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.