,981	10/1/2018	9,070		1,472		83%
616 FM 1960 Houston,TX	142,194	10/1/2018	11,710		1,270		49%
601 Sawyer Houston,TX	88,258	10/1/2018	17,300		1,096		81%
Gulf Plaza Houston,TX	120,651	3/11/2014	13,950		2,241		87%
Timbercreek Atrium Houston,TX	51,035	12/30/2014	2,897		712		82%
Copperfield Houston,TX	42,621	12/30/2014	2,419		695		86%
400 N. Belt Houston,TX	230,872	5/8/2015	10,150		1,489		57%
Ashford Crossing Houston,TX	158,451	7/31/2015	10,600		1,812		68%
Regency Square Houston,TX	64,063	10/1/2018	2,630		663		90%
Energy Plaza San Antonio,TX	180,119	12/30/2014	17,610		3,188		85%
One Technology Ctr San Antonio,TX	196,348	11/10/2015	19,575		4,600		95%
Central Park Dallas,TX	73,099	10/1/2018	4,570		574		88%
Quitman Houston,TX	736,957	10/1/2018	5,870		1,290		88%
Mitchelldale Houston,TX	377,752	6/13/2014	19,175		2,298		93%
	6,669,865		$	547,911	$	73,313	81%

The following table sets forth certain information relating to our properties, by commercial property type, as of December 31, 2019:

41

Property Name	Location	Gross Leasable Area SF	In Place Occupancy		Annualized Base Rental Revenue (in thousands)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF
Retail:
Promenade	Dallas	176,585	78	%	$	1,622	$	11.84	$	11.53
Prestonwood Park	Dallas	105,783	85	%	$	1,948	$	21.79	$	22.54
Richardson Heights	Dallas	201,433	79	%	$	2,957	$	18.67	$	19.13
Cooper Street	Dallas	127,696	100	%	$	1,648	$	12.90	$	12.60
One Mason SC	Houston	75,183	93	%	$	1,055	$	15.13	$	15.06
Chelsea Square SC	Houston	70,275	78	%	$	495	$	9.01	$	8.55
Mission Center SC	Houston	112,971	100	%	$	750	$	6.64	$	6.35
Garden Oaks SC	Houston	106,858	71	%	$	1,123	$	14.84	$	15.11
Harwin	Houston	38,813	82	%	$	369	$	11.60	$	10.75
Fondren	Houston	93,196	91	%	$	795	$	9.32	$	8.75
Northeast Square SC	Houston	40,525	67	%	$	394	$	14.41	$	13.86
Walzem Plaza SC	San Antonio	182,713	80	%	$	1,585	$	10.82	$	10.10
Total - Retail		1,332,031	84	%	$	14,740	$	13.20	$	13.04
Office:
North Central Plaza	Dallas	198,374	75	%	$	2,300	$	15.39	$	14.90
Gateway Tower	Dallas	266,412	66	%	$	2,707	$	15.38	$	15.70
Bent Tree Green	Dallas	139,609	80	%	$	2,060	$	18.34	$	17.67
Parkway Plaza I&II	Dallas	136,506	80	%	$	1,804	$	16.54	$	17.77
Hillcrest	Dallas	203,688	82	%	$	2,612	$	15.73	$	15.65
Skymark	Dallas	115,700	78	%	$	1,585	$	17.45	$	17.62
Corporate Park Place	Dallas	113,429	77	%	$	1,417	$	16.16	$	16.57
Westway One	Dallas	165,982	92	%	$	2,887	$	18.91	$	17.61
Three Forest Plaza	Dallas	366,549	74	%	$	5,253	$	19.33	$	18.63
Spring Valley	Dallas	94,304	68	%	$	835	$	12.94	$	9.87
Tower Pavilion	Houston	87,589	90	%	$	1,238	$	15.66	$	15.72
The Preserve	Houston	218,689	94	%	$	3,345	$	16.27	$	15.90
Westheimer Central	Houston	182,506	79	%	$	1,694	$	11.79	$	12.35
11811 N Freeway	Houston	156,362	79	%	$	1,962	$	15.83	$	15.53
Atrium I	Houston	118,461	76	%	$	1,279	$	14.13	$	11.91
3100 Timmons	Houston	111,265	81	%	$	1,295	$	14.43	$	14.66
Cornerstone	Houston	71,008	89	%	$	896	$	14.11	$	14.60
Northchase	Houston	128,981	83	%	$	1,472	$	13.81	$	12.94
616 FM 1960	Houston	142,194	49	%	$	1,270	$	18.28	$	18.35
601 Sawyer	Houston	88,258	81	%	$	1,096	$	15.60	$	14.85
Gulf Plaza	Houston	120,651	87	%	$	2,241	$	21.46	$	22.22
Timbercreek Atrium	Houston	51,035	82	%	$	712	$	16.98	$	16.80
Copperfield	Houston	42,621	86	%	$	695	$	18.86	$	19.07
400 N. Belt	Houston	230,872	57	%	$	1,489	$	11.33	$	11.54
Ashford Crossing	Houston	158,451	68	%	$	1,812	$	16.88	$	16.41
Regency Square	Houston	64,063	90	%	$	663	$	11.45	$	11.56
Energy Plaza	San Antonio	180,119	85	%	$	3,188	$	20.93	$	20.50
One Technology Ctr	San Antonio	196,348	95	%	$	4,600	$	24.75	$	25.98
Total -office		4,150,026	77	%	54,411		16.79		16.6
Industrial/Flex
Central Park	Dallas	73,099	88	%	$	574	$	8.94	$	8.18
Quitman	Houston	736,957	88	%	$	1,290	$	1.98	$	2.00
Mitchelldale	Houston	377,752	93	%	$	2,298	$	6.51	$	6.40
Total -Industrial/Flex		1,187,808	89	%	$	4,161	$	3.90	$	3.83
Grand Total		6,669,865	81	%	73,313		$	13.52	$	13.36

42

Significant Tenants

The following table sets forth information about our ten largest tenants as of December 31, 2019:

Tenant Name	Location	Annualized Rental Revenue (in thousands)		Percentage of Total Annualized Rental Revenue		Initial Lease Date	Lease Expiration Year
Gulf Interstate Engineering	Gulf Plaza	$	2,138	3	%	3/1/2011	4/30/2024
Galen College of Nursing	One Technology	1,727		2	%	7/1/2013	6/30/2025
GSA-Veterans Administration	One Technology	1,312		2	%	11/1/2003	1/14/2024
Lennar Homes of Texas	Westway One	1,167		2	%	5/1/2014	2/28/2022
CEC Entertainment, INC.	Westway One	1,133		2	%	8/1/2015	7/31/2026
Board of Regents of the UT System	One Technology	1,033		1	%	9/1/2011	8/31/2023
Sunbelt Warehouse, LLC	Quitman	972		1	%	8/1/2003	8/31/2022
Iced Tea With Lemon LLC	Richardson Heights	685		1	%	8/1/2013	7/31/2028
DRS Network & Imaging Systems, LLC	Spring Valley	543		1	%	5/1/2013	9/30/2024
QRX Medical Management, LLC	Three Forest Plaza	530		1	%	10/1/2013	7/31/2025
		$	11,240	15	%

Lease Expirations

The following table shows lease expirations for our properties as of December 31, 2019 during each of the next ten years:

		Gross Leasable Area Covered by Expiring Leases		Annualized Base Rent Represented by Expiring Leases
Year of Lease Expiration	Number of Leases Expiring	Approx. Square Feet	Percent of Total Occupied Square Feet		Amount (in thousands)	Percent of Total Rent
2020	293	656,937	11%	$	11,300	15%
2021	273	640,994	10%		9,647	13%
2022	324	1,448,694	24%		13,649	19%
2023	173	614,341	10%		8,972	12%
2024	211	797,489	13%		12,489	17%
2025	81	420,877	7%		6,085	8%
2026	21	179,363	3%		2,274	3%
2027	22	118,115	2%		1,733	2%
2028	22	114,513	2%		1,809	2%
2029	16	64,083	1%		829	1%
2030	6	48,637	1%		681	1%
Total	1,442	5,104,043	84%	$	69,467	95%

Leases expiring beyond the period presented are not included in the table above, therefore the percent of total annualized base rents do not total 100%.

Location of Properties

Our properties, which represent continuing operations, are located in the Houston, Dallas and San Antonio metropolitan statistical areas (“MSAs”).  We believe that the long-term outlook for Texas MSAs remains positive.

As of December 31, 2019, our real estate properties comprised the following annualized base rental revenue, in thousands, by asset type and geographic location:

43

	Retail		Office		Flex/Industrial		Total
Dallas	$	8,175	$	23,462	$	574	$	32,211
Houston	4,981		23,161		3,588		31,730
San Antonio	1,585		7,788		—		9,373
Total	$	14,740	$	54,411	$	4,161	$	73,313

The following information generally applies to all of our properties:

•we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;

•except as otherwise noted above, we have no plans for any material renovations, improvements or developments with respect to any of our properties; and

•our properties face competition in attracting new residents and retaining current residents from other multifamily properties in and around their respective submarkets.

Item 3. Legal Proceedings

We are not presently subject to any material litigation nor, to our knowledge, is any litigation threatened against us or any of our properties, other than routine actions arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on our business or financial condition or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

44

PART II

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stockholder Information

     As of March 31, 2020, we had 18,417,687 shares of common stock issued and outstanding, held by a total of approximately 3,072 stockholders. The number of stockholders is based on the records of Phoenix American Financial Services, Inc. which serves as our transfer agent.

Market Information

Our shares of common stock are not currently listed on a national securities exchange or any over-the-counter market. We do not expect our shares to become listed in the near future, and they may not become listed at all.  Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them. Effective March 31, 2016, we terminated our follow-on public offering. Our board of directors continues to evaluate potential liquidity events to maximize the total potential return to our stockholders, including, but not limited to, merging our company with its affiliates followed by a listing of our shares of common stock on a national securities exchange. However, our board of directors has not made a decision to pursue any specific liquidity event, and there can be no assurance that we will complete a liquidity event on the terms described above or at all.

Our board of directors has not determined an estimated net asset value per share for our common stock as of December 31, 2019 as of the filing of this Annual Report on Form 10-K.

On July 30, 2019, our board of directors determined an estimated net asset value per share of our common stock of $12.61 as of December 31, 2018. Our board of directors’ objective in determining the estimated net asset value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with our advisor. However, the market for commercial real estate can fluctuate quickly and substantially and the value of our assets is expected to change in the future and may decrease. Also, our board of directors did not consider certain other factors, such as a liquidity discount to reflect the fact that our shares are not currently traded on a national securities exchange and the limitations on the ability to redeem shares pursuant to our share repurchase plan.

As with any valuation method, the methods used to determine the estimated net asset value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. Our assets have been valued based upon appraisal standards and the values of our assets using these methods are not required to be a reflection of market value under those standards and will not necessarily result in a reflection of fair value under GAAP. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated net asset value per share, which could be significantly different from the estimated net asset value per share determined by our board of directors. The estimated net asset value per share is not a representation or indication that, among other things: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company; shares of our common stock would trade at the estimated net asset value per share on a national securities exchange; a third party would offer the estimated net asset value per share in an arms-length transaction to purchase all or substantially all of our shares of common stock; or the methodologies used to estimate the net asset value per share would be acceptable to FINRA or ERISA with respect to their respective requirements.  Further, the estimated net asset value per share was calculated as of a moment in time and the value of our shares will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets, developments related to individual assets and changes in the real estate and capital markets.

45

For additional information on the determination of our estimated fair value per share, see our Current Report on Form 8-K filed with the SEC on September 23, 2019.

We intend to determine an updated estimated fair value per share every year on or about the last day of our fiscal year or more frequently in the sole discretion of our board of directors. The market for commercial real estate can fluctuate quickly and substantially, and values of our assets and liabilities are expected to change in the future. 

Unregistered Sales of Equity Securities

For the year ended December 31, 2019, each of our two independent directors received a grant of 3,000 shares of restricted common stock as compensation for their service on our board of directors pursuant to our omnibus stock incentive plan.We issued 6,000 shares of restricted common stock in the aggregate to our independent directors in 2019 in fulfillment of shares granted for 2018 service on our board of directors. As of December 31, 2019, a total of 51,000 shares of restricted common stock have been issued by us to our independent directors pursuant to our omnibus stock incentive plan, and 12,000 shares of restricted common stock have been issued to executives of our advisor and our property manager pursuant to our omnibus stock incentive plan.

The shares of restricted stock issued to our independent directors and executives of our advisor and property manager were issued in transactions exempt from registration under the Securities Act pursuant to Section 4(a)(2) of the Securities Act.

Share Redemption Program

Our board of directors adopted a share redemption program that permitted our stockholders to sell their shares back to us after they have held them for at least one year, subject to the significant conditions and limitations described below. Our board of directors suspended the share redemption program on June 1, 2018 pending the completion of the Mergers. Under the provisions of the plan as previously constituted, our board of directors could amend the provisions of our share redemption program without the approval of our stockholders. The purchase price for shares redeemed under the share redemption program was as set forth below.  Except for redemptions sought upon a stockholder’s death or qualifying disability or redemptions sought upon a stockholder’s confinement to a long-term care facility, the purchase price for shares redeemed under the redemption program was determined as follows:

Share Purchase Anniversary	Redemption Price as a Percentage of Purchase Price Per Share
1 year or more	90%
2 years or more	92.5%
3 years or more	95%
4 years or more	97.5%
5 years or more	100%

Our board of directors reserves the right in its sole discretion at any time to (1) waive the one-year holding period in the event of exigent circumstances affecting a stockholder such as bankruptcy, a mandatory distribution requirement under a stockholder’s IRA or death or disability (as described below), (2) reject any request for redemption, (3) change the purchase price for redemptions, or (4) otherwise amend the terms of our redemption program.

46

For the years ended December 31, 2019 and 2018, we received 1 and 97 requests, respectively, for share redemptions pursuant to the terms of our share redemption program. For the year ended December 31, 2019, we redeemed 0 shares at a weighted average price per share of $0 per share. For the year ended December 31, 2018, we redeemed 298,135 shares at a weighted average price per share of $9.67 per share. For the period from our initial public offering commencement date (February 9, 2009) to December 31, 2019, we received and fulfilled 186 redemption requests representing 875,077 shares of our common stock. Redemption prices paid were as set forth in our share redemption program. The source of cash used to fund the redemption requests was subscription proceeds.  As of December 31, 2019, we had no unfulfilled redemption requests.

Distribution Policy

To maintain our qualification as a REIT, we must meet certain organizational and operational requirements, including a requirement to annually distribute at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction and excluding net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. generally accepted accounting principles, or GAAP) to our stockholders. Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

We declared distributions based on daily record dates for each day. Distributions declared for all record dates of a given month are paid approximately 20 days after month-end. Distributions are currently calculated at a rate of $0.001918 per share per day, which is $0.70 annually per share of common stock.

For federal income tax purposes, distributions to common stockholders are characterized as ordinary dividends, capital gain distributions or nontaxable distributions. To the extent that we make distributions in excess of our current or accumulated earnings and profits, the distribution will be a nontaxable return of capital which reduces the tax basis of each share of common stock held by a U.S. stockholder.  The amount of distributions in excess of a U.S. stockholder’s tax basis will be a taxable gain realized upon the sale of the stockholders’ shares.

The following table summarizes the distributions we paid in cash and pursuant to our distribution reinvestment plan for the years ended December 31, 2019 and 2018, in thousands:

Period	Cash (1)		DRIP (1)(2)		Total
First Quarter 2019	$	3,141	$	—	$	3,141
Second Quarter 2019	3,223		—		3,223
Third Quarter 2019	3,224		—		3,224
Fourth Quarter 2019	3,223		—		3,223
Total	$	12,811	$	—	$	12,811
First Quarter 2018	$	3,151	$	—	$	3,151
Second Quarter 2018	3,152		—		3,152
Third Quarter 2018	3,151		—		3,151
Fourth Quarter 2018	3,101		—		3,101
Total	$	12,555	$	—	$	12,555

(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) Our distribution reinvestment plan which was terminated effective July 16, 2016.

47

Item 6.    Selected Financial Data

The following table sets forth selected financial data for the years ended December 31, 2019, 2018, 2017, 2016, and 2015. Certain information in the table has been derived from our audited consolidated financial statements and notes thereto. This data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 15, Financial Statements and Notes thereto, appearing elsewhere in this Annual Report. Our results of operations for the periods presented below are not indicative of those expected in future periods.

	As of December 31,
Balance Sheet Data (in thousands)	2019		2018		2017		2016		2015
Total real estate assets, at cost	$	594,569	$	583,112	$	259,962	$	253,099	$	189,707
Total real estate assets, net	476,917		493,272		186,822		203,227		162,323
Total assets	556,775		582,083		230,712		248,264		177,595
Notes payable	303,039		305,907		117,237		117,609		74,995
Total liabilities	331,769		333,602		130,673		131,833		85,688
Total stockholders’ equity	$	225,006	$	248,481	$	100,039	$	116,431	$	91,907

			For the year ended December 31,
Operating Data (in thousands, except per share amounts)	2019		2018		2017		2016		2015
Total revenues	$	86,724	$	57,022	$	44,309	$	38,570	$	26,204
Net loss	(5,995)		(3,540)		(9,035)		(10,924)		(8,488)
Net loss per common share – basic and diluted	$	(0.08)	$	(0.05)	$	(0.49)	$	(0.64)	$	(0.79)

			For the year ended December 31,
Other Data (in thousands, except per share amounts)	2019		2018		2017		2016		2015
Cash flow provided by (used in)
Operating activities	$	18,653	$	44,151	$	9,288	$	10,115	$	8,325
Investing activities	$	(21,534)	(16,841)		2,739		(90,871)		(73,529)
Financing activities	(21,484)		18,603		(8,217)		78,101		62,155
Distributions paid	12,811		12,555		12,650		11,906		7,193
Distributions declared per common share (1)	$	0.70	$	0.70	$	0.70	$	0.70	$	0.70
Weighted average number of common shares outstanding, basic and diluted	18,304		17,946		18,110		17,362		10,734
FFO (2)	$	21,817	$	13,160	$	14,233	$	11,564	$	5,992
MFFO (2)	$	21,817	$	13,160	$	14,233	$	13,138	$	7,744

(1) Distributions declared per common share for the years ended December 31, 2019, 2018, 2017, 2016, and 2015 assumes each share was issued and outstanding each day of each year. Distributions currently declared are calculated at a rate of $0.001918 per share of common stock per day, which is $0.70 annually per share of common stock. We paid our first monthly distribution payment in January 2011.

48

(2) GAAP basis accounting for real estate utilizes historical cost accounting and assumes real estate values diminish over time.  In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, established the measurement tool of funds from operations (“FFO”).  Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations (“MFFO”) as defined by the Investment Program Association as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity.  For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the “Selected Financial Data” above and our consolidated financial statements and the notes thereto included in this Annual Report. Also see “Forward Looking Statements” preceding Part I of this Annual Report. As used herein, the terms “we,” “our,” “us” and “our company” refer to Hartman Short Term Income Properties XX, Inc. and, as required by context, Hartman XX Limited Partnership, our operating partnership, and to their respective subsidiaries. References to “shares” and “our common stock” refer to the shares of our common stock.

Impact of Coronavirus Outbreak

Since the beginning of 2020, the COVID-19 coronavirus outbreak which originated in mainland China has significantly impacted the global and U.S. economies. Through the date of the filing of this Form 10-K, all the Company’s office, retail and flex/industrial properties are open and accessible to our tenants. The Company’s properties are all located in Texas in the metropolitan areas of Houston, Dallas and San Antonio. The operation of tenant businesses is subject to the business judgement of tenant business owners and the direction of government authorities and public health officials. The Company’s retail property tenants may be particularly affected by the coronavirus outbreak to the extent that they have been required to close or limit hours of operations in the case of experiential businesses such as movie theaters, restaurants and specialty event operations. Restaurant and bar operations in the metropolitan areas in which our properties are located, have been required to limit activities to carry-out and delivery sales and service. The Company’s retail properties account for approximately 20% of the Company’s total annual base rental income. The Company’s office property tenants have in many cases adopted limited office hours as well as work from home policies as part of their respective business continuity plans.

The effects of the coronavirus outbreak on our tenants will largely determine the effect of the public health event on the cash flows and earnings of the Company. The coronavirus situation is ongoing and its dynamic nature makes it difficult to forecast any impacts on the Company’s 2020 results with any certainty. As of the date of this filing our results for the quarter ending March 31, 2020 have not been significantly impacted, however, we do expect to be impacted with potentially continuing and possibly adverse impacts beyond March 31, 2020.

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

49

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 real estate assets located in the United States and other countries.  

On February 9, 2010, we commenced our initial public offering of up to $250,000,000 in shares of our common stock to the public at a price of $10.00 per share and up to $23,750,000 in shares of our common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. On April 25, 2013, we terminated our initial public offering.  As of the termination of our initial public offering on April 25, 2013, we had accepted subscriptions for and issued 4,455,678 shares of our common stock, including 162,561 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross offering proceeds of $43,943,731.

On July 16, 2013, we commenced our follow-on offering of up to $200,000,000 in shares of our common stock to the public at a price of $10.00 per share and up to $19,000,000 in shares of our common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. We accepted subscriptions for, and issued, 18,574,461 shares of our common stock in our initial public offering and follow-on offering, including 1,216,240 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross proceeds of $181,336,480.

Effective March 31, 2016, we terminated the offer and sale of shares of our common stock to the public in our follow-on offering. The sale of shares of our common stock to our stockholders pursuant to our distribution reinvestment plan was terminated effective July 16, 2016.  

As of December 31, 2019 we owned 43 commercial real properties.

We have a $259,000,000 SPE Loan (the "SPE Loan") outstanding as of December 31, 2019 which has an initial maturity date of October 9, 2020, which is within one year of the date that this Annual Report was available to be issued. Management has considered whether there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial statement due to the fact of the uncertainty regarding the loan maturity of the SPE Loan, as set forth in Accounting Standards Update (ASU) 2014-15, “Presentation of Financial Statements – Going Concern.”

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

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

50

Our Real Estate Portfolio

As of December 31, 2019, our portfolio consisted of the 43 commercial real estate properties listed below.

Property Name	Location	Gross Leasable Area SF	Percent Occupied		Annualized Base Rental Revenue (in thousands)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF
Retail:
Promenade	Dallas	176,585	78	%	$	1,622	$	11.84	$	11.53
Prestonwood Park	Dallas	105,783	85	%	$	1,948	$	21.79	$	22.54
Richardson Heights	Dallas	201,433	79	%	$	2,957	$	18.67	$	19.13
Cooper Street	Dallas	127,696	100	%	$	1,648	$	12.90	$	12.60
One Mason SC	Houston	75,183	93	%	$	1,055	$	15.13	$	15.06
Chelsea Square SC	Houston	70,275	78	%	$	495	$	9.01	$	8.55
Mission Center SC	Houston	112,971	100	%	$	750	$	6.64	$	6.35
Garden Oaks SC	Houston	106,858	71	%	$	1,123	$	14.84	$	15.11
Harwin	Houston	38,813	82	%	$	369	$	11.60	$	10.75
Fondren	Houston	93,196	91	%	$	795	$	9.32	$	8.75
Northeast Square SC	Houston	40,525	67	%	$	394	$	14.41	$	13.86
Walzem Plaza SC	San Antonio	182,713	80	%	$	1,585	$	10.82	$	10.10
Total - Retail		1,332,031	84	%	$	14,740	$	13.20	$	13.04
Office:
North Central Plaza	Dallas	198,374	75	%	$	2,300	$	15.39	$	14.90
Gateway Tower	Dallas	266,412	66	%	$	2,707	$	15.38	$	15.70
Bent Tree Green	Dallas	139,609	80	%	$	2,060	$	18.34	$	17.67
Parkway Plaza I&II	Dallas	136,506	80	%	$	1,804	$	16.54	$	17.77
Hillcrest	Dallas	203,688	82	%	$	2,612	$	15.73	$	15.65
Skymark	Dallas	115,700	78	%	$	1,585	$	17.45	$	17.62
Corporate Park Place	Dallas	113,429	77	%	$	1,417	$	16.16	$	16.57
Westway One	Dallas	165,982	92	%	$	2,887	$	18.91	$	17.61
Three Forest Plaza	Dallas	366,549	74	%	$	5,253	$	19.33	$	18.63
Spring Valley	Dallas	94,304	68	%	$	835	$	12.94	$	9.87
Tower Pavilion	Houston	87,589	90	%	$	1,238	$	15.66	$	15.72
The Preserve	Houston	218,689	94	%	$	3,345	$	16.27	$	15.90
Westheimer Central	Houston	182,506	79	%	$	1,694	$	11.79	$	12.35
11811 N Freeway	Houston	156,362	79	%	$	1,962	$	15.83	$	15.53
Atrium I	Houston	118,461	76	%	$	1,279	$	14.13	$	11.91
3100 Timmons	Houston	111,265	81	%	$	1,295	$	14.43	$	14.66
Cornerstone	Houston	71,008	89	%	$	896	$	14.11	$	14.60
Northchase	Houston	128,981	83	%	$	1,472	$	13.81	$	12.94
616 FM 1960	Houston	142,194	49	%	$	1,270	$	18.28	$	18.35
601 Sawyer	Houston	88,258	81	%	$	1,096	$	15.60	$	14.85
Gulf Plaza	Houston	120,651	87	%	$	2,241	$	21.46	$	22.22
Timbercreek Atrium	Houston	51,035	82	%	$	712	$	16.98	$	16.80
Copperfield	Houston	42,621	86	%	$	695	$	18.86	$	19.07
400 N. Belt	Houston	230,872	57	%	$	1,489	$	11.33	$	11.54
Ashford Crossing	Houston	158,451	68	%	$	1,812	$	16.88	$	16.41

51

Regency Square	Houston	64,063	90	%	$	663	$	11.45	$	11.56
Energy Plaza	San Antonio	180,119	85	%	$	3,188	$	20.93	$	20.50
One Technology Ctr	San Antonio	196,348	95	%	$	4,600	$	24.75	$	25.98
Total -office		4,150,026	77	%	$	54,411	$	16.79	$	16.60
Industrial/Flex
Central Park	Dallas	73,099	88	%	$	574	$	8.94	$	8.18
Quitman	Houston	736,957	88	%	$	1,290	$	1.98	$	2.00
Mitchelldale	Houston	377,752	93	%	$	2,298	$	6.51	$	6.40
Total -Industrial/Flex		1,187,808	89	%	$	4,161	$	3.90	$	3.83
Grand Total		6,669,865	81	%	$	73,313	$	13.52	$	13.36

Property Acquisitions and Real Estate Investments

2019 Property Acquisitions

We did not make any property acquisitions or acquire any real estate investments in 2019.

2018 Property Acquisitions

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

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

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

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. We believe the following are our more critical accounting policies due to the significance, subjectivity and judgment used in determining our estimates included in the preparation of our consolidated financial statements. See also Note 2,"Summary of Significant Accounting Policies", of our consolidated financial statements.We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable and appropriate based upon the circumstances.

Revenue Recognition

52

The Company’s leases are accounted for as operating leases.  Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases.  Revenue is recognized on a straight-line basis over the terms of the individual leases.  Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. The Company’s accrued rents are included in accrued rent and accounts receivable, net, on the accompanying consolidated balance sheets. The Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Additionally, cost recoveries from tenants are included in the Tenant Reimbursement and Other Revenues line item in the consolidated statements of operations in the period the related costs are incurred.

The Company adopted ASU 2014-09, "Revenue from Contracts with Customers," (“ASU 2014-09”) which amends the guidance for revenue recognition to eliminate the industry-specific revenue recognition guidance and replace it with a principle based approach for determining revenue recognition. The Company adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective approach and the adoption of this guidance did not have a material impact on the consolidated financial statements. The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from ASU 2014-09. The Company’s other revenue is comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are also excluded from of ASU 2014-09.

Real Estate

Allocation of Purchase Price of Acquired Assets

Upon the acquisition of real properties, it is our 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. We utilize 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 revenue 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 intangible lease assets in the consolidated balance sheets and are amortized to expense over the remaining term of the respective leases.

53

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 our reported net income (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 on an asset by asset basis 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 December 31, 2019 and 2018.

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, net

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 rents 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 Costs

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

RESULTS OF CONTINUING OPERATIONS

Comparison of the year ended December 31, 2019 versus the year ended December 31, 2018.

54

As of December 31, 2019 and 2018, we owned 43 commercial properties comprising approximately 6,700,000 square feet plus three pad sites, all located in Texas. As of December 31, 2019 and 2018, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.

We define same store (“Same Store”) properties as those properties which the Company owned for the entirety of the year ended December 31, 2019 and the year ended December 31, 2018. Net operating income (property revenues minus property expenses), or “NOI,” is the measure used by management to assess property performance. NOI is not a measure of operating income or cash flows from operating activities as measured by accounting principles generally accepted in the United States, or “GAAP,” and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the operating results of our real estate. For purposes of the following discussion, Same Store properties refer to Richardson Heights, Cooper Street, Bent Tree Green, Parkway, Gulf Plaza, Mitchelldale, Energy Plaza, Timbercreek Atrium, Copperfield, Commerce Plaza Hillcrest, 400 North Belt, Ashford Crossing, Corporate Park Place, Skymark Tower, One Technology Center, Westway One and Three Forest Plaza properties.

(in thousands)	Year ended December 31,
	2019		2018		Change
Same Store
Total revenues	$	45,065	$	45,252	$	(187)
Property operating expenses	15,745		15,101		644
Asset management fees	1,760		1,760		—
Real estate taxes and insurance	7,068		6,831		237
General and administrative	4,130		2,425		1,705
Same Store NOI	$	16,362	$	19,135	$	(2,773)
Reconciliation of Net loss to Property NOI
Net loss	$	(5,995)	$	(3,540)	$	(2,455)
SPE consolidating properties	(17,435)		(4,003)		(13,432)
Depreciation and amortization	27,812		16,700		11,112
Interest expense	13,834		11,306		2,528
Interest and dividend income	(1,854)		(1,328)		(526)
Property NOI	$	16,362	$	19,135	$	(2,773)

Revenues – The primary source of our revenue is rental revenues and tenant reimbursements.  For the years ended December 31, 2019 and 2018 we had total same store rental revenues and tenant reimbursements of $45,065,000 and $45,252,000, respectively.

Property operating expenses – Property operating expenses consists of labor, contract services, repairs and maintenance, utilities and management fees. For the years ended December 31, 2019 and 2018, we had same store property operating expenses of $15,745,000 and $15,101,000, respectively. Operating expenses increased $644,000 primarily due to an increase in repairs and maintenance.

55

Fees to affiliates – We pay acquisition fees and asset management fees to our advisor in connection with the acquisition of properties and management of our company. Asset management fees incurred to our advisor were $1,760,000 and $1,760,000 for the years ended December 31, 2019 and 2018. We pay property management and leasing commissions to our Property Manager in connection with the management and leasing of our properties. Property management fees and expense reimbursements are included in property operating expenses.

Real estate taxes and insurance – Same store real estate taxes and insurance were $7,068,000 and $6,831,000 for the years ended December 31, 2019 and 2018, respectively. The increase in real estate taxes and insurance is attributable to the increase in ad valorem tax valuation of certain properties.

Depreciation and amortization – Depreciation and amortization were $27,812,000 and $16,700,000 for the years ended December 31, 2019 and 2018, respectively. Depreciation and amortization increased due to an increase for in-place lease value intangible amortization.

General and administrative expenses - Same store General and administrative expenses consist primarily of transfer agent fees, other professional fees, and independent director compensation. For the years ended December 31, 2019 and 2018, we had same store general and administrative expenses of $4,130,000 and $2,425,000 respectively. The increase of $1,705,000 is mainly attributable to an increase in leasing commission amortization.

Net loss – We incurred a net loss from continuing operations of $5,995,000 and $3,540,000 for the years ended December 31, 2019 and 2018, respectively. Effective October 1, 2018, Hartman SPE LLC is consolidated with the Company. Consolidating SPE property earnings represent earnings of non same store properties for the year ended December 31, 2019 and the quarter ended December 31, 2018. The increase in net loss is primarily attributable to additional three quarters of non same store properties' profit and loss activity.

Funds From Operations

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

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO.  Our 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.  We believe 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, we believe 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 indicators exist and if the carrying, or book value, exceeds the total estimated undiscounted

56

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 our 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, we believe 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 our performance to investors and to management, and when compared year over year, reflects the impact on our 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 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 our operating performance. 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 measures and the adjustments to GAAP in calculating FFO.

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 the same way, so comparisons with other REITs may not be meaningful. FFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of its liquidity, or indicative of funds available to fund its cash needs including its ability to make distributions to its stockholders. FFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. FFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO.

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

The table below summarizes our calculation of FFO for the years ended December 31, 2019, 2018 and 2017, respectively, and a reconciliation of such non-GAAP financial performance measures to our net loss, in thousands.

	December 31,
	2019		2018		2017
Net loss	$	(5,995)	$	(3,540)	$	(9,035)
Depreciation and amortization of real estate assets	27,812		16,700		23,268
Funds from operations (FFO)	$	21,817	$	13,160	$	14,233

Distributions

The following table summarizes the distributions we paid in cash and pursuant to our distribution reinvestment plan for the period from January 2011 (the month we first paid distributions) through December 31, 2019, in thousands:

57

Period	Cash (1)		DRIP (2)(3)		Total
2011	$	255	$	242	$	497
2012	891		869		1,760
2013	1,681		1,594		3,275
2014	2,479		2,358		4,837
2015	3,475		3,718		7,193
2016	8,918		2,988		11,906
2017	12,650		—		12,650
2018	12,555		—		12,555
2019	12,811		—		12,811
Total	$	55,715	$	11,769	$	67,484

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

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

(3)Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan. Effective July 16, 2016, we terminated the sale of additional shares of our common stock to our stockholders pursuant to our distribution reinvestment plan.

For the year ended December 31, 2019, we paid aggregate distributions of $12,811,000. During the same period, cash provided by (used in) operating activities was $18,653,000 and our FFO was $21,817,000. For the year ended December 31, 2019, 100% of distributions were paid from cash provided by operating activities.

For the year ended December 31, 2018, we paid aggregate distributions of $12,555,000. During the same period, cash provided by (used in) operating activities was $44,151,000 and our FFO was $13,160,000. For the year ended December 31, 2018, 100% of distributions were paid from cash provided by operating activities. 

For the period from inception to December 31, 2019, we paid aggregate distributions of $67,484,000. During the period from our inception to December 31, 2019, our cash provided by operating activities was $94,766,000, our net loss was $47,650,000 and our FFO was 69,855,000. Of the $67,484,000 in aggregate distributions paid to our stockholders from inception to December 31, 2019, approximately 71% was paid from net cash provided by operating activities and approximately 29% was funded from offering proceeds. For a discussion of how we calculate FFO, see “Funds From Operations and Modified Funds From Operations”.

For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31, 2019 and 2018:

	2019		2018
Ordinary income (unaudited)	53.1	%	24.9	%
Return of capital (unaudited)	46.9	%	75.1	%
Total	100.0	%	100.0	%

58

Liquidity and Capital Resources

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

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

We use, and intend to use in the future, secured and unsecured debt to acquire properties and make other investments.  As of December 31, 2019, our outstanding secured debt is $303,039,000. There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment.  Under our charter, we are prohibited from borrowing in excess of 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors and if such excess is disclosed to the stockholders in the next quarterly report along with the explanation for such excess borrowings.  Our board of directors has adopted a policy to limit our aggregate borrowings to approximately 50% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests.  Such limitation, however, does not apply to individual real estate assets and only will apply once we have ceased raising capital in our public offering and invested substantially all 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.

Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The SPE Loan has an initial maturity date of October 9, 2020. The SPE Loan provides for three successive one-year maturity date extensions. In order to exercise each successive one-year extension options, the Hartman SPE must meet five conditions in order to extend the maturity date without any further qualification. One of the five conditions is that Hartman SPE must have a debt yield, as defined, of 12.5% or greater as of June 30, 2020.

As of December 31, 2019 and March 31, 2020, Hartman SPE has a debt yield of 13.29% and 12.95%, respectively. In response to the coronavirus outbreak and related economic disruption, the Company has undertaken cost reduction and avoidance measures which began in March 2020. Management expects the test period debt calculation to be 12.5% or greater which will allow the Company to exercise the extension option based solely on the terms of the loan agreement.

If the debt yield calculation as of the end of the June 30, 2020 test period is less than 12.5%, management believes that the lender will agree to a one-year extension, however, extension terms may be less favorable to the Company than as provided under the loan agreement. Any required modification of the loan agreement to conclude an extension of the maturity date may involve additional loan costs which would not otherwise be incurred.

59

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

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.

Comparison of Cash Flow for the Years Ended December 31, 2019 and December 31, 2018

The following table sets forth a summary of cash flows for our company for the years ended December 31, 2019 and 2018:

	For the years ended December 31,
	2019		2018		Change
(Amounts in thousands)
Net Cash provided by (used in):
Operating activities	$	18,653	$	44,151	$	(25,498)
Investing activities	(21,534)		(16,841)		(4,693)
Financing activities	(21,484)		18,603		(40,087)

Operating Activities

We have generated $18.7 million and $44.2 million of cash from operating activities during the years ended December 31, 2019 and 2018, respectively. Net cash provided by operating activities for the year ended December 31, 2019 includes $22.3 million in net cash from rental activities net of expenses offset by $3.6 million in repayments to related parties. Net cash provided by operating activities for the year ended December 31, 2018 includes $38.2 million in net cash from rental activities net of expenses plus $6.0 million in repayments from related parties.

Investing Activities

We used $21.5 million and $16.8 million in cash for investing activities during the years ended December 31, 2019, and 2018. Net cash used in investing activities for the year ended December 31, 2019 primarily includes additions to real estate of $11.5 million and $10.6 million in advances to related parties. Net cash used in investing activities for the year ended December 31, 2018, primarily includes $8.9 million in additions to real estate, $10.4 million in lender required capital reserves, offset by $2.5 million in repayments received from related party.

60

Financing Activities  

We used $21.5 million in cash for and generated $18.6 million in cash from financing activities during the years ending December 31, 2019 and 2018, respectively. Net cash used in financing activities for the year ended December 31, 2019 includes distributions to stockholders and non-controlling interests of $17.5 million and loan repayments of $8.3 million, offset by $4.4 million of funds borrowed from an affiliate. Net cash provided by financing activities for the year ended December 31, 2018 includes $259 million of funds from Goldman Sachs note, offset by net loan repayments of $40.2 million, distributions to stockholders and non-controlling interests of $13.2 million, payment of deferred loan costs of $4.7 million.

Off-Balance Sheet Arrangements

As of December 31, 2019 and 2018, 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 the notes to the consolidated financial statements included in this Annual Report.

Related-Party Transactions and Agreements

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

Review of our Investment Policies

Our board of directors, including our independent directors, has reviewed our investment policies as described in this Annual Report and determined that such policies are in the best interests of our stockholders based on the following factors: (1) such policies increase the likelihood that we will be able to acquire a diversified portfolio of income producing properties, thereby reducing risk in our portfolio; (2) our executive officers and directors and the affiliates of our advisor have expertise with the type of real estate investments we seek; (3) there are sufficient property acquisition opportunities with the attributes that we seek; and (4) borrowings should enable us to purchase assets and earn income more quickly, thereby increasing the likelihood of generating income for our stockholders and preserving stockholder capital.

Item 7A.     Quantitative and Qualitative Disclosures about Market Risks

We will be exposed to interest rate changes primarily as a result of short and 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

61

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 8. Financial Statements and Supplementary Data

The consolidated financial statements and supplementary data required by this Item 8 can be found beginning on page F-1 of this Annual Report.

Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

On December 17, 2019, we dismissed Grant Thornton LLP (“GT”) as our independent registered public accounting firm. The decision to dismiss GT as the Company’s independent registered public accounting firm was approved by the Audit Committee (the “Audit Committee”) of our Board of Directors. The audit report of GT on the consolidated financial statements of the Company for each of the two most recent fiscal years ended December 31, 2018 and December 31, 2017, did not contain an adverse opinion or disclaimer of opinion, and such report was not qualified or modified as to uncertainty, audit scope, or accounting principle.

During the two most recent fiscal years and subsequent interim periods through December 17, 2019, we did not have any disagreements with GT on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to GT’s satisfaction, would have caused them to make reference thereto in their reports on our consolidated financial statements for such periods.

During the two most recent fiscal years and subsequent interim periods through December 17, 2019, there have been no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.

We provided GT with a copy of the foregoing disclosure and requested GT to furnish a letter addressed to the Securities & Exchange Commission stating whether or not it agrees with the above statements.

On February 21, 2020 (the “Engagement Date”), we engaged Weaver and Tidwell, L.L.P. (“Weaver”) as our independent registered public accounting firm for our fiscal year ended December 31, 2019. The decision to engage Weaver as the Company’s independent registered public accounting firm was approved by the Audit Committee of our Board of Directors.

During the two most recent fiscal years and through the Engagement Date, we have not consulted with Weaver regarding either:

(1) the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the company's financial statements, and neither a written report was provided to the company nor oral advice was provided that Weaver concluded was an important factor considered by the company in reaching a decision as to the accounting, auditing or financial reporting issue; or

(2) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).

Item 9A.     Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 15a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act are recorded, processed, summarize and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.  Because of inherent limitations, disclosure controls or procedures, no matter how well designed it operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2019, our disclosure controls and procedures were effective at a reasonable assurance level.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting.  Internal control over Financial Reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principle executive and principal financial officers and effected by the board of directors, management another personnel, to provide reasonable assurance regarding the reliability of financial reporting in the preparation of financial statements for external purposes in accordance with generally excepted accounting principles in the United States of America (GAAP) and include those policies and procedures that:

•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and disposition of our assets;

•provide reasonable assurance the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally excepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of management and our directors; and

•provide reasonable assurance regarding prevention of timely detection of unauthorized acquisition, use or disposition of any of our assets in circumstances that could have a material adverse effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2019.  In making this assessment we use the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).  Based on that assessment and criteria, management concluded that our internal control over financial reporting was effective as of December 31, 2019.

Weaver, an independent registered public accounting firm, audited our consolidated financial statements for the year ended December 31, 2019 included in this Annual Report on Form 10-K. Their report is included in “Item 15. Exhibits and Financial Statement Schedules” under the heading Report of Independent Registered Public

63

Accounting Firm. This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm on our internal control over financial reporting due exemption established by rule of the SEC for smaller reporting companies.

Changes in Internal Control Over Financial Reporting

There have been no changes during the quarter ended December 31, 2019 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financing reporting.

Item 9B. Other Information

 None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

Our current directors and executive officers and their respective ages and positions are listed below:

Name	Age	Position
Allen R. Hartman	68	Chairman of the Board, Chief Executive Officer and President
Jack I. Tompkins	74	Independent Director
Richard R. Ruskey	64	Independent Director
Louis T. Fox, III	59	Chief Financial Officer, Secretary and Treasurer
Mark T. Torok	61	General Counsel

Allen R. Hartman, age 68, has served as our CEO and Chairman of our Board of Directors since February 2009 and has served as President of our advisor, Hartman Advisors, since March 2009, and as President of our property manager, HIR Management, since January 2008. In 1984, Mr. Hartman formed Hartman Management and began sponsoring private real estate investment programs. Mr. Hartman built Hartman Management into one of the leading commercial property management firms in the state of Texas and sponsored 18 privately offered programs and two publicly offered programs, including our current public offering, which invested in commercial real estate in Houston, San Antonio and Dallas, Texas. In 1998, Mr. Hartman merged the Hartman real estate programs and formed Hartman Commercial Properties REIT (HCP REIT), now known as Whitestone REIT. He served as CEO and Chairman of the Board of HCP REIT until October, 2006. In April, 2008, Mr. Hartman merged 4 of the 5 Hartman programs to form Hartman Income REIT (HIREIT) and contributed the assets and ongoing business operations of Hartman Management into Hartman Income REIT Management, Inc., a wholly owned subsidiary of HIREIT. Mr. Hartman has acquired 80 commercial real estate properties, raised over $300 million of investor equity and acquired more than $400 million in commercial real estate assets in various private and public real estate investment programs.  Currently, Mr. Hartman oversees a staff of 60 employees who manage 38 commercial properties encompassing over five million square feet. In addition to his day-to-day management responsibilities, Mr. Hartman serves as the principal officer of each Hartman sponsored investment program.  Mr. Hartman attended the University of Colorado and studied Business Administration.

Our board of directors, excluding Mr. Hartman, has determined that the leadership positions previously and currently held by Mr. Hartman, and the extensive experience Mr. Hartman has accumulated from acquiring and managing investments in commercial real estate and debt, have provided Mr. Hartman with the experiences, attributes and skills necessary to effectively carry out the duties and responsibilities of a director.

64

Jack I. Tompkins, age 74, has served as one of our independent directors since our inception in February, 2009.  Mr. Tompkins has served since 1998 as Chairman and CEO of ARTA Equity Advisors, L.L.C., which was formed to engage in various entrepreneurial opportunities. Mr. Tompkins began his career with Arthur Young & Co., working as a certified public accountant there for three years before joining Arthur Andersen,& Co., where he was elected to the partnership in 1981 and served until 1988. While at Arthur Andersen he was in charge of the Merger and Acquisition Program for the Houston office as well as head of the Natural Gas Industry Group. From 1988 until October 1996, Mr. Tompkins served as Chief Financial Officer, Senior Vice President and Chief Information, Administrative and Accounting Officer of a large publicly traded energy company. Corporate functions reporting to Mr. Tompkins included financial planning, risk management, tax, accounting, information systems, administration and internal audit. Mr. Tompkins served as Chairman and CEO of Automotive Realty Trust Company of America from its inception in 1997 until its sale to a publicly traded REIT in January 1999. Automotive Realty was formed to engage in the business of consolidating real estate properties owned by automobile dealerships into a REIT. From March to September of 1999, Mr. Tompkins served as interim Executive Vice President and CFO of Crescent Real Estate Equities as the Company restructured. Mr. Tompkins served as an independent director of Hartman XIX from July 2009 until March 2010 and as an independent director of Hartman Income REIT from January 2008 until July 2009. Mr. Tompkins previously served on the board of directors of Bank of America Texas and Michael Petroleum Corp. He is a member of American Institute of Certified Public Accountants. Mr. Tompkins received a Bachelor of Business Administration and Master of Business Administration from Baylor University.

Our board of directors, excluding Mr. Tompkins, has determined that the experience as a certified public accountant and leadership positions previously and currently held by Mr. Tompkins, including experience Mr. Tompkins has accumulated from acquiring and managing investments in commercial real estate and debt, have provided Mr. Tompkins with the experiences, attributes and skills necessary to effectively carry out the duties and responsibilities of a director.

Richard R. Ruskey, age 64, has served as one of our independent directors since April 2011.  Mr. Ruskey began his professional career in 1978 as a Certified Public Accountant with the accounting firm of Peat, Marwick, Mitchell, & Co. in St. Louis, Missouri where he obtained extensive experience in both the audit and tax departments.  In 1983 he joined the firm of Deloitte, Haskins, & Sells as a manager in the tax department.  In 1986 Mr. Ruskey transitioned into the security brokerage industry as the chief financial officer of Westport Financial Group.  Within a one-year period he became a full-time broker and due diligence officer for the firm.  In 1990 he continued his career in financial services by joining the broker dealer firm of R. T. Jones Capital Equities, Inc. where he served as due diligence officer.  In June 2010 Mr. Ruskey joined the broker dealer firm of Moloney Securities Co. Inc. where he currently serves as an investment broker and as a senior due diligence analyst.  He is a Certified Public Accountant and Certified Financial Planner and is a member of the American Institute of Certified Public Accountants and the Missouri Society of Certified Public Accountants.  He has been an active investor in numerous real estate and business ventures throughout his 30 year career in financial services. Mr. Ruskey received dual B.S. degrees in Accounting and Finance from Southern Illinois University – Carbondale.

Our board of directors, excluding Mr. Ruskey, has determined that the experience as a certified public accountant and leadership positions previously and currently held by Mr. Ruskey, including experience Mr. Ruskey has accumulated from analyzing and advising with respect to investments in commercial real estate and debt, have provided Mr. Ruskey with the experiences, attributes and skills necessary to effectively carry out the duties and responsibilities of a director.

Louis T. Fox, III, age 59, is our Chief Financial Officer and Treasurer. Mr. Fox also serves as Chief Financial Officer for our advisor, Hartman Advisors, and our property manager, HIR Management. He has responsibility for financial reporting, accounting, treasury and investor relations. Prior to joining HIR Management in March, 2007, Mr. Fox served as Chief Financial Officer of Legacy Brands, a restaurant group from April, 2006 until January, 2007. Prior to that, Mr. Fox served as Chief Financial Officer of Unidynamics, Inc., a specialized EPC manufacturer

65

of unique handling system solutions for the marine and energy industries from January, 2004 until April, 2006. He also served as Treasurer and CFO of Goodman Manufacturing, a major manufacturer of residential and commercial HVAC products for 9 years prior to that. In addition to his years of experience in the manufacturing industry, he has served in senior financial positions in the construction and debt collection service concerns. He started his career as a tax accountant with Arthur Andersen & Co. Mr. Fox is a former practicing certified public accountant. Mr. Fox received a Bachelor of Arts degree in accounting from the University of Texas at San Antonio.

Mark T. Torok, age 61, has served as our General Counsel and Secretary since April 2016. Mr. Torok also serves as General Counsel for both our advisor and our property manager. In this capacity, Mr. Torok manages our advisor’s in-house legal department and is responsible for all legal matters affecting our company and its affiliates, including our advisor and our property manager. Prior to joining our property manager in June, 2015, Mr. Torok practiced law from 2006 to May 2015, as the founder of The Torok Law Firm P.C., where his practice focused on real estate, securities, and business law. In addition, he served as a fee attorney and provided escrow agent services for Providence Title Insurance Company.  Prior to founding The Torok Law Firm in 2006, from 1989 to 1991, Mr. Torok served as a Hearings Officer for the Pennsylvania Insurance Department. From 1991 to 2000 he served as Assistant General Counsel and Assistant Secretary of the various companies of the Erie Insurance Group, a property and casualty insurance company. From 2000 to 2002 he served as Assistant General Counsel and Assistant Secretary for the United Services Automobile Association (USAA), a property and casualty insurance company. From 2002 to 2004 he served as Assistant General Counsel and Chief Compliance Officer for the companies of the Argonaut Group, a commercial property and casualty insurance company. He subsequently returned to USAA from 2004 to 2006 to serve as Director of Regulatory Compliance before founding his own law firm. Mr. Torok holds the insurance designations of Chartered Property Casualty Underwriter (CPCU) and Associate in Reinsurance (ARe). Mr. Torok holds an inactive real estate agent’s license in Texas and an inactive escrow agent’s license in Texas and is a member of the Texas Bar Association. Mr. Torok earned a Bachelor of Arts degree in Economics from Gettysburg College and a Juris Doctor degree from Willamette University College of Law.

Board Committees

Audit Committee

Our board of directors has established an Audit Committee.  The Audit Committee meets on a regular basis at least four times a year. Our Audit Committee is comprised of our two independent directors, Jack Tompkins and Richard Ruskey, each of whom is “independent” as defined by our charter. Our Board of Directors has adopted an Audit Committee Charter, a copy of which is posted on our website, http://www.hartmanreits.com/sec-filings/. The audit committee’s primary functions are to evaluate and approve the services and fees of our independent auditors; to periodically review the auditors’ independence; and to assist our board of directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, the system of internal controls that management has established, and the audit and financial reporting process.  All members of the audit committee have significant financial experience.  Our board of directors has determined that Mr. Tompkins satisfies the SEC’s requirements for and serves as our “audit committee financial expert.”

Compensation Committee

Our board of directors has established a Compensation Committee to assist the board of directors in discharging its responsibility in all matters of compensation practices, including any salary and other forms of compensation for our directors and for our employees in the event we ever have employees. Our Compensation Committee is comprised of our two independent directors, Jack Tompkins and Richard Ruskey. Our Board of Directors has adopted our Compensation Committee Charter, a copy of which is posted on our website, http://www.hartmanreits.com/sec-filings/. The primary duties of the Compensation Committee include reviewing all forms of compensation for our directors; approving all stock option grants, warrants, stock appreciation rights and other current or deferred compensation payable with respect to the current or future value of our shares; and advising on

66

changes in compensation of members of our Board of Directors. We currently do not pay any compensation to our executive officers and have no paid employees.

Nominating and Governance Committee

Our board of directors has established a Nominating and Governance Committee, or the “Nominating Committee.” Our Nominating Committee is comprised of our two independent directors, Jack Tompkins and Richard Ruskey. Our Board of Directors has adopted our Nominating Committee Charter, a copy of which is posted on our website, http://www.hartmanreits.com/sec-filings/. The Nominating Committee will recommend nominees to serve on our Board of Directors. The Nominating Committee will consider nominees recommended by stockholders if submitted to the committee in accordance with the procedures specified in our bylaws. Generally, this requires that the stockholder send certain information about the nominee to our corporate secretary between 120 and 150 days prior to the first anniversary of the mailing of notice for the annual meeting held in the prior year. The Nominating Committee is responsible for assessing the appropriate mix of skills and characteristics required of board members in the context of the perceived needs of the board at a given point in time and shall periodically review and recommend for approval by the board any updates to the criteria as deemed necessary. Diversity in personal background, race, gender, age and nationality for the board as a whole may be taken into account favorably in considering individual candidates. The nominating committee will evaluate the qualifications of each director candidate against these criteria in making its recommendation to our board concerning nominations for election or reelection as a director. The process for evaluating candidates recommended by our stockholders pursuant to our bylaws will be no different than the process for evaluating other candidates considered by the Nominating Committee.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics which contains general guidelines for conducting our business and is designed to help directors, employees and consultants resolve ethical issues in an increasingly complex business environment. The Code of Business Conduct and Ethics applies to all of our officers, including our principal executive officer, principal financial officer and principal accounting officer and persons performing similar functions and all members of our board of directors. A copy of our Code of Business Conduct and Ethics will be made available, free of charge, to anyone who requests a copy in writing.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires each director, officer and individual beneficially owning more than 10% of our common stock to file with the SEC, within specified time frames, initial statements of beneficial ownership (Form 3) of our common stock and statements of changes in beneficial ownership (Forms 4 and 5) of our common stock. These specified time frames require the reporting of changes in ownership within two business days of the transaction giving rise to the reporting obligation. Reporting persons are required to furnish us with copies of all Section 16(a) forms filed with the SEC. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2019, or written representations that no additional forms were required, we believe that all required Section 16(a) filings were timely and correctly made by reporting persons during 2019.

Item 11.    Executive Compensation

Compensation of our Executive Officers

67

Our executive officers do not receive compensation directly from us for services rendered to us and we do not intend to pay any compensation to our executive officers. We do not reimburse our advisor directly or indirectly for the salary or other compensation paid to any of our executive officers. As a result, we do not nor has our Board of Directors considered, a compensation policy for our executive officers and we have not included a Compensation and Discussion Analysis in this Annual Report.

Each of our executive officers, including each executive officer who serves as a director, is an officer or employee of our advisor or its affiliates and receives compensation for his or her services, including services performed on our behalf, from such entities.  See Item 13, “Certain Relationships and Related Transactions and Director Independence” below for a discussion of fees paid to our advisor and its affiliates.

Compensation of our Directors

The following table sets forth certain information regarding compensation earned by or paid to our directors during the year ended December 31, 2019. Directors who are also our executive officers do not receive compensation for services rendered as a director.

Name	Fees Earned or Paid In Cash (1)		All Other Compensation (2)		Total
Allen R. Hartman	$	—	$	—	$	—
Jack I. Tompkins	$	16,000	$	38,370	$	54,370
Richard R. Ruskey	$	16,000	$	38,370	$	54,370
	$	32,000	$	76,740	$	108,740

(1)The amounts shown in this column include fees earned for attendance at board of director and committee meetings and annual retainers, as described below under “Cash Compensation.”

(2)As described below under “Equity Plan Compensation,” each of Messrs. Tompkins and Ruskey received shares of restricted common stock as non-cash compensation for their service as independent members of our Board of Directors.  Amounts shown reflect the aggregate fair value of the shares of restricted stock as of the date of grant computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.

Cash Compensation

We pay each of our independent directors an annual retainer of $10,000, plus $1,000 per board meeting attended and $500 per committee meeting attended; provided, however, we do not pay an additional fee to our directors for attending a committee meeting when the committee meeting is held on the same day as a board meeting.  We also reimburse all directors for reasonable out-of-pocket expenses incurred in connection with attending board meetings.

Equity Plan Compensation

We have approved and adopted an omnibus stock incentive plan.  Under our omnibus stock incentive plan, each of our current independent directors was entitled to receive 3,000 shares of restricted common stock in connection with the initial meeting of our full board of directors. Going forward, each new independent director that joins our board of directors receives 3,000 shares of restricted common stock upon election to our board of directors. In addition, on the date following an independent director’s re-election to our board of directors, he or she receives an additional 3,000 shares of restricted common stock. The shares of restricted common stock granted to our independent directors fully vest upon the completion of the annual term for which the director was elected.  As of

68

December 31, 2019, 51,000 shares of restricted common stock have been granted to our current independent directors pursuant to the omnibus stock incentive plan.

Compensation Committee Interlocks and Insider Participation

We do not compensate our executive officers. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Beneficial Owners

The following table sets forth information as of March 31, 2020, regarding the beneficial ownership of our common stock by (1) each person known by us to be the beneficial owner of 5% or more of the outstanding shares of common stock, (2) each of our directors, (3) each of our executive officers, and (4) all of our directors and executive officers as a group. The percentage of beneficial ownership set forth in the table below is calculated based on 18,417,687 shares of our common stock outstanding as of March 31, 2020. The address of each beneficial owner listed below is c/o Hartman Short Term Income Properties XX, Inc., 2909 Hillcroft, Suite 420, Houston, Texas 77057.

Name of Beneficial Owner	Amount and Nature of Shares Beneficially Owned (1)
	Number	Percentage
Allen R. Hartman (2)	22,420	0.12%
Jack I. Tompkins	27,750	0.15%
Richard R. Ruskey	23,250	0.13%
Louis T. Fox, III	—	—%
Mark T. Torok	—	—%
All Officers and Directors as a group	73,420	0.40%

(1)Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities and shares issuable pursuant to options warrants and similar rights held by the respective person or group which may be exercised within 60 days. Except as otherwise indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

(2)Includes 19,000 shares owned by Hartman XX Holdings, Inc., a Texas corporation, and 3,420 shares owned by Mr. Hartman’s spouse, Mrs. Lisa Hartman.  Mr. Hartman is the sole stockholder of Hartman XX Holdings, Inc. and controls the voting and disposition decisions of Hartman XX Holdings, Inc.

Item 13.    Certain Relationships and Related Transactions and Director Independence

The following describes all transactions since January 1, 2016 involving us, our directors, our advisor, our sponsor and any affiliate thereof and all such proposed transactions. See also Note 10 (Related Party Arrangements) to the consolidated financial statements included in this Annual Report. Our independent directors are specifically

69

charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.

Ownership Interests

We initially issued 100 shares of our common stock to Hartman XX Holdings, Inc., or “Holdings,” for $1,000. Holdings is a Texas corporation wholly owned by Allen R. Hartman. Holdings was formed solely for the purpose of facilitating the organization and offering of the initial offering of our shares.  Effective October 15, 2009 we issued an additional 18,900 shares of common stock to Holdings for $189,000. Holdings contributed a related party liability in the amount of $189,000 to us in exchange for the issuance of an additional 18,900 shares of our common stock. The transaction resulted in a total of 19,000 shares of our common stock issued for total consideration of $190,000.

We issued our advisor, Hartman Advisors LLC, 1000 shares of our non-voting convertible preferred stock, or “convertible stock,” for $10,000. Upon the terms described below, these shares may be converted into shares of our common stock, resulting in dilution of common stockholders’ interest in our company.

The shares of our convertible stock held by our advisor will convert into shares of our common stock if (1) we have made total distributions on then then outstanding shares of our 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) we list our common stock for trading on a national securities exchange, provided that 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)  our  advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor), and at the time of such expiration or termination we are deemed to have met the foregoing 6% performance threshold based on our 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 our 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.

Our Relationships with our Advisor and our Sponsor

Our advisor supervises and manages our day-to-day operations and selects our real property investments and real estate-related investments, subject to the oversight by our board of directors. Our advisor also provides marketing, sales and client services on our behalf. Our advisor was formed in March 2009 and is owned 70% by Allen R. Hartman, our Chief Executive Officer and Chairman of the Board of Directors, and 30% by the Property Manager.  The Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. All of our officers and directors, other than our independent directors, are officers of our advisor and serve, and may serve in the future, other affiliates of our advisor.

Fees and Expense Reimbursements Paid to our Advisor

Pursuant to the terms of our Advisory Agreement, we pay our advisor the fees described below.

•We pay our advisor an acquisition fee of 2.5% of (1) the total cost of investment, as defined in connection with the acquisition or origination of any type of real property or real estate-related asset or (2) our

70

allocable cost of a real property or real estate-related asset acquired in a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. For the period from January 1, 2010 to December 31, 2019, we incurred acquisition fees of $6,013,000.

•We pay our advisor an annual asset management fee that is payable monthly in an amount equal to one-twelfth of 0.75% of the higher of the cost or value of each asset, where the cost equals the amount actually paid or budgeted (excluding acquisition fees and expenses), including the amount of any debt attributable to the asset (including debt encumbering the asset after its acquisition) and where the value of an asset is the value established by the most recent independent valuation report, if available. For the years ended December 31, 2019 and 2018 we paid asset management fees to our advisor of $1,760,000 and $1,760,000, respectively.

•We pay our advisor a debt financing fee equal to 1.0% of the amount available under any loan or line of credit we obtain and use to acquire properties or other permitted investments, which will be in addition to the acquisition fee paid to our advisor. For the fiscal years ended December 31, 2019 and 2018, we did not pay our advisor any debt financing fees.

•If our property manager provides a substantial amount of services, as determined by our independent directors, in connection with the sale of one or more assets, it will receive a disposition fee equal to (1) in the case of the sale of real property, the lesser of: (A) one-half of the aggregate brokerage commission paid (including the disposition fee) or, if none is paid, the amount that customarily would be paid, or (B) 3% of the sales price of each property sold, and (2) in the case of the sale of any asset other than real property, 3% of the sales price of such asset. With respect to a property held in a joint venture, the foregoing disposition fee will be reduced to a percentage of such amounts reflecting our economic interest in the joint venture. For the years ended December 31, 2019 and 2018, we did not pay our advisor any disposition fees.

In addition to the fees we pay to our advisor pursuant to the Advisory Agreement, we also reimburse our advisor and its affiliates for the costs and expenses:

•Pursuant to our Advisory Agreement, we are obligated to reimburse our advisor and its affiliates, as applicable, for organization and offering costs (other than selling commissions and the dealer manager fee) incurred on our behalf associated with each of our public offerings, but only to the extent that such reimbursements do not exceed actual expenses incurred by our advisor and would not cause our total organization and offering expenses related to our primary offering (other than selling commissions and the dealer manager fee) to exceed 1.5% of gross offering proceeds from the primary offering. Our advisor and its affiliates will be responsible for the payment of organization and offering expenses (other than selling commissions and the dealer manager fee) to the extent they exceed 1.5% of gross offering proceeds from the primary offering. As of December 31, 2019, total offering costs for our follow-on offering were $12,796,000. We directly incurred $12,796,000 of offering costs for our follow-on offering and $0 in offering costs reimbursable to our advisor for our follow-on offering. As of December 31, 2019, offering costs related to our follow-on offering exceeded 1.5% of the gross offering proceeds from the sale of shares of our common stock in our primary follow-on offering, however none of such excess costs were reimbursable to our advisor because we incurred all such costs directly. Pursuant to our charter, in no event may organization and offering costs (including selling commissions and the dealer manager fees) incurred by us in connection with a completed public offering exceed 15.0% of the gross offering proceeds from the sale of our shares of common stock in the completed public offering. As of December 31, 2019, the organization and offering costs incurred in connection with our follow-on offering did not exceed 15.0% of the gross offering proceeds from the sale of our shares of common stock in the follow-on offering.

•Pursuant to our Advisory Agreement and our charter, we will reimburse our advisor for all operating expenses paid or incurred by our advisor in connection with the services provided to us. However, we will

71

not reimburse our advisor or its affiliates at the end of any fiscal quarter for total operating expenses (as defined in our Advisory Agreement)) that for the four consecutive fiscal quarters then ended, or the “expense year,” exceeded the greater of (1) 2% of our average invested assets or (2) 25% of our net income, which we refer to as the “2%/25% Guidelines,” and our advisor must reimburse us quarterly for any amounts by which our total operating expenses exceed the 2%/25% Guidelines in the expense year, unless our independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. For the four fiscal quarters ended December 31, 2019, our total operating expenses were $92,719,000. Total operating expenses incurred during the four fiscal quarters ended December 31, 2019, did not exceed the 2%/25% Limitation. We reimbursed our advisor $0 in operating expenses during the four fiscal quarters ended December 31, 2019.

Our Advisory Agreement has a one-year term expiring February 9, 2021, subject to an unlimited number of successive one-year renewals upon mutual consent of the parties. We may terminate the Advisory Agreement without cause or penalty upon 60 days’ written notice and immediately for cause or upon the bankruptcy of our advisor. If we terminate the Advisory Agreement, we will pay our advisor all unpaid reimbursements of expenses and all earned but unpaid fees.

Property Management Fees Paid to Our Property Manager

We have entered into property management agreements with our property manager, Hartman Income REIT Management, Inc., an affiliate of our sponsor, with respect to the management of properties. Pursuant to the management agreements, we pay the property manager a monthly management fee in an amount equal to between 3% and 5% of each property’s gross revenues (as defined in the respective management agreements) for each month. Each management agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless either party gives prior notice of its desire to terminate the management agreement, provided that we may terminate the management agreement at any time without cause or upon an uncured breach of the agreement upon thirty (30) days prior written notice to the property manager. For the fiscal years ended December 31, 2019 and 2018, we have paid property management fees and reimbursements of $8,053,000 and $4,910,000, respectively, to our property manager.

Transactions with Related Persons

The following describes all transactions during the period from January 1, 2018 to December 31, 2019 involving us, our directors, our advisor, our sponsor and any affiliate thereof and all such proposed transactions. See also Note 10 (Related Party Transactions) to the consolidated financial statements included in this Annual Report. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.

Ownership Interests

Hartman Advisors LLC, is owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. and Subsidiaries of which approximately 20% is owned by Allen R. Hartman who is the Chief Executive Officer and Chairman of the Board of Directors. Hartman Advisors LLC owns 100% of the issued and outstanding shares of Preferred Stock.

We own 1,561,523 shares of the common stock of Hartman Income REIT, Inc., which we acquired for cash consideration of $8,978,000. We receive monthly dividend distributions from Hartman Income REIT, Inc. with respect to our common stock investment.

72

Our consolidated financial statements include the accounts of Hartman SPE, LLC in which our membership interest is 36.16%. Our wholly owned subsidiary, Hartman SPE Management, LLC, is the sole manager of Hartman SPE, LLC.

Advisory and Property Management

We pay acquisition fees and asset management fees to the Advisor in connection with the acquisition of properties and management of the Company. We pay property management fees and reimbursable expenses and leasing commissions to the Property Manager in connection with the management and leasing of our properties.

Mergers with Hartman Income REIT, Inc. and Hartman Short Term Income Properties XIX, Inc.

As described above in Part I, Item 1, “Pending Mergers,” the contemplated Mergers and the description thereof is incorporated herein by reference.

Loan to Hartman Short Term Income Properties XIX, Inc.

We have a note receivable from Hartman Short Term Income Properties XIX, Inc. in the original amount of $4,500,000. The outstanding balance of the note is $4,200,000 as of December 31, 2019.

Loan to Hartman Retail II Holdings Company, Inc.

Our taxable REIT subsidiary, Hartman TRS, Inc. ("TRS") has a note receivable from Hartman Retail II Holdings Company, Inc., an affiliate of the Advisor and the Property Manager, in the original amount of $7,231,000. The outstanding balance of the note is $2,476,000 as of December 31, 2019. The maturity date of the note, as amended, is December 31, 2020.

Loan to Hartman Retail III Holdings Company, Inc.

Our taxable REIT subsidiary, Hartman TRS, Inc. ("TRS") has a note receivable from Hartman Retail III Holdings Company, Inc., an affiliate of the Advisor and the Property Manager, in the principal amount of $7,500,000. The outstanding balance of the note is $6,782,455 as of December 31, 2019. The maturity date of the note, as amended is February 29, 2021.

Loan to Hartman Ashford Bayou, LLC

Our taxable REIT subsidiary, Hartman TRS, Inc. ("TRS") has a note receivable from Hartman Ashford Bayou LLC, an affiliate of the Advisor and the Property Manager, in the original amount of $3,500,000. The outstanding balance of the note is $3,829,711 as of December 31, 2019. The maturity date of the note, as amended is March 31, 2021.

Loan from Hartman vREIT XXI, Inc.

During 2019, we borrowed under an unsecured promissory note payable to Hartman vREIT XXI, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $4,400,000. The outstanding balance of the note is $4,400,000 as of December 31, 2019. The maturity date of the note, as amended, is March 31, 2021.

Other than as described above, there is no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.

73

Policies and Procedures for Transactions with Related Persons

In order to reduce or eliminate certain potential conflicts of interest, our charter and our Advisory Agreement contain restrictions and conflict resolution procedures relating to transactions we enter into with our advisor, our directors or their respective affiliates. Each of the restrictions and procedures that apply to transactions with our advisor and its affiliates will also apply to any transaction with any entity or real estate program controlled by our advisor and its affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties.

Director Independence

As required by our charter, a majority of the members of our Board of Directors must qualify as “independent directors,” as such term is defined by our charter. Our charter defines independent director in accordance with the North American Securities Administrators Association, Inc.’s Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007. As defined in our charter, an independent director is a person who is not, on the date of determination, and within the last two years from the date of determination been, directly or indirectly, associated with our sponsor or our advisor by virtue of (1) ownership of an interest in our sponsor, our advisor, or any of their affiliates; (2) employment by our sponsor, our advisor, or any of their affiliates; (3) service as an officer or director of our sponsor, our advisor, or any of their affiliates (other than as one of our directors); (4) performance of services, other than as a director, for us; (5) service as a director or trustee of more than three real estate investment trusts organized by our sponsor or advised by our advisor; or (6) maintenance of a material business or professional relationship with our sponsor, our advisor, or any of their affiliates. A business or professional relationship is considered “material” if the aggregate gross revenue derived by the director from the sponsor, the advisor, and their affiliates exceeds 5.0% of either the director’s annual gross revenue during either of the last two years or the director’s net worth on a fair market value basis. An indirect association with the sponsor or the advisor shall include circumstances in which a director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law, or brother- or sister-in-law is or has been associated with the sponsor, the advisor, any of their affiliates, or with us.

We have a three-member board of directors. One of our directors, Allen R. Hartman, is affiliated with our sponsor and its affiliates, and we do not consider Mr. Hartman to be an independent director.  After review of all relevant transactions or relationships between each director, or any of his family members, and our company, our senior management and our independent registered public accounting firm, our board has determined that Messrs. Tompkins and Ruskey, who comprise the majority of our board, qualify as independent directors as defined in our charter.

Item 14.    Principal Accounting Fees and Services

Independent Registered Public Accounting Firm

The audit committee has engaged Weaver and Tidwell, L.L.P. (“Weaver”) as our independent registered public accounting firm to audit our consolidated financial statements for the year ended December 31, 2019, which represents a change in the engagement of our certifying accountant.  The audit committee engaged Grant Thornton , L.L.P. (“GT”) as our independent registered public accounting firm to audit our consolidated financial statements for the years ended December 31, 2018 and 2017. The change in certifying accountant was reported in our Current Report on Form 8-K filed with the SEC on December 18, 2019.

The audit committee reserves the right to select new auditors at any time in the future in its discretion if it deems such decision to be in the best interests of our company and our stockholders.  

74

Pre-Approval Policies

The audit committee charter imposes a duty on the audit committee to pre-approve all auditing services performed for us by our independent auditors as well as all permitted non-audit services in order to ensure that the provision of such services does not impair the auditors’ independence. In determining whether or not to pre-approve services, the audit committee will consider whether the service is a permissible service under the rules and regulations promulgated by the SEC. The audit committee, may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.

All services rendered to us by Weaver for the year ended December 31, 2019 and GT for the years ended December 31, 2018 and 2017, were pre-approved in accordance with the policies and procedures described above.

Independent Registered Public Accounting Firm Fees

The audit committee reviewed the audit and non-audit services performed by Weaver and GT, as well as the fees charged by Weaver and GT for such services.  In its review of the non-audit service fees, the audit committee considered whether the provision of such services is compatible with maintaining the independence of Weaver. The aggregate fees billed to us by GT and Weaver for professional accounting services for the years ended December 31, 2019 and 2018 are set forth in the tables below.  

Weaver

	2019		2018
Audit fees	$	46,825	$	—
Audit related fees	—		—
Tax fees	—		—
Total	$	46,825	$	—

GT

	2019		2018
Audit fees	$	382,130	$	443,903
Audit related fees	82,274		—
Tax fees	89,237		—
Total	$	553,641	$	443,903

For purposes of the preceding tables, GT’s and Weaver’s professional fees are classified as follows:

•Audit fees—These are fees for professional services performed for the audit of our annual financial statements, the required review of quarterly financial statements, registration statements and other procedures performed in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.

75

•Audit-related fees—These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as audits and due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews, and consultation concerning financial accounting and reporting standards.

•Tax fees—These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning, and tax advice, including federal, state, and local issues. Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state, and local tax issues related to due diligence.

PART IV

Item 15.    Exhibits and Financial Statement Schedules

The following documents are filed as part of this Annual Report:

(a) Exhibits

Exhibits.  The index of exhibits below is incorporated herein by reference.

(b) Financial Statement Schedules

See the Index to Consolidated Financial Statements and Schedule at page F-1 of this report.

The following financial statement schedule is included herein at pages F-24 through F-27 of this report:

Schedule III – Real Estate Assets and Accumulated Depreciation

Item 16.    Form 10-K Summary

The Company has elected not to provide summary information.

76

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Houston, State of Texas, on May 13, 2020.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.

By:	/s/ Allen R. Hartman
	Allen R. Hartman, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

POWER OF ATTORNEY

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated.

By:	/s/ Allen R. Hartman	Date: May 13, 2020
	Allen R. Hartman, Chief Executive Officer and  Chairman of the Board (Principal Executive Officer)
By:	/s/ Louis T. Fox, III	Date: May 13, 2020
	Louis T. Fox, III, Chief Financial Officer  (Principal Financial Officer and  Principal Accounting Officer)
By:	/s/ Jack I. Tompkins	Date: May 13, 2020
	Jack I. Tompkins, Director
By:	/s/ Richard R. Ruskey	Date: May 13, 2020
	Richard R. Ruskey, Director

77

EXHIBIT INDEX

78

Exhibit Number	Description of Documents
1.1	Dealer Manager Agreement (Incorporated by reference to Exhibit 1.1 to the Company’s Form 8-K filed February 1, 2012)
3.1.1	First Articles of Amendment to Third Amended and Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1to the Company’s Form 10-K filed April 12, 2012)
3.1.2	Third Amended and Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 1 to the registrant’s registration statement on Form 8-A12G (SEC File No. 000-53912) March 22, 2010)
3.2	Bylaws of the Registrant (Incorporated by reference to Exhibit 2 to the registrant’s registration statement on Form 8-A12G (SEC File No. 000-53912) March 22, 2010)
10.1	Form of Advisory Agreement between the Registrant and Hartman Advisors, LLC. (Incorporated by reference to Exhibit 10.1 to the registrant’s registration statement on Form S-11 Amendment No. 9 (SEC File No. 333-154750) November 24, 2009)
10.2	Form of Property Management Agreement between the Registrant and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.2 to registrant’s registration statement on Form S-11 Amendment No. 9 (SEC File No. 333-154750) November 24, 2009)
10.3	Form of Employee and Director Incentive Share Plan (Incorporated by reference to Exhibit 10.3 to registrant’s registration statement on Form S-11 Amendment No. 5 (SEC File No. 333-154750) July 14, 2009)
10.4	Operating Agreement of Hartman Richardson Heights Properties, LLC (Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-K filed March 31, 2011)
10.5	Economic Development and Incentive Agreement by and between the City of Richardson, Texas and Hartman Richardson Heights Properties, LLC (Incorporated by reference to Exhibit 10.12 to the Company’s Form 10-Q filed August 14, 2012)
10.6	Loan Agreement, dated May 11, 2012, by and among Texas Capital Bank, NA and Hartman Richardson Heights Properties, LLC, Hartman Short Term Income Properties XX, Inc., and Hartman Cooper Street Plaza, LLC. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed May 18, 2012)
10.7	Promissory Note, dated May 11, 2012, by Hartman Richardson Heights Properties, LLC, Hartman Short Term Income Properties XX, Inc., and Hartman Cooper Street Plaza, LLC in favor of Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed May 18, 2012)
10.8	Assignment and Subordination of Management Agreement, dated as of May 11, 2012, by and between Hartman Richardson Heights Properties, LLC, Hartman Income REIT Management, Inc. and Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed May 18, 2012)
10.9	Assignment and Subordination of Management Agreement, dated as of May 11, 2012, by and between Hartman Cooper Street Plaza, LLC, Hartman Income REIT Management, Inc. and Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed May 18, 2012)
10.1	Assignment of Rents, dated as of May 11, 2012, by and between Hartman Richardson Heights Properties, LLC and Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed May 18, 2012)
10.11	Assignment of Rents, dated as of May 11, 2012, by and between Hartman Cooper Street Plaza, LLC and Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K filed May 18, 2012)
10.12	Assignment of Licenses, Permits and Contracts, dated as of May 11, 2012, by and between Hartman Richardson Heights Properties, LLC, Hartman Short Term Income Properties XX, Inc., Hartman Cooper Street Plaza, LLC, and Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K filed May 18, 2012)
10.13	Guaranty Agreement (Validity), dated as of May 11, 2012, by Allen R. Hartman as guarantor in favor of Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.10 to the Company’s Form 8-K filed May 18, 2012)

79

10.14	Real Property and Company Management Agreement, dated as of March 26, 2012, by and among Hartman Cooper Street Plaza, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.11 to the Company’s Form 8-K filed May 18, 2012)
10.15	Loan Modification Agreement, dated October 16, 2012, by and among Texas Capital Bank, NA and Hartman Bent Tree Green, LLC; Hartman Richardson Heights Properties, LLC, Hartman Short Term Income Properties XX, Inc., and Hartman Cooper Street Plaza, LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed October 19, 2012)
10.16	Promissory Note, dated October 16, 2012, by Hartman Bent Tree Green, LLC; Hartman Richardson Heights Properties, LLC, Hartman Short Term Income Properties XX, Inc., and Hartman Cooper Street Plaza, LLC in favor of Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed October 19, 2012)
10.17	Real Property Management Agreement, dated as of October 16, 2012, by and among Hartman Bent Tree Green, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed October 19, 2012)
10.18	Loan Modification Agreement dated as of March 15, 2013 by and among Hartman Parkway LLC, Hartman Bent Tree Green, LLC; Hartman Richardson Heights Properties, LLC, Hartman Short Term Income Properties XX, Inc., and Hartman Cooper Street Plaza, LLC in favor of Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 21, 2013)
10.19	Amended and Restated Promissory Note dated as of March 15, 2013 by and among Hartman Parkway LLC, Hartman Bent Tree Green, LLC; Hartman Richardson Heights Properties, LLC, Hartman Short Term Income Properties XX, Inc., and Hartman Cooper Street Plaza, LLC in favor of Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed March 21, 2013)
10.20	Real Property Management Agreement, dated as of March 15, 2013, by and among Hartman Parkway, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed March 21, 2013)
10.21	Purchase and Sale Agreement and Escrow Instructions, dated as of February 7, 2014, by and between Hartman Gulf Plaza Acquisitions L.P. and Hartman Short Term Income Properties XX, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed February 7, 2014)
10.22	Agreement of Sales and Purchase, dated as of March 12, 2014, by and between AFS NW Business Park, L.P. and Hartman Short Term Income Properties XX, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 14, 2014)
10.23	First Amendment to Agreement of Sale and Purchase, dated as of April 10, 2014, by and between AFS NW Business Park, L.P. and Hartman Short Term Income Properties XX, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 17, 2014)
10.24	Loan Modification Agreement, dated June 13, 2014, by and among Texas Capital Bank, NA and Hartman Richardson Heights Properties, LLC, Hartman Cooper Street Plaza, LLC, Hartman Bent Tree Green LLC, Hartman Parkway LLC and Hartman Short Term Income Properties XX, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 19, 2014)
10.25	Loan Agreement by and between Hartman Mitchelldale Business Park, LLC and Security Life of Denver Insurance Company, dated as of June 13, 2014 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed June 19, 2014)
10.26	Promissory Note, dated as of June 13, 2014, by Hartman Mitchelldale Business Park, LLC, in favor of Security Life of Denver Insurance Company (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed June 19, 2014)
10.27	Real Property Management Agreement, dated as of June 13, 2014, by and among Hartman Mitchelldale  Business Park, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed June 19, 2014)

80

10.28	Assignment, Consent and Subordination Regarding Management Agreement dated June 30, 2014 in favor of Security Life of Denver Insurance Company – Mitchelldale (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed June 19, 2014)
10.29	Assignment of Rents and Leases, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Mitchelldale (Incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed June 19, 2014)
10.30	Limited Guaranty, dated as of June 13, 2013 in favor of Security Life of Denver Insurance Company – Mitchelldale (Incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K filed June 19, 2014)

10.31	Affiliate Guaranty, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Mitchelldale (Incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K filed June 19, 2014)
10.32	Loan Agreement by and between Hartman Richardson Heights Properties, LLC and Security Life of Denver Insurance Company, dated as of June 13, 2014 (Incorporated by reference to Exhibit 10.10 to the Company’s Form 8-K filed June 19, 2014)
10.33	Promissory Note, dated as of June 13, 2014, by Hartman Richardson Heights Properties, LLC, in favor of Security Life of Denver Insurance Company (Incorporated by reference to Exhibit 10.11 to the Company’s Form 8-K filed June 19, 2014)
10.34	Assignment of Rents and Leases, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Richardson Heights (Incorporated by reference to Exhibit 10.12 to the Company’s Form 8-K filed June 19, 2014)
10.35	Assignment of Rents and Leases (2nd Assignment), dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Richardson Heights (Incorporated by reference to Exhibit 10.13 to the Company’s Form 8-K filed June 19, 2014)
10.36	Assignment, Consent and Subordination Regarding Management Agreement, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Richardson Heights (Incorporated by reference to Exhibit 10.14 to the Company’s Form 8-K filed June 19, 2014)
10.37	Limited Guaranty, dated as of June 13, 2013 in favor of Security Life of Denver Insurance Company – Richardson Heights (Incorporated by reference to Exhibit 10.15 to the Company’s Form 8-K filed June 19, 2014)
10.38	Affiliate Guaranty, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Richardson Heights (Incorporated by reference to Exhibit 10.16 to the Company’s Form 8-K filed June 19, 2014)
10.39	Loan Agreement by and between Hartman Cooper Street Plaza, LLC and Security Life of Denver Insurance Company, dated as of June 13, 2014 (Incorporated by reference to Exhibit 10.17 to the Company’s Form 8-K filed June 19, 2014)
10.40	Promissory Note, dated as of June 13, 2014, by Hartman Cooper Street Plaza, LLC, in favor of Security Life of Denver Insurance Company (Incorporated by reference to Exhibit 10.18 to the Company’s Form 8-K filed June 19, 2014)
10.41	Assignment of Rents and Leases, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Cooper Street (Incorporated by reference to Exhibit 10.19 to the Company’s Form 8-K filed June 19, 2014)
10.42	Assignment of Rents and Leases (2nd Assignment), dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Cooper Street (Incorporated by reference to Exhibit 10.20 to the Company’s Form 8-K filed June 19, 2014)
10.43	Assignment, Consent and Subordination Regarding Management Agreement, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company –  Cooper Street (Incorporated by reference to Exhibit 10.21 to the Company’s Form 8-K filed June 19, 2014)

81

10.44	Limited Guaranty, dated as of June 13, 2013 in favor of Security Life of Denver Insurance Company – Cooper Street (Incorporated by reference to Exhibit 10.22 to the Company’s Form 8-K filed June 19, 2014)
10.45	Affiliate Guaranty, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Cooper Street (Incorporated by reference to Exhibit 10.23 to the Company’s Form 8-K filed June 19, 2014)
10.46	Loan Agreement by and between Hartman Bent Tree Green, LLC and Security Life of Denver Insurance Company, dated as of June 13, 2014 (Incorporated by reference to Exhibit 10.24 to the Company’s Form 8-K filed June 19, 2014)
10.47	Promissory Note, dated as of June 13, 2014, by Hartman Bent Tree Green, LLC, in favor of Security Life of Denver Insurance Company (Incorporated by reference to Exhibit 10.25 to the Company’s Form 8-K filed June 19, 2014)
10.48	Assignment of Rents and Leases, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Bent Tree Green (Incorporated by reference to Exhibit 10.26 to the Company’s Form 8-K filed June 19, 2014)
10.49	Assignment of Rents and Leases (2nd Assignment), dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Bent Tree Green (Incorporated by reference to Exhibit 10.27 to the Company’s Form 8-K filed June 19, 2014)

10.50	Assignment, Consent and Subordination Regarding Management Agreement, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Bent Tree Green (Incorporated by reference to Exhibit 10.28 to the Company’s Form 8-K filed June 19, 2014)
10.51	Limited Guaranty, dated as of June 13, 2013 in favor of Security Life of Denver Insurance Company – Bent Tree Green (Incorporated by reference to Exhibit 10.29 to the Company’s Form 8-K filed June 19, 2014)
10.52	Affiliate Guaranty, dated as of June 13, 2014 in favor of Security Life of Denver Insurance Company – Bent Tree Green (Incorporated by reference to Exhibit 10.30 to the Company’s Form 8-K filed June 19, 2014)
10.53	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 Company’s Form 8-K filed July 7, 2014)
10.54	Loan Modification Agreement dated July 2, 2014 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed July 7, 2014)
10.55	Note Amended and Restated dated July 2, 2014 (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed July 7, 2014)
10.56	Assignment of Rents – Gulf Plaza (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed July 7, 2014)
10.57	Assignment of Management Agreement – Gulf Plaza (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed July 7, 2014)
10.58	Agreement of Purchase and Sale, dated as of November 14, 2014, between U.S. Bank National Association, as Trustee, as successor-in-interest to Bank of America, National Association, as successor-by-merger to LaSalle Bank National Association, as Trustee for the Registered Holders of Bear Stearns Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-PWR17 and Hartman XX Limited Partnership, a Texas limited partnership, its successors or assigns. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 18, 2014)
10.59	Real Property and Company Management Agreement by and between Hartman Highway 6 LLC and Hartman Income REIT Management, Inc., dated as of December 30, 2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed January 1, 2015)

82

10.60	First Amendment to Agreement of Purchase and Sale, dated as of December 5, 2014 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed January 1, 2015)
10.61	Purchase and Sales and Escrow Agreement, dated as of March 12, 2015, by and between 12830 Hillcrest Road Investors LP and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 16, 2015)
10.62	Purchase and Sales Agreement, dated as of March 24, 2015, by and between PKY 400 North Belt, LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 26, 2015)
10.63	Real Property Management Agreement, dated as of April 21, 2015 by and between Hartman Hillcrest, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed May 8, 2015)
10.64	Promissory Note, dated May 1, 2015, by Hartman Hillcrest, LLC in favor of Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed May 8, 2015)
10.65	Deed of Trust, dated May 1, 2015, by Hartman Hillcrest LLC in favor of Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed May 8, 2015)
10.66	Real Property Management Agreement, dated as of April 21, 2015 by and between Hartman North Belt, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed May 15, 2015)
10.67	Promissory Note, dated May 8, 2015, by Hartman 400 North Belt, LLC in favor of Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed May 15, 2015)
10.68	Deed of Trust, dated May 8, 2015, by Hartman 400 North Belt LLC in favor of Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed May 15, 2015)
10.69	Negative Pledge, dated May 8, 2015, by Hartman 400 North Belt LLC and Hartman XX Operating Partnership in favor of Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed May 15, 2015)
10.70	Purchase and Sales Agreement, dated as of May 27, 2015 by and between AF Corporate Park Place, Ltd. and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 2, 2015)

10.71	Purchase and Sales Agreement, dated as of June 9, 2015 by and between CSFB Skymark Tower 2007-C2 LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 11, 2015)
10.72	Purchase and Sales Agreement, dated as of June 12, 2015 by and between KWI Ashford Westchase Buildings, L.P. and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 19, 2015)
10.73	Real Property Management Agreement, dated as of July 7, 2015 by and between Hartman Ashford Crossing LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed August 4, 2015)
10.74	Negative Pledge, dated July 31, 2015, by Hartman Ashford Crossing LLC and Hartman XX Operating Partnership in favor of Texas Capital Bank, NA (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed August 4, 2015)
10.75	Real Property Management Agreement, dated as of July 16, 2015 by and between Hartman Corporate Park Place, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed August 31, 2015)

83

10.76	Deed of Trust, Assignment of Rents and Security Agreement, dated as of August 24, 2015 by and between Hartman 400 North Belt LLC, Hartman Corporate Park Place LLC, Hartman Hillcrest LLC and Hartman Short Term Income Properties XX, Inc. and East West Bank (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed August 31, 2015)
10.77	Revolving Promissory Note, dated as of August 24, 2015 by and between Hartman 400 North Belt LLC, Hartman Corporate Park Place LLC, Hartman Hillcrest LLC and Hartman Short Term Income Properties XX, Inc. and East West Bank (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed August 31, 2015)
10.78	Assignment of Leases and Rents, dated as of August 21, 2015 by and between Hartman 400 North Belt LLC, Hartman Corporate Park Place LLC, Hartman Hillcrest LLC and Hartman Short Term Income Properties XX, Inc. and East West Bank (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed August 31, 2015)
10.79	Real Property Management Agreement, dated as of July 16, 2015 by and between Hartman Skymark Tower, LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed September 8, 2015)
10.80	First Amendment to Purchase and Sale Agreement dated as of June 29, 2015 by and between CSFB Skymark Tower 2007-C2 LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed September 8, 2015)
10.81	Second Amendment to Purchase and Sale Agreement dated as of July 6, 2015 by and between CSFB Skymark Tower 2007-C2 LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed September 8, 2015)
10.82	Third Amendment to Purchase and Sale Agreement dated as of July 21, 2015 by and between CSFB Skymark Tower 2007-C2 LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed September 8, 2015)
10.83	Purchase and Sales Agreement, dated as of September 15, 2015 by and between KW Funds One-Technology, LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed September 15, 2015)
10.84	First Amendment to Purchase and Sales Agreement, dated as of October 8, 2015 by and between KW Funds One-Technology, LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed October 14, 2015)
10.85	Real Property Management Agreement dated October 12, 2015 by and between Hartman One Technology LLC and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 16, 2015)
10.86	Loan Modification Agreement dated November 10, 2015 by and among Hartman Parkway LLC, Hartman Short Term Income Properties XX, Inc., Hartman Gulf Plaza LLC, Hartman Highway 6 LLC, Hartman XX Limited Partnership, Hartman XX REIT GP LLC and Hartman One Technology LLC and Texas Capital Bank, National Association (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed November 16, 2015)

10.87	Amended and Restated Promissory Note dated November 10, 2015 by and among Hartman Parkway LLC, Hartman Short Term Income Properties XX, Inc., Hartman Gulf Plaza LLC, Hartman Highway 6 LLC, Hartman XX Limited Partnership, Hartman XX REIT GP LLC and Hartman One Technology LLC and Texas Capital Bank, National Association (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed November 16, 2015)
10.88	Assignment of Rents dated November 10, 2015 by Hartman One Technology LLC in favor of Texas Capital Bank, National Association (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed November 16, 2015)
10.89	Assignment and Subordination of Management Agreement dated November 10, 2015 by Hartman One Technology LLC in favor of Texas Capital Bank, National Association and Hartman Income REIT Management, Inc. (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed November 16, 2015)

84

10.90	Purchase and Sales Agreement, dated as of February 2, 2016 by and between EQYInvest Mission Bend, LLC and Hartman Short Term Income Properties XX, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed February 3, 2016)
10.91	Purchase and Sales Agreement, dated as of April 4, 2016 by and between Market Place Boulevard, Irving, LLC and Hartman Short Term Income Properties XX, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 6, 2016)
10.92	Guaranty Agreement, dated as of May 17, 2016 by and between JPMorgan Chase Bank, National Association and Hartman Short Term Income Properties XX, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed May 20, 2016)
10.93	Loan Agreement dated as of June 1, 2016 by and between Southside Bank and Hartman Westway One, LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 7, 2016)
10.94	Promissory Note dated June 1, 2016 by Hartman Westway One, LLC in favor of Southside Bank (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed June 7, 2016)
10.95	Deed of Trust, Security Agreement and Assignment of Rents dated June 1, 2016 by Hartman Westway One, LLC in favor of Southside Bank (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed June 7, 2016)
10.96	First Amendment to Real Estate Purchase and Sale Agreement dated April 26, 2016 by and between Market Place Boulevard, Irving, LLC and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed June 7, 2016)
10.97	Contract of Sale, dated as of October 14, 2016 by and between Village Pointe Investors, L.P. and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed October 20, 2016)
10.98	Agreement of Purchase and Sale and Joint Escrow Instructions Agreement, dated November 21, 2016 by and between Massachusetts Mutual Life Insurance Company and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 28, 2016)
10.99	First Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions dated December 2, 2016 by and between Massachusetts Mutual Life Insurance Company and Hartman XX Limited Partnership (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed December 29, 2016)
10.100	Loan Agreement dated as of December 22, 2016 by and between Southside Bank and Hartman Three Forest Plaza, LLC (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed December 29, 2016)
10.101	Promissory Note dated December 22, 2016 by Hartman Three Forest Plaza, LLC in favor of Southside Bank (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed December 29, 2016)
10.102	Deed of Trust, Security Agreement and Assignment of Rents dated December 22, 2016 by Hartman Westway One, LLC in favor of Southside Bank (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed December 29, 2016)
10.103	Guaranty Agreement dated December 22, 2016 by Hartman Three Forest Plaza, LLC in favor of Southside Bank (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed December 29, 2016)
10.104	Agreement and Plan of Merger among Hartman Short Term Income Properties XX, Inc., Hartman XX Limited Partnership, Hartman Income REIT, Inc. and Hartman Income REIT Operating Partnership, L.P. dated July 21, 2017 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 24, 2017)

85

10.105	Agreement and Plan of Merger among Hartman Short Term Income Properties XX, Inc., and Hartman Short Term Income Properties XIX, Inc. dated July 21, 2017 (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on July 24, 2017)
21.1*	List of subsidiaries of Hartman Short Term Income Properties XX, Inc.
31.1*	Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

* Filed herewith

86

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Stockholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-9
Financial Statement Schedule
Schedule III – Real Estate Assets and Accumulated Depreciation and Amortization	F-29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Hartman Short Term Income Properties XX, Inc. and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Hartman Short Term Income Properties XX, Inc. (a Maryland corporation) and Subsidiaries (the Company) as of December 31, 2019, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2019, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s Hartman SPE term loan has a maturity date less than twelve months from the date these consolidated financial statements are issued, which raises substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Weaver and Tidwell, L.L.P.

F-1

WEAVER AND TIDWELL, L.L.P.

We have served as the Company’s auditor since 2019.

Houston, Texas

May 13, 2020

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Hartman Short Term Income Properties XX, Inc. and Subsidiaries

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Hartman Short Term Income Properties XX, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2018, the related consolidated statements of operations, equity, and cash flows for the year ended December 31, 2018, and the related notes and financial statement schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We served as the Company’s auditor from 2018 to 2019.

Philadelphia, Pennsylvania

April 8, 2019

F-3

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	2019		2018
ASSETS
Real estate assets, at cost	$	594,569	$	583,112
Accumulated depreciation and amortization	(117,652)		(89,840)
Real estate assets, net	476,917		493,272
Cash and cash equivalents	1,033		17,780
Restricted cash	26,078		33,696
Accrued rent and accounts receivable, net	12,576		11,881
Notes receivable - related party	17,288		6,676
Deferred leasing commission costs, net	10,790		8,301
Goodwill	250		250
Prepaid expenses and other assets	735		1,249
Due from related parties	2,130		—
Investment in affiliate	8,978		8,978
Total assets	$	556,775	$	582,083
LIABILITIES AND EQUITY
Liabilities:
Notes payable, net	$	303,039	$	305,907
Due to related parties	—		1,496
Accounts payable and accrued expenses	23,444		21,335
Tenants' security deposits	5,286		4,864
Total liabilities	331,769		333,602
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	—		—
Common stock, $0.001 par value, 750,000,000 authorized, 18,417,687 shares and 17,711,384 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	18		18
Additional paid-in capital	174,019		165,084
Accumulated distributions and net loss	(109,406)		(95,162)
Total stockholders' equity	64,631		69,940
Noncontrolling interests in subsidiary	160,375		178,541
Total equity	225,006		248,481
Total liabilities and equity	$	556,775	$	582,083
The accompanying notes are an integral part of these consolidated financial statements.

F-4

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
	Year Ended December 31,
	2019		2018
Revenues
Rental revenues	$	72,045	$	49,112
Tenant reimbursements and other revenues	14,679		7,910
Total revenues	86,724		57,022
Expenses (income)
Property operating expenses	31,721		18,613
Asset management fees	1,760		1,760
Real estate taxes and insurance	13,545		9,412
Depreciation and amortization	27,812		16,700
General and administrative	5,901		4,099
Interest expense	13,834		11,306
Interest and dividend income	(1,854)		(1,328)
Total expenses, net	92,719		60,562
Net loss	(5,995)		(3,540)
Net loss attributable to noncontrolling interests	(4,562)		(2,713)
Net loss attributable to common stockholders	$	(1,433)	$	(827)
Net loss attributable to common stockholders per share	$	(0.08)	$	(0.05)
Weighted average number of common shares outstanding, basic and diluted	18,304		17,946
The accompanying notes are an integral part of these consolidated financial statements.

F-5

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance, January 1, 2018	1	$	—	18,004	$	18	$	167,871	$	(81,188)	$	86,701	$	13,338	$	100,039
Redemptions of common shares	—	—		(298)	—		(2,864)		—		(2,864)		—		(2,864)
Issuance of common shares	—	—		6	—		77		—		77		—		77
Purchase of non-controlling Interest	—	—		—	—		—		—		—		167,968		167,968
Dividends and distributions (cash)	—	—		—	—		—		(12,555)		(12,555)		(644)		(13,199)
Net loss	—	—		—	—		—		(1,419)		(1,419)		(2,121)		(3,540)
Balance, December 31, 2018	1	$	—	17,712	$	18	$	165,084	$	(95,162)	$	69,940	$	178,541	$	248,481
Issuance of common shares	—	—		6	—		76		—		76		—		76
Purchase of non-controlling interest	—	—		700	—		8,859		—		8,859		(8,859)		—
Dividends and distributions (cash)	—	—		—	—		—		(12,811)		(12,811)		(4,745)		(17,556)
Net loss	—	$	—	—	$	—	$	—	$	(1,433)	$	(1,433)	$	(4,562)	$	(5,995)
Balance, December 31, 2019	1	$	—	18,418	$	18	$	174,019	$	(109,406)	$	64,631	$	160,375	$	225,006
The accompanying notes are an integral part of these consolidated financial statements.

F-6

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	Year Ended December 31,
	2019		2018
Cash flows from operating activities:
Net loss	$	(5,995)	$	(3,540)
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation	77		74
Depreciation and amortization	27,812		16,700
Deferred loan and lease commission costs amortization	3,558		2,981
Bad debt (recovery) provision, net	1,674		(4)
Changes in operating assets and liabilities:
Accrued rent and accounts receivable	(2,369)		(3,929)
Deferred leasing commissions	(4,948)		(4,037)
Prepaid expenses and other assets	(21)		20,264
Accounts payable and accrued expenses	2,069		9,369
Due to/from related parties	(3,626)		6,001
Tenants' security deposits	422		272
Net cash provided by operating activities	18,653		44,151
Cash flows from investing activities:
Acquisition deposits	535		(535)
Advance to affiliate - related party	(10,612)		—
Repayment of note receivable - related party	—		3,039
Lender required capital reserves	—		(10,405)
Additions to real estate	(11,457)		(8,940)
Net cash used in investing activities	(21,534)		(16,841)
Cash flows from financing activities:
Distributions to common stockholders	(12,772)		(12,555)
Distributions to non-controlling interest	(4,745)		(658)
Borrowings under insurance premium finance note	1,577		—
Repayments under insurance premium finance note	(1,577)		—
Payments of deferred loan costs	(72)		(4,734)
Repayments under term loan notes	(8,295)		(40,165)
Borrowing from affiliate	4,400		—
Borrowings under term loan notes	—		259,000
Borrowings under revolving credit facility	—		11,525
Repayments under revolving credit advances	—		(45,225)
Lender reserve for Promenade payoff	—		(10,273)
Proceeds from issuance of common stock, net of redemptions	—		(2,859)
Repayments of consolidating notes payable	—		(135,453)
Net cash (used in) provided by financing activities	(21,484)		18,603
Net change in cash and cash equivalents and restricted cash	$	(24,365)	$	45,913
Cash and cash equivalents and restricted cash, beginning of period	$	51,476	$	5,563
Cash and cash equivalents and restricted cash, end of period	$	27,111	$	51,476
The accompanying notes are an integral part of these consolidated financial statements.

F-7

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Supplemental cash flow information:
	Year Ended December 31,
	2019		2018
Cash paid for interest	$	12,663	$	7,670
Cash paid for prepayment of refinanced debt (included in interest expense)	$	—	$	2,323
Supplemental disclosures of non-cash investing and financing activities:
Security deposits	$	—	$	2,708
Additions to real estate	$	—	$	313,230
Note payable - Promenade property	$	—	$	7,101
Decrease in distribution payable	$	—	$	(15)
Issuance of SPE membership interests	$	—	$	167,967
Value of Director's stock compensation shares issued	$	76	$	—
Value of Common shares issued to acquire non-controlling interest	$	8,859	$	—
Acquisition of non-controlling interest	$	(8,859)	$	—
The accompanying notes are an integral part of these consolidated financial statements.

F-8

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 ended December 31, 2011.  As used herein, the "Company," "we," "us," or "our" refer to Hartman Short Term Income Properties XX, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership and SPE LLC, except where context requires otherwise.

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

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

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

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

Subject to certain restrictions and limitations, Hartman Advisors LLC ("Advisor") is responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf pursuant to an advisory agreement (the “Advisory Agreement”) by and among the Company and Advisor. Management of the Company’s properties and the Properties, is provided pursuant to property management agreements with Hartman Income REIT Management, Inc. (the "Property Manager"), a wholly-owned subsidiary of HIREIT.  

As of December 31, 2019 and 2018, we owned 43 commercial properties comprising approximately 6.7 million square feet plus three pad sites, all located in Texas. As of December 31, 2019 and 2018, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.  

On July 21, 2017, the Company and Hartman XIX, entered into an agreement and plan of merger (the “XIX Merger Agreement”) and (ii) the Company, the Operating Partnership, HIREIT and Hartman Income REIT Operating Partnership LP, the operating partnership of HIREIT, (“HIROP”), entered into an agreement and plan of merger (the “HIREIT Merger Agreement,” and together with the XIX Merger Agreement, the “Merger Agreements”).

Subject to the terms and conditions of the XIX Merger Agreement, including the satisfaction of all closing conditions set forth in the Merger Agreements, Hartman XIX will merge with and into the Company, with the Company surviving the merger (the “Hartman XIX Merger”). Subject to the terms and conditions of the HIREIT Merger Agreement, (i) HIREIT will merge with and into the Company, with the Company surviving the merger (the “HIREIT Merger,” and together with the Hartman XIX Merger, the “REIT Mergers”), and (ii) HIROP will merge and with and into the Operating Partnership, with the Operating Partnership surviving the merger (the “Partnership Merger,” and together with the REIT Mergers, the “Mergers”). The REIT Mergers are intended to qualify as a

F-9

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

“reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Partnership Merger is intended to be treated as a tax-deferred exchange under Section 721 of the Code.

Subject to the terms and conditions of the XIX Merger Agreement, (i) each share of common stock of Hartman XIX (the “XIX Common Stock”) issued and outstanding immediately prior to the Effective Time (as defined in the XIX Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 9,171.98 shares of common stock, $0.01 par value per share, of the Company (“Company Common Stock”), (ii) each share of 8% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of Company Common Stock, and (iii) each share of 9% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of Company Common Stock.

Subject to the terms and conditions of the HIREIT Merger Agreement, (a) in connection with the HIREIT Merger, (i) each share of common stock of HIREIT (the “HIREIT Common Stock”) issued and outstanding immediately prior to the REIT Merger Effective Time (as defined in the HIREIT Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of Company Common Stock, and (ii) each share of subordinate common stock of HIREIT will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of Company Common Stock, and (b) in connection with the Partnership Merger, each unit of limited partnership interest in HIREIT Operating Partnership (“HIREIT OP Units”) issued and outstanding immediately prior to the Partnership Merger Effective Time (as defined in the HIREIT Merger Agreement) (other than any HIREIT OP Units held by HIREIT) will be automatically cancelled and retired and converted into the right to receive 0.752222 validly issued, fully paid and non-assessable units of limited partnership interests in XX Operating Partnership.

On February 14, 2020, the Company's joint proxy statement and prospectus was declared effective by the Securities and Exchange Commission. The meeting of the shareholder's of the Company, HIREIT and XIX will be held on May 14, 2020.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements as of December 31, 2019 and 2018 and for the years then ended have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-K and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods.

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

Use of Estimates

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

F-10

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

Cash and cash equivalents on the accompanying consolidated balance sheets include all cash and liquid investments with maturities of three months or less. Cash and cash equivalents as of December 31, 2019 and 2018 consisted of demand deposits at commercial banks. We maintain accounts which may from time to time exceed federally insured limits. We have not experienced any losses in these accounts and believe that the company is not exposed to any significant credit risk and regularly monitors the financial stability of these financial institutions. 

Restricted Cash

Restricted cash on the accompanying consolidated balance sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements. As of December 31, 2019 and 2018, the Company had a restricted cash balance of $26,078,000 and $33,696,000, respectively.  

Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, accrued rent and accounts receivable, accounts payable and accrued expenses and balances due to/ due from related parties, as well as related party notes receivable. The Company considers the carrying value of these financial instruments to approximate their respective fair values due to their short-term nature. Disclosure about the fair value of financial instruments is based on relevant information available as of December 31, 2019 and 2018.

Revenue Recognition

The Company's leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. The Company's accrued rents are included in accrued rent and accounts receivable, net. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in the Tenant Reimbursement and Other Revenues line item in the consolidated statements of operations in the period the related costs are incurred.

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-9, Revenue from Contracts with Customers, (“ASU 2014-9”) which amends the guidance for revenue recognition to eliminate the industry-specific revenue recognition guidance and replace it with a principle based approach for determining revenue recognition. The Company adopted ASU 2014-9 effective January 1, 2018 using the modified retrospective approach and the adoption of this guidance did not have a material impact on the consolidated financial statements. The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from ASU 2014-9. The Company’s other revenue is comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are also excluded from of ASU 2014-9. Additionally, the Company’s property dispositions have historically been cash sales with no contingencies and no future involvement in the property, as a result, the new guidance did not have an effect on the Company’s real estate transactions, however, the Company will account future sales of real estate properties in accordance with requirements of ASU 2014-9.

F-11

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 revenue 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.

Real Estate Joint Ventures and Partnerships

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

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

Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out

F-12

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

rights and substantive participating rights.Partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

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

Depreciation and amortization

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

Impairment

The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property.  If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value.  Management has determined that there has been no impairment in the carrying value of the Company’s real estate assets as of December 31, 2019 and 2018.

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.

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets.

Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to

develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:  Prices and other relevant information generated by market transactions involving

identical or comparable assets or liabilities.

Cost approach:  Amount required to replace the service capacity of an asset (replacement cost).

Income approach:  Techniques used to convert future amounts to a single amount based on market

expectations (including present-value, option-pricing, and excess-earnings models).

F-13

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.  The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

Accrued Rent and Accounts Receivable, net

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 the Company’s claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Deferred Leasing Commissions Costs, net

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

Goodwill

GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired.  The Company applies a one-step quantitative assessment to determine if the estimated fair value is less than the carrying amount.  If the carrying amount exceeds the estimated fair value, the Company will record a goodwill impairment equal to such excess, not to exceed the total amount of goodwill. No goodwill impairment has been recognized in the accompanying consolidated financial statements.

Noncontrolling Interests

Noncontrolling interests is the portion of equity in a subsidiary not attributable to a parent.  The ownership interests not held by the parent are considered noncontrolling interests.  Accordingly, the Company has reported noncontrolling interests in equity on the consolidated balance sheets but separate from the Company's equity.  On the consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests.  

Stock-Based Compensation

The Company follows Accounting Standards Codification ("ASC") 718- Compensation- Stock Compensation, with regard to issuance of stock in payment of services.  ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the estimated grant date fair value, as of the grant date of the Company’s common stock, of the equity or liability instruments issued.  Stock-based compensation expense are recorded over the vesting period and is included in general and administrative expense in the accompanying consolidated statements of operations.

Income Taxes

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

F-14

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP).  As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions.  Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders.  However, the Company believes that it is organized and will continue to operate in such a manner as to qualify for treatment as a REIT. 

For the years ended December 31, 2019 and 2018, the Company incurred a net loss of $5,995,000 and $3,540,000.  The Company formed a taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward.  The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the 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 December 31, 2019 and 2018, 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 years ended December 31, 2019 and 2018 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.

Concentration of Risk

The geographic concentration of the Company’s real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocation of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Going Concern Evaluation

Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The Hartman SPE LLC loan agreement (“SPE Loan”) has an initial maturity date of October 9, 2020. The SPE Loan provides for three successive one-year maturity date extensions. In order to exercise each successive one-year extension options, the Hartman SPE must meet five conditions in order to extend the maturity date without any further qualification. One of the five conditions is that Hartman SPE must have a debt yield, as defined, of 12.5% as of June 30, 2020.

F-15

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and March 31, 2020, Hartman SPE has a debt yield of 13.29% and 12.95%, respectively. In response to the coronavirus outbreak and related economic disruption, the Company has undertaken cost reduction and avoidance measures which began in March 2020. Management expects the test period debt calculation to be 12.5% or greater which will allow the Company to exercise the extension option based solely on the terms of the loan agreement.

If the debt yield calculation as of the end of the June 30, 2020 test period is less than 12.5%, management believes that the lender will agree to a one-year extension, however, extension terms may be less favorable to the Company than as provided under the loan agreement. Any required modification of the loan agreement to conclude an extension of the maturity date may involve additional loan costs which would not otherwise be incurred.

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

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-2, Leases, along with various subsequent ASUs, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in the same manner as the previous guidance for operating leases today.

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

As of December 31, 2019, the Company, through SPE LLC has a ground lease for a parking lot located adjacent to the property at 601 Sawyer, Houston, Texas. The parking lot lease agreement expires at the end of September 2020. The Sawyer property is included in the Company’s consolidated financial statements as of December 31, 2019 and for the year ended December 31, 2019 because of the consolidation of SPE with the Company. SPE commenced operations and is consolidated with the Company for periods beginning after September 30, 2018.

Lease payments under the parking lot lease agreement are $3,500 per month. As of December 31, 2019, 9 monthly payments remain under the lease agreement for a total of $31,500.

The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In connection with the new revenue guidance (ASC 606), the new revenue standard will apply to other components of revenue deemed to be non-lease components. Under the new guidance, we will continue to recognize the lease components of lease revenue on a straight-line basis over our respective lease terms as we do under prior guidance. However, we would recognize these non-lease components under the new revenue guidance as the related services are delivered. As a result, the total revenue recognized over time would not differ under the new guidance. This does not result in a difference from how the Company has historically recognized revenue for these lease and non-lease components.

F-16

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, ASU 2016-2 requires that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under ASU 2016-2, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. This does not result in a difference from how the Company has historically recognized lease acquisition costs.

On January 1, 2019, the Company adopted ASU 2018-07, "Improvements to Non-employee Stock-Based Payment Accounting." The updated guidance simplifies aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. The adoption of this guidance had no impact on our consolidated financial statements.

On January 1, 2019, the Company adopted ASU 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities". The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of either adopting the new standard early using a modified retrospective transition method in any interim period after issuance of the update, or alternatively adopting the new standard for fiscal years beginning after December 15, 2018. The adoption of this guidance had no impact on our consolidated financial statements.

On January 1, 2018, the Company adopted ASU 2014-9, codified in Accounting Standards Codification (“ASC”) 606 - “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-9 replaces most existing revenue recognition guidance under GAAP. The standard permits the use of either the retrospective or cumulative effect transition method. Certain contracts with customers, principally lease contracts, are not within the scope of the new guidance. The Company has elected to use the modified retrospective method. The adoption of ASU 2014-9 has no impact on the Company’s consolidated financial statements on adoption” at January 1, 2018.

On January 1, 2018, the Company adopted ASU 2016-17, “Interest Held Through Related Parties That Are Under Common Control,” issued by the FASB, which amends the accounting guidance when determining the treatment of certain VIE’s to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. In connection with our adoption of ASU 2016-17, we have determined that SPE LLC is a VIE and that the Company is the primary beneficiary. Accordingly, the accounts of SPE LLC are included in our consolidated financial position as of December 31, 2018 and beginning October 1, 2018, in our consolidated results of operations. The Company and its affiliates, Hartman XIX and HIREIT, are guarantors of the SPE LLC note payable.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The updated guidance requires measurement and recognition of expected credit losses for financial assets, including trade and other receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Generally, the pronouncement requires a modified retrospective method of adoption. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted. In identifying all our financial instruments covered under this guidance, the majority of our instruments result from operating leasing transactions, which are not within the scope of the new standard and are to remain governed by the recently issued leasing guidance and other previously issued guidance. The adoption of this guidance had no impact on our consolidated financial statements.

Reclassification

Certain items in the comparative consolidated financial statements have been reclassified to conform to the presentation adopted in the current period. Restricted cash reporting line was added on the face of the consolidated balance sheets. The balance currently reported as restricted cash was reported previously in the prepaid expenses and

F-17

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

other assets. Additionally, insurance proceeds account has been reclassified from being reported in real estate taxes and insurance reporting line in 2018 to property operating expenses.

Note 3 — Real Estate

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

	December 31,
	2019		2018
Land	$	145,050	$	145,050
Buildings and improvements	348,729		337,272
In-place lease value intangible	100,790		100,790
	594,569		583,112
Less accumulated depreciation and amortization	(117,652)		(89,840)
Total real estate assets	$	476,917	$	493,272

Depreciation expense for the years ended December 31, 2019 and 2018 was $16,917,000 and $8,900,000, respectively.

The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms.  With respect to all properties owned by the Company, the Company considers all of the in-place leases to be market rate leases.

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

	December 31,
	2019		2018
In-place lease value intangible	$	100,790	$	100,790
Less: In-place leases – accumulated amortization	(68,884)		(57,989)
Acquired lease intangible assets, net	$	31,906	$	42,801

The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands:

December 31,	In-place lease amortization
2020	$	10,459
2021	8,410
2022	7,454
2023	5,583
2024	—
Total	$	31,906

Amortization expense for the year ended December 31, 2019 and 2018 was $10,895,000 and $7,799,000, respectively.

As of December 31, 2019 and 2018, we owned or held a majority interest in 43 commercial properties comprising approximately 6.7 million square feet plus three pad sites, all located in Texas. As of December 31, 2019 and 2018, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.  

F-18

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Acquisition fees earned by the Advisor were $0 for both the years ended December 31, 2019 and 2018, respectively. Asset management fees earned by the Advisor for the year year ended December 31, 2019 and 2018, respectively was $1,760,000 and $1,760,000. Asset management fees are captioned as such in the accompanying consolidated statements of operations for the years ended December 31, 2019 and 2018, respectively.

The Company’s indirect 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 paid annual grants to HRHP LLC in equal installments over a 5 year period of $1,500,000 and pays sales tax grants, paid annually over the first 10 years of the Alamo Draft House lease. For the years ended December 31, 2019 and 2018, HRHP LLC received sales tax grant proceeds of $66,000 and $82,000 for the 2019 and 2018 incentive agreement fiscal years, 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 December 31, 2019, 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.

Note 4 - Accrued Rent and Accounts Receivable, net

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

	December 31,
	2019		2018
Tenant receivables	$	5,929	$	5,205
Accrued rent	9,244		8,386
Allowance for uncollectible accounts	(2,597)		(1,710)
Accrued rents and accounts receivable, net	$	12,576	$	11,881

As of December 31, 2019 and 2018, the Company had an allowance for uncollectible accounts of $2,597,000 and $1,710,000, respectively. For the years ended December 31, 2019 and 2018, the Company recorded bad debt expense (recovery) of $1,674,000 and $(4,000), respectively, related to tenant receivables that the Company have specifically identified as potentially uncollectible based on the Company’s assessment of each tenant’s credit-worthiness. Bad debt expenses and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

Note 5 - Deferred Leasing Commission Costs, net

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

	December 31,
	2019		2018
Deferred leasing commissions	$	17,620	$	12,671
Less: accumulated amortization	(6,830)		(4,370)
Deferred leasing commission costs, net	$	10,790	$	8,301

F-19

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Future Minimum Rents

The Company leases the majority of its properties under noncancellable operating leases which provide for minimum base rentals.A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at December 31, 2019 is as follows, in thousands:

December 31,	Minimum Future Rents
2020	$	69,973,000
2021	61,237,000
2022	49,396,000
2023	37,477,000
2024	25,851,000
Thereafter	39,785,000
Total	$	283,719,000

Note 7 - Notes Payable

The Operating Partnership is a party to four, cross-collateralized, term loan agreements with an insurance company. The term loans are secured by the Richardson Heights Property, the Cooper Street Property, the Bent Tree Green Property and the Mitchelldale Property. The loans require monthly payments of principal and interest due and payable on the first day of each month. Monthly payments are based on a 27-year loan amortization.  Each of the loan agreements are subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements. Each of the loan agreements provides for a fixed interest rate of 4.61%. As of December 31, 2019, 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. The outstanding balance of the four loans was $43,393,000 and $44,584,000 as of December 31, 2019 and 2018, respectively.

On October 1, 2018, the Company through SPE LLC and Goldman Sachs Mortgage Company entered into a $259,000,000 term loan agreement. The Company together with its affiliates HIREIT, Hartman XIX and vREIT XXI, contributed a total of 39 commercial real estate properties ("Properties") to SPE, LLC, a recently formed Delaware limited liability company, subject to the mortgage indebtedness encumbering the Properties, in exchange for membership interests in SPE LLC. Proceeds of the Loan were immediately used to extinguish the existing mortgage indebtedness encumbering the Properties.

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

The outstanding principal of the loan bears interest at the one-month LIBOR rate plus 1.8%. As a condition to the funding of the Loan, SPE LLC has entered into an interest rate cap arrangement with SMBC Capital Markets, Inc. that caps LIBOR at 3.75% during the initial term of the Loan.

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

F-20

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following is a summary of the mortgage notes payable, in thousands:

					December 31,
Property/Facility	Payment (1)	Maturity Date	Rate		2019		2018
Richardson Heights (2)	P&I	July 1, 2041	4.61	%	$	17,260	$	17,760
Cooper Street (2)	P&I	July 1, 2041	4.61	%	$	7,435	$	7,632
Bent Tree Green (2)	P&I	July 1, 2041	4.61	%	$	7,435	$	7,632
Mitchelldale (2)	P&I	July 1, 2041	4.61	%	$	11,263	$	11,560
Promenade (3)	P&I				$	—	$	7,102
Hartman SPE LLC	IO	October 9, 2020	3.60	%	$	259,000	$	259,000
Hartman XXI	IO	March 31, 2021	10.00	%	$	4,400	$	—
					$	306,793	$	310,686
Less unamortized deferred loan costs					$	(3,754)	$	(4,779)
					$	303,039	$	305,907

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

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

(3) Hartman SPE LLC loan proceeds for the repayment of the Promenade loan were in escrow as of October 1, 2018. The loan was paid in full with the refinancing proceeds on February 15, 2019.

Annual maturities of notes payable as of December 31, 2019 are as follows, in thousands:

December 31,	Amount Due
2020	$	260,253
2021	5,712
2022	1,374
2023	1,439
2024	1,506
Thereafter	36,509
Total	$	306,793

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

	December 31,
	2019		2018
Deferred loan costs	$	7,155	$	7,082
Less:  deferred loan cost accumulated amortization	(3,401)		(2,303)
Total cost, net of accumulated amortization	$	3,754	$	4,779

Interest expense incurred for the year ending December 31, 2019 and 2018 was $13,834,000 and $11,306,000, respectively. Interest expense of $516,000 and $421,000 was payable as of December 31, 2019 and 2018, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Fair Value of Debt

F-21

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the Company’s fixed rate notes payable, variable rate notes payable and secured revolving credit facilities aggregates to $308,671,000 and $309,545,000 as compared to book value of $306,793,000 and $310,686,000 as of December 31, 2019 and 2018, respectively. The fair value of our debt instruments is estimated on a Level 2 basis, as provided by ASC 820, using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments. Disclosure about the fair value of notes payable is based on relevant information available as of December 31, 2019 and 2018.

Note 8 - 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 weighted average shares outstanding reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic loss per share are included in the diluted loss per share.

	December 31,
	2019		2018
Numerator:
Net income (loss) attributable to common stockholders	$	(1,433)	$	(827)
Denominator:
Weighted average number of common shares outstanding,basic and diluted	18,304		17,946
Basic and diluted loss per common share:
Net loss attributable to common stockholders per share	$	(0.08)	$	(0.05)

Note 9 - Income Taxes

Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.  The Company’s federal income tax returns for the years ended December 31, 2015, 2016, 2017 and 2018 have not been examined by the Internal Revenue Service.The Company’s federal income tax return for the year ended December 31, 2015 may be examined on or before September 15, 2020. 

The Company has formed a taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in the light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements.

The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  Management has reviewed the Company’s tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions.

F-22

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Taxable income (loss) differs from net income (loss) for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and amortization and rental revenue.

For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31:

	2019		2018
Ordinary income (unaudited)	53.1	%	24.9	%
Return of capital (unaudited)	46.9	%	75.1	%
Capital gains distribution (unaudited)	—	%	—	%
Total	100.0	%	100.0	%

A provision for Texas Franchise tax under the Texas Margin Tax Bill in the amount of $385,000 and $267,000 was recorded in the consolidated financial statements for the years ended December 31, 2019 and 2018 respectively, with a corresponding charge to real estate taxes and insurance.

Note 10 - 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 Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. and Subsidiaries of which approximately 20% is owned by Allen R. Hartman who is the Chief Executive Officer and Chairman of the Board of Directors.

The Company pays acquisition fees and asset management fees to the Advisor in connection with the acquisition of properties and management of the Company. The Company pays property management and leasing commissions to the Property Manager in connection with the management and leasing of the Company’s properties. For the years ended December 31, 2019 and 2018 the Company incurred property management fees and reimbursements of $8,053,000 and $4,910,000, respectively, and $4,948,000 and $4,103,000, respectively for leasing commissions owed to our Property Manager. We incurred asset management fees of $1,760,000 and $1,760,000, respectively owed to Advisor. These fees are monthly fees equal to one-twelfth of 0.75% of the sum of the higher of the cost or value of each asset. The asset management fee will be based only on the portion of the cost or value attributable to the Company’s investment in an asset, if the Company do not own all or a majority of an asset. There were no acquisition fees incurred to the Advisor for the years ended December 31, 2019 and 2018, respectively. Property management fees and reimbursements are included in property operating expense in the accompanying consolidated statements of operations. Leasing commissions are capitalized in the accompanying consolidated balance sheets. Asset management fees are captioned as such in the accompanying consolidated statements of operations.

The Company also pays construction management fees to the Property Manager in connection with the construction management of the Company's properties. For the years ended December 31, 2019 and 2018, the Company incurred construction management fees of $664,000 and $2,122,000, respectively. Construction management fees are capitalized and included in real estate assets in the consolidated balance sheets.

The Company had a balance due to the Property Manager of $1,168,000 and $462,000 as of December 31, 2019 and 2018, respectively. The Company owed the Advisor $2,077,000 and $1,204,000 for asset management fees as of December 31, 2019 and 2018, respectively. The Company had a net balance due from other related parties of $5,375,000 and $170,000 as of December 31, 2019 and 2018, respectively.

The Company owns 1,561,523 shares of the common stock of HIREIT which it acquired for cash consideration of $8,978,000. The Company’s investment in HIREIT is accounted for under the cost method.The Company’s

F-23

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

approximately 11% ownership interest in HIREIT is less than a controlling stake, and is reflected as “Investment in Affiliate” on the accompanying consolidated balance sheets. The Company received dividend distributions from HIREIT of $425,000 and $425,000 for the years ended December 31, 2019 and 2018, respectively, which is included in interest and dividend income in the accompanying consolidated statements of operations.

During 2019, the Company borrowed under an unsecured promissory note payable to Hartman vREIT XXI, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $4,400,000. This note payable had an outstanding balance of $4,400,000 as of December 31, 2019, which is included in Notes payable in the accompanying consolidated balance sheets. Interest has been accrued on the loan amount at an annual rate of 5%. The Company recognized interest expense on the affiliate note in the amount of $23,000 for the year ended December 31, 2019,which is included in interest expense in the accompanying consolidated statements of operations.

In May 2016, the Company, through its taxable REIT subsidiary, Hartman TRS, Inc. (“TRS”), loaned $7,231,000 pursuant to a promissory note in the face amount of up to $8,820,000 to Hartman Retail II Holdings Company, Inc. (“Retail II Holdings”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of a retail shopping center by Hartman Retail II DST, a Delaware statutory trust sponsored by the Property Manager.  Pursuant to the terms of the promissory note, TRS will receive a two percent (2)% origination fee of amounts advanced under the promissory note, and interest at ten percent (10)% per annum on the outstanding principal balance. The outstanding principal balance of the promissory note will be repaid as investor funds are raised by Hartman Retail II DST. The maturity date of the promissory note, as amended is December 31, 2020. This note receivable had an outstanding balance of $2,476,000 as of December 31, 2019 and 2018, respectively, which is included in Notes receivable – related party in the accompanying consolidated balance sheets. For the years ended December 31, 2019 and 2018, respectively, interest and dividend income in the accompanying consolidated statements of operations, includes $235,000 and $456,000 of interest income from this promissory note.

The Company had a note receivable due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), of $4,200,000 as of December 31, 2019 and 2018, respectively, which is included in Notes receivable - related party in the accompanying consolidated balance sheets. The face amount of the promissory note is $4,500,000. Interest has been accrued on the loan amount at an annual rate of six percent (6%). The Company recognized interest income on the affiliate note in the amount of $252,000 for each of the years ended December 31, 2019 and 2018, respectively, which is included in interest income in the accompanying consolidated statements of operations.

In February 2019, the Company through TRS, loaned $6,782,455 pursuant to a promissory note in the face amount of up to $7,500,000 to Hartman Retail III Holdings Company, Inc. (“Retail III Holdings”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of a retail shopping center by Hartman Retail III DST, a Delaware statutory trust sponsored by the Advisor. This note receivable had an outstanding balance of $6,782,455 as of December 31, 2019, which is included in Notes receivable – related party in the accompanying consolidated balance sheets. Pursuant to the terms of the promissory note, TRS receives a two percent (2%) origination fee of amounts advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The outstanding principal balance of the promissory note will be repaid as investor funds are raised by Hartman Retail III DST. The maturity date of the promissory note, as amended, is February 29, 2021. The Company recognized interest income on this affiliate note in the amount of $570,000 for the year ended December 31, 2019, which is included in interest and dividend income in the accompanying consolidated statements of operations.

In March 2019, the Company through TRS, loaned $3,829,711 pursuant to a promissory note in the face amount of $3,500,000 to Hartman Ashford Bayou, LLC (“Ashford Bayou”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of office building by Ashford Bayou, a wholly owned subsidiary of Hartman Total Return, Inc. This note receivable had an outstanding balance of $3,829,711 as of December 31, 2019, which is included in Notes receivable – related party in the accompanying consolidated balance sheets. Pursuant to the terms of the promissory note, TRS receives a two percent (2%) origination fee of amounts advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The outstanding

F-24

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

principal balance of the promissory note will be repaid as investor funds are raised by Hartman Total Return, Inc. The maturity date of the promissory note is March 31, 2020. The Company recognized interest income on this affiliate note in the amount of $298,000 for the year ended December 31, 2019, which is included in interest and dividend income in the accompanying consolidated statements of operations.

Variable interest entities (“VIEs”) are defined as entities with a level of invested equity that is not sufficient to fund future operations on a stand-alone basis, or whose equity holders lack certain characteristics of a controlling financial interest. For identified VIEs, an assessment must be made to determine which party to the VIE, if any, has both the power to direct the activities of the VIE that most significantly impacts the performance of the VIE and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company is not deemed to be the primary beneficiary of Retail II Holdings, Retail III Holdings or Ashford Bayou, each of which qualifies as a VIE.  Accordingly, the assets and liabilities and revenues and expenses of Retail II Holdings, Retail III Holdings and Ashford Bayou have not been included in the accompanying consolidated financial statements.

The Board of Directors voted to acquire an additional 3.42% ownership interest of Hartman SPE, LLC from Hartman vREIT XXI, Inc. in exchange for 700,302 shares of the Company's common stock with a total value of $8,859,000 ($12.65 per share). The exchange increased the Company’s ownership interest in Hartman SPE, LLC from 32.74% to 36.16%. The transaction was effective March 1, 2019.

Note 11 - 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 the articles of incorporation, the Company has authority to issue 750,000,000 common shares of beneficial interest, $0.001 par value per share, and 200,000,000 preferred shares of beneficial interest, $0.001 par value per share.

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.In February 2009, the Company sold 19,000 shares of common stock to Hartman XX Holdings, Inc. at a price of $10.00 per share. In February 2009, the Company issued 1,000 shares of the Company’s convertible preferred stock to the Company’s advisor, Hartman Advisors LLC (“Advisor”), at a price of $10.00 per share. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc..Hartman Income REIT Management, Inc. is a wholly owned subsidiary of Hartman Income REIT, Inc. Allen R. Hartman, the Company’s Chief Executive Officer and Chairman of the Board of Directors, beneficially owns approximately 20% of Hartman Income REIT, Inc.

Preferred Stock

Under the Company’s articles of incorporation the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors 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 December 31, 2019 and 2018 the Company has issued 1,000 shares of convertible preferred shares to Hartman Advisors LLC at a price of $10.00 per share.

F-25

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 the Company’s common stock plus the aggregate market value of the Company’s 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 the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.

Stock-Based Compensation

The Company awards 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. As of December 31, 2019, 51,000 shares of restricted common stock have been granted to our current independent directors pursuant to the omnibus stock incentive plan. For the years ended December 31, 2019 and 2018, respectively, the Company granted 6,000 and 6,000 shares of restricted common stock to independent directors as compensation for services. The Company recognized $77,000 and $77,000 as stock-based compensation expense for the years ended December 31, 2019 and 2018, respectively, based upon the estimated fair value per share. Stock-based compensation also includes incentive plan awards discussed at Note 12. These amounts are included in general and administrative expenses for the years ended December 31, 2019 and 2018, respectively in the accompanying consolidated statements of operations.

Distributions

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

F-26

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Quarter Paid	Distributions per Common Share		Total Distributions Paid
2019
4th Quarter	$	0.175	$	3,223
3rd Quarter	0.175		3,224
2nd Quarter	0.175		3,223
1st Quarter	0.171		3,141
Total	$	0.696	$	12,811
2018
4th Quarter	$	0.175	$	3,101
3rd Quarter	0.175		3,151
2nd Quarter	0.175		3,152
1st Quarter	0.175		3,151
Total	$	0.700	$	12,555

Note 12 - Incentive Awards Plan

The Company has adopted an incentive plan (the “Omnibus Stock Incentive Plan” or the “Incentive Plan”) that provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards within the meaning of Internal Revenue Code Section 422, or any combination of the foregoing. The Company has initially reserved 5,000,000 shares of the Company’s common stock for the issuance of awards under the Company’s stock incentive plan, but in no event more than ten (10%) percent of the Company’s issued and outstanding shares. The number of shares reserved under the Company’s stock incentive plan is also subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. Generally, shares that are forfeited or canceled from awards under the Company’s stock incentive plan also will be available for future awards.  The Compensation Committee of the Board of Directors did not approve any awards restricted common stock for the years ended December 31, 2019 and 2018.

Note 13 - Commitments and Contingencies

Economic Dependency

The Company is dependent on the Property Manager and the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the 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.

F-27

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14 - Subsequent events

The Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.

Since the beginning of 2020, the COVID-19 coronavirus outbreak which originated in mainland China has significantly impacted the global and U.S. economies. As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which are likely to negatively impact the results of our operations.

F-28

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2019

(Dollars in thousands)

Initial Cost to the Company
Property	Date Acquired	Date of Construction	Land		Building and Improvements		In-place lease value intangible		Total		Post – acquisition Improvements
Garden Oaks	10/01/2018	1956	$	1,770	$	17,969	$	1,021	$	20,760	$	458
Quitman	10/01/2018	1920	3,130		2,389		351		5,870		130
Chelsea Square	10/01/2018	1984	1,570		5,046		494		7,110		170
Mission Centre	10/01/2018	1987	2,020		7,690		890		10,600		51
Regency	10/01/2018	1979	960		819		851		2,630		338
Spring Valley	10/01/2018	1982	3,490		1,064		1,066		5,620		997
Northeast Square	10/01/2018	1984	1,300		3,330		280		4,910		75
One Mason	10/01/2018	1983	2,440		9,290		1,130		12,860		30
Tower	10/01/2018	1981	2,750		2,584		1,336		6,670		394
Preserve	10/01/2018	1970	9,730		9,085		3,485		22,300		441
Westheimer	10/01/2018	1983	3,800		12,416		2,284		18,500		543
Walzem Plaza	10/01/2018	1981	3,900		10,660		1,840		16,400		1,083
11811 North Freeway	10/01/2018	1982	1,980		1,037		2,473		5,490		311
Atrium I	10/01/2018	1980	2,540		716		1,494		4,750		524
North Central Plaza	10/01/2018	1982	2,330		14,511		2,959		19,800		1,087
3100 Timmons	10/01/2018	1975	10,330		3,543		1,427		15,300		718
Central Park	10/01/2018	1984	730		2,851		989		4,570		23
601 Sawyer	10/01/2018	1982	3,360		12,796		1,144		17,300		245
Prestonwood	10/01/2018	1999	7,410		13,895		1,695		23,000		182
Harwin	10/01/2018	1992	1,960		3,041		279		5,280		73
Fondren	10/01/2018	2004	1,650		7,326		1,004		9,980		220
Cornerstone	10/01/2018	1984	1,110		1,620		920		3,650		79
Northchase	10/01/2018	1984	1,700		5,821		1,549		9,070		573
616 FM 1960	10/01/2018	1983	1,510		8,931		1,269		11,710		239
Gateway	10/01/2018	1983	3,510		22,182		3,408		29,100		743
Promenade	10/01/2018	1973-1979	5,750		12,671		1,579		20,000		153
400 North Belt	05/08/2015	1982	2,538		3,800		3,812		10,150		2,605
Commerce Plaza Hillcrest	05/01/2015	1977	6,500		1,031		3,869		11,400		2,240
Corporate Park Place	08/24/2015	1980	2,375		5,215		1,910		9,500		1,235
Skymark Tower	09/02/2015	1985	2,212		4,404		2,230		8,846		1,701
Ashford Crossing	07/31/2015	1983	2,650		4,240		3,710		10,600		2,079
Energy Plaza	12/30/2014	1983	4,403		6,840		6,367		17,610		2,104
Westway	06/01/2016	2001	5,410		11,276		4,950		21,636		340
Three Forest Plaza	12/22/2016	1983	8,910		18,186		8,558		35,654		3,300
Parkway Plaza I & II	03/15/2013	1982	2,373		4,765		2,352		9,490		2,825
Gulf Plaza	03/11/2014	1979/1980	3,488		6,005		4,457		13,950		1,356
Timbercreek	12/30/2014	1984	724		962		1,211		2,897		619
Copperfield	12/30/2014	1986	605		760		1,054		2,419		520
One Technology	11/10/2015	1984	4,894		8,558		6,123		19,575		1,866
Richardson Heights	12/28/2010	1958-1962	4,788		10,890		3,472		19,150		7,232
Bent Tree Green	10/16/2012	1983	3,003		6,272		2,740		12,015		3,351
Cooper Street	05/11/2012	1992	2,653		5,768		2,192		10,613		494
Mitchelldale Business Park	06/13/2014	1977	4,794		9,816		4,565		19,175		2,911
Total			$	145,050	$	302,071	$	100,790	$	547,911	$	46,658

F-29

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2019

(Dollars in thousands)

Gross Carrying Amount at December 31, 2019
Property	Land		Building and Improvements		In-place lease value intangible		Total		Accumulated Depreciation & Amortization		Net Book Carrying Value		Encumbrances
Garden Oaks	$	1,770	$	18,427	$	1,021	$	21,218	$	(994)	$	20,225
Quitman	3,130		2,519		351		6,000		(174)		5,826
Chelsea Square	1,570		5,216		494		7,280		(357)		6,923
Mission Centre	2,020		7,741		890		10,651		(632)		10,019
Regency	960		1,157		852		2,969		(342)		2,627
Spring Valley	3,490		2,061		1,066		6,617		(616)		6,001
Northeast Square	1,300		3,405		280		4,985		(227)		4,758
One Mason	2,440		9,320		1,130		12,890		(719)		12,170
Tower	2,750		2,977		1,335		7,062		(584)		6,478
Preserve	9,730		9,526		3,485		22,740		(1,617)		21,124
Westheimer	3,800		12,959		2,284		19,043		(1,312)		17,731
Walzem Plaza	3,900		11,743		1,840		17,482		(1,210)		16,273
11811 N Freeway	1,980		1,348		2,473		5,801		(883)		4,918
Atrium I	2,540		1,240		1,494		5,275		(569)		4,706
North Central	2,330		15,598		2,959		20,887		(1,544)		19,342
3100 Timmons	10,330		4,261		1,428		16,019		(673)		15,345
Central Park	730		2,874		989		4,593		(458)		4,135
601 Sawyer	3,360		13,041		1,144		17,545		(798)		16,747
Prestonwood	7,410		14,076		1,695		23,181		(1,073)		22,108
Harwin	1,960		3,114		279		5,353		(240)		5,114
Fondren	1,650		7,546		1,005		10,201		(774)		9,427
Cornerstone	1,110		1,699		920		3,729		(404)		3,325
Northchase	1,700		6,394		1,549		9,643		(783)		8,860
616 FM 1960	1,510		9,170		1,269		11,949		(812)		11,137
Gateway	3,510		22,925		3,408		29,843		(1,928)		27,915
Promenade	5,750		12,824		1,578		20,152		(1,060)		19,092
400 North Belt	2,538		6,405		3,812		12,755		(5,933)		6,822
Commerce Plaza	6,500		3,271		3,869		13,639		(5,538)		8,101
Corporate Park	2,375		6,450		1,910		10,736		(3,278)		7,457
Skymark Tower	2,212		6,105		2,230		10,546		(3,565)		6,981
Ashford Crossing	2,650		6,319		3,710		12,679		(5,443)		7,236
Energy Plaza	4,403		8,944		6,367		19,713		(8,503)		11,210
Westway	5,410		11,616		4,951		21,977		(4,692)		17,285
Three Forest	8,914		21,486		8,557		38,957		(9,771)		29,186
Parkway Plaza	2,373		7,590		2,352		12,315		(5,048)		7,267
Gulf Plaza	3,488		7,361		4,457		15,306		(6,056)		9,249
Timbercreek	724		1,581		1,211		3,517		(1,711)		1,806
Copperfield	605		1,280		1,054		2,938		(1,153)		1,785
One Technology	4,894		10,424		6,123		21,441		(8,471)		12,970
Richardson Heights	4,788		18,122		3,472		26,382		(9,389)		16,994		17,259
Bent Tree Green	3,003		9,623		2,740		15,366		(6,067)		9,299		7,435
Cooper Street	2,653		6,262		2,192		11,107		(4,243)		6,864		7,435
Mitchelldale	4,794		12,727		4,565		22,086		(8,007)		14,079		11,263
Total	$	145,050	$	348,729	$	100,790	$	594,569	$	(117,652)	$	476,917	$	43,392

The aggregate cost of real estate for federal income tax purposes was $594,569  as of  December 31, 2019.

F-30

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2019

Summary of activity for real estate assets for the years ended December 31, 2019 and 2018, in thousands:

	Years ended December 31,
	2019		2018
Balance at beginning of period	$	583,112	$	259,962
Additions during the period:
Acquisitions	—		—
Consolidation of Hartman SPE LLC	—		313,230
Improvements	11,457		9,920
	594,569		323,150
Reductions – cost of real estate assets sold	—		—
Balance at end of period	$	594,569	$	583,112

F-31

EX-21.1

Exhibit 21.1 Subsidiaries of the Company
NAME OF SUBSIDIARY	DOMICILE
Hartman XX Limited Partnership Hartman CRMB Holdings, LLC Hartman Richardson Heights Properties, LLC	Texas Texas Texas
Hartman Cooper Street Plaza, LLC	Texas
Hartman Bent Tree, LLC Hartman Gulf Plaza LLC Hartman Parkway, LLC Hartman Mitchelldale Business Park, LLC Hartman Energy LLC Hartman Highway 6 LLC Hartman XX REIT GP LLC Hartman Hillcrest LLC Hartman 400 North Belt LLC Hartman Ashford Crossing LLC Hartman Corporate Park Place LLC Hartman Skymark Tower LLC Hartman One Technology LLC Hartman Westway One, LLC Hartman Three Forest Plaza, LLC Hartman SPE, LLC	Texas Texas Texas Texas Texas Texas Texas Texas Texas Texas Texas Texas Texas Texas Texas Delaware

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Allen R. Hartman, certify that:

1. I have reviewed this annual report on Form 10-K, for the year ended December 31, 2019, 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 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 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: May 13, 2020

/s/ Allen R. Hartman

Allen R. Hartman

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Executive Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Louis T. Fox, III, certify that:

1. I have reviewed this annual report on Form 10-K, for the year ended December 31, 2019, 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 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 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: May 13, 2020

/s/ Louis T. Fox, III

Louis T. Fox, III

Chief Financial Officer and Chief Accounting Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the annual report on Form 10-K of Hartman Short Term Income Properties XX, Inc. (the “Company”) for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Executive Officer and President of the Company, certifies, to his knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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: May 13, 2020

/s/ Allen R. Hartman

Allen R. Hartman

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the annual report on Form 10-K of Hartman Short Term Income Properties XX, Inc. (the “Company”) for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Financial Officer and Chief Accounting Officer of the Company, certifies, to his knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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: May 13, 2020

/s/ Louis T. Fox, III

Louis T. Fox, III

Chief Financial Officer and Chief Accounting Officer

(Principal Financial and Accounting Officer)

XML

Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	$ 145,050
Building and Improvements	302,071
In-place lease value intangible	100,790
Total	547,911
Post-acquisition Improvements	46,658
Gross Carrying Amount
Land	145,050
Building and Improvements	348,729
In-place lease value intangible	100,790
Total	594,569	$ 583,112	$ 259,962
Accumulated Depreciation & Amortization	(117,652)
Net Book Carrying Value	476,917
Encumbrances	43,392
Garden Oaks
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,770
Building and Improvements	17,969
In-place lease value intangible	1,021
Total	20,760
Post-acquisition Improvements	458
Gross Carrying Amount
Land	1,770
Building and Improvements	18,427
In-place lease value intangible	1,021
Total	21,218
Accumulated Depreciation & Amortization	(994)
Net Book Carrying Value	20,225
Encumbrances
Quitman
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,130
Building and Improvements	2,389
In-place lease value intangible	351
Total	5,870
Post-acquisition Improvements	130
Gross Carrying Amount
Land	3,130
Building and Improvements	2,519
In-place lease value intangible	351
Total	6,000
Accumulated Depreciation & Amortization	(174)
Net Book Carrying Value	5,826
Encumbrances
Chelsea Square
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,570
Building and Improvements	5,046
In-place lease value intangible	494
Total	7,110
Post-acquisition Improvements	170
Gross Carrying Amount
Land	1,570
Building and Improvements	5,216
In-place lease value intangible	494
Total	7,280
Accumulated Depreciation & Amortization	(357)
Net Book Carrying Value	6,923
Encumbrances
Mission Centre
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,020
Building and Improvements	7,690
In-place lease value intangible	890
Total	10,600
Post-acquisition Improvements	51
Gross Carrying Amount
Land	2,020
Building and Improvements	7,741
In-place lease value intangible	890
Total	10,651
Accumulated Depreciation & Amortization	(632)
Net Book Carrying Value	10,019
Encumbrances
Regency
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	960
Building and Improvements	819
In-place lease value intangible	851
Total	2,630
Post-acquisition Improvements	338
Gross Carrying Amount
Land	960
Building and Improvements	1,157
In-place lease value intangible	852
Total	2,969
Accumulated Depreciation & Amortization	(342)
Net Book Carrying Value	2,627
Encumbrances
Spring Valley
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,490
Building and Improvements	1,064
In-place lease value intangible	1,066
Total	5,620
Post-acquisition Improvements	997
Gross Carrying Amount
Land	3,490
Building and Improvements	2,061
In-place lease value intangible	1,066
Total	6,617
Accumulated Depreciation & Amortization	(616)
Net Book Carrying Value	6,001
Encumbrances
Northeast Square
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,300
Building and Improvements	3,330
In-place lease value intangible	280
Total	4,910
Post-acquisition Improvements	75
Gross Carrying Amount
Land	1,300
Building and Improvements	3,405
In-place lease value intangible	280
Total	4,985
Accumulated Depreciation & Amortization	(227)
Net Book Carrying Value	4,758
Encumbrances
One Mason
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,440
Building and Improvements	9,290
In-place lease value intangible	1,130
Total	12,860
Post-acquisition Improvements	30
Gross Carrying Amount
Land	2,440
Building and Improvements	9,320
In-place lease value intangible	1,130
Total	12,890
Accumulated Depreciation & Amortization	(719)
Net Book Carrying Value	12,170
Encumbrances
Tower
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,750
Building and Improvements	2,584
In-place lease value intangible	1,336
Total	6,670
Post-acquisition Improvements	394
Gross Carrying Amount
Land	2,750
Building and Improvements	2,977
In-place lease value intangible	1,335
Total	7,062
Accumulated Depreciation & Amortization	(584)
Net Book Carrying Value	6,478
Encumbrances
Preserve
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	9,730
Building and Improvements	9,085
In-place lease value intangible	3,485
Total	22,300
Post-acquisition Improvements	441
Gross Carrying Amount
Land	9,730
Building and Improvements	9,526
In-place lease value intangible	3,485
Total	22,740
Accumulated Depreciation & Amortization	(1,617)
Net Book Carrying Value	21,124
Encumbrances
Westheimer
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,800
Building and Improvements	12,416
In-place lease value intangible	2,284
Total	18,500
Post-acquisition Improvements	543
Gross Carrying Amount
Land	3,800
Building and Improvements	12,959
In-place lease value intangible	2,284
Total	19,043
Accumulated Depreciation & Amortization	(1,312)
Net Book Carrying Value	17,731
Encumbrances
Walzem Plaza
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,900
Building and Improvements	10,660
In-place lease value intangible	1,840
Total	16,400
Post-acquisition Improvements	1,083
Gross Carrying Amount
Land	3,900
Building and Improvements	11,743
In-place lease value intangible	1,840
Total	17,482
Accumulated Depreciation & Amortization	(1,210)
Net Book Carrying Value	16,273
Encumbrances
11811 North Freeway
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,980
Building and Improvements	1,037
In-place lease value intangible	2,473
Total	5,490
Post-acquisition Improvements	311
Gross Carrying Amount
Land	1,980
Building and Improvements	1,348
In-place lease value intangible	2,473
Total	5,801
Accumulated Depreciation & Amortization	(883)
Net Book Carrying Value	4,918
Encumbrances
Atrium I
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,540
Building and Improvements	716
In-place lease value intangible	1,494
Total	4,750
Post-acquisition Improvements	524
Gross Carrying Amount
Land	2,540
Building and Improvements	1,240
In-place lease value intangible	1,494
Total	5,275
Accumulated Depreciation & Amortization	(569)
Net Book Carrying Value	4,706
Encumbrances
North Central Plaza
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,330
Building and Improvements	14,511
In-place lease value intangible	2,959
Total	19,800
Post-acquisition Improvements	1,087
Gross Carrying Amount
Land	2,330
Building and Improvements	15,598
In-place lease value intangible	2,959
Total	20,887
Accumulated Depreciation & Amortization	(1,544)
Net Book Carrying Value	19,342
Encumbrances
3100 Timmons
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	10,330
Building and Improvements	3,543
In-place lease value intangible	1,427
Total	15,300
Post-acquisition Improvements	718
Gross Carrying Amount
Land	10,330
Building and Improvements	4,261
In-place lease value intangible	1,428
Total	16,019
Accumulated Depreciation & Amortization	(673)
Net Book Carrying Value	15,345
Encumbrances
Central Park
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	730
Building and Improvements	2,851
In-place lease value intangible	989
Total	4,570
Post-acquisition Improvements	23
Gross Carrying Amount
Land	730
Building and Improvements	2,874
In-place lease value intangible	989
Total	4,593
Accumulated Depreciation & Amortization	(458)
Net Book Carrying Value	4,135
Encumbrances
601 Sawyer
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,360
Building and Improvements	12,796
In-place lease value intangible	1,144
Total	17,300
Post-acquisition Improvements	245
Gross Carrying Amount
Land	3,360
Building and Improvements	13,041
In-place lease value intangible	1,144
Total	17,545
Accumulated Depreciation & Amortization	(798)
Net Book Carrying Value	16,747
Encumbrances
Prestonwood
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	7,410
Building and Improvements	13,895
In-place lease value intangible	1,695
Total	23,000
Post-acquisition Improvements	182
Gross Carrying Amount
Land	7,410
Building and Improvements	14,076
In-place lease value intangible	1,695
Total	23,181
Accumulated Depreciation & Amortization	(1,073)
Net Book Carrying Value	22,108
Encumbrances
Harwin
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,960
Building and Improvements	3,041
In-place lease value intangible	279
Total	5,280
Post-acquisition Improvements	73
Gross Carrying Amount
Land	1,960
Building and Improvements	3,114
In-place lease value intangible	279
Total	5,353
Accumulated Depreciation & Amortization	(240)
Net Book Carrying Value	5,114
Encumbrances
Fondren
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,650
Building and Improvements	7,326
In-place lease value intangible	1,004
Total	9,980
Post-acquisition Improvements	220
Gross Carrying Amount
Land	1,650
Building and Improvements	7,546
In-place lease value intangible	1,005
Total	10,201
Accumulated Depreciation & Amortization	(774)
Net Book Carrying Value	9,427
Encumbrances
Cornerstone
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,110
Building and Improvements	1,620
In-place lease value intangible	920
Total	3,650
Post-acquisition Improvements	79
Gross Carrying Amount
Land	1,110
Building and Improvements	1,699
In-place lease value intangible	920
Total	3,729
Accumulated Depreciation & Amortization	(404)
Net Book Carrying Value	3,325
Encumbrances
Northchase
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,700
Building and Improvements	5,821
In-place lease value intangible	1,549
Total	9,070
Post-acquisition Improvements	573
Gross Carrying Amount
Land	1,700
Building and Improvements	6,394
In-place lease value intangible	1,549
Total	9,643
Accumulated Depreciation & Amortization	(783)
Net Book Carrying Value	8,860
Encumbrances
616 FM 1960
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	1,510
Building and Improvements	8,931
In-place lease value intangible	1,269
Total	11,710
Post-acquisition Improvements	239
Gross Carrying Amount
Land	1,510
Building and Improvements	9,170
In-place lease value intangible	1,269
Total	11,949
Accumulated Depreciation & Amortization	(812)
Net Book Carrying Value	11,137
Encumbrances
Gateway
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,510
Building and Improvements	22,182
In-place lease value intangible	3,408
Total	29,100
Post-acquisition Improvements	743
Gross Carrying Amount
Land	3,510
Building and Improvements	22,925
In-place lease value intangible	3,408
Total	29,843
Accumulated Depreciation & Amortization	(1,928)
Net Book Carrying Value	27,915
Encumbrances
Promenade
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	5,750
Building and Improvements	12,671
In-place lease value intangible	1,579
Total	20,000
Post-acquisition Improvements	153
Gross Carrying Amount
Land	5,750
Building and Improvements	12,824
In-place lease value intangible	1,578
Total	20,152
Accumulated Depreciation & Amortization	(1,060)
Net Book Carrying Value	19,092
Encumbrances
400 North Belt
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,538
Building and Improvements	3,800
In-place lease value intangible	3,812
Total	10,150
Post-acquisition Improvements	2,605
Gross Carrying Amount
Land	2,538
Building and Improvements	6,405
In-place lease value intangible	3,812
Total	12,755
Accumulated Depreciation & Amortization	(5,933)
Net Book Carrying Value	6,822
Encumbrances
Commerce Plaza Hillcrest
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	6,500
Building and Improvements	1,031
In-place lease value intangible	3,869
Total	11,400
Post-acquisition Improvements	2,240
Gross Carrying Amount
Land	6,500
Building and Improvements	3,271
In-place lease value intangible	3,869
Total	13,639
Accumulated Depreciation & Amortization	(5,538)
Net Book Carrying Value	8,101
Encumbrances
Corporate Park Place
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,375
Building and Improvements	5,215
In-place lease value intangible	1,910
Total	9,500
Post-acquisition Improvements	1,235
Gross Carrying Amount
Land	2,375
Building and Improvements	6,450
In-place lease value intangible	1,910
Total	10,736
Accumulated Depreciation & Amortization	(3,278)
Net Book Carrying Value	7,457
Encumbrances
Skymark Tower
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,212
Building and Improvements	4,404
In-place lease value intangible	2,230
Total	8,846
Post-acquisition Improvements	1,701
Gross Carrying Amount
Land	2,212
Building and Improvements	6,105
In-place lease value intangible	2,230
Total	10,546
Accumulated Depreciation & Amortization	(3,565)
Net Book Carrying Value	6,981
Encumbrances
Ashford Crossing
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,650
Building and Improvements	4,240
In-place lease value intangible	3,710
Total	10,600
Post-acquisition Improvements	2,079
Gross Carrying Amount
Land	2,650
Building and Improvements	6,319
In-place lease value intangible	3,710
Total	12,679
Accumulated Depreciation & Amortization	(5,443)
Net Book Carrying Value	7,236
Encumbrances
Energy Plaza I&II
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	4,403
Building and Improvements	6,840
In-place lease value intangible	6,367
Total	17,610
Post-acquisition Improvements	2,104
Gross Carrying Amount
Land	4,403
Building and Improvements	8,944
In-place lease value intangible	6,367
Total	19,713
Accumulated Depreciation & Amortization	(8,503)
Net Book Carrying Value	11,210
Encumbrances
Westway One
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	5,410
Building and Improvements	11,276
In-place lease value intangible	4,950
Total	21,636
Post-acquisition Improvements	340
Gross Carrying Amount
Land	5,410
Building and Improvements	11,616
In-place lease value intangible	4,951
Total	21,977
Accumulated Depreciation & Amortization	(4,692)
Net Book Carrying Value	17,285
Encumbrances
Three Forest Plaza
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	8,910
Building and Improvements	18,186
In-place lease value intangible	8,558
Total	35,654
Post-acquisition Improvements	3,300
Gross Carrying Amount
Land	8,914
Building and Improvements	21,486
In-place lease value intangible	8,557
Total	38,957
Accumulated Depreciation & Amortization	(9,771)
Net Book Carrying Value	29,186
Encumbrances
Parkway I&II
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,373
Building and Improvements	4,765
In-place lease value intangible	2,352
Total	9,490
Post-acquisition Improvements	2,825
Gross Carrying Amount
Land	2,373
Building and Improvements	7,590
In-place lease value intangible	2,352
Total	12,315
Accumulated Depreciation & Amortization	(5,048)
Net Book Carrying Value	7,267
Encumbrances
Gulf Plaza
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,488
Building and Improvements	6,005
In-place lease value intangible	4,457
Total	13,950
Post-acquisition Improvements	1,356
Gross Carrying Amount
Land	3,488
Building and Improvements	7,361
In-place lease value intangible	4,457
Total	15,306
Accumulated Depreciation & Amortization	(6,056)
Net Book Carrying Value	9,249
Encumbrances
Timbercreek
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	724
Building and Improvements	962
In-place lease value intangible	1,211
Total	2,897
Post-acquisition Improvements	619
Gross Carrying Amount
Land	724
Building and Improvements	1,581
In-place lease value intangible	1,211
Total	3,517
Accumulated Depreciation & Amortization	(1,711)
Net Book Carrying Value	1,806
Encumbrances
Copperfield
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	605
Building and Improvements	760
In-place lease value intangible	1,054
Total	2,419
Post-acquisition Improvements	520
Gross Carrying Amount
Land	605
Building and Improvements	1,280
In-place lease value intangible	1,054
Total	2,938
Accumulated Depreciation & Amortization	(1,153)
Net Book Carrying Value	1,785
Encumbrances
One Technology Center
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	4,894
Building and Improvements	8,558
In-place lease value intangible	6,123
Total	19,575
Post-acquisition Improvements	1,866
Gross Carrying Amount
Land	4,894
Building and Improvements	10,424
In-place lease value intangible	6,123
Total	21,441
Accumulated Depreciation & Amortization	(8,471)
Net Book Carrying Value	12,970
Encumbrances
Richardson Heights
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	4,788
Building and Improvements	10,890
In-place lease value intangible	3,472
Total	19,150
Post-acquisition Improvements	7,232
Gross Carrying Amount
Land	4,788
Building and Improvements	18,122
In-place lease value intangible	3,472
Total	26,382
Accumulated Depreciation & Amortization	(9,389)
Net Book Carrying Value	16,994
Encumbrances	17,259
Bent Tree Green
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	3,003
Building and Improvements	6,272
In-place lease value intangible	2,740
Total	12,015
Post-acquisition Improvements	3,351
Gross Carrying Amount
Land	3,003
Building and Improvements	9,623
In-place lease value intangible	2,740
Total	15,366
Accumulated Depreciation & Amortization	(6,067)
Net Book Carrying Value	9,299
Encumbrances	7,435
Cooper Street
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	2,653
Building and Improvements	5,768
In-place lease value intangible	2,192
Total	10,613
Post-acquisition Improvements	494
Gross Carrying Amount
Land	2,653
Building and Improvements	6,262
In-place lease value intangible	2,192
Total	11,107
Accumulated Depreciation & Amortization	(4,243)
Net Book Carrying Value	6,864
Encumbrances	7,435
Mitchelldale Business Park
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost
Land	4,794
Building and Improvements	9,816
In-place lease value intangible	4,565
Total	19,175
Post-acquisition Improvements	2,911
Gross Carrying Amount
Land	4,794
Building and Improvements	12,727
In-place lease value intangible	4,565
Total	22,086
Accumulated Depreciation & Amortization	(8,007)
Net Book Carrying Value	14,079
Encumbrances	$ 11,263

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Revenues
Rental revenues	$ 72,045	$ 49,112
Tenant reimbursements and other revenues	14,679	7,910
Total revenues	86,724	57,022
Expenses (income)
Property operating expenses	31,721	18,613
Asset management fees	1,760	1,760
Real estate taxes and insurance	13,545	9,412
Depreciation and amortization	27,812	16,700
General and administrative	5,901	4,099
Interest expense	13,834	11,306
Interest and dividend income	(1,854)	(1,328)
Total expenses, net	92,719	60,562
Net loss	(5,995)	(3,540)
Net loss attributable to noncontrolling interest	(4,562)	(2,713)
Net loss attributable to common stockholders	$ (1,433)	$ (827)
Net loss attributable to common stockholders per share (in dollars per share)	$ (0.08)	$ (0.05)
Weighted average number of common shares outstanding, basic and diluted (in shares)	18,304	17,946

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements as of December 31, 2019 and 2018 and for the years then ended have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-K and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods.

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

Use of Estimates

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

Cash and Cash Equivalents

Cash and cash equivalents on the accompanying consolidated balance sheets include all cash and liquid investments with maturities of three months or less. Cash and cash equivalents as of December 31, 2019 and 2018 consisted of demand deposits at commercial banks. We maintain accounts which may from time to time exceed federally insured limits. We have not experienced any losses in these accounts and believe that the company is not exposed to any significant credit risk and regularly monitors the financial stability of these financial institutions. 

Restricted Cash

Restricted cash on the accompanying consolidated balance sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements. As of December 31, 2019 and 2018, the Company had a restricted cash balance of $26,078,000 and $33,696,000, respectively.  

Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, accrued rent and accounts receivable, accounts payable and accrued expenses and balances due to/ due from related parties, as well as related party notes receivable. The Company considers the carrying value of these financial instruments to approximate their respective fair values due to their short-term nature. Disclosure about the fair value of financial instruments is based on relevant information available as of December 31, 2019 and 2018.

Revenue Recognition

The Company's leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. The Company's accrued rents are included in accrued rent and accounts receivable, net. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in the Tenant Reimbursement and Other Revenues line item in the consolidated statements of operations in the period the related costs are incurred.

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-9, Revenue from Contracts with Customers, (“ASU 2014-9”) which amends the guidance for revenue recognition to eliminate the industry-specific revenue recognition guidance and replace it with a principle based approach for determining revenue recognition. The Company adopted ASU 2014-9 effective January 1, 2018 using the modified retrospective approach and the adoption of this guidance did not have a material impact on the consolidated financial statements. The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from ASU 2014-9. The Company’s other revenue is comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are also excluded from of ASU 2014-9. Additionally, the Company’s property dispositions have historically been cash sales with no contingencies and no future involvement in the property, as a result, the new guidance did not have an effect on the Company’s real estate transactions, however, the Company will account future sales of real estate properties in accordance with requirements of ASU 2014-9.

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 revenue 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.

Real Estate Joint Ventures and Partnerships

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

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

Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out

rights and substantive participating rights.Partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

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

Depreciation and amortization

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

Impairment

The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property.  If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value.  Management has determined that there has been no impairment in the carrying value of the Company’s real estate assets as of December 31, 2019 and 2018.

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.

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets.

Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to

develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:  Prices and other relevant information generated by market transactions involving

identical or comparable assets or liabilities.

Cost approach:  Amount required to replace the service capacity of an asset (replacement cost).

Income approach:  Techniques used to convert future amounts to a single amount based on market

expectations (including present-value, option-pricing, and excess-earnings models).

The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.  The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

Accrued Rent and Accounts Receivable, net

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 the Company’s claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Deferred Leasing Commissions Costs, net

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

Goodwill

GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired.  The Company applies a one-step quantitative assessment to determine if the estimated fair value is less than the carrying amount.  If the carrying amount exceeds the estimated fair value, the Company will record a goodwill impairment equal to such excess, not to exceed the total amount of goodwill. No goodwill impairment has been recognized in the accompanying consolidated financial statements.

Noncontrolling Interests

Noncontrolling interests is the portion of equity in a subsidiary not attributable to a parent.  The ownership interests not held by the parent are considered noncontrolling interests.  Accordingly, the Company has reported noncontrolling interests in equity on the consolidated balance sheets but separate from the Company's equity.  On the consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests.  

Stock-Based Compensation

The Company follows Accounting Standards Codification ("ASC") 718- Compensation- Stock Compensation, with regard to issuance of stock in payment of services.  ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the estimated grant date fair value, as of the grant date of the Company’s common stock, of the equity or liability instruments issued.  Stock-based compensation expense are recorded over the vesting period and is included in general and administrative expense in the accompanying consolidated statements of operations.

Income Taxes

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

annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP).  As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions.  Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders.  However, the Company believes that it is organized and will continue to operate in such a manner as to qualify for treatment as a REIT. 

For the years ended December 31, 2019 and 2018, the Company incurred a net loss of $5,995,000 and $3,540,000.  The Company formed a taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward.  The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the 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 December 31, 2019 and 2018, 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 years ended December 31, 2019 and 2018 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.

Concentration of Risk

The geographic concentration of the Company’s real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocation of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Going Concern Evaluation

Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The Hartman SPE LLC loan agreement (“SPE Loan”) has an initial maturity date of October 9, 2020. The SPE Loan provides for three successive one-year maturity date extensions. In order to exercise each successive one-year extension options, the Hartman SPE must meet five conditions in order to extend the maturity date without any further qualification. One of the five conditions is that Hartman SPE must have a debt yield, as defined, of 12.5% as of June 30, 2020.

As of December 31, 2019 and March 31, 2020, Hartman SPE has a debt yield of 13.29% and 12.95%, respectively. In response to the coronavirus outbreak and related economic disruption, the Company has undertaken cost reduction and avoidance measures which began in March 2020. Management expects the test period debt calculation to be 12.5% or greater which will allow the Company to exercise the extension option based solely on the terms of the loan agreement.

If the debt yield calculation as of the end of the June 30, 2020 test period is less than 12.5%, management believes that the lender will agree to a one-year extension, however, extension terms may be less favorable to the Company than as provided under the loan agreement. Any required modification of the loan agreement to conclude an extension of the maturity date may involve additional loan costs which would not otherwise be incurred.

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

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-2, Leases, along with various subsequent ASUs, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in the same manner as the previous guidance for operating leases today.

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

As of December 31, 2019, the Company, through SPE LLC has a ground lease for a parking lot located adjacent to the property at 601 Sawyer, Houston, Texas. The parking lot lease agreement expires at the end of September 2020. The Sawyer property is included in the Company’s consolidated financial statements as of December 31, 2019 and for the year ended December 31, 2019 because of the consolidation of SPE with the Company. SPE commenced operations and is consolidated with the Company for periods beginning after September 30, 2018.

Lease payments under the parking lot lease agreement are $3,500 per month. As of December 31, 2019, 9 monthly payments remain under the lease agreement for a total of $31,500.

The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In connection with the new revenue guidance (ASC 606), the new revenue standard will apply to other components of revenue deemed to be non-lease components. Under the new guidance, we will continue to recognize the lease components of lease revenue on a straight-line basis over our respective lease terms as we do under prior guidance. However, we would recognize these non-lease components under the new revenue guidance as the related services are delivered. As a result, the total revenue recognized over time would not differ under the new guidance. This does not result in a difference from how the Company has historically recognized revenue for these lease and non-lease components.

Additionally, ASU 2016-2 requires that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under ASU 2016-2, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. This does not result in a difference from how the Company has historically recognized lease acquisition costs.

On January 1, 2019, the Company adopted ASU 2018-07, "Improvements to Non-employee Stock-Based Payment Accounting." The updated guidance simplifies aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. The adoption of this guidance had no impact on our consolidated financial statements.

On January 1, 2019, the Company adopted ASU 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities". The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of either adopting the new standard early using a modified retrospective transition method in any interim period after issuance of the update, or alternatively adopting the new standard for fiscal years beginning after December 15, 2018. The adoption of this guidance had no impact on our consolidated financial statements.

On January 1, 2018, the Company adopted ASU 2014-9, codified in Accounting Standards Codification (“ASC”) 606 - “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-9 replaces most existing revenue recognition guidance under GAAP. The standard permits the use of either the retrospective or cumulative effect transition method. Certain contracts with customers, principally lease contracts, are not within the scope of the new guidance. The Company has elected to use the modified retrospective method. The adoption of ASU 2014-9 has no impact on the Company’s consolidated financial statements on adoption” at January 1, 2018.

On January 1, 2018, the Company adopted ASU 2016-17, “Interest Held Through Related Parties That Are Under Common Control,” issued by the FASB, which amends the accounting guidance when determining the treatment of certain VIE’s to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. In connection with our adoption of ASU 2016-17, we have determined that SPE LLC is a VIE and that the Company is the primary beneficiary. Accordingly, the accounts of SPE LLC are included in our consolidated financial position as of December 31, 2018 and beginning October 1, 2018, in our consolidated results of operations. The Company and its affiliates, Hartman XIX and HIREIT, are guarantors of the SPE LLC note payable.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The updated guidance requires measurement and recognition of expected credit losses for financial assets, including trade and other receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Generally, the pronouncement requires a modified retrospective method of adoption. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted. In identifying all our financial instruments covered under this guidance, the majority of our instruments result from operating leasing transactions, which are not within the scope of the new standard and are to remain governed by the recently issued leasing guidance and other previously issued guidance. The adoption of this guidance had no impact on our consolidated financial statements.

Reclassification

Certain items in the comparative consolidated financial statements have been reclassified to conform to the presentation adopted in the current period. Restricted cash reporting line was added on the face of the consolidated balance sheets. The balance currently reported as restricted cash was reported previously in the prepaid expenses and

other assets. Additionally, insurance proceeds account has been reclassified from being reported in real estate taxes and insurance reporting line in 2018 to property operating expenses.

XML

Future Minimum Rents

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Future Minimum Rents

Future Minimum Rents

The Company leases the majority of its properties under noncancellable operating leases which provide for minimum base rentals.A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at December 31, 2019 is as follows, in thousands:

December 31,	Minimum Future Rents
2020	$	69,973,000
2021	61,237,000
2022	49,396,000
2023	37,477,000
2024	25,851,000
Thereafter	39,785,000
Total	$	283,719,000

XML

Related Party Transactions

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

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 Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. and Subsidiaries of which approximately 20% is owned by Allen R. Hartman who is the Chief Executive Officer and Chairman of the Board of Directors.

The Company pays acquisition fees and asset management fees to the Advisor in connection with the acquisition of properties and management of the Company. The Company pays property management and leasing commissions to the Property Manager in connection with the management and leasing of the Company’s properties. For the years ended December 31, 2019 and 2018 the Company incurred property management fees and reimbursements of $8,053,000 and $4,910,000, respectively, and $4,948,000 and $4,103,000, respectively for leasing commissions owed to our Property Manager. We incurred asset management fees of $1,760,000 and $1,760,000, respectively owed to Advisor. These fees are monthly fees equal to one-twelfth of 0.75% of the sum of the higher of the cost or value of each asset. The asset management fee will be based only on the portion of the cost or value attributable to the Company’s investment in an asset, if the Company do not own all or a majority of an asset. There were no acquisition fees incurred to the Advisor for the years ended December 31, 2019 and 2018, respectively. Property management fees and reimbursements are included in property operating expense in the accompanying consolidated statements of operations. Leasing commissions are capitalized in the accompanying consolidated balance sheets. Asset management fees are captioned as such in the accompanying consolidated statements of operations.

The Company also pays construction management fees to the Property Manager in connection with the construction management of the Company's properties. For the years ended December 31, 2019 and 2018, the Company incurred construction management fees of $664,000 and $2,122,000, respectively. Construction management fees are capitalized and included in real estate assets in the consolidated balance sheets.

The Company had a balance due to the Property Manager of $1,168,000 and $462,000 as of December 31, 2019 and 2018, respectively. The Company owed the Advisor $2,077,000 and $1,204,000 for asset management fees as of December 31, 2019 and 2018, respectively. The Company had a net balance due from other related parties of $5,375,000 and $170,000 as of December 31, 2019 and 2018, respectively.

The Company owns 1,561,523 shares of the common stock of HIREIT which it acquired for cash consideration of $8,978,000. The Company’s investment in HIREIT is accounted for under the cost method.The Company’s

approximately 11% ownership interest in HIREIT is less than a controlling stake, and is reflected as “Investment in Affiliate” on the accompanying consolidated balance sheets. The Company received dividend distributions from HIREIT of $425,000 and $425,000 for the years ended December 31, 2019 and 2018, respectively, which is included in interest and dividend income in the accompanying consolidated statements of operations.

During 2019, the Company borrowed under an unsecured promissory note payable to Hartman vREIT XXI, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $4,400,000. This note payable had an outstanding balance of $4,400,000 as of December 31, 2019, which is included in Notes payable in the accompanying consolidated balance sheets. Interest has been accrued on the loan amount at an annual rate of 5%. The Company recognized interest expense on the affiliate note in the amount of $23,000 for the year ended December 31, 2019,which is included in interest expense in the accompanying consolidated statements of operations.

In May 2016, the Company, through its taxable REIT subsidiary, Hartman TRS, Inc. (“TRS”), loaned $7,231,000 pursuant to a promissory note in the face amount of up to $8,820,000 to Hartman Retail II Holdings Company, Inc. (“Retail II Holdings”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of a retail shopping center by Hartman Retail II DST, a Delaware statutory trust sponsored by the Property Manager.  Pursuant to the terms of the promissory note, TRS will receive a two percent (2)% origination fee of amounts advanced under the promissory note, and interest at ten percent (10)% per annum on the outstanding principal balance. The outstanding principal balance of the promissory note will be repaid as investor funds are raised by Hartman Retail II DST. The maturity date of the promissory note, as amended is December 31, 2020. This note receivable had an outstanding balance of $2,476,000 as of December 31, 2019 and 2018, respectively, which is included in Notes receivable – related party in the accompanying consolidated balance sheets. For the years ended December 31, 2019 and 2018, respectively, interest and dividend income in the accompanying consolidated statements of operations, includes $235,000 and $456,000 of interest income from this promissory note.

The Company had a note receivable due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), of $4,200,000 as of December 31, 2019 and 2018, respectively, which is included in Notes receivable - related party in the accompanying consolidated balance sheets. The face amount of the promissory note is $4,500,000. Interest has been accrued on the loan amount at an annual rate of six percent (6%). The Company recognized interest income on the affiliate note in the amount of $252,000 for each of the years ended December 31, 2019 and 2018, respectively, which is included in interest income in the accompanying consolidated statements of operations.

In February 2019, the Company through TRS, loaned $6,782,455 pursuant to a promissory note in the face amount of up to $7,500,000 to Hartman Retail III Holdings Company, Inc. (“Retail III Holdings”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of a retail shopping center by Hartman Retail III DST, a Delaware statutory trust sponsored by the Advisor. This note receivable had an outstanding balance of $6,782,455 as of December 31, 2019, which is included in Notes receivable – related party in the accompanying consolidated balance sheets. Pursuant to the terms of the promissory note, TRS receives a two percent (2%) origination fee of amounts advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The outstanding principal balance of the promissory note will be repaid as investor funds are raised by Hartman Retail III DST. The maturity date of the promissory note, as amended, is February 29, 2021. The Company recognized interest income on this affiliate note in the amount of $570,000 for the year ended December 31, 2019, which is included in interest and dividend income in the accompanying consolidated statements of operations.

In March 2019, the Company through TRS, loaned $3,829,711 pursuant to a promissory note in the face amount of $3,500,000 to Hartman Ashford Bayou, LLC (“Ashford Bayou”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of office building by Ashford Bayou, a wholly owned subsidiary of Hartman Total Return, Inc. This note receivable had an outstanding balance of $3,829,711 as of December 31, 2019, which is included in Notes receivable – related party in the accompanying consolidated balance sheets. Pursuant to the terms of the promissory note, TRS receives a two percent (2%) origination fee of amounts advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The outstanding

principal balance of the promissory note will be repaid as investor funds are raised by Hartman Total Return, Inc. The maturity date of the promissory note is March 31, 2020. The Company recognized interest income on this affiliate note in the amount of $298,000 for the year ended December 31, 2019, which is included in interest and dividend income in the accompanying consolidated statements of operations.

Variable interest entities (“VIEs”) are defined as entities with a level of invested equity that is not sufficient to fund future operations on a stand-alone basis, or whose equity holders lack certain characteristics of a controlling financial interest. For identified VIEs, an assessment must be made to determine which party to the VIE, if any, has both the power to direct the activities of the VIE that most significantly impacts the performance of the VIE and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company is not deemed to be the primary beneficiary of Retail II Holdings, Retail III Holdings or Ashford Bayou, each of which qualifies as a VIE.  Accordingly, the assets and liabilities and revenues and expenses of Retail II Holdings, Retail III Holdings and Ashford Bayou have not been included in the accompanying consolidated financial statements.

The Board of Directors voted to acquire an additional 3.42% ownership interest of Hartman SPE, LLC from Hartman vREIT XXI, Inc. in exchange for 700,302 shares of the Company's common stock with a total value of $8,859,000 ($12.65 per share). The exchange increased the Company’s ownership interest in Hartman SPE, LLC from 32.74% to 36.16%. The transaction was effective March 1, 2019.

XML

Future Minimum Rents (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 69,973
2021	61,237
2022	49,396
2023	37,477
2024	25,851
Thereafter	39,785
Total	$ 283,719

XML

Real Estate - Future Amortization From Acquired Lease Intangibles (Details) - In-place leases $ in Thousands	Dec. 31, 2019 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
2020	$ 10,459
2021	8,410
2022	7,454
2023	5,583
2024	0
Total	$ 31,906

XML

Organization and Business (Details) $ / shares in Units, ft² in Millions	Jul. 21, 2017 $ / shares	Dec. 31, 2019 ft² property $ / shares	Dec. 31, 2018 $ / shares	Oct. 01, 2018 USD ($) property
Schedule of Equity Method Investments [Line Items]
Number of real estate properties		39
Commercial properties		43
Area of property (in square feet) | ft²		6.7
Common stock, par value (in dollars per share) | $ / shares		$ 0.001	$ 0.001
XIX Merger Agreement
Schedule of Equity Method Investments [Line Items]
Conversion rate	9,171.98
Common stock, par value (in dollars per share) | $ / shares	$ 0.01
HIREIT Merger
Schedule of Equity Method Investments [Line Items]
Conversion rate	0.752222
8% Cumulative Preferred Stock | XIX Merger Agreement
Schedule of Equity Method Investments [Line Items]
Conversion rate	1.238477
Preferred stock dividend rate	8.00%
9% Cumulative Preferred Stock | XIX Merger Agreement
Schedule of Equity Method Investments [Line Items]
Conversion rate	1.238477
Preferred stock dividend rate	9.00%
Common Stock | HIREIT Merger
Schedule of Equity Method Investments [Line Items]
Conversion rate	0.752222
Subordinated Common Stock | HIREIT Merger
Schedule of Equity Method Investments [Line Items]
Conversion rate	0.752222
Richardson, Arlington And Dallas, Texas
Schedule of Equity Method Investments [Line Items]
Number of real estate properties		15
Houston, Texas
Schedule of Equity Method Investments [Line Items]
Number of real estate properties		25
San Antonio, Texas
Schedule of Equity Method Investments [Line Items]
Number of real estate properties		3
TEXAS
Schedule of Equity Method Investments [Line Items]
Number of real estate properties		3
Hartman SPE LLC | Variable Interest Entity, Primary Beneficiary
Schedule of Equity Method Investments [Line Items]
Number of real estate properties				39
Notes Payable to Banks | Hartman SPE LLC
Schedule of Equity Method Investments [Line Items]
Debt instrument, face amount | $				$ 259,000,000

XML

Subsequent events	12 Months Ended
	Dec. 31, 2019
Subsequent Events [Abstract]
Subsequent events	Subsequent eventsThe Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.Since the beginning of 2020, the COVID-19 coronavirus outbreak which originated in mainland China has significantly impacted the global and U.S. economies. As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which are likely to negatively impact the results of our operations.

XML

Accrued Rent and Accounts Receivable, net (Tables)

12 Months Ended

Dec. 31, 2019

Receivables [Abstract]

Accrued Rent and Accounts Receivable, net

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

	December 31,
	2019		2018
Tenant receivables	$	5,929	$	5,205
Accrued rent	9,244		8,386
Allowance for uncollectible accounts	(2,597)		(1,710)
Accrued rents and accounts receivable, net	$	12,576	$	11,881

XML

Loss Per Share (Tables)

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

Only those items that have a dilutive impact on basic loss per share are included in the diluted loss per share.

	December 31,
	2019		2018
Numerator:
Net income (loss) attributable to common stockholders	$	(1,433)	$	(827)
Denominator:
Weighted average number of common shares outstanding,basic and diluted	18,304		17,946
Basic and diluted loss per common share:
Net loss attributable to common stockholders per share	$	(0.08)	$	(0.05)

XML

Incentive Awards Plan (Details)	12 Months Ended
	Dec. 31, 2019 shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Shares reserve for issuance (in shares)	5,000,000
Percentage of outstanding stock maximum	10.00%

XML

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Ordinary income (unaudited)	53.10%	24.90%
Return of capital (unaudited)	46.90%	75.10%
Capital gains distribution (unaudited)	0.00%	0.00%
Total	100.00%	100.00%
Provision for Texas Franchise Tax	$ 385,000	$ 267

XML

Notes Payable - Summary of Mortgage Notes Payable (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Long-term debt, gross	$ 306,793	$ 310,686
Less unamortized deferred loan costs	(3,754)	(4,779)
Total	$ 303,039	305,907
Richardson Heights
Debt Instrument [Line Items]
Rate	4.61%
Long-term debt, gross	$ 17,260	17,760
Cooper Street
Debt Instrument [Line Items]
Rate	4.61%
Long-term debt, gross	$ 7,435	7,632
Bent Tree Green
Debt Instrument [Line Items]
Rate	4.61%
Long-term debt, gross	$ 7,435	7,632
Mitchelldale
Debt Instrument [Line Items]
Rate	4.61%
Long-term debt, gross	$ 11,263	11,560
Promenade
Debt Instrument [Line Items]
Long-term debt, gross	$ 0	7,102
Hartman SPE LLC
Debt Instrument [Line Items]
Rate	3.60%
Long-term debt, gross	$ 259,000	259,000
Hartman XXI
Debt Instrument [Line Items]
Rate	10.00%
Long-term debt, gross	$ 4,400	$ 0

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Cash Distribution Percentage

For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31:

	2019		2018
Ordinary income (unaudited)	53.1	%	24.9	%
Return of capital (unaudited)	46.9	%	75.1	%
Capital gains distribution (unaudited)	—	%	—	%
Total	100.0	%	100.0	%

XML

Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization

12 Months Ended

Dec. 31, 2019

SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract]

Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization

(Dollars in thousands)

Initial Cost to the Company
Property	Date Acquired	Date of Construction	Land		Building and Improvements		In-place lease value intangible		Total		Post – acquisition Improvements
Garden Oaks	10/01/2018	1956	$	1,770	$	17,969	$	1,021	$	20,760	$	458
Quitman	10/01/2018	1920	3,130		2,389		351		5,870		130
Chelsea Square	10/01/2018	1984	1,570		5,046		494		7,110		170
Mission Centre	10/01/2018	1987	2,020		7,690		890		10,600		51
Regency	10/01/2018	1979	960		819		851		2,630		338
Spring Valley	10/01/2018	1982	3,490		1,064		1,066		5,620		997
Northeast Square	10/01/2018	1984	1,300		3,330		280		4,910		75
One Mason	10/01/2018	1983	2,440		9,290		1,130		12,860		30
Tower	10/01/2018	1981	2,750		2,584		1,336		6,670		394
Preserve	10/01/2018	1970	9,730		9,085		3,485		22,300		441
Westheimer	10/01/2018	1983	3,800		12,416		2,284		18,500		543
Walzem Plaza	10/01/2018	1981	3,900		10,660		1,840		16,400		1,083
11811 North Freeway	10/01/2018	1982	1,980		1,037		2,473		5,490		311
Atrium I	10/01/2018	1980	2,540		716		1,494		4,750		524
North Central Plaza	10/01/2018	1982	2,330		14,511		2,959		19,800		1,087
3100 Timmons	10/01/2018	1975	10,330		3,543		1,427		15,300		718
Central Park	10/01/2018	1984	730		2,851		989		4,570		23
601 Sawyer	10/01/2018	1982	3,360		12,796		1,144		17,300		245
Prestonwood	10/01/2018	1999	7,410		13,895		1,695		23,000		182
Harwin	10/01/2018	1992	1,960		3,041		279		5,280		73
Fondren	10/01/2018	2004	1,650		7,326		1,004		9,980		220
Cornerstone	10/01/2018	1984	1,110		1,620		920		3,650		79
Northchase	10/01/2018	1984	1,700		5,821		1,549		9,070		573
616 FM 1960	10/01/2018	1983	1,510		8,931		1,269		11,710		239
Gateway	10/01/2018	1983	3,510		22,182		3,408		29,100		743
Promenade	10/01/2018	1973-1979	5,750		12,671		1,579		20,000		153
400 North Belt	05/08/2015	1982	2,538		3,800		3,812		10,150		2,605
Commerce Plaza Hillcrest	05/01/2015	1977	6,500		1,031		3,869		11,400		2,240
Corporate Park Place	08/24/2015	1980	2,375		5,215		1,910		9,500		1,235
Skymark Tower	09/02/2015	1985	2,212		4,404		2,230		8,846		1,701
Ashford Crossing	07/31/2015	1983	2,650		4,240		3,710		10,600		2,079
Energy Plaza	12/30/2014	1983	4,403		6,840		6,367		17,610		2,104
Westway	06/01/2016	2001	5,410		11,276		4,950		21,636		340
Three Forest Plaza	12/22/2016	1983	8,910		18,186		8,558		35,654		3,300
Parkway Plaza I & II	03/15/2013	1982	2,373		4,765		2,352		9,490		2,825
Gulf Plaza	03/11/2014	1979/1980	3,488		6,005		4,457		13,950		1,356
Timbercreek	12/30/2014	1984	724		962		1,211		2,897		619
Copperfield	12/30/2014	1986	605		760		1,054		2,419		520
One Technology	11/10/2015	1984	4,894		8,558		6,123		19,575		1,866
Richardson Heights	12/28/2010	1958-1962	4,788		10,890		3,472		19,150		7,232
Bent Tree Green	10/16/2012	1983	3,003		6,272		2,740		12,015		3,351
Cooper Street	05/11/2012	1992	2,653		5,768		2,192		10,613		494
Mitchelldale Business Park	06/13/2014	1977	4,794		9,816		4,565		19,175		2,911
Total			$	145,050	$	302,071	$	100,790	$	547,911	$	46,658

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2019

(Dollars in thousands)

Gross Carrying Amount at December 31, 2019
Property	Land		Building and Improvements		In-place lease value intangible		Total		Accumulated Depreciation & Amortization		Net Book Carrying Value		Encumbrances
Garden Oaks	$	1,770	$	18,427	$	1,021	$	21,218	$	(994)	$	20,225
Quitman	3,130		2,519		351		6,000		(174)		5,826
Chelsea Square	1,570		5,216		494		7,280		(357)		6,923
Mission Centre	2,020		7,741		890		10,651		(632)		10,019
Regency	960		1,157		852		2,969		(342)		2,627
Spring Valley	3,490		2,061		1,066		6,617		(616)		6,001
Northeast Square	1,300		3,405		280		4,985		(227)		4,758
One Mason	2,440		9,320		1,130		12,890		(719)		12,170
Tower	2,750		2,977		1,335		7,062		(584)		6,478
Preserve	9,730		9,526		3,485		22,740		(1,617)		21,124
Westheimer	3,800		12,959		2,284		19,043		(1,312)		17,731
Walzem Plaza	3,900		11,743		1,840		17,482		(1,210)		16,273
11811 N Freeway	1,980		1,348		2,473		5,801		(883)		4,918
Atrium I	2,540		1,240		1,494		5,275		(569)		4,706
North Central	2,330		15,598		2,959		20,887		(1,544)		19,342
3100 Timmons	10,330		4,261		1,428		16,019		(673)		15,345
Central Park	730		2,874		989		4,593		(458)		4,135
601 Sawyer	3,360		13,041		1,144		17,545		(798)		16,747
Prestonwood	7,410		14,076		1,695		23,181		(1,073)		22,108
Harwin	1,960		3,114		279		5,353		(240)		5,114
Fondren	1,650		7,546		1,005		10,201		(774)		9,427
Cornerstone	1,110		1,699		920		3,729		(404)		3,325
Northchase	1,700		6,394		1,549		9,643		(783)		8,860
616 FM 1960	1,510		9,170		1,269		11,949		(812)		11,137
Gateway	3,510		22,925		3,408		29,843		(1,928)		27,915
Promenade	5,750		12,824		1,578		20,152		(1,060)		19,092
400 North Belt	2,538		6,405		3,812		12,755		(5,933)		6,822
Commerce Plaza	6,500		3,271		3,869		13,639		(5,538)		8,101
Corporate Park	2,375		6,450		1,910		10,736		(3,278)		7,457
Skymark Tower	2,212		6,105		2,230		10,546		(3,565)		6,981
Ashford Crossing	2,650		6,319		3,710		12,679		(5,443)		7,236
Energy Plaza	4,403		8,944		6,367		19,713		(8,503)		11,210
Westway	5,410		11,616		4,951		21,977		(4,692)		17,285
Three Forest	8,914		21,486		8,557		38,957		(9,771)		29,186
Parkway Plaza	2,373		7,590		2,352		12,315		(5,048)		7,267
Gulf Plaza	3,488		7,361		4,457		15,306		(6,056)		9,249
Timbercreek	724		1,581		1,211		3,517		(1,711)		1,806
Copperfield	605		1,280		1,054		2,938		(1,153)		1,785
One Technology	4,894		10,424		6,123		21,441		(8,471)		12,970
Richardson Heights	4,788		18,122		3,472		26,382		(9,389)		16,994		17,259
Bent Tree Green	3,003		9,623		2,740		15,366		(6,067)		9,299		7,435
Cooper Street	2,653		6,262		2,192		11,107		(4,243)		6,864		7,435
Mitchelldale	4,794		12,727		4,565		22,086		(8,007)		14,079		11,263
Total	$	145,050	$	348,729	$	100,790	$	594,569	$	(117,652)	$	476,917	$	43,392

The aggregate cost of real estate for federal income tax purposes was $594,569  as of  December 31, 2019.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2019

Summary of activity for real estate assets for the years ended December 31, 2019 and 2018, in thousands:

	Years ended December 31,
	2019		2018
Balance at beginning of period	$	583,112	$	259,962
Additions during the period:
Acquisitions	—		—
Consolidation of Hartman SPE LLC	—		313,230
Improvements	11,457		9,920
	594,569		323,150
Reductions – cost of real estate assets sold	—		—
Balance at end of period	$	594,569	$	583,112

XML

Deferred Leasing Commission Costs, net (Tables)

12 Months Ended

Dec. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Deferred Leasing Commission Costs, net

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

	December 31,
	2019		2018
Deferred leasing commissions	$	17,620	$	12,671
Less: accumulated amortization	(6,830)		(4,370)
Deferred leasing commission costs, net	$	10,790	$	8,301

XML

Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Numerator:
Net loss attributable to common stockholders	$ (1,433)	$ (827)
Denominator:
Basic and diluted weighted average shares outstanding (in shares)	18,304	17,946
Basic and diluted loss per common share:
Net loss attributable to common stockholders (in dollars per share)	$ (0.08)	$ (0.05)

XML

Notes Payable - Additional Information (Details)		12 Months Ended
	Oct. 01, 2018 USD ($) extension_option	Dec. 31, 2019 USD ($) property loan_outstanding	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Number of term loans outstanding | loan_outstanding		4
Outstanding balance		$ 306,793,000	$ 310,686,000
Number of real estate properties | property		39
Initial term of debt instrument		2 years
Debt instrument, extension term		1 year
Interest expense incurred		$ 13,834,000	11,306,000
Interest expense payable		$ 516,000	421,000
Secured Debt | Richardson Heights, Cooper Street, Bent Tree Green And Mitchelldale Property Loans
Debt Instrument [Line Items]
Amortization term		27 years
Outstanding balance		$ 43,393,000	44,584,000
Hartman SPE LLC | Notes Payable to Banks
Debt Instrument [Line Items]
Debt instrument, face amount	$ 259,000,000
Term of debt instrument	5 years
Initial term of debt instrument	2 years
Number of extensions | extension_option	3
Debt instrument, extension term	1 year
Hartman SPE LLC | LIBOR | Notes Payable to Banks
Debt Instrument [Line Items]
Basis spread on variable rate	1.80%
Maximum | Hartman SPE LLC | LIBOR | Notes Payable to Banks
Debt Instrument [Line Items]
Basis spread on variable rate	3.75%
Fair Value
Debt Instrument [Line Items]
Debt instrument, fair value disclosure		308,671,000	309,545,000
Book Value
Debt Instrument [Line Items]
Debt instrument, fair value disclosure		$ 306,793,000	$ 310,686,000

XML

Stockholders' Equity - Distributions (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Equity [Abstract]
Distributions per Common Share (in dollars per share)	$ 0.175	$ 0.175	$ 0.175	$ 0.171	$ 0.175	$ 0.175	$ 0.175	$ 0.175	$ 0.696	$ 0.700
Total Distributions Paid	$ 3,223	$ 3,224	$ 3,223	$ 3,141	$ 3,101	$ 3,151	$ 3,152	$ 3,151	$ 12,811	$ 12,555

XML

Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization - Summary of Activity of Real Estate Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate [Roll Forward]
Balance at beginning of period	$ 583,112	$ 259,962
Acquisitions	0	0
Consolidation of Hartman SPE LLC	0	313,230
Improvements	11,457	9,920
Ending balance, before reduction for real estate asset sold	594,569	323,150
Reductions – cost of real estate assets sold	0	0
Balance at end of period	$ 594,569	$ 583,112

XML

Real Estate

12 Months Ended

Dec. 31, 2019

Real Estate [Abstract]

Real Estate

Real Estate

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

	December 31,
	2019		2018
Land	$	145,050	$	145,050
Buildings and improvements	348,729		337,272
In-place lease value intangible	100,790		100,790
	594,569		583,112
Less accumulated depreciation and amortization	(117,652)		(89,840)
Total real estate assets	$	476,917	$	493,272

Depreciation expense for the years ended December 31, 2019 and 2018 was $16,917,000 and $8,900,000, respectively.

The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms.  With respect to all properties owned by the Company, the Company considers all of the in-place leases to be market rate leases.

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

	December 31,
	2019		2018
In-place lease value intangible	$	100,790	$	100,790
Less: In-place leases – accumulated amortization	(68,884)		(57,989)
Acquired lease intangible assets, net	$	31,906	$	42,801

The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands:

December 31,	In-place lease amortization
2020	$	10,459
2021	8,410
2022	7,454
2023	5,583
2024	—
Total	$	31,906

Amortization expense for the year ended December 31, 2019 and 2018 was $10,895,000 and $7,799,000, respectively.

As of December 31, 2019 and 2018, we owned or held a majority interest in 43 commercial properties comprising approximately 6.7 million square feet plus three pad sites, all located in Texas. As of December 31, 2019 and 2018, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.  

Acquisition fees earned by the Advisor were $0 for both the years ended December 31, 2019 and 2018, respectively. Asset management fees earned by the Advisor for the year year ended December 31, 2019 and 2018, respectively was $1,760,000 and $1,760,000. Asset management fees are captioned as such in the accompanying consolidated statements of operations for the years ended December 31, 2019 and 2018, respectively.

The Company’s indirect 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 paid annual grants to HRHP LLC in equal installments over a 5 year period of $1,500,000 and pays sales tax grants, paid annually over the first 10 years of the Alamo Draft House lease. For the years ended December 31, 2019 and 2018, HRHP LLC received sales tax grant proceeds of $66,000 and $82,000 for the 2019 and 2018 incentive agreement fiscal years, 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 December 31, 2019, 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.

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Distributions and Net Loss	Total Stockholders’ Equity	Non-controlling Interest
Stockholders' equity, beginning balance at Dec. 31, 2017	$ 100,039	$ 0	$ 18	$ 167,871	$ (81,188)	$ 86,701	$ 13,338
Shares outstanding, beginning balance (in shares) at Dec. 31, 2017		1	18,004
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Redemption of common shares (in shares)			(298)
Redemption of common shares	(2,864)			(2,864)		(2,864)
Issuance of common shares (in shares)			6
Issuance of common shares	77			77		77
Purchase of non-controlling Interest	167,968						167,968
Dividends and distributions (cash)	(13,199)				(12,555)	(12,555)	(644)
Net loss	(3,540)				(1,419)	(1,419)	(2,121)
Shares outstanding, ending balance (in shares) at Dec. 31, 2018		1	17,712
Stockholders' equity, ending balance at Dec. 31, 2018	248,481	$ 0	$ 18	165,084	(95,162)	69,940	178,541
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common shares (in shares)			6
Issuance of common shares	76			76		76
Purchase of non-controlling interest (in shares)			700
Purchase of non-controlling Interest				8,859		8,859	(8,859)
Dividends and distributions (cash)	(17,556)				(12,811)	(12,811)	(4,745)
Net loss	(5,995)				(1,433)	(1,433)	(4,562)
Shares outstanding, ending balance (in shares) at Dec. 31, 2019		1	18,418
Stockholders' equity, ending balance at Dec. 31, 2019	$ 225,006	$ 0	$ 18	$ 174,019	$ (109,406)	$ 64,631	$ 160,375

XML

Cover Page - USD ($)	12 Months Ended
	Dec. 31, 2019	Mar. 31, 2020	Jun. 30, 2019
Document and Entity Information:
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Fiscal Period Focus	FY
Entity File Number	000-53912
Entity Registrant Name	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	2909 Hillcroft
Entity Address, Address Line Two	Suite 420
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Tax Identification Number	26-3455189
Entity Address, Postal Zip Code	77057
City Area Code	713
Local Phone Number	467-2222
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2019
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Amendment Flag	false
Entity Central Index Key	0001446687
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		18,417,687
Entity Public Float			$ 0
Entity Ex Transition Period	false
Document Fiscal Year Focus	2019

XML

Notes Payable

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Notes Payable

Notes Payable

The Operating Partnership is a party to four, cross-collateralized, term loan agreements with an insurance company. The term loans are secured by the Richardson Heights Property, the Cooper Street Property, the Bent Tree Green Property and the Mitchelldale Property. The loans require monthly payments of principal and interest due and payable on the first day of each month. Monthly payments are based on a 27-year loan amortization.  Each of the loan agreements are subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements. Each of the loan agreements provides for a fixed interest rate of 4.61%. As of December 31, 2019, 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. The outstanding balance of the four loans was $43,393,000 and $44,584,000 as of December 31, 2019 and 2018, respectively.

On October 1, 2018, the Company through SPE LLC and Goldman Sachs Mortgage Company entered into a $259,000,000 term loan agreement. The Company together with its affiliates HIREIT, Hartman XIX and vREIT XXI, contributed a total of 39 commercial real estate properties ("Properties") to SPE, LLC, a recently formed Delaware limited liability company, subject to the mortgage indebtedness encumbering the Properties, in exchange for membership interests in SPE LLC. Proceeds of the Loan were immediately used to extinguish the existing mortgage indebtedness encumbering the Properties.

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

The outstanding principal of the loan bears interest at the one-month LIBOR rate plus 1.8%. As a condition to the funding of the Loan, SPE LLC has entered into an interest rate cap arrangement with SMBC Capital Markets, Inc. that caps LIBOR at 3.75% during the initial term of the Loan.

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

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

The following is a summary of the mortgage notes payable, in thousands:

					December 31,
Property/Facility	Payment (1)	Maturity Date	Rate		2019		2018
Richardson Heights (2)	P&I	July 1, 2041	4.61	%	$	17,260	$	17,760
Cooper Street (2)	P&I	July 1, 2041	4.61	%	$	7,435	$	7,632
Bent Tree Green (2)	P&I	July 1, 2041	4.61	%	$	7,435	$	7,632
Mitchelldale (2)	P&I	July 1, 2041	4.61	%	$	11,263	$	11,560
Promenade (3)	P&I				$	—	$	7,102
Hartman SPE LLC	IO	October 9, 2020	3.60	%	$	259,000	$	259,000
Hartman XXI	IO	March 31, 2021	10.00	%	$	4,400	$	—
					$	306,793	$	310,686
Less unamortized deferred loan costs					$	(3,754)	$	(4,779)
					$	303,039	$	305,907

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

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

(3) Hartman SPE LLC loan proceeds for the repayment of the Promenade loan were in escrow as of October 1, 2018. The loan was paid in full with the refinancing proceeds on February 15, 2019.

Annual maturities of notes payable as of December 31, 2019 are as follows, in thousands:

December 31,	Amount Due
2020	$	260,253
2021	5,712
2022	1,374
2023	1,439
2024	1,506
Thereafter	36,509
Total	$	306,793

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

	December 31,
	2019		2018
Deferred loan costs	$	7,155	$	7,082
Less:  deferred loan cost accumulated amortization	(3,401)		(2,303)
Total cost, net of accumulated amortization	$	3,754	$	4,779

Interest expense incurred for the year ending December 31, 2019 and 2018 was $13,834,000 and $11,306,000, respectively. Interest expense of $516,000 and $421,000 was payable as of December 31, 2019 and 2018, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Fair Value of Debt

The fair value of the Company’s fixed rate notes payable, variable rate notes payable and secured revolving credit facilities aggregates to $308,671,000 and $309,545,000 as compared to book value of $306,793,000 and $310,686,000 as of December 31, 2019 and 2018, respectively. The fair value of our debt instruments is estimated on a Level 2 basis, as provided by ASC 820, using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments. Disclosure about the fair value of notes payable is based on relevant information available as of December 31, 2019 and 2018.

XML

Stockholders' Equity

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Stockholders' Equity

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

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.In February 2009, the Company sold 19,000 shares of common stock to Hartman XX Holdings, Inc. at a price of $10.00 per share. In February 2009, the Company issued 1,000 shares of the Company’s convertible preferred stock to the Company’s advisor, Hartman Advisors LLC (“Advisor”), at a price of $10.00 per share. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc..Hartman Income REIT Management, Inc. is a wholly owned subsidiary of Hartman Income REIT, Inc. Allen R. Hartman, the Company’s Chief Executive Officer and Chairman of the Board of Directors, beneficially owns approximately 20% of Hartman Income REIT, Inc.

Preferred Stock

Under the Company’s articles of incorporation the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors 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 December 31, 2019 and 2018 the Company has 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 the Company’s common stock plus the aggregate market value of the Company’s 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 the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.

Stock-Based Compensation

The Company awards 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. As of December 31, 2019, 51,000 shares of restricted common stock have been granted to our current independent directors pursuant to the omnibus stock incentive plan. For the years ended December 31, 2019 and 2018, respectively, the Company granted 6,000 and 6,000 shares of restricted common stock to independent directors as compensation for services. The Company recognized $77,000 and $77,000 as stock-based compensation expense for the years ended December 31, 2019 and 2018, respectively, based upon the estimated fair value per share. Stock-based compensation also includes incentive plan awards discussed at Note 12. These amounts are included in general and administrative expenses for the years ended December 31, 2019 and 2018, respectively in the accompanying consolidated statements of operations.

Distributions

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

Quarter Paid	Distributions per Common Share		Total Distributions Paid
2019
4th Quarter	$	0.175	$	3,223
3rd Quarter	0.175		3,224
2nd Quarter	0.175		3,223
1st Quarter	0.171		3,141
Total	$	0.696	$	12,811
2018
4th Quarter	$	0.175	$	3,101
3rd Quarter	0.175		3,151
2nd Quarter	0.175		3,152
1st Quarter	0.175		3,151
Total	$	0.700	$	12,555

XML

Real Estate - In-Place Lease Intangible Assets and Accumulated Amortization (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Real Estate [Abstract]
In-place lease value intangible	$ 100,790	$ 100,790
Less: In-place leases – accumulated amortization	(68,884)	(57,989)
Acquired lease intangible assets, net	$ 31,906	$ 42,801

XML

Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Distributions Paid in Cash and Through Distribution Reinvestment Plan

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

Quarter Paid	Distributions per Common Share		Total Distributions Paid
2019
4th Quarter	$	0.175	$	3,223
3rd Quarter	0.175		3,224
2nd Quarter	0.175		3,223
1st Quarter	0.171		3,141
Total	$	0.696	$	12,811
2018
4th Quarter	$	0.175	$	3,101
3rd Quarter	0.175		3,151
2nd Quarter	0.175		3,152
1st Quarter	0.175		3,151
Total	$	0.700	$	12,555

XML

Deferred Leasing Commission Costs, net (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Deferred leasing commissions	$ 17,620	$ 12,671
Less: accumulated amortization	(6,830)	(4,370)
Deferred leasing commission costs, net	$ 10,790	$ 8,301

XML

Real Estate (Tables)

12 Months Ended

Dec. 31, 2019

Real Estate [Abstract]

Schedule of Real Estate Assets

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

	December 31,
	2019		2018
Land	$	145,050	$	145,050
Buildings and improvements	348,729		337,272
In-place lease value intangible	100,790		100,790
	594,569		583,112
Less accumulated depreciation and amortization	(117,652)		(89,840)
Total real estate assets	$	476,917	$	493,272

Schedule of Total In-place Lease Intangible Assets and Accumulated Amortization

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

	December 31,
	2019		2018
In-place lease value intangible	$	100,790	$	100,790
Less: In-place leases – accumulated amortization	(68,884)		(57,989)
Acquired lease intangible assets, net	$	31,906	$	42,801

Aggregate Future Amortization Amounts From Acquired Lease Intangibles

The estimated aggregate future amortization amounts from acquired lease intangibles are as follows, in thousands:

December 31,	In-place lease amortization
2020	$	10,459
2021	8,410
2022	7,454
2023	5,583
2024	—
Total	$	31,906

XML

Notes Payable (Tables)

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Mortgage Notes Payable

The following is a summary of the mortgage notes payable, in thousands:

					December 31,
Property/Facility	Payment (1)	Maturity Date	Rate		2019		2018
Richardson Heights (2)	P&I	July 1, 2041	4.61	%	$	17,260	$	17,760
Cooper Street (2)	P&I	July 1, 2041	4.61	%	$	7,435	$	7,632
Bent Tree Green (2)	P&I	July 1, 2041	4.61	%	$	7,435	$	7,632
Mitchelldale (2)	P&I	July 1, 2041	4.61	%	$	11,263	$	11,560
Promenade (3)	P&I				$	—	$	7,102
Hartman SPE LLC	IO	October 9, 2020	3.60	%	$	259,000	$	259,000
Hartman XXI	IO	March 31, 2021	10.00	%	$	4,400	$	—
					$	306,793	$	310,686
Less unamortized deferred loan costs					$	(3,754)	$	(4,779)
					$	303,039	$	305,907

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

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

(3) Hartman SPE LLC loan proceeds for the repayment of the Promenade loan were in escrow as of October 1, 2018. The loan was paid in full with the refinancing proceeds on February 15, 2019.

Annual Maturities of Notes

Annual maturities of notes payable as of December 31, 2019 are as follows, in thousands:

December 31,	Amount Due
2020	$	260,253
2021	5,712
2022	1,374
2023	1,439
2024	1,506
Thereafter	36,509
Total	$	306,793

Amortized Loan Costs

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

	December 31,
	2019		2018
Deferred loan costs	$	7,155	$	7,082
Less:  deferred loan cost accumulated amortization	(3,401)		(2,303)
Total cost, net of accumulated amortization	$	3,754	$	4,779

XML

Related Party Transactions (Details) - USD ($)				12 Months Ended
	Mar. 01, 2019	Feb. 28, 2019	May 17, 2016	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019	Feb. 26, 2019	Feb. 28, 2009
Related Party Transaction [Line Items]
Balance due (from) to the Property Manager				$ 1,168,000	$ 462,000
Due from other related parties				5,375,000	170,000
Due to related parties				$ 0	1,496,000
Share price (in dollars per share)								$ 10.00
Ownership percentage	36.16%	32.74%
Hartman SPE LLC
Related Party Transaction [Line Items]
Share price (in dollars per share)	$ 12.65
Variable Interest Entity, Primary Beneficiary | Hartman SPE LLC
Related Party Transaction [Line Items]
Additional ownership percentage acquired	3.42%
Chief Executive Officer
Related Party Transaction [Line Items]
Ownership percentage				20.00%
Allen R Hartman | Affiliated Entity
Related Party Transaction [Line Items]
Ownership percentage				70.00%
Property Manager | Affiliated Entity
Related Party Transaction [Line Items]
Ownership percentage				30.00%
Texas Limited Liability Company | Affiliated Entity | Asset Management Fees Payable
Related Party Transaction [Line Items]
Property management fees and reimbursements				$ 8,053,000	4,910,000
Payments for leasing commissions				4,948,000	4,103,000
Asset management fees				1,760,000	1,760,000
Due to related parties				$ 2,077,000	1,204,000
Due to related parties, monthly fees, percentage of asset cost or value				0.0625%
Texas Limited Liability Company | Affiliated Entity | Construction Management Fees Payable
Related Party Transaction [Line Items]
Asset management fees				$ 664,000	2,122,000
Hartman Short Term Income Properties XIX, Inc. | Affiliated Entity | Loan From Company To Related Party
Related Party Transaction [Line Items]
Loans receivable, face amount				$ 4,500,000
Loans receivable, interest rate				6.00%
Interest income, related party				$ 252,000	252,000
Hartman Short Term Income Properties XIX, Inc. | Affiliated Entity | Loan From Company To Related Party Hartman Retail II Holdings Co
Related Party Transaction [Line Items]
Loans receivable, related parties				$ 4,200,000
HIREIT, Inc. | Affiliated Entity | Acquisition Of Related Party Stock
Related Party Transaction [Line Items]
Ownership percentage				11.00%
HIREIT, Inc. | Affiliated Entity | Dividend Distributions
Related Party Transaction [Line Items]
Amounts of transaction with related party				$ 425,000	425,000
Hartman TRS, Inc. | Affiliated Entity | Loan From Company To Related Party
Related Party Transaction [Line Items]
Loans receivable, interest rate			10.00%
Origination fees, percentage			2.00%
Hartman TRS, Inc. | Affiliated Entity | Loan From Company To Related Party Hartman Retail II Holdings Co
Related Party Transaction [Line Items]
Loans receivable, face amount			$ 8,820,000
Loans receivable, related parties			$ 7,231,000	2,476,000	2,476,000
Interest income, related party				235,000	$ 456,000
Hartman TRS, Inc. | Affiliated Entity | Loan From Company To Related Party Hartman Ashford Bayou, LLC
Related Party Transaction [Line Items]
Loans receivable, face amount						$ 3,500,000
Loans receivable, interest rate			10.00%
Loans receivable, related parties				3,829,711		$ 3,829,711
Interest income, related party				298,000
Origination fees, percentage			2.00%
Hartman TRS, Inc. | Affiliated Entity | Loan From Company To Related Party Hartman Retail III Holdings Co
Related Party Transaction [Line Items]
Loans receivable, face amount							$ 7,500,000
Loans receivable, related parties				6,782,455			$ 6,782,455
Interest income, related party				570,000
Hartman vREIT XXI | Affiliated Entity | Loan From Related Party To Company
Related Party Transaction [Line Items]
Note payable to related party				$ 4,400,000
Debt instrument, stated interest rate				5.00%
Interest Expense, Related Party				$ 23,000
Common Stock | Hartman SPE LLC
Related Party Transaction [Line Items]
Shares issued in exchange for ownership (in shares)	700,302
Value of shares issued	$ 8,859,000
Common Stock | HIREIT, Inc. | Affiliated Entity | Acquisition Of Related Party Stock
Related Party Transaction [Line Items]
Shares acquired (in shares)				1,561,523
Value of shares acquired				$ 8,978,000

XML

Notes Payable - Annual Maturities of Notes Payable (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
2020	$ 260,253
2021	5,712
2022	1,374
2023	1,439
2024	1,506
Thereafter	36,509
Total	$ 306,793	$ 310,686

XML

Organization and Business

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Business

Organization and Business

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

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

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

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

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

Subject to certain restrictions and limitations, Hartman Advisors LLC ("Advisor") is responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf pursuant to an advisory agreement (the “Advisory Agreement”) by and among the Company and Advisor. Management of the Company’s properties and the Properties, is provided pursuant to property management agreements with Hartman Income REIT Management, Inc. (the "Property Manager"), a wholly-owned subsidiary of HIREIT.  

As of December 31, 2019 and 2018, we owned 43 commercial properties comprising approximately 6.7 million square feet plus three pad sites, all located in Texas. As of December 31, 2019 and 2018, we owned 15 properties located in Richardson, Arlington, and Dallas, Texas, 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.  

On July 21, 2017, the Company and Hartman XIX, entered into an agreement and plan of merger (the “XIX Merger Agreement”) and (ii) the Company, the Operating Partnership, HIREIT and Hartman Income REIT Operating Partnership LP, the operating partnership of HIREIT, (“HIROP”), entered into an agreement and plan of merger (the “HIREIT Merger Agreement,” and together with the XIX Merger Agreement, the “Merger Agreements”).

Subject to the terms and conditions of the XIX Merger Agreement, including the satisfaction of all closing conditions set forth in the Merger Agreements, Hartman XIX will merge with and into the Company, with the Company surviving the merger (the “Hartman XIX Merger”). Subject to the terms and conditions of the HIREIT Merger Agreement, (i) HIREIT will merge with and into the Company, with the Company surviving the merger (the “HIREIT Merger,” and together with the Hartman XIX Merger, the “REIT Mergers”), and (ii) HIROP will merge and with and into the Operating Partnership, with the Operating Partnership surviving the merger (the “Partnership Merger,” and together with the REIT Mergers, the “Mergers”). The REIT Mergers are intended to qualify as a

“reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Partnership Merger is intended to be treated as a tax-deferred exchange under Section 721 of the Code.

Subject to the terms and conditions of the XIX Merger Agreement, (i) each share of common stock of Hartman XIX (the “XIX Common Stock”) issued and outstanding immediately prior to the Effective Time (as defined in the XIX Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 9,171.98 shares of common stock, $0.01 par value per share, of the Company (“Company Common Stock”), (ii) each share of 8% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of Company Common Stock, and (iii) each share of 9% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to the Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of Company Common Stock.

Subject to the terms and conditions of the HIREIT Merger Agreement, (a) in connection with the HIREIT Merger, (i) each share of common stock of HIREIT (the “HIREIT Common Stock”) issued and outstanding immediately prior to the REIT Merger Effective Time (as defined in the HIREIT Merger Agreement) will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of Company Common Stock, and (ii) each share of subordinate common stock of HIREIT will be automatically cancelled and retired and converted into the right to receive 0.752222 shares of Company Common Stock, and (b) in connection with the Partnership Merger, each unit of limited partnership interest in HIREIT Operating Partnership (“HIREIT OP Units”) issued and outstanding immediately prior to the Partnership Merger Effective Time (as defined in the HIREIT Merger Agreement) (other than any HIREIT OP Units held by HIREIT) will be automatically cancelled and retired and converted into the right to receive 0.752222 validly issued, fully paid and non-assessable units of limited partnership interests in XX Operating Partnership.

On February 14, 2020, the Company's joint proxy statement and prospectus was declared effective by the Securities and Exchange Commission. The meeting of the shareholder's of the Company, HIREIT and XIX will be held on May 14, 2020.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Convertible, non-voting shares authorized (in shares)	200,000,000	200,000,000
Preferred stock, shares issued (in shares)	1,000	1,000
Preferred stock, shares outstanding (in shares)	1,000	1,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	750,000,000	750,000,000
Common stock, shares issued (in shares)	18,417,687	17,711,384
Common stock, shares outstanding (in shares)	18,417,687	17,711,384

XML

Real Estate - Additional Information (Details) ft² in Millions	12 Months Ended
	Dec. 31, 2019 USD ($) ft² property	Dec. 31, 2018 USD ($)
Related Party Transaction [Line Items]
Depreciation expense | $	$ 16,917,000	$ 8,900,000
Amortization expense | $	$ 10,895,000	7,799,000
Area of property (in square feet) | ft²	6.7
Commercial properties | property	43
Number of real estate properties | property	39
Acquisition fees | $	$ 0	0
Asset management fees to advisor | $	$ 1,760,000	1,760,000
Economic development incentive agreement, annual grants, term	5 years
Economic development incentive agreement, annual grants, maximum amount | $	$ 1,500,000
Economic development incentive agreement, annual sales tax grants, term	10 years
Economic development incentive agreement, annual sales tax grants, application amount | $	$ 66,000	$ 82,000
Richardson, Arlington And Dallas, Texas
Related Party Transaction [Line Items]
Number of real estate properties | property	15
Houston, Texas
Related Party Transaction [Line Items]
Number of real estate properties | property	25
San Antonio, Texas
Related Party Transaction [Line Items]
Number of real estate properties | property	3
TEXAS
Related Party Transaction [Line Items]
Number of real estate properties | property	3

XML

Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2019 USD ($) monthly_payment extension shares	Dec. 31, 2018 USD ($) shares	Dec. 31, 2017 USD ($)	Jun. 30, 2020	Mar. 31, 2020
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Restricted cash	$ 26,078,000	$ 33,696,000
Impairment of real estate assets	0	0
Goodwill impairment	0	0	$ 0
Net loss	$ 5,995,000	$ 3,540,000
Antidilutive securities (in shares) | shares	0	0
Operating lease, monthly lease payment received	$ 3,500
Operating lease, number of monthly payments remaining | monthly_payment	9
Remaining lease payments	$ 31,500
Buildings and Improvements | Minimum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Useful life	5 years
Buildings and Improvements | Maximum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Useful life	39 years
SPE Loan
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Number of extensions | extension	3
Debt instrument, term, extension period	1 year
Debt yield	13.29%
SPE Loan | Forecast
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt covenant, minimum debt yield required				12.50%
SPE Loan | Subsequent Event
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt yield					12.95%

XML

Deferred Leasing Commission Costs, net

12 Months Ended

Dec. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Deferred Leasing Commission Costs, net

Deferred Leasing Commission Costs, net

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

	December 31,
	2019		2018
Deferred leasing commissions	$	17,620	$	12,671
Less: accumulated amortization	(6,830)		(4,370)
Deferred leasing commission costs, net	$	10,790	$	8,301

XML

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.  The Company’s federal income tax returns for the years ended December 31, 2015, 2016, 2017 and 2018 have not been examined by the Internal Revenue Service.The Company’s federal income tax return for the year ended December 31, 2015 may be examined on or before September 15, 2020. 

The Company has formed a taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in the light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements.

The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  Management has reviewed the Company’s tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions.

Taxable income (loss) differs from net income (loss) for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and amortization and rental revenue.

For Federal income tax purposes, the cash distributed to stockholders was characterized as follows for the years ended December 31:

	2019		2018
Ordinary income (unaudited)	53.1	%	24.9	%
Return of capital (unaudited)	46.9	%	75.1	%
Capital gains distribution (unaudited)	—	%	—	%
Total	100.0	%	100.0	%

A provision for Texas Franchise tax under the Texas Margin Tax Bill in the amount of $385,000 and $267,000 was recorded in the consolidated financial statements for the years ended December 31, 2019 and 2018 respectively, with a corresponding charge to real estate taxes and insurance.

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Economic Dependency

The Company is dependent on the Property Manager and the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the 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.

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net loss	$ (5,995)	$ (3,540)
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation	77	74
Depreciation and amortization	27,812	16,700
Deferred loan and lease commission costs amortization	3,558	2,981
Bad debt (recovery) provision, net	1,674	(4)
Changes in operating assets and liabilities:
Accrued rent and accounts receivable	(2,369)	(3,929)
Deferred leasing commissions	(4,948)	(4,037)
Prepaid expenses and other assets	(21)	20,264
Accounts payable and accrued expenses	2,069	9,369
Due to/from related parties	(3,626)	6,001
Tenants' security deposits	422	272
Net cash provided by operating activities	18,653	44,151
Cash flows from investing activities:
Acquisition deposits	535	(535)
Advance to affiliate - related party	(10,612)	0
Repayment of note receivable - related party	0	3,039
Lender required capital reserves	0	(10,405)
Additions to real estate	(11,457)	(8,940)
Net cash used in investing activities	(21,534)	(16,841)
Cash flows from financing activities:
Distributions to common stockholders	(12,772)	(12,555)
Distributions to non-controlling interest	(4,745)	(658)
Borrowings under insurance premium finance note	1,577	0
Repayments under insurance premium finance note	(1,577)	0
Payments of deferred loan costs	(72)	(4,734)
Repayments under term loan notes	(8,295)	(40,165)
Borrowing from affiliate	4,400	0
Borrowings under term loan notes	0	259,000
Borrowings under revolving credit facility	0	11,525
Repayments under revolving credit advances	0	(45,225)
Lender reserve for Promenade payoff	0	(10,273)
Proceeds from issuance of common stock, net of redemptions	0	(2,859)
Repayments of consolidating notes payable	0	(135,453)
Net cash (used in) provided by financing activities	(21,484)	18,603
Net change in cash and cash equivalents and restricted cash	(24,365)	45,913
Cash and cash equivalents and restricted cash, beginning of period	51,476	5,563
Cash and cash equivalents and restricted cash, end of period	27,111	51,476
Supplemental cash flow information:
Cash paid for interest	12,663	7,670
Cash paid for prepayment of refinanced debt (included in interest expense)	0	2,323
Security deposits	0	2,708
Additions to real estate	0	313,230
Note payable - Promenade property	0	7,101
Decrease in distribution payable	0	(15)
Issuance of SPE membership interests	0	167,967
Value of Director's stock compensation shares issued	76	0
Value of Common shares issued to acquire non-controlling interest	8,859	0
Acquisition of non-controlling interest	$ (8,859)	$ 0

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
ASSETS
Real estate assets, at cost	$ 594,569	$ 583,112
Accumulated depreciation and amortization	(117,652)	(89,840)
Real estate assets, net	476,917	493,272
Cash and cash equivalents	1,033	17,780
Restricted cash	26,078	33,696
Accrued rent and accounts receivable, net	12,576	11,881
Notes receivable - related party	17,288	6,676
Deferred leasing commission costs, net	10,790	8,301
Goodwill	250	250
Prepaid expenses and other assets	735	1,249
Due from related parties	2,130	0
Investment in affiliate	8,978	8,978
Total assets	556,775	582,083
Liabilities:
Notes payable, net	303,039	305,907
Due to related parties	0	1,496
Accounts payable and accrued expenses	23,444	21,335
Tenants' security deposits	5,286	4,864
Total liabilities	331,769	333,602
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	0	0
Common stock, $0.001 par value, 750,000,000 authorized, 18,417,687 shares and 17,711,384 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	18	18
Additional paid-in capital	174,019	165,084
Accumulated distributions and net loss	(109,406)	(95,162)
Total stockholders' equity	64,631	69,940
Non-controlling interests	160,375	178,541
Total equity	225,006	248,481
Total liabilities and equity	$ 556,775	$ 582,083

XML

Accrued Rent and Accounts Receivable, net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Receivables [Abstract]
Tenant receivables	$ 5,929	$ 5,205
Accrued rent	9,244	8,386
Allowance for uncollectible accounts	(2,597)	(1,710)
Accrued rents and accounts receivable, net	12,576	11,881
Bad debt (recovery) expense	$ 1,674	$ (4)

XML

Real Estate - Real Estate Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Real Estate [Abstract]
Land	$ 145,050	$ 145,050
Buildings and improvements	348,729	337,272
In-place lease value intangible	100,790	100,790
Real estate assets, at cost	594,569	583,112
Less accumulated depreciation and amortization	(117,652)	(89,840)
Real estate assets, net	$ 476,917	$ 493,272

XML

Incentive Awards Plan	12 Months Ended
	Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Incentive Awards Plan	Incentive Awards PlanThe Company has adopted an incentive plan (the “Omnibus Stock Incentive Plan” or the “Incentive Plan”) that provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards within the meaning of Internal Revenue Code Section 422, or any combination of the foregoing. The Company has initially reserved 5,000,000 shares of the Company’s common stock for the issuance of awards under the Company’s stock incentive plan, but in no event more than ten (10%) percent of the Company’s issued and outstanding shares. The number of shares reserved under the Company’s stock incentive plan is also subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. Generally, shares that are forfeited or canceled from awards under the Company’s stock incentive plan also will be available for future awards.  The Compensation Committee of the Board of Directors did not approve any awards restricted common stock for the years ended December 31, 2019 and 2018.

XML

Accrued Rent and Accounts Receivable, net

12 Months Ended

Dec. 31, 2019

Receivables [Abstract]

Accrued Rent and Accounts Receivable, net

Accrued Rent and Accounts Receivable, net

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

	December 31,
	2019		2018
Tenant receivables	$	5,929	$	5,205
Accrued rent	9,244		8,386
Allowance for uncollectible accounts	(2,597)		(1,710)
Accrued rents and accounts receivable, net	$	12,576	$	11,881

As of December 31, 2019 and 2018, the Company had an allowance for uncollectible accounts of $2,597,000 and $1,710,000, respectively. For the years ended December 31, 2019 and 2018, the Company recorded bad debt expense (recovery) of $1,674,000 and $(4,000), respectively, related to tenant receivables that the Company have specifically identified as potentially uncollectible based on the Company’s assessment of each tenant’s credit-worthiness. Bad debt expenses and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

XML

Loss Per Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Loss Per Share

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 weighted average shares outstanding reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic loss per share are included in the diluted loss per share.

	December 31,
	2019		2018
Numerator:
Net income (loss) attributable to common stockholders	$	(1,433)	$	(827)
Denominator:
Weighted average number of common shares outstanding,basic and diluted	18,304		17,946
Basic and diluted loss per common share:
Net loss attributable to common stockholders per share	$	(0.08)	$	(0.05)

XML

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements as of December 31, 2019 and 2018 and for the years then ended have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-K and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods.

Consolidation

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

Use of Estimates

Use of Estimates

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

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents on the accompanying consolidated balance sheets include all cash and liquid investments with maturities of three months or less. Cash and cash equivalents as of December 31, 2019 and 2018 consisted of demand deposits at commercial banks. We maintain accounts which may from time to time exceed federally insured limits. We have not experienced any losses in these accounts and believe that the company is not exposed to any significant credit risk and regularly monitors the financial stability of these financial institutions.

Restricted Cash

Restricted Cash Restricted cash on the accompanying consolidated balance sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements. As of December 31, 2019 and 2018, the Company had a restricted cash balance of $26,078,000 and $33,696,000, respectively.

Financial Instruments

Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, accrued rent and accounts receivable, accounts payable and accrued expenses and balances due to/ due from related parties, as well as related party notes receivable. The Company considers the carrying value of these financial instruments to approximate their respective fair values due to their short-term nature. Disclosure about the fair value of financial instruments is based on relevant information available as of December 31, 2019 and 2018.

Revenue Recognition

Revenue Recognition

The Company's leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. The Company's accrued rents are included in accrued rent and accounts receivable, net. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in the Tenant Reimbursement and Other Revenues line item in the consolidated statements of operations in the period the related costs are incurred.

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-9, Revenue from Contracts with Customers, (“ASU 2014-9”) which amends the guidance for revenue recognition to eliminate the industry-specific revenue recognition guidance and replace it with a principle based approach for determining revenue recognition. The Company adopted ASU 2014-9 effective January 1, 2018 using the modified retrospective approach and the adoption of this guidance did not have a material impact on the consolidated financial statements. The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from ASU 2014-9. The Company’s other revenue is comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are also excluded from of ASU 2014-9. Additionally, the Company’s property dispositions have historically been cash sales with no contingencies and no future involvement in the property, as a result, the new guidance did not have an effect on the Company’s real estate transactions, however, the Company will account future sales of real estate properties in accordance with requirements of ASU 2014-9.

Real Estate

Real Estate

Allocation of Purchase Price of Acquired Assets

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

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

Real Estate Joint Ventures and Partnerships

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

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

Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out

rights and substantive participating rights.Partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

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

Depreciation and amortization

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

Impairment

The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property.  If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value.  Management has determined that there has been no impairment in the carrying value of the Company’s real estate assets as of December 31, 2019 and 2018.

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.

Fair Value Measurement

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets.

Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to

develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:  Prices and other relevant information generated by market transactions involving

identical or comparable assets or liabilities.

Cost approach:  Amount required to replace the service capacity of an asset (replacement cost).

Income approach:  Techniques used to convert future amounts to a single amount based on market

expectations (including present-value, option-pricing, and excess-earnings models).

The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.  The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

Accrued Rent and Accounts Receivables, net

Accrued Rent and Accounts Receivable, net

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 the Company’s claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Deferred Leasing Commission Costs, net

Deferred Leasing Commissions Costs, net

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

Goodwill

Goodwill

GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired.  The Company applies a one-step quantitative assessment to determine if the estimated fair value is less than the carrying amount.  If the carrying amount exceeds the estimated fair value, the Company will record a goodwill impairment equal to such excess, not to exceed the total amount of goodwill. No goodwill impairment has been recognized in the accompanying consolidated financial statements.

Noncontrolling Interests

Noncontrolling InterestsNoncontrolling interests is the portion of equity in a subsidiary not attributable to a parent.  The ownership interests not held by the parent are considered noncontrolling interests.  Accordingly, the Company has reported noncontrolling interests in equity on the consolidated balance sheets but separate from the Company's equity.  On the consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests.

Stock-Based Compensation

Stock-Based Compensation

The Company follows Accounting Standards Codification ("ASC") 718- Compensation- Stock Compensation, with regard to issuance of stock in payment of services.  ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the estimated grant date fair value, as of the grant date of the Company’s common stock, of the equity or liability instruments issued.  Stock-based compensation expense are recorded over the vesting period and is included in general and administrative expense in the accompanying consolidated statements of operations.

Income Taxes

Income Taxes

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

annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP).  As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions.  Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders.  However, the Company believes that it is organized and will continue to operate in such a manner as to qualify for treatment as a REIT. 

For the years ended December 31, 2019 and 2018, the Company incurred a net loss of $5,995,000 and $3,540,000.  The Company formed a taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward.  The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the 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

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 December 31, 2019 and 2018, 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 years ended December 31, 2019 and 2018 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.

Concentration of Risk

Concentration of Risk

The geographic concentration of the Company’s real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocation of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Going Concern Evaluation

Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The Hartman SPE LLC loan agreement (“SPE Loan”) has an initial maturity date of October 9, 2020. The SPE Loan provides for three successive one-year maturity date extensions. In order to exercise each successive one-year extension options, the Hartman SPE must meet five conditions in order to extend the maturity date without any further qualification. One of the five conditions is that Hartman SPE must have a debt yield, as defined, of 12.5% as of June 30, 2020.

As of December 31, 2019 and March 31, 2020, Hartman SPE has a debt yield of 13.29% and 12.95%, respectively. In response to the coronavirus outbreak and related economic disruption, the Company has undertaken cost reduction and avoidance measures which began in March 2020. Management expects the test period debt calculation to be 12.5% or greater which will allow the Company to exercise the extension option based solely on the terms of the loan agreement.

If the debt yield calculation as of the end of the June 30, 2020 test period is less than 12.5%, management believes that the lender will agree to a one-year extension, however, extension terms may be less favorable to the Company than as provided under the loan agreement. Any required modification of the loan agreement to conclude an extension of the maturity date may involve additional loan costs which would not otherwise be incurred.

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

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-2, Leases, along with various subsequent ASUs, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in the same manner as the previous guidance for operating leases today.

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

As of December 31, 2019, the Company, through SPE LLC has a ground lease for a parking lot located adjacent to the property at 601 Sawyer, Houston, Texas. The parking lot lease agreement expires at the end of September 2020. The Sawyer property is included in the Company’s consolidated financial statements as of December 31, 2019 and for the year ended December 31, 2019 because of the consolidation of SPE with the Company. SPE commenced operations and is consolidated with the Company for periods beginning after September 30, 2018.

Lease payments under the parking lot lease agreement are $3,500 per month. As of December 31, 2019, 9 monthly payments remain under the lease agreement for a total of $31,500.

The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In connection with the new revenue guidance (ASC 606), the new revenue standard will apply to other components of revenue deemed to be non-lease components. Under the new guidance, we will continue to recognize the lease components of lease revenue on a straight-line basis over our respective lease terms as we do under prior guidance. However, we would recognize these non-lease components under the new revenue guidance as the related services are delivered. As a result, the total revenue recognized over time would not differ under the new guidance. This does not result in a difference from how the Company has historically recognized revenue for these lease and non-lease components.

Additionally, ASU 2016-2 requires that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under ASU 2016-2, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. This does not result in a difference from how the Company has historically recognized lease acquisition costs.

On January 1, 2019, the Company adopted ASU 2018-07, "Improvements to Non-employee Stock-Based Payment Accounting." The updated guidance simplifies aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. The adoption of this guidance had no impact on our consolidated financial statements.

On January 1, 2019, the Company adopted ASU 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities". The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of either adopting the new standard early using a modified retrospective transition method in any interim period after issuance of the update, or alternatively adopting the new standard for fiscal years beginning after December 15, 2018. The adoption of this guidance had no impact on our consolidated financial statements.

On January 1, 2018, the Company adopted ASU 2014-9, codified in Accounting Standards Codification (“ASC”) 606 - “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-9 replaces most existing revenue recognition guidance under GAAP. The standard permits the use of either the retrospective or cumulative effect transition method. Certain contracts with customers, principally lease contracts, are not within the scope of the new guidance. The Company has elected to use the modified retrospective method. The adoption of ASU 2014-9 has no impact on the Company’s consolidated financial statements on adoption” at January 1, 2018.

On January 1, 2018, the Company adopted ASU 2016-17, “Interest Held Through Related Parties That Are Under Common Control,” issued by the FASB, which amends the accounting guidance when determining the treatment of certain VIE’s to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. In connection with our adoption of ASU 2016-17, we have determined that SPE LLC is a VIE and that the Company is the primary beneficiary. Accordingly, the accounts of SPE LLC are included in our consolidated financial position as of December 31, 2018 and beginning October 1, 2018, in our consolidated results of operations. The Company and its affiliates, Hartman XIX and HIREIT, are guarantors of the SPE LLC note payable.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The updated guidance requires measurement and recognition of expected credit losses for financial assets, including trade and other receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Generally, the pronouncement requires a modified retrospective method of adoption. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted. In identifying all our financial instruments covered under this guidance, the majority of our instruments result from operating leasing transactions, which are not within the scope of the new standard and are to remain governed by the recently issued leasing guidance and other previously issued guidance. The adoption of this guidance had no impact on our consolidated financial statements.

Reclassification

Reclassification

Certain items in the comparative consolidated financial statements have been reclassified to conform to the presentation adopted in the current period. Restricted cash reporting line was added on the face of the consolidated balance sheets. The balance currently reported as restricted cash was reported previously in the prepaid expenses and

other assets. Additionally, insurance proceeds account has been reclassified from being reported in real estate taxes and insurance reporting line in 2018 to property operating expenses.

XML

Future Minimum Rents (Tables)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Summary of Minimum Future Rentals to be Received Under Noncancelable Operating Leases

A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at December 31, 2019 is as follows, in thousands:

December 31,	Minimum Future Rents
2020	$	69,973,000
2021	61,237,000
2022	49,396,000
2023	37,477,000
2024	25,851,000
Thereafter	39,785,000
Total	$	283,719,000

XML

Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Feb. 28, 2009	Dec. 31, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Common stock, shares authorized (in shares)		750,000,000	750,000,000
Common stock, par value (in dollars per share)		$ 0.001	$ 0.001
Convertible, non-voting shares authorized (in shares)		200,000,000	200,000,000
Preferred stock, par value (in dollars per share)		$ 0.001	$ 0.001
Number of shares sold	19,000
Share price (in dollars per share)	$ 10.00
Preferred stock, shares issued (in shares)		1,000	1,000
Convertible Preferred Stock
Class of Stock [Line Items]
Share price (in dollars per share)		$ 10.00	$ 10.00
Preferred stock, shares issued (in shares)		1,000	1,000
Conversion terms, cumulative annual return on issue price, percentage		6.00%
Conversion terms, performance threshold		6.00%
Conversion terms, percentage of excess enterprise value		15.00%
Restricted Stock
Class of Stock [Line Items]
Shares of restricted common stock granted to directors (in shares)		51,000,000
Number of shares granted (in shares)		6,000	6,000
Stock-based compensation expense		$ 77,000	$ 77
Affiliated Entity | Hartman Advisors LLC (Advisor) | Convertible Preferred Stock
Class of Stock [Line Items]
Number of shares sold	1,000
Share price (in dollars per share)	$ 10.00
Hartman Advisors LLC (Advisor) | Hartman Income REIT Management Inc
Class of Stock [Line Items]
Ownership percentage by noncontrolling owners		30.00%
Hartman Advisors LLC (Advisor) | Allen R Hartman
Class of Stock [Line Items]
Ownership percentage by Company		70.00%
Allen R Hartman | Hartman Advisors LLC (Advisor)
Class of Stock [Line Items]
Ownership percentage by noncontrolling owners		20.00%

XML

Notes Payable - Amortization of Loan Costs (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Deferred loan costs	$ 7,155	$ 7,082
Less:  deferred loan cost accumulated amortization	(3,401)	(2,303)
Total cost, net of accumulated amortization	$ 3,754	$ 4,779