
	September 30, 2020		December 31, 2019
Land	$	146,008	$	145,050
Buildings and improvements	359,408		348,729
In-place lease value intangible	102,054		100,790
	607,470		594,569
Less: accumulated depreciation and amortization	(138,894)		(117,652)
Total real estate assets	$	468,576	$	476,917

Depreciation expense for the three months ended September 30, 2020 and 2019 was $4,567,000 and $4,116,000, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 was $13,239,000 and $12,337,000, respectively. Amortization expense of in-place lease value intangible was $2,673,000 and $2,873,000 for the three months ended September 30, 2020 and 2019, respectively. Amortization expense of in-place lease value intangible was $8,003,000 and $8,315,000 for the nine months ended September 30, 2020 and 2019, respectively.

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


	September 30, 2020		December 31, 2019
In-place lease value intangible	$	102,054	$	100,790
In-place leases – accumulated amortization	(76,887)		(68,884)
Acquired lease intangible assets, net	$	25,167	$	31,906

As of September 30, 2020 and 2019, respectively, the Company owned 44 and 43 commercial properties comprising approximately 6.8 and 6.7 million square feet plus four and three pad sites and two and none land developments, all located in Texas. As of September 30, 2020 and 2019, respectively, the Company owned 15 properties located in Richardson, Arlington and Dallas, Texas, 26 and 25 properties located in Houston, Texas and three properties located in San Antonio, Texas.

Asset management fees incurred and paid to Advisor were $0 and $440,000, $880,000 and $1,320,000 for the three and nine months ended September 30, 2020 and 2019, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations.

Effective July 1, 2020, in connection with the Mergers, the Company acquired interests in (i) one commercial real estate property, (ii) one pad site development in progress, (iii) a 34.38% member interest in SPE LLC, (iv) the Property Manager and (v) a 30% interest in Advisor.

As of the date of the Mergers, there were 12,378,718 shares of HIREIT common stock issued and outstanding and 1,214,197 HIROP OP units, which converted to 9,525,691 shares of Company stock and 913,346 OP units of Hartman XX Operating Partnership units ("XX OP units"); resulting in aggregate merger consideration of $117,544,000.

Effective July 1, 2020, in connection with the Mergers, the Company acquired interests in (i) two commercial land developments in progress and (ii) a 26.99% interest in SPE LLC.

As of the date of the Mergers, there were 5,895,967 shares of Hartman XIX preferred stock and 100 common shares issued and outstanding, which converted to 7,343,511 shares of Company stock, resulting in aggregate merger consideration of $82,688,000.

After consideration of all applicable factors pursuant to ASC 805, the Company is considered the “legal acquirer” because the Company is issuing common stock to HIREIT and Hartman XIX stockholders, and also due to various factors including that the Company’s stockholders immediately preceding the Merger hold the largest portion of the voting rights in the Company immediately after the Merger.

The value of the Company’s common shares and Hartman XX Operating Partnership units is presented based on the most recent net asset value (“NAV”) determination by the Company which is $11.26 per common share and OP unit.

For the three and nine months ended September 30, 2020 and 2019, in connection with our acquisitions, we incurred acquisition costs of $0 and $15,000, and $132,000 and $26,000, respectively, recorded in general and administrative costs and expenses. We included the operating results of HIREIT and Hartman XIX in our consolidated results of operations, effective July 1, 2020. During the three months ended September 30, 2020, our consolidated statement of operations includes revenues of $1,270,000 and net loss of $1,103,000 associated with the operations of HIREIT and Hartman XIX.

The following table illustrates the fair value of assets and liabilities of HIREIT and Hartman XIX contributed in the merger on July 1, 2020, in thousands:


	HIREIT		XIX		Combined
Assets
Real estate assets	$	3,376	$	4,774	$	8,150
Cash and cash equivalents, accounts receivable, prepaid expenses and other assets, and due from related parties	4,943		111		5,054
Notes receivable – related party	—		3,900		3,900
Acquired intangibles	8,514		171		8,685
Investment in HIREIT	—		2,845		2,845
Investment in SPE LLC	111,369		87,430		198,799
Investment in other affiliates	201		—		201
Total Assets	$	128,403	$	99,231	$	227,634

Liabilities
Notes payable	$	6,393	$	4,200	$	10,593
Accounts payable and accrued expenses, and due to related parties	4,466		8,475		12,941
Unpaid preferred dividends due to Hartman XIX shareholders	—		3,868		3,868
Total Liabilities	$	10,859	$	16,543	$	27,402

Net assets acquired	$	117,544	$	82,688	$	200,232

The fair value of all assets and liabilities presented above is management's best estimate and is subject to change during the measurement period due to management's receiving the final valuations performed by the third party.

Real estate assets – the fair value is based on the independent third party appraisal. The fair value cost of real estate assets added as of July 1, 2020 was segregated and allocated to land, buildings and improvements and in-place lease value intangible. Depreciation and amortization of the real estate assets added on July 1, 2020 commenced as of that date.

Cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other assets, and due from related parties – recorded at cost basis which approximates fair value.

Investment in HIREIT - the fair value is based on 347,826 HIREIT common shares time the estimated net asset value of $8.18 per share determined by HIREIT as of December 31, 2019.